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SECOND AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
ULTRA PAC, INC.
AND
NORWEST CREDIT, INC.
FEBRUARY 7, 1997
[LOGO] NORWEST
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Table of Contents
ARTICLE I DEFINITIONS.........................................................................1
Section 1.1 Definitions....................................................................1
Section 1.2 Cross References..............................................................13
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY...........................................13
Section 2.1 Existing Advances.............................................................13
Section 2.2 Revolving Advances............................................................13
Section 2.3 Existing Letter of Credit.....................................................14
Section 2.4 Letters of Credit.............................................................14
Section 2.5 Payment of Amounts Drawn Under Letters of Credit; Obligation of
Reimbursement................................................................15
Section 2.6 Special Account...............................................................16
Section 2.7 Obligations Absolute..........................................................16
Section 2.8 Working Capital Term Advances.................................................17
Section 2.9 Real Estate Term Advance......................................................17
Section 2.10 Capex Term Advances..........................................................17
Section 2.11 Payment of Term Notes........................................................18
Section 2.12 Interest; Default Interest; Participations; Usury............................19
Section 2.13 Interest Rate Spreads.......................................................19
Section 2.14 Fees.........................................................................21
Section 2.15 Computation of Interest and Fees; When Interest Due and Payable..............22
Section 2.16 Capital Adequacy; Increased Costs and Reduced Return.........................22
Section 2.17 Voluntary Prepayment; Termination of Credit Facility by the Borrower;
Permanent Reduction of the Maximum Line; Prepayment of the Term Notes;
Waiver of Reduction and Prepayment Fees.....................................23
Section 2.18 Mandatory Prepayment.........................................................25
Section 2.19 Payment......................................................................25
Section 2.20 Payment on Non-Banking Days..................................................25
Section 2.21 Use of Proceeds..............................................................26
Section 2.22 Liability Records............................................................26
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF.............................................26
Section 3.1 Grant of Security Interest....................................................26
Section 3.2 Notification of Account Debtors and Other Obligors............................26
Section 3.3 Assignment of Insurance.......................................................26
Section 3.4 Occupancy.....................................................................27
Section 3.5 License.......................................................................27
Section 3.6 Financing Statement...........................................................28
Section 3.7 Setoff........................................................................28
ARTICLE IV CONDITIONS OF LENDING.............................................................28
Section 4.1 Conditions Precedent to the Initial Revolving and Term Advances and the
Initial Letter of Credit.....................................................28
Section 4.2 Conditions Precedent to All Advances and Letters of Credit....................30
ARTICLE V REPRESENTATIONS AND WARRANTIES.....................................................31
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office; Inventory and
Equipment Locations; Tax Identification Number...............................31
Section 5.2 Authorization of Borrowing; No Conflict as to Law or Agreements...............31
Section 5.3 Legal Agreements..............................................................32
Section 5.4 Subsidiaries..................................................................32
Section 5.5 Financial Condition; No Adverse Change........................................32
Section 5.6 Litigation....................................................................32
Section 5.7 Regulation U..................................................................33
Section 5.8 Taxes.........................................................................33
Section 5.9 Titles and Liens..............................................................33
Section 5.10 Plans........................................................................33
Section 5.11 Default......................................................................33
Section 5.12 Environmental Matters........................................................34
Section 5.13 Submissions to Lender........................................................35
Section 5.14 Financing Statements.........................................................35
Section 5.15 Rights to Payment............................................................35
ARTICLE VI BORROWER'S AFFIRMATIVE COVENANTS..................................................35
Section 6.1 Reporting Requirements........................................................35
Section 6.2 Books and Records; Inspection and Examination.................................38
Section 6.3 Account Verification..........................................................38
Section 6.4 Compliance with Laws..........................................................39
Section 6.5 Payment of Taxes and Other Claims.............................................39
Section 6.6 Maintenance of Properties.....................................................39
Section 6.7 Insurance.....................................................................40
Section 6.8 Preservation of Existence.....................................................40
Section 6.9 Delivery of Instruments, etc..................................................40
Section 6.10 Collateral Account...........................................................40
Section 6.11 Key Person Life Insurance....................................................41
Section 6.12 Performance by the Lender....................................................41
Section 6.13 Maximum Debt to Tangible Net Worth Ratio.....................................41
Section 6.14 Minimum EBT..................................................................42
Section 6.15 Maximum Inventory Days.......................................................43
Section 6.16 New Covenants................................................................43
ARTICLE VII NEGATIVE COVENANTS...............................................................43
Section 7.1 Liens.........................................................................43
Section 7.2 Indebtedness..................................................................44
Section 7.3 Guaranties....................................................................44
Section 7.4 Investments and Subsidiaries..................................................44
Section 7.5 Dividends.....................................................................45
Section 7.7 Consolidation and Merger; Asset Acquisitions..................................45
Section 7.8 Sale and Leaseback............................................................45
Section 7.9 Restrictions on Nature of Business............................................46
Section 7.10 Capital Expenditures.........................................................46
Section 7.11 Operating Leases.............................................................46
Section 7.12 Accounting...................................................................46
Section 7.13 Discounts, etc...............................................................46
Section 7.14 Defined Benefit Pension Plans................................................46
Section 7.15 Other Defaults...............................................................46
Section 7.16 Place of Business; Name......................................................46
Section 7.17 Organizational Documents; S Corporation Status...............................47
Section 7.18 Salaries.....................................................................47
ARTICLE VIII EVENTS OF DEFAULT, RIGHTS AND REMEDIES..........................................47
Section 8.1 Events of Default.............................................................47
Section 8.2 Rights and Remedies...........................................................49
Section 8.3 Certain Notices...............................................................50
ARTICLE IX MISCELLANEOUS.....................................................................50
Section 9.1 Restatement of Prior Credit Agreement.........................................50
Section 9.2 Release.......................................................................51
Section 9.3 No Waiver; Cumulative Remedies................................................51
Section 9.4 Amendments, Etc...............................................................51
Section 9.5 Addresses for Notices, Etc....................................................51
Section 9.6 Servicing of Credit Facility..................................................52
Section 9.7 Further Documents.............................................................53
Section 9.8 Collateral....................................................................53
Section 9.9 Costs and Expenses............................................................53
Section 9.10 Indemnity....................................................................54
Section 9.11 Participants.................................................................55
Section 9.12 Execution in Counterparts....................................................55
Section 9.13 Binding Effect; Assignment; Complete Agreement; Sharing of Information.......55
Section 9.14 Severability of Provisions...................................................55
Section 9.15 Headings.....................................................................55
Section 9.16 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.....................55
SECOND AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
Dated as of February 7, 1997
This Agreement is made by ULTRA PAC, INC., a Minnesota
corporation (the "Borrower"), and NORWEST CREDIT, INC., a Minnesota corporation
(the "Lender").
Recitals
The Borrower and the Lender are parties to the Prior Credit
Agreement and Norwest Bank and the Borrower are parties to the Prior Norwest
Bank Credit Agreement. (Capitalized terms used in these recitals shall have the
meanings given in Section 1.1.) The Borrower and Norwest Bank, as successor to
Ameribank, are also parties to the Mortgage Loan Documents. Pursuant to the
Assignment of Mortgage Loan Documents, Norwest Bank has assigned all of its
right, title and interest in the Mortgage Loan Documents to the Lender. The
Lender and the Borrower now desire to amend and restate the Prior Credit
Agreement and the Old Real Estate Term Note in their entirety and to amend the
Original Mortgage and the Original Assignment of Rents. The Borrower shall use
some of the proceeds of the Credit Facility to retire all of its obligations to
Norwest Bank under the Prior Norwest Bank Credit Agreement. Accordingly, the
Borrower and the Lender hereby agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means the aggregate unpaid obligations of customers
and other account debtors to the Borrower arising out of the sale or
lease of goods or rendition of services by the Borrower on an open
account or deferred payment basis.
"Advance" means a Revolving Advance or a Term Advance.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrower, including
(without limitation) any Subsidiary of the Borrower. For purposes of
this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Second Amended and Restated Credit and
Security Agreement, as amended, supplemented or restated from time to
time.
"Assignment of Mortgage Loan Documents" means collectively,
the Lender's Certificate and Assignment of Loan Documents and the
Assignment of Combination Mortgage, Security Agreement, Assignment of
Rents and Fixture Financing Statement, and of Assignment of Leases and
Rents, each of even date herewith, by Norwest Bank in favor of the
Lender, pursuant to which Norwest Bank assigns to the Lender all of its
right, title and interest in the indebtedness evidenced by the Old Real
Estate Term Note and in the Mortgage Loan Documents.
"Assignment of Rents" means the Original Assignment of Rents
as amended by the First Amendment to Mortgage Documents.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Minneapolis, Minnesota.
"Base Rate" means the rate of interest publicly announced from
time to time by Norwest Bank as its "base rate" or, if such bank ceases
to announce a rate so designated, any similar successor rate designated
by the Lender.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's
reasonable discretion, the sum of:
(i) 80% of Eligible Accounts; plus
(ii) the lesser of (A) 50% of Eligible Inventory
or (B) $5,000,000; less
(iii) $1,000,000 until the Lender shall have
received the Borrower's audited financial
statements for the Borrower's fiscal year
ending January 31, 1997 showing that no
Default Period then exists.
"Capex Term Advance" has the meaning given in Section 2.10.
"Capex Term Note" means the Borrower's promissory note,
payable to the order of the Lender in substantially the form of Exhibit
C hereto and any note or notes issued in substitution therefor, as the
same may hereafter be amended, supplemented or restated from time to
time.
"Capital Expenditures" for a period means any expenditure of
money for the capitalized lease, purchase or other acquisition of any
capital asset.
"Collateral" means the Personal Property Collateral and the
Mortgaged Property.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement dated as of June 21, 1996 by and among the Borrower, Norwest
Bank and the Lender.
"Commitment" means the Lender's commitment to make Advances
and to cause the Issuer to issue Letters of Credit to or for the
Borrower's account pursuant to Article II.
"Credit Facility" means the credit facility being made
available to the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Debt to Tangible Net Worth Ratio" as of a given date means
the ratio of the Borrower's Debt less deferred tax liabilities to the
Borrower's Tangible Net Worth.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrower in
writing that such Default or Event of Default has been cured or waived.
"Default Rate" means, with respect to the Revolving Advances,
an annual rate equal to two and one half percent (2.5%) over the
Revolving Floating Rate, which rate shall change when and as the
Revolving Floating Rate changes, and with respect to the Term Advances,
an annual rate equal to two and one half percent (2.5%) over the Term
Floating Rate, which rate shall change when and as the Term Floating
Rate changes.
"EBT" for a period means, pretax earnings from continuing
operations before (i) special extraordinary gains (ii) minority
interests, and (iii) miscellaneous gains and losses unless approved by
the Lender, in each case for such period.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of Accounts over 90 days past
invoice date unless such Account is backed by a letter of
credit;
(ii) That portion of Accounts that are disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by the Borrower to the customer;
(iv) Accounts owed by any unit of government,
whether foreign or domestic (provided, however, that there
shall be included in Eligible Accounts that portion of
Accounts owed by such units of government for which the
Borrower has provided evidence satisfactory to the Lender that
(A) the Lender has a first priority perfected security
interest and (B) such Accounts may be enforced by the Lender
directly against such unit of government under all applicable
laws);
(v) Accounts owed by an account debtor located
outside the United States which are not backed by a bank
letter of credit assigned to the Lender, in the Lender's
possession and acceptable to the Lender in all respects, in
its sole discretion or credit insurance acceptable to the
Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower which are not
backed by a bank letter of credit assigned to the Lender, in
the Lender's possession and acceptable to the Lender in all
respects, in its sole discretion or credit insurance
acceptable to the Lender in its sole discretion;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject
to any lien, security interest or claim in favor of any Person
other than the Lender unless such Person is acceptable to the
Lender in its sole discretion;
(ix) That portion of Accounts that have been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes finance
charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 10% or more of the total
amount due under Accounts from such debtor is ineligible under
clauses (i), (ii) or (ix) above; and
(xii) Accounts, or portions thereof, otherwise
deemed ineligible by the Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at
the lower of cost or market value as determined in accordance with
GAAP; provided, however, that the following shall not in any event be
deemed Eligible Inventory:
(i) Inventory that is: in-transit; located at any
warehouse, job site or other premises not approved by the
Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, ▇▇▇▇ of lading or other
document of title; on consignment from or to any Person or
subject to any bailment;
(ii) Supplies, packaging, parts or sample Inventory;
(iii) Inventory that is damaged, slow moving,
obsolete or not currently saleable in the normal course of the
Borrower's operations;
(iv) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning or intends
to return to the vendor thereof;
(v) Inventory that is perishable or live;
(vi) Inventory manufactured by the Borrower pursuant
to a license unless the applicable licensor has agreed in
writing to permit the Lender to exercise its rights and
remedies against such Inventory or the Lender has received
evidence satisfactory to it in its sole discretion that it can
exercise its rights and remedies against such Inventory;
(vii) Inventory that is subject to a security
interest in favor of any Person other than the Lender unless
such Person is acceptable to the Lender in its sole
discretion; and
(viii) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"Environmental Laws" has the meaning specified in Section
5.12.
"Equipment" means all of the Borrower's equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and recordkeeping equipment, parts, tools, supplies, and
including specifically (without limitation) the goods described in any
equipment schedule or list herewith or hereafter furnished to the
Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Existing Letter of Credit" has the meaning specified in
Section 2.3.
"Existing Revolving Advances" has the meaning specified in
Section 2.1.
"First Amendment to Mortgage Documents" means that certain
First Amendment to Combination Mortgage, Security Agreement, Assignment
of Rents and Fixture Financing Statement, to Assignment of Leases and
Rents and to Indemnification Agreement, of even date herewith, by and
between the Borrower and the Lender.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5, except for any change in
accounting practices to the extent that, due to a promulgation of the
Financial Accounting Standards Board changing or implementing any new
accounting standard, the Borrower either (i) is required to implement
such change, or (ii) for future periods will be required to and for the
current period may in accordance with generally accepted accounting
principles implement such change, for its financial statements to be in
conformity with generally accepted accounting principles (any such
change is hereinafter referred to as a "Required GAAP Change"),
provided that (1) the Borrower shall fully disclose in such financial
statements any such Required GAAP Change and the effects of the
Required GAAP Change on the Borrower's income, retained earnings or
other accounts, as applicable, and (2) the Borrower's financial
covenants set forth in Sections 6.13, 6.14, 6.15, 7.10 and 7.11 shall
be adjusted as necessary to reflect the effects of such Required GAAP
Change.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade
names, trade secrets, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use
the Borrower's name, and the goodwill of the Borrower's business.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"Inventory Days" as of any date means ratio of (i) Inventory
as of such date to (ii) the average daily cost of goods sold during the
three month period ending on such date.
"Issuer" means the issuer of any Letter of Credit.
"L/C Amount" means the sum of (i) the aggregate face amount of
any issued and outstanding Letters of Credit and (ii) the unpaid amount
of the Obligation of Reimbursement.
"L/C Application" means an application and agreement for
letters of credit in a form acceptable to the Issuer and the Lender.
"Letter of Credit" has the meaning specified in Section 2.4.
"Life Insurance Assignment" means an Assignment of Life
Insurance Policy as Collateral to be executed by the owner and the
beneficiary thereof, in form and substance satisfactory to the Lender,
granting the Lender a lien on the Life Insurance Policy to secure
payment of the Obligations.
"Life Insurance Policy" has the meaning given in Section 6.11.
"Loan Documents" means this Agreement, the Notes, and the
Security Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox Agreement by and among
the Borrower, Norwest Bank and, the Lender, dated as of June 21, 1996.
"Maturity Date" means May 31, 1999.
"Maximum Line" means $8,000,000, unless said amount is reduced
pursuant to Section 2.17, in which event it means the amount to which
said amount is reduced.
"Mortgage" means the Original Mortgage as amended by the First
Amendment to Mortgage Documents.
"Mortgaged Property" has the meaning given to the term
"Mortgaged Premises" in the Mortgage.
"Mortgage Loan Documents" means the Old Real Estate Term Note,
the Original Mortgage, the Original Assignment of Rents and other
related documents.
"Norwest Bank" means Norwest Bank Minnesota, National
Association.
"Note" means the Revolving Note or a Term Note, and "Notes"
means the Revolving Note and the Term Notes.
"Obligations" means the Notes and each and every other debt,
liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, the Obligation of Reimbursement and all indebtedness of
the Borrower arising under this Agreement, the Notes, any L/C
Application completed by the Borrower, or any other loan or credit
agreement or guaranty between the Borrower and the Lender, whether now
in effect or hereafter entered into.
"Obligation of Reimbursement" has the meaning given in Section
2.5(a).
"Old Financing Statements" means financing statement No.
1344270, filed on July 16, 1990 and No. 1505853, filed on June 1, 1992.
"Old Real Estate Term Note" means the Borrower's promissory
note dated as of May 28, 1993, payable to the order of Ameribank in the
original principal amount of $1,155,000, as amended by the Waiver and
Modification Agreement.
"Old Revolving Note" means the Borrower's Revolving Note dated
as of June 21, 1996, payable to the order of the Lender in the original
principal amount of $9,500,000.
"Operating Lease" means any lease of any asset whether payable
currently or in the future but excluding Capital Expenditures.
"Original Assignment of Rents" means that certain Assignment
of Leases and Rents by the Borrower in favor of Ameribank dated as of
May 28, 1993, and recorded in the office of the County Recorder in and
for Hennepin County, Minnesota on June 9, 1993 as Document No. 6092804.
"Original Mortgage" means the Combination Mortgage, Security
Agreement, Assignment of Rents and Fixture Financing Statement by the
Borrower in favor of Ameribank dated as of May 28, 1993, and recorded
in the office of the County Recorder in and for Hennepin County,
Minnesota on June 9, 1993 as Document No. 6092803, as amended by the
Waiver and Modification Agreement.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement dated as of June 21, 1996, by the Borrower
in favor of the Lender and Norwest Bank.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Personal Property Collateral" means all of the Borrower's
Equipment, General Intangibles, Inventory, Receivables, all sums on
deposit in any Collateral Account, and any items in any Lockbox,
together with (i) all substitutions and replacements for and products
of any of the foregoing, (ii) proceeds of any and all of the foregoing,
(iii) in the case of all tangible goods, all accessions, (iv) all
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any tangible goods,
(v) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods; (vi) all sums on deposit in
the Special Account; and (vii) the Life Insurance Policy.
"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including (without
limitation) the premises legally described in Exhibit E attached
hereto.
"Prior Credit Agreement" means the Amended and Restated Credit
and Security Agreement dated as of June 21, 1996, by and between the
Borrower and the Lender.
"Prior Norwest Bank Credit Agreement" means the Credit and
Security Agreement dated as of June 21, 1996, by and between the
Borrower and Norwest Bank.
"Real Estate Term Advance" has the meaning given in Section
2.9.
"Real Estate Term Note" means the Borrower's promissory note,
payable to the order of the Lender in substantially the form of Exhibit
B hereto and any note or notes issued in substitution therefor, as the
same may hereafter be amended, supplemented or restated from time to
time.
"Receivables" means each and every right of the Borrower to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently
transfers such person's interest to the Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.2.
"Revolving Floating Rate" means an annual rate equal to the
sum of the Base Rate plus the Revolving Rate Spread, which annual rate
shall change when and as the Base Rate changes.
"Revolving Note" means the Borrower's revolving promissory
note, payable to the order of the Lender in substantially the form of
Exhibit A hereto.
"Revolving Rate Spread" means a percentage as determined
pursuant to Section 2.13.
"Second Funding Date" has the meaning given in Section 2.2.
"Security Documents" means this Agreement, the Collateral
Account Agreement, the Lockbox Agreement, the Life Insurance
Assignment, the Patent and Trademark Security Agreement, the Old
Financing Statements, the Assignment of Rents and the Mortgage.
"Security Interest" has the meaning given in Section 3.1.
"Servicer" means Norwest Business Credit, Inc., a Minnesota
corporation, or such other person as the Lender may from time to time
designate.
"Special Account" means a specified cash collateral account
maintained by a financial institution acceptable to the Lender in
connection with Letters of Credit, as contemplated by Section 2.6.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
"Tangible Net Worth" means the difference between (i) the
tangible assets of the Borrower, which, in accordance with GAAP are
tangible assets, after deducting adequate reserves in each case where,
in accordance with GAAP, a reserve is proper and (ii) all Debt of the
Borrower other than deferred tax liabilities; provided, however, that
notwithstanding the foregoing in no event shall there be included as
such tangible assets patents, trademarks, trade names, copyrights,
licenses, goodwill, investments in Ultra Pac Sud America, S.A. and
Ultra Pac Middle East, receivables from or investments in Affiliates,
directors, officers or employees, prepaid expenses, deferred tax
assets, deposits, deferred charges or treasury stock or any securities
or Debt of the Borrower or any other securities unless the same are
readily marketable in the United States of America or entitled to be
used as a credit against federal income tax liabilities, and any other
assets designated from time to time by the Lender, in its sole
discretion.
"Term Advance" means a Working Capital Term Advance, a Real
Estate Term Advance or a Capex Term Advance, and "Term Advances" means
the Working Capital Term Advances, the Real Estate Term Advances and
the Capex Term Advances.
"Term Floating Rate" means an annual rate equal to the sum of
the Base Rate plus the Term Rate Spread, which annual rate shall change
when and as the Base Rate changes.
"Term Notes" means the Working Capital Term Note, the Real
Estate Term Note and the Capex Term Note collectively, and "Term Note"
means any of such notes individually.
"Term Rate Spread" means a percentage as determined pursuant
to Section 2.13.
"Termination Date" means the Maturity Date, or the earlier
date of termination in whole of the Commitment pursuant to Sections
2.17(a) or 8.2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.16 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
Waiver and Modification Agreement means that certain Waiver
and Modification Agreement dated as of April 26, 1996 by and between
the Borrower and Ameribank.
"Working Capital Term Advance" has the meaning specified in
Section 2.8.
"Working Capital Term Note" means the Borrower's $4,527,372.88
Term Promissory Note dated as of June 21, 1996.
Section 1.2 Cross References. All references in this Agreement
to Articles, Sections and Subsections, shall be to Articles, Sections and
Subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
Amount and Terms of the Credit Facility
Section 2.1 Existing Advances. The Lender has made various
advances to the Borrower (the "Existing Revolving Advances") pursuant to the
Prior Credit Agreement. As of the date hereof, the outstanding principal balance
of the Existing Revolving Advances was $1,859,589.59. Upon execution and
delivery of this Agreement, the Existing Revolving Advances shall be deemed to
be Revolving Advances made pursuant to Section 2.2 and repayable in accordance
with the Revolving Note. To the extent the Revolving Note evidences the Existing
Revolving Advances, the Revolving Note shall be issued in substitution for and
replacement of but not in payment of the Old Revolving Note.
Section 2.2 Revolving Advances. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the date all of the conditions set forth in
Section 4.1 are satisfied (the "Second Funding Date") to the Termination Date,
on the terms and subject to the conditions herein set forth (the "Revolving
Advances"). The Lender shall have no obligation to make a Revolving Advance if,
after giving effect to such requested Revolving Advance, the sum of the
outstanding and unpaid Revolving Advances under this Section 2.2 or otherwise
would exceed the Borrowing Base less the L/C Amount. The Borrower's obligation
to pay the Revolving Advances shall be evidenced by the Revolving Note and shall
be secured by the Personal Property Collateral as provided in Article III.
Within the limits set forth in this Section 2.2, the Borrower may borrow, prepay
pursuant to Section 2.17 and reborrow. The Borrower agrees to comply with the
following procedures in requesting Revolving Advances under this Section 2.2:
(a) The Borrower shall make each request for a Revolving
Advance to the Lender before 1:00 p.m. (Minneapolis time) of the day of
the requested Revolving Advance. Requests may be made in writing or by
telephone, specifying the date of the requested Revolving Advance and
the amount thereof. Each request shall be by (i) any officer of the
Borrower; or (ii) any person designated as the Borrower's agent by any
officer of the Borrower in a writing delivered to the Lender; or (iii)
any person whom the Lender reasonably believes to be an officer of the
Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the Borrower's demand
deposit account maintained with Norwest Bank unless the Lender and the
Borrower shall agree in writing to another manner of disbursement. Upon
the Lender's request, the Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Borrower shall
repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in
fact authorized to do so. Any request for an Advance, whether written
or telephonic, shall be deemed to be a representation by the Borrower
that the conditions set forth in Section 4.2 have been satisfied as of
the time of the request.
Section 2.3 Existing Letter of Credit. The Lender has caused
the Issuer to issue one letter of credit which is presently outstanding (the
"Existing Letter of Credit"). The Borrower's obligations with respect to the
Existing Letters of Credit are evidenced by the Prior Credit Agreement. As of
the date of this Agreement, the aggregate amount available to be drawn under the
Existing Letter of Credit was $100,000. Upon execution and delivery of this
Agreement, the Existing Letters of Credit shall be deemed to be Letters of
Credit issued pursuant to Section 2.4.
Section 2.4 Letters of Credit.
(a) The Lender agrees, on the terms and subject to the
conditions herein set forth, to cause an Issuer to issue, from the
Second Funding Date to the Termination Date, one or more irrevocable
standby or documentary letters of credit (each, a "Letter of Credit")
for the Borrower's account. The Lender shall have no obligation to
cause an Issuer to issue any Letter of Credit if the face amount of the
Letter of Credit to be issued would exceed the lesser of:
(i) $1,000,000 less the L/C Amount, or
(ii) the Borrowing Base less the sum of (A) all
outstanding and unpaid Revolving Advances and (B) the L/C
Amount.
Each Letter of Credit, if any, shall be issued pursuant to a separate
L/C Application entered into between the Borrower and the Lender,
completed in a manner satisfactory to the Lender and the Issuer. The
terms and conditions set forth in each such L/C Application shall
supplement the terms and conditions hereof, but if the terms of any
such L/C Application and the terms of this Agreement are inconsistent,
the terms hereof shall control.
(b) No Letter of Credit shall be issued with an expiry date
later than the Termination Date in effect as of the date of issuance.
(c) Any request for the Lender to cause an Issuer to issue a
Letter of Credit under this Section 2.4 shall be deemed to be a
representation by the Borrower that the conditions set forth in Section
4.2 have been satisfied as of the date of the request.
Section 2.5 Payment of Amounts Drawn Under Letters of Credit;
Obligation of Reimbursement.
The Borrower acknowledges that the Lender, as co-applicant,
will be liable to the Issuer for reimbursement of any and all draws under
Letters of Credit and for all other amounts required to be paid under the
applicable L/C Application. Accordingly, the Borrower agrees to pay to the
Lender any and all amounts required to be paid under the applicable L/C
Application, when and as required to be paid thereby, and the amounts designated
below, when and as designated:
(a) The Borrower hereby agrees to pay the Lender on the day a
draft is honored under any Letter of Credit a sum equal to all amounts
drawn under such Letter of Credit plus any and all reasonable charges
and expenses that the Issuer or the Lender may pay or incur relative to
such draw and the applicable L/C Application, plus interest on all such
amounts, charges and expenses as set forth below (the Borrower's
obligation to pay all such amounts is hereinafter referred to as the
"Obligation of Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit,
the Lender shall make a Revolving Advance in the amount of the
Obligation of Reimbursement and shall apply the proceeds of such
Revolving Advance thereto. Such Revolving Advance shall be repayable in
accordance with and be treated in all other respects as a Revolving
Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the
Borrower is unable, because a Default Period then exists or for any
other reason, to obtain a Revolving Advance to pay the Obligation of
Reimbursement, the Borrower shall pay to the Lender on demand and in
immediately available funds, the amount of the Obligation of
Reimbursement together with interest, accrued from the date of the
draft until payment in full at the Default Rate applicable to Revolving
Advances. Notwithstanding the Borrower's inability to obtain a
Revolving Advance for any reason, the Lender is irrevocably authorized,
in its sole discretion, to make a Revolving Advance in an amount
sufficient to discharge the Obligation of Reimbursement and all accrued
but unpaid interest thereon.
(d) The Borrower's obligation to pay any Revolving Advance
made under this Section 2.5, shall be evidenced by Revolving Note and
shall bear interest as provided in Section 2.12.
Section 2.6 Special Account. If the Commitment is terminated
for any reason whatsoever, while any Letter of Credit is outstanding, the
Borrower shall thereupon pay the Lender in immediately available funds for
deposit in the Special Account an amount equal to the L/C Amount. The Special
Account shall be an interest bearing account maintained for the Lender by any
financial institution acceptable to the Lender. Any interest earned on amounts
deposited in the Special Account shall be credited to the Special Account.
Amounts on deposit in the Special Account may be applied by the Lender at any
time or from time to time to the Obligations in the Lender's sole discretion,
and shall not be subject to withdrawal by the Borrower so long as the Lender
maintains a security interest therein. The Lender agrees to transfer any balance
in the Special Account to the Borrower at such time as the Lender is required to
release its security interest in the Special Account under applicable law.
Section 2.7 Obligations Absolute. The Borrower's obligations
arising under this Agreement shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement, under
all circumstances whatsoever, including (without limitation) the following
circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or any other agreement or instrument relating to any Letter of
Credit (collectively the "Related Documents");
(b) any amendment or waiver of or any consent to departure
from all or any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such beneficiary or any such transferee may be acting), or other
person or entity, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents or any
unrelated transactions;
(d) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Issuer or the Lender under
any Letter of Credit against presentation of a draft or certificate
which does not strictly comply with the terms of such Letter of Credit;
or
(f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
Section 2.8 Working Capital Term Advances. The Lender's
predecessors in interest have made various advances to the Borrower (the
"Working Capital Term Advances"), the Borrower's obligation to pay which is
evidenced by the Working Capital Term Note. As of the date hereof, the
outstanding principal balance of the Working Capital Term Note was
$3,889,036.88.
Section 2.9 Real Estate Term Advance. Pursuant to the Mortgage
Loan Documents, Ameribank made a single advance to the Borrower in the amount of
$1,155,000 (the "Real Estate Term Advance"), the Borrower's obligation to pay
which is evidenced by the Old Real Estate Term Note and secured by the Original
Mortgage and the Original Assignment of Rents. As of the date hereof, the
outstanding principal balance of the Old Real Estate Term Note was $855,655.49.
Upon execution and delivery of this Agreement, (a) the Borrower shall reduce the
outstanding principal balance of the Real Estate Term Advance to $825,000, (b)
the Borrower shall issue the Real Estate Term Note in substitution for and
replacement of, but not in payment of, the Old Real Estate Term Note, (c) the
Real Estate Term Advance shall be deemed to have been made pursuant to this
Agreement and shall be subject to and repayable in accordance with this
Agreement and the Real Estate Term Note, (d) the Borrower and the Lender shall
execute and deliver the First Amendment to Mortgage Documents, and (e) the Real
Estate Term Note shall be secured by the Personal Property Collateral as
provided in Article III and pursuant to the Mortgage and the Assignment of
Rents.
Section 2.10 Capex Term Advances. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the Second Funding Date to the Termination Date
(the "Capex Term Advances"). The Lender shall have no obligation to make a Capex
Term Advance if, after giving effect to such requested Capex Term Advance, the
outstanding principal balance of the Capex Term Advances would exceed (a) the
lesser of (i) $1,000,000 or (ii) 75% of the hard costs of new or used Equipment,
acceptable to the Lender in its sole discretion, that the Borrower may acquire
after the date of this Agreement, reduced by (b) the aggregate amount of the
scheduled principal payments described in Section 2.11. The Borrower's
obligation to pay the Capex Term Advances shall be evidenced by the Capex Term
Note and shall be secured by the Personal Property Collateral as provided in
Article III.
(c) The Borrower agrees to comply with the following
procedures in requesting Capex Term Advances:
(i) The Borrower shall make each request for a Capex
Term Advance to the Lender before 11:00 a.m. (Minneapolis
time) five (5) Banking Days before the day of the requested
Capex Term Advance. Requests may be made in writing or by
telephone, specifying the date of the requested Capex Term
Advance and the amount thereof.
(ii) Each Capex Term Advance shall be in a minimum
amount of $100,000 and for any advances over $100,000, in
minimum increments of $10,000.
(iii) Each request shall be by an individual
authorized pursuant to Section 2.2(a).
(d) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall deposit the proceeds of the requested
Capex Term Advance by crediting the same to the Borrower's demand
deposit account specified in Section 2.2(b) unless the Lender and the
Borrower shall agree in writing to another manner of disbursement. Upon
the Lender's request, the Borrower shall promptly confirm each
telephonic request for a Capex Term Advance by executing and delivering
an appropriate confirmation certificate to the Lender. The Borrower
shall be obligated to repay all Capex Term Advances notwithstanding the
Lender's failure to receive such confirmation and notwithstanding the
fact that the person requesting the same was not in fact authorized to
do so. Any request for a Capex Term Advance, whether written or
telephonic, shall be deemed to be a representation by the Borrower that
the conditions set forth in Section 4.2 have been satisfied as of the
time of the request.
Section 2.11 Payment of Term Notes. The outstanding principal
balance of the Term Notes shall be due and payable as follows:
(a) WORKING CAPITAL TERM NOTE. The Working Capital Term Note
shall be due and payable in equal monthly installments of $64,817.28,
beginning on March 1, 1997, and on the first day of each month
thereafter until the Termination Date when the entire unpaid principal
balance of the Working Capital Term Note, and all unpaid interest
accrued thereon, shall in any event be due and payable.
(b) REAL ESTATE TERM NOTE. The Real Estate Term Note shall be
due and payable in equal monthly installments of $13,750, beginning on
March 1, 1997, and on the first day of each month thereafter until the
Termination Date when the entire unpaid principal balance of the Real
Estate Term Note, and all unpaid interest accrued thereon, shall in any
event be due and payable.
(c) CAPEX TERM NOTE. The Capex Term Note shall be due and
payable in monthly installments beginning on the first day of the first
month after the initial Capex Term Advance is made, and on the first
day of each month thereafter until the Termination Date when the entire
unpaid principal balance of the Capex Term Note, and all unpaid
interest accrued thereon, shall in any event be due and payable. The
amount of each installment on the Capex Term Note before the
Termination Date shall be equal to the amount which would be sufficient
to amortize fully each Capex Term Advance in 36 equal monthly
installments; i.e., after each Capex Term Advance is made, the amount
of each installment on the Capex Term Note will be increased by the
amount which would be sufficient to amortize fully such Capex Term
Advance in 36 equal monthly payments.
Section 2.12 Interest; Default Interest; Participations;
Usury. Interest accruing on the Notes shall be due and payable in arrears on the
first day of each month.
(a) REVOLVING NOTE. Except as set forth in Sections 2.12(c)
and 2.12(e), the outstanding principal balance of the Revolving Note
shall bear interest at the Revolving Floating Rate.
(b) TERM NOTES. Except as set forth in Sections 2.12(c) and
2.12(e), the outstanding principal balance of the Term Notes shall bear
interest at the Term Floating Rate.
(c) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(d) PARTICIPATIONS. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrower shall
be obligated to the Lender to pay the full amount of all interest
calculated under Sections 2.12(a) and 2.12(b), along with all other
fees, charges and other amounts due under this Agreement, regardless if
such Person elects to accept interest with respect to its participation
at a lower rate than the Revolving Floating Rate or the Term Floating
Rate, or otherwise elects to accept less than its prorata share of such
fees, charges and other amounts due under this Agreement.
(e) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law.
Section 2.13 Interest Rate Spreads.
(a) The Revolving Rate Spread and the Term Rate Spread used in
calculating the Revolving Floating Rate and the Term Floating Rate at
any time shall be determined in accordance with paragraphs (b) and (c)
below.
(b) The Revolving Rate Spread through and including February
28, 1997 shall be one half of one percent (0.5%). The Term Rate Spread
through and including February 28, 1997 shall be three-quarters of one
percent (0.75%).
(c) Beginning March 1, 1997, the Revolving Rate Spread and the
Term Rate Spread shall be adjusted on the basis of the Borrower's Debt
to Tangible Net Worth Ratio as at the end of each fiscal quarter.
(i) Until May 31, 1997, or if an Event of Default
occurs on or before April 30, 1997, the Revolving Rate Spread
and the Term Rate Spread shall be as set forth below opposite
the applicable Debt to Tangible Net Worth Ratio:
Debt to Tangible Net Revolving Rate Term Rate
Worth Ratio Spread Spread
--------------------------- -------------- -----------
3.51 to 1 or more 1.50% 2.00%
2.76 to 1 or more, but less 0.50% 0.75%
than 3.51 to 1
2.01 to 1 or more, but less 0.25% 0.50%
than 2.76 to 1
1.01 to 1 or more, but less 0.00% 0.25%
than 2.01 to 1
1.00 to 1 or less (0.25%) 0.00%
( ii) Provided no Event of Default occurs on or
before April 30, 1997, effective June 1, 1997, the Revolving
Rate Spread and the Term Rate Spread shall be as set forth
below opposite the applicable Debt to Tangible Net Worth
Ratio:
Debt to Tangible Net Revolving Rate Term Rate
Worth Ratio Spread Spread
--------------------------- -------------- -----------
3.51 to 1 or more 1.25% 1.75
2.76 to 1 or more, but less 0.25% 0.50%
than 3.51 to 1
2.01 to 1 or more, but less 0.00% 0.25%
than 2.76 to 1
1.01 to 1 or more, but less 0.00% 0.25%
than 2.01 to 1
1.00 to 1 or less (0.50%) (0.25%)
Reductions and increases in the Revolving Rate Spread and the Term Rate
Spread will be made effective on the first day of the second month
after the end of each fiscal quarter of the Borrower (e.g., March 1 for
the fiscal quarter ending January 31); provided, however, that if the
Borrower fails to deliver any financial statements or compliance
certificates when required under Section 6.1 for more than five days
after receiving written notice of such non-delivery, the Lender may,
without limiting its other rights and remedies, increase the Revolving
Rate Spread and/or the Term Rate Spread to the highest rates set forth
above until such time as the Lender has received all such financial
statements and compliance certificates. Notwithstanding the foregoing,
no reduction in the Revolving Rate Spread or the Term Rate Spread will
be made if a Default Period exists at the time that such reduction
would otherwise be made.
Section 2.14 Fees.
(a) AMENDMENT FEE. The Borrower shall pay the Lender on the
Second Funding Date, the amendment fee of $50,000 due pursuant to the
Prior Credit Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.14(b),
"Unused Amount" means the Maximum Line reduced by (i) outstanding
Revolving Advances and (ii) the L/C Amount. The Borrower agrees to pay
to the Lender an unused line fee at the rate of one-quarter of one
percent (0.25%) per annum on the average daily Unused Amount from the
date of this Agreement to and including the Termination Date, due and
payable quarterly in arrears on the first day of the month and on the
Termination Date.
(c) LETTER OF CREDIT FEES. The Borrower agrees to pay the
Lender a fee with respect to each Letter of Credit, if any, accruing on
a daily basis and computed at the annual rate of two percent (2.0%) of
the aggregate amount that may then be drawn on all issued and
outstanding Letters of Credit, assuming compliance with all conditions
for drawing thereunder from and including the date of issuance of such
Letter of Credit until such date as such Letter of Credit shall
terminate by its terms or be returned to the Lender, due and payable
annually in advance. The foregoing fee shall be in addition to any and
all fees, commissions and charges of any Issuer of a Letter of Credit
with respect to or in connection with such Letter of Credit.
(d) LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower agrees
to pay the Lender, on written demand, the administrative fees charged
by the Issuer in connection with the honoring of drafts under any
Letter of Credit, amendments thereto, transfers thereof and all other
activity with respect to the Letters of Credit at the then-current
rates published by the Issuer for such services rendered on behalf of
customers of the Issuer generally.
(e) AUDIT FEES. The Borrower hereby agrees to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations
or business at the standard rate or rates established from time to time
by the Lender as its audit fees (which fees are currently $400 per day
per auditor), together with all actual out-of-pocket costs and expenses
incurred in conducting any such audit or inspection; provided, however,
that except during Default Periods, the Borrower shall not have to
reimburse the Lender in connection with more than three audits per
year.
Section 2.15 Computation of Interest and Fees; When Interest
Due and Payable. Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be computed on
the basis of actual number of days elapsed in a year of 360 days. Interest shall
be payable in arrears on the first day of each month and on the Termination
Date.
Section 2.16 Capital Adequacy; Increased Costs and Reduced
Return. If any Related Lender determines at any time that its Return has been
reduced as a result of any Rule Change, such Related Lender may require the
Borrower to pay it the amount necessary to restore its Return to what it would
have been had there been no Rule Change. For purposes of this Section 2.16:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "L/C Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding letters of credit, or the
interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender. Such rules
include rules imposing taxes, duties or other similar charges, or
mandating reserves, special deposits or similar requirements against
assets of, deposits with or for the account of, or credit extended by
any Related Lender, on letters of credit.
(c) "Return", for any period, means the return as determined
by such Related Lender on the Advances and Letters of Credit based upon
its total capital requirements and a reasonable attribution formula
that takes account of the Capital Adequacy Rules then in effect and
costs of issuing or maintaining any Letter of Credit. Return may be
calculated for each calendar quarter and for the shorter period between
the end of a calendar quarter and the date of termination in whole of
this Agreement.
(d) "Rule Change" means any change in any Capital Adequacy
Rule or L/C Rule occurring after the date of this Agreement, but the
term does not include any changes in applicable requirements that at
the Closing Date are scheduled to take place under the existing Capital
Adequacy Rules or L/C Rules or any increases in the capital that any
Related Lender is required to maintain to the extent that the increases
are required due to a regulatory authority's assessment of the
financial condition of such Related Lender.
(e) "Related Lender" includes (but is not limited to) the
Lender, the Issuer, any parent corporation of the Lender or the Issuer
and any assignee of any interest of the Lender hereunder and any
participant in the loans made hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.16, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Section 2.17 Voluntary Prepayment; Termination of Credit
Facility by the Borrower; Permanent Reduction of the Maximum Line; Prepayment of
the Term Notes; Waiver of Reduction and Prepayment Fees. Except as otherwise
provided herein, the Borrower may terminate the Credit Facility or prepay the
Advances in whole at any time or from time to time in part.
(a) TERMINATION BY BORROWER. The Borrower may terminate the
Credit Facility at any time so long as no Letter of Credit has been
issued and is outstanding with an expiration date after such date, and,
subject to payment and performance of all Obligations, may obtain any
release or termination of the Security Interest and the Security
Documents to which the Borrower is otherwise entitled by law by (i)
giving at least 30 days' prior written notice to the Lender of the
Borrower's intention to terminate the Credit Facility; and (ii) paying
the Lender reduction, termination and prepayment fees in accordance
with subsections (b) and (c) if the Borrower reduces the Maximum Line,
terminates the Credit Facility or prepays the Term Advances effective
as of any date other than the Maturity Date.
(b) PERMANENT REDUCTION OF MAXIMUM LINE. The Borrower may at
any time and from time to time, upon at least 30 days' prior written
notice to the Lender, permanently reduce in part or completely the
Maximum Line or terminate the Credit Facility in accordance with the
following provisions:
(i) The Borrower may not reduce the Maximum Line to
an amount less than the then-aggregate outstanding balance of
the Revolving Advances plus the L/C Amount.
(ii) If a reduction of the Maximum Line occurs at any
time on or before May 31, 1998, the Borrower shall pay to the
Lender a premium in an amount equal to two percent (2%) of the
reduction. If a reduction of the Maximum Line occurs at any
time after May 31, 1998 but before the Maturity Date, the
Borrower shall pay to the Lender a premium in an amount equal
to one percent (1%) of the reduction.
(iii) If the Borrower reduces the Maximum Line to
zero, all Obligations shall be immediately due and payable.
(c) PREPAYMENT OF THE TERM NOTES. The Borrower may at any time
and from time to time, upon at least 30 days' prior written notice to
the Lender, prepay in part or in whole the outstanding principal
balance of any Term Note in accordance with the following provisions:
(i) If such prepayment occurs at any time on or
before May 31, 1998, the Borrower shall pay to the Lender a
premium in an amount equal to two percent (2%) of the amount
prepaid. If such prepayment occurs at any time after May 31,
1998 but before the Maturity Date, the Borrower shall pay to
the Lender a premium in an amount equal to one percent (1%) of
the amount prepaid.
(ii) Any partial prepayments of any Term Note shall
be applied to principal payments due and owing in inverse
order of their maturities and must be in a minimum amount of
$100,000.
(d) WAIVER OF REDUCTION, TERMINATION AND PREPAYMENT FEES. The
Borrower will not be required to pay the reduction, termination or
prepayment fees otherwise due under subsections (b) or (c) if the
Borrower requests such reduction or makes such prepayment (i) because
of increased cash flow generated from the Borrower's operations, (ii)
in connection with refinancing by an affiliate of the Lender, (iii)
promptly after the sale of Collateral (other than Inventory) from time
to time and the Lender agrees to waive such fees, or (iv) within 120
days after the Lender delivers a notice pursuant to Section 2.16
Section 2.18 Mandatory Prepayment. Without notice or demand,
if the sum of the outstanding principal balance of the Revolving Advances plus
the L/C Amount shall at any time exceed the Borrowing Base, the Borrower shall
(i) first, immediately prepay the Revolving Advances to the extent necessary to
eliminate such excess; and (ii) if prepayment in full of the Revolving Advances
is insufficient to eliminate such excess, pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess. Any payment received by the Lender under this Section 2.18 or
under Section 2.17 may be applied to the Obligations, in such order and in such
amounts as the Lender, in its discretion, may from time to time determine;
provided that any prepayment under Section 2.17 which the Borrower designates as
a partial prepayment of the Term Note shall be applied to principal installments
of the Term Note in inverse order of maturity.
Section 2.19 Payment. All payments to be applied to the
Obligations shall be made to the Lender in immediately available funds. The
Lender may hold all payments not constituting immediately available funds for
three (3) days before applying them to the Obligations. Notwithstanding anything
in Section 2.2, the Borrower hereby authorizes the Lender, in its discretion at
any time or from time to time without the Borrower's request and even if the
conditions set forth in Section 4.2 would not be satisfied, to make a Revolving
Advance in an amount equal to the portion of the Obligations from time to time
due and payable.
Section 2.20 Payment on Non-Banking Days. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
Section 2.21 Use of Proceeds. The Borrower shall use the
proceeds of Advances, and each Letter of Credit, if any, to retire a portion of
its obligations to Norwest Bank as set forth in Schedule 2.21 and for ordinary
working capital purposes, and shall not use such proceeds for any speculative
purpose.
Section 2.22 Liability Records. The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrower
establishes the contrary. Upon the Lender's demand, the Borrower will admit and
certify in writing the exact principal balance of the Obligations that the
Borrower then asserts to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrower
unless the Borrower gives the Lender specific written notice of exception within
30 days after receipt.
ARTICLE III
Security Interest; Occupancy; Setoff
Section 3.1 Grant of Security Interest. The Borrower hereby
pledges, assigns and grants to the Lender a security interest (collectively
referred to as the "Security Interest") in the Personal Property Collateral, as
security for the payment and performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the Borrower or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in the Borrower's name, (a) demand,
▇▇▇ for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under the Security Documents and holding all other mail for the Borrower's
account or forwarding such mail to the Borrower's last known address.
Section 3.3 Assignment of Insurance. As additional security
for the payment and performance of the Obligations, the Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises at any time during a Default
Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Personal Property Collateral and for other
purposes that the Lender may in good ▇▇▇▇▇ ▇▇▇▇ to be related or
incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and ( ii) final sale or
disposition of all goods constituting Personal Property Collateral and
delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrower shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 License. Without limiting the generality of the
Patent and Trademark Security Agreement, the Borrower hereby grants to the
Lender a non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of the
Borrower for the purpose of selling, leasing or otherwise disposing of any or
all Personal Property Collateral during any Default Period.
Section 3.6 Financing Statement. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Name and address of Debtor:
Ultra Pac, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Name and address of Secured Party:
Norwest Credit, Inc.
Norwest Center
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Section 3.7 Setoff. The Borrower agrees that the Lender may at
any time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to the Borrower by the
Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any Obligations
shall have the right to appropriate or setoff any deposit or other liability
then owed by such Person to the Borrower, whether or not due, and apply the same
to the payment of said participating interest, as fully as if such Person had
lent directly to the Borrower the amount of such participating interest.
ARTICLE IV
Conditions of Lending
Section 4.1 Conditions Precedent to the Initial Revolving and
Term Advances and the Initial Letter of Credit. The Lender's obligation to make
the initial Revolving Advance and Term Advance or to cause to be issued the
initial Letter of Credit hereunder shall be subject to the condition precedent
that the Lender shall have received all of the following, each in form and
substance satisfactory to the Lender:
(a) The Assignment of Mortgage Loan Documents, properly
executed by Norwest Bank.
(b) An amendment to financing statement No. 1596789 filed with
the Minnesota Secretary of State to name Norwest Bank as secured party,
properly executed by the Borrower and Norwest Bank.
(c) A UCC-3 assignment naming the Lender as secured party for
financing statement No. 1596789 filed with the Minnesota Secretary of
State, properly executed by Norwest Bank.
(d) The Old Real Estate Term Note, properly endorsed by
Norwest Bank in favor of the Lender.
(e) Releases by Norwest Bank of its interests in any
Collateral not otherwise assigned to the Lender, properly executed by
Norwest Bank.
(f) The First Amendment to Mortgage Documents, properly
executed by the Borrower.
(g) Copies of the Mortgage Loan Documents.
(h) This Agreement, properly executed by the Borrower.
(i) The Revolving Note, the Real Estate Term Note and the
Capex Term Note, properly executed by the Borrower.
(j) An endorsement or commitment to issue an endorsement to
Title Insurance Policy No. C2424925 issued by Chicago Title Insurance
Company which will "down date" such policy, identify the Lender as the
mortgagee under such policy and insure that the Mortgage constitutes a
first and valid lien on the Mortgaged Property, subject only to such
encumbrances and matters as the Lender may approve.
(k) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower; (ii) the Borrower has not assigned any of
the patents or trademarks subject to the Patent and Trademark Security
Agreement; (iii) no financing statements have been filed and remain in
effect against the Borrower except those financing statements relating
to Permitted Liens or to liens held by Persons who have agreed in
writing that upon receipt of proceeds of the Advances, they will
deliver UCC releases and/or terminations satisfactory to the Lender;
and (iv) the Lender has duly filed all financing statements necessary
to perfect the Security Interest, to the extent the Security Interest
is capable of being perfected by filing.
(l) A certificate of the Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of the Borrower's
directors and, if required, shareholders, authorizing the execution,
delivery and performance of the Loan Documents, (ii) the fact that the
Articles of Incorporation and Bylaws of the Borrower, which were
certified and delivered to the Lender pursuant to the Certificate of
Authority of the Borrower's Secretary dated as of June 21, 1996
continue in full force and effect and have not been amended or
otherwise modified except as set forth in the Certificate to be
delivered, and (iii) certifying that the officers and agents of the
Borrower who have been certified to the Lender, pursuant to the
Certificate of Authority of the Borrower's Secretary dated as of June
21, 1996 as being authorized to sign and to act on behalf of the
Borrower continue to be so authorized or setting forth the sample
signatures of each of the officers and agents of the Borrower
authorized to execute and deliver this Amendment and all other
documents, agreements and certificates on behalf of the Borrower.
(m) A current certificate issued by the Secretary of State of
Minnesota, certifying that the Borrower is in compliance with all
applicable organizational requirements of the State of Minnesota.
(n) Evidence that the Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
(o) An opinion of counsel to the Borrower, addressed to the
Lender.
(p) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as
mortgagee and additional insured.
(q) Payment of the fees and commissions due through the date
of the initial Advance or Letter of Credit under Section 2.14 and
expenses incurred by the Lender through such date and required to be
paid by the Borrower under Section 9.9, including all reasonable legal
expenses incurred through the date of this Agreement.
(r) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 Conditions Precedent to All Advances and Letters
of Credit. The Lender's obligation to make each Advance or to issue any Letter
of Credit shall be subject to the further conditions precedent that on such
date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance or issuance of Letter
of Credit as though made on and as of such date, except to the extent
that such representations and warranties relate solely to an earlier
date; and
(b) no event has occurred and is continuing, or would result
from such Advance or the issuance of such Letter of Credit, as the case
may be, which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief
Executive Office; Inventory and Equipment Locations; Tax Identification Number.
The Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Minnesota and is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary, except the Borrower is not presently
qualified in California and New Jersey, but shall be so qualified within 60 days
of the date hereof. The Borrower has all requisite power and authority,
corporate or otherwise, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents. During its existence, the Borrower has done business solely under the
names set forth in Schedule 5.1 hereto. The Borrower's chief executive office
and principal place of business is located at the address set forth in Schedule
5.1 hereto, and all of the Borrower's records relating to its business or the
Collateral are kept at that location. All Inventory and Equipment is located at
that location or at one of the other locations set forth in Schedule 5.1 hereto.
The Borrower's tax identification number is correctly set forth in Section 3.6
hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law
or Agreements. The execution, delivery and performance by the Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Borrower's articles of incorporation or bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
Section 5.3 Legal Agreements.
(a) The Prior Credit Agreement, the Old Revolving Note, and
the Mortgage Loan Documents, constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms. The Borrower has no claim,
defense or offset to enforcement of such documents.
(b) This Agreement constitutes and, upon due execution by the
Borrower, the other Loan Documents will constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
Section 5.4 Subsidiaries. The Borrower has no Subsidiaries.
The Borrower does, however have minority investments in Ultra Pac SudAmerica,
S.A. and Ultra Pac Middle East.
Section 5.5 Financial Condition; No Adverse Change. The
Borrower has heretofore furnished to the Lender audited financial statements of
the Borrower for its fiscal year ended January 31, 1996, and unaudited financial
statements of the Borrower for the months ended December 31, 1996, and those
statements fairly present the Borrower's financial condition on the dates
thereof and the results of its operations and cash flows for the periods then
ended and were prepared in accordance with generally accepted accounting
principles. Since the date of the most recent financial statements, there has
been no material adverse change in the Borrower's business, properties or
condition (financial or otherwise).
Section 5.6 Litigation. Except as described in the letter to
the Borrower's auditors by the Borrower's attorneys, there are no actions, suits
or proceedings pending or, to the Borrower's knowledge, threatened against or
affecting the Borrower or any of its Affiliates or the properties of the
Borrower or any of its Affiliates before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any of its Affiliates, would
have a material adverse effect on the financial condition, properties or
operations of the Borrower or any of its Affiliates.
Section 5.7 Regulation U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.8 Taxes. The Borrower and its Affiliates have paid
or caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them. The Borrower and its
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrower or any Affiliate, as the case may be,
are required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.9 Titles and Liens. The Borrower has good and
absolute title to all Collateral described in the collateral reports provided to
the Lender and all other collateral, properties and assets reflected in the
latest balance sheet referred to in Section 5.5 and all proceeds thereof, free
and clear of all mortgages, security interests, liens and encumbrances, except
for Permitted Liens. No financing statement naming the Borrower as debtor is on
file in any office except to perfect only Permitted Liens.
Section 5.10 Plans. Except as disclosed to the Lender in
writing prior to the date hereof, neither the Borrower nor any of its Affiliates
maintains or has maintained any Plan. Neither the Borrower nor any Affiliate has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA. No Reportable Event or other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. Neither the Borrower nor
any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11 Default. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Section 5.12 Environmental Matters.
(a) Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for either the
Borrower or the Lender under common law of any jurisdiction or under
any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on
or under the Premises in such a way as to create any such liability.
(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the
Borrower, alleging liability under, violation of, or noncompliance with
any Environmental Law or any license, permit or other authorization
issued pursuant thereto. To the Borrower's best knowledge, no such
matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
Borrower's possession and are in full force and effect. No permit
required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrower's
businesses.
Section 5.13 Submissions to Lender. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.14 Financing Statements. The Borrower has provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which is
capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in effect
with respect thereto.
Section 5.15 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
ARTICLE VI
Borrower's Affirmative Covenants
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrower will deliver,
or cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 92 days
after the end of each fiscal year of the Borrower, the Borrower's
audited financial statements with the unqualified opinion of
independent certified public accountants selected by the Borrower and
acceptable to the Lender, which annual financial statements shall
include the Borrower's balance sheet as at the end of such fiscal year
and the related statements of the Borrower's income, retained earnings
and cash flows for the fiscal year then ended, prepared, if the Lender
so requests, on a consolidating and consolidated basis to include any
Affiliates, all in reasonable detail and prepared in accordance with
GAAP, together with (i) copies of all management letters prepared by
such accountants; (ii) a report signed by such accountants stating that
in making the investigations necessary for said opinion they obtained
no knowledge, except as specifically stated, of any Default or Event of
Default hereunder and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Sections 6.13, 6.14,
6.15, 7.10 and 7.11; and (iii) a certificate of the Borrower's chief
financial officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer has
knowledge of the occurrence of any Default or Event of Default
hereunder and, if so, stating in reasonable detail the facts with
respect thereto;
(b) as soon as available and in any event within 20 days after
the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the
end of and for such month and for the year to date period then ended,
prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments; and accompanied by a certificate
of the Borrower's chief financial officer, substantially in the form of
Exhibit D hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto, and (iii) all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the requirements set forth in Sections
6.13, 6.14, 6.15, 7.10 and 7.11;
(c) within 15 days after the end of each month, agings of the
Borrower's accounts receivable and its accounts payable and an
inventory and accounts receivable certification report as at the end of
such month setting forth in form acceptable to the Lender the
Borrower's Accounts, Eligible Accounts, Inventory and Eligible
Inventory;
(d) at least 30 days before the beginning of each fiscal year
of the Borrower, the projected balance sheets and income statements for
each month of such year, each in reasonable detail, representing the
Borrower's good faith projections and certified by the Borrower's chief
financial officer as being the most accurate projections available and
identical to the projections used by the Borrower for internal planning
purposes, together with such supporting schedules and information as
the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 5.12 or which seek a monetary recovery against the
Borrower in excess of $100,000 and not previously disclosed pursuant to
Section 5.6;
(f) as promptly as practicable (but in any event not later
than five business days) after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrower of the
steps being taken by the Borrower to cure the effect of such breach,
default or event;
(g) as soon as possible and in any event within 30 days after
the Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the Borrower's chief
financial officer setting forth details as to such Reportable Event and
the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after
the Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, the statement of the Borrower's chief financial
officer setting forth details as to such failure and the action which
the Borrower proposes to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the
Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers exceeding $25,000
individually; and (ii) any change in the persons constituting the
Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(l) promptly after the sending or filing thereof, copies of
all regular and periodic financial reports which the Borrower shall
file with the Securities and Exchange Commission or any national
securities exchange;
(m) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition; and
(n) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
The Borrower shall also send to the Lender's participants such copies of the
foregoing information as the Lender shall request from time to time.
Section 6.2 Books and Records; Inspection and Examination. The
Borrower will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to the Borrower's business and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time
and from time to time send or require the Borrower to send requests for,
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time after notice to
the Borrower telephone account debtors and other obligors to verify accounts.
Section 6.4 Compliance with Laws.
(a) The Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
Section 6.5 Payment of Taxes and Other Claims. The Borrower
will pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to it (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by it, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrower; provided, that the Borrower shall
not be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section 6.6 Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent the
Borrower from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims
or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security
interests, liens and encumbrances except Permitted Liens.
Section 6.7 Insurance. The Borrower will obtain and at all
times maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrower operates. Without limiting the generality of the foregoing, the
Borrower will at all times keep all tangible Collateral insured against risks of
fire (including so-called extended coverage), theft, collision (for Collateral
consisting of motor vehicles) and such other risks and in such amounts as the
Lender may reasonably request, with any loss payable to the Lender to the extent
of its interest, and all policies of such insurance shall contain a mortgagee's
and lender's loss payable endorsement for the Lender's benefit. All policies of
liability insurance required hereunder shall name the Lender as an additional
insured.
Section 6.8 Preservation of Existence. The Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the
Lender, the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by the Borrower.
Section 6.10 Collateral Account. If, notwithstanding the
instructions to debtors to make payments to the Lockbox, the Borrower receives
any payments on Receivables, the Borrower shall deposit such payments into the
Collateral Account. Until so deposited, the Borrower shall hold all such
payments in trust for and as the property of the Lender and shall not commingle
such payments with any of its other funds or property.
(a) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(b) All deposits in the Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations. The Lender from time to time at its discretion may, after
allowing two (2) Banking Days, apply deposited funds in the Collateral
Account to the payment of the Obligations, in any order or manner of
application satisfactory to the Lender.
(c) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the
Borrower will immediately pay the Lender, or, for items deposited in
the Collateral Account, the bank maintaining such account, the amount
of that item, or such bank at its discretion may charge any uncollected
item to the Borrower's commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the
Collateral Account, whether or not in fact endorsed by the Borrower.
Section 6.11 Key Person Life Insurance. The Borrower shall
maintain insurance upon the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, its president, with the
death benefit thereunder in an amount not less than $3,500,000 (the "Life
Insurance Policy"). The right to receive the proceeds of the Life Insurance
Policy shall be assigned to the Lender.
Section 6.12 Performance by the Lender. If the Borrower at any
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.5 and 6.7,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed
to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Floating Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender,
or the Lender's delegate, acting alone, as the Borrower's attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrower under this Section 6.12.
Section 6.13 Maximum Debt to Tangible Net Worth Ratio. The
Borrower will maintain as of the last day of each month for each month or during
each period listed below, its Debt to its Tangible Net Worth Ratio at not more
than the ratio set forth opposite such month or period:
Month/Period Maximum Debt to Tangible
------------ ------------------------
Net Worth Ratio
---------------
January 1997 4.50 to 1.00
February 1997 through May 1997 3.50 to 1.00
June 1997 3.25 to 1.00
July 1997 3.00 to 1.00
August 1997 through April 1998 2.75 to 1.00
Section 6.14 Minimum EBT. The Borrower will achieve during
each year-to-date period ending on the last day of each month listed below, EBT
of not less than the amount set forth opposite such month:
Month Minimum EBT
----- -----------
January 1997 ($220,000)
February 1997 $75,000
March 1997 $200,000
April 1997 $550,000
May 1997 $1,125,000
June 1997 $1,500,000
July 1997 $1,700,000
August 1997 $1,900,000
September 1997 $2,000,000
October 1997 $2,000,000
November 1997 $2,150,000
December 1997 $2,300,000
January 1998 $2,320,000
February 1998 $75,000
March 1998 $200,000
April 1998 $550,000
Section 6.15 Maximum Inventory Days. As of the end of each
month for each month or during each period listed below, the Borrower shall
achieve a turnover rate for its Inventory of not more than the number of
Inventory Days set forth opposite such month:
Month/Period Inventory Days
------------ --------------
January 1997 75
February 1997 85
March 1997 through 75
April 1997
May 1997 through 70
April 1998
Section 6.16 New Covenants. On or before February 28, 1998,
the Borrower and the Lender shall agree on new covenant levels for Sections
6.13, 6.14, 6.15, 7.10 and 7.11 for periods after April 1998. The new covenant
levels will be based on the Borrower's projections for such periods and shall be
no less stringent than the present levels.
ARTICLE VII
Negative Covenants
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 Liens. The Borrower will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however, from the operation of
the foregoing the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2;
(c) encumbrances listed on Schedule B to Title Insurance
Policy No. C2424925 issued by Chicago Title Insurance Company;
(d) the Security Interest and liens and security interests
created by the Security Documents; and
(e) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower and so long as
no Default Period is then in existence and no Default or Event of
Default would exist immediately after such acquisition.
Section 7.2 Indebtedness. The Borrower will not incur, create,
assume or permit to exist any indebtedness or liability on account of deposits,
advances, any indebtedness for borrowed money, or any other indebtedness or
liability, in each case evidenced by notes, bonds, debentures or similar
obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
Section 7.3 Guaranties. The Borrower will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Schedule 7.2 hereto.
Section 7.4 Investments and Subsidiaries.
(a) The Borrower will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by ▇▇▇▇▇'▇ Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(ii) investment in certain companies as set forth in
Section 5.4, provided that the Borrower shall make no further
cash investments in such companies other than up to $50,000 in
any twelve month period in Ultra Pac SudAmerica S.A.;
(iii) travel advances or loans to the Borrower's
officers and employees not exceeding at any one time an
aggregate of $10,000;
(iv) advances in the form of progress payments,
prepaid rent not exceeding two months or security deposits;
and
(v) a promissory note by Maine Fresh Pack having an
outstanding balance of approximately $9,502.30 as of the date
hereof.
(b) The Borrower will not create or permit to exist any
Subsidiary.
Section 7.5 Dividends. The Borrower will not declare or pay
any dividends (other than dividends payable solely in stock of the Borrower) on
any class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 7.6 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 Consolidation and Merger; Asset Acquisitions. The
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 7.8 Sale and Leaseback. The Borrower will not enter
into any arrangement, directly or indirectly, with any other Person whereby the
Borrower shall sell or transfer any real or personal property, whether now owned
or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which the Borrower intends to
use for substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 Restrictions on Nature of Business. The Borrower
will not engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10 Capital Expenditures. The Borrower will not incur
or contract to incur Capital Expenditures exceeding $1,000,000 in the aggregate
during any fiscal year.
Section 7.11 Operating Leases. The Borrower will not incur or
contract to incur any new Operating Lease having a monthly payment exceeding
$5,000 except to replace existing Equipment or in connection with upgrading the
Borrower's computer system.
Section 7.12 Accounting. The Borrower will not adopt any
material change in accounting principles other than as required by GAAP. The
Borrower will not adopt, permit or consent to any change in its fiscal year.
Section 7.13 Discounts, etc. The Borrower will not grant any
discount, credit or allowance to any customer of the Borrower or accept any
return of goods sold, or modify, amend, subordinate, cancel or terminate the
obligation of any account debtor or other obligor of the Borrower except in the
ordinary course of business and until the Lender directs it to cease such
activity.
Section 7.14 Defined Benefit Pension Plans. The Borrower will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.15 Other Defaults. The Borrower will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.16 Place of Business; Name. The Borrower will not
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrower will not permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
Section 7.17 Organizational Documents; S Corporation Status.
The Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws. The Borrower will not become an S Corporation within
the meaning of the Internal Revenue Code of 1986, as amended.
Section 7.18 Salaries. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation.
ARTICLE VIII
Events of Default, Rights and Remedies
Section 8.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) Default in the payment of any interest on or principal of
the Notes when it becomes due and payable;
(b) Failure to pay when due any amount specified in Section
2.5 relating to the Borrower's Obligation of Reimbursement, or failure
to pay immediately when due or upon termination of the Credit Facility
any amounts required to be paid for deposit in the Special Account
under Section 2.6 or;
(c) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement which
continues for more than five days after the Borrower receives written
notice from the Lender;
(d) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
(e) The Borrower shall be or become insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or the Borrower shall apply
for or consent to the appointment of any receiver, trustee, or similar
officer for it or for all or any substantial part of its property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of the Borrower, as the case may be; or the
Borrower shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against the Borrower; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower;
(f) A petition shall be filed by or against the Borrower under
the United States Bankruptcy Code naming the Borrower as debtor;
(g) (i) The Life Insurance Policy shall be terminated, by the
Borrower or otherwise, (ii) or the Life Insurance Policy shall be
scheduled to terminate within 30 days and the Borrower shall not have
delivered a satisfactory renewal thereof to the Lender, or ( iii) the
Borrower shall fail to pay any premium on the Life Insurance Policy
when due, or (iv) the Borrower shall continue any other action that
impairs the value of the Life Insurance Policy, and the Borrower shall
fail to remedy such situation within five days after receiving written
notice from the Lender.
(h) Any representation or warranty made by the Borrower in
this Agreement, or by the Borrower (or any of its officers) in any
agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement shall prove to have been incorrect in
any material respect when deemed to be effective;
(i) The rendering against the Borrower of a final judgment,
decree or order for the payment of money in excess of $50,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution,
unless the Borrower's liability therefore is fully insured, less any
deductible, provided such deductible is less than $50,000;
(j) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower owed to any Person other than
the Lender, or under any indenture or other instrument under which any
such evidence of indebtedness has been issued or by which it is
governed, or under any lease of any of the Premises, and the expiration
of the applicable period of grace, if any, specified in such evidence
of indebtedness, indenture, other instrument or lease;
(k) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
the Borrower by the Lender; or a trustee shall have been appointed by
an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer
any Plan; or the Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or the Borrower shall have failed
to make any quarterly contribution required with respect to any Plan
under Section 412(m) of the Internal Revenue Code of 1986, as amended,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
the Borrower's assets in favor of the Plan;
(l) An event of default shall occur under any Security
Document;
(m) An event of default shall occur under any other security
agreement, mortgage, deed of trust, assignment or other instrument or
agreement securing any obligations of the Borrower hereunder or under
any note, and shall continue for more than five days after the Borrower
receives written notice thereof from the Lender;
(n) The Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(o) The Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued, and such failure shall continue for five days after
the Borrower receives written notice thereof from the Lender;
(p) Default in the payment of any amount owed by the Borrower
to the Lender other than any indebtedness arising hereunder;
(q) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender, and such breach, default or event of default shall continue
for five days after the Borrower receives written notice thereof from
the Lender;.
Section 8.2 Rights and Remedies. During any Default Period,
the Lender may exercise any or all of the following rights and remedies:
(a) The Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) The Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrower hereby expressly waives;
(c) The Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(d) The Lender may make demand upon the Borrower and,
forthwith upon such demand, the Borrower will pay to the Lender in
immediately available funds for deposit in the Special Account pursuant
to Section 2.18 an amount equal to the maximum aggregate amount
available to be drawn under all Letters of Credit then outstanding,
assuming compliance with all conditions for drawing thereunder;
(e) The Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrower will on demand assemble the
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(f) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(g) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 8.1(f), the Obligations shall be immediately due and
payable automatically without presentment, demand, protest or notice of any
kind.
Section 8.3 Certain Notices. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.5) at least ten
calendar days before the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
Section 9.1 Restatement of Prior Credit Agreement. This
Agreement is executed for the purpose of amending and restating the Prior Credit
Agreement.
Section 9.2 Release. The Borrower, hereby absolutely and
unconditionally releases and forever discharges the Lender, any participants and
any and all parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower has had, now has or has made claim to have against any such person for
or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Agreement, whether
such claims, demands and causes of action are matured or unmatured or known or
unknown.
Section 9.3 No Waiver; Cumulative Remedies. No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.4 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances.
Section 9.5 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
If to the Borrower:
Ultra Pac, Inc.
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Telecopier: 612/428-8344
Attention: ▇▇▇▇ ▇. ▇▇▇▇
If to the Lender:
Norwest Credit, Inc.
Norwest Center
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Telecopier: 612/341-2472
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.6 Servicing of Credit Facility.
(a) The Lender has entered into a servicing agreement (the
"Servicing Agreement") with the Servicer to service and enforce the
Loan Documents and collect the Obligations on the Lender's behalf.
Pursuant to the Servicing Agreement, the Lender has authorized the
Servicer to take certain actions, perform certain duties and exercise
certain powers on the Lender's behalf under the provisions of the Loan
Documents and any other instruments and agreements referred to in this
Agreement.
(b) The Servicer shall have no duties or responsibilities to
the Borrower, but only to the Lender and then only as expressly set
forth in the Servicing Agreement. Without limiting the generality of
the foregoing, the Servicer shall have no obligation to make any loans
or advances to the Borrower. Neither the Servicer nor any of its
officers, directors, employees or agents shall be liable for any action
taken or omitted by them hereunder or in connection herewith, unless
caused by its or their willful misconduct. The Servicer's duties shall
be mechanical and administrative in nature; nothing in this Agreement,
express or implied, is intended to or shall be so construed as to
impose upon the Servicer any obligations with respect to the Loan
Documents except as expressly set forth herein. The Borrower shall not
in any way be construed to be a third party beneficiary of any
relationship between the Servicer and the Lender.
(c) The Servicer shall be entitled to rely, and shall be fully
protected in relying, upon any communication whether written or oral
believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person, and, with respect to all legal matters
pertaining to this Agreement and its duties hereunder, upon advice of
counsel selected by it.
(d) The Borrower shall be entitled to rely upon any
communication whether written or oral sent or made by the Servicer for
and on behalf of the Lender with respect to all matters pertaining to
the Loan Documents and the Borrower's duties and obligations hereunder,
unless and until the Borrower receives written notice from the Lender
that the Servicer is no longer servicing the Credit Facility.
(e) The Servicer shall hold and be the custodian of the Loan
Documents on the Lender's behalf for so long as the Servicer is
servicing the Credit Facility.
(f) The Servicing Agreement may be terminated at any time
without prior notice to or consent of the Borrower. Upon termination of
the Servicing Agreement and failure to replace the Servicing Agreement
with a new servicing agreement, all references herein to the Servicer
shall thereafter mean and refer to the Lender.
Section 9.7 Further Documents. The Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that the Borrower
executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).
Section 9.8 Collateral. This Agreement does not contemplate a
sale of accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
Section 9.9 Costs and Expenses. The Borrower agrees to pay on
demand all reasonable costs and expenses, including (without limitation), title
insurance costs, recording fees and reasonable attorneys' fees, incurred by the
Lender in connection with the Obligations, this Agreement, the Loan Documents,
any Letters of Credit, and any other document or agreement related hereto or
thereto, and the transactions contemplated hereby, including without limitation
all such costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
Section 9.10 Indemnity. In addition to the payment of expenses
pursuant to Section 9.9, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or
the making of the Advances;
(ii) any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty
contained in Section 5.12 proves to be incorrect in any
respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection
with the foregoing and any other investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall
be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the
making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.10 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
Section 9.11 Participants. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.12 Execution in Counterparts. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.13 Binding Effect; Assignment; Complete Agreement;
Sharing of Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender may share at any time with Norwest Corporation, and all
direct and indirect subsidiaries of Norwest Corporation, any and all information
the Lender may have in its possession regarding the Borrower and its Affiliates,
and the Borrower waives any right of confidentiality it may have with respect to
such sharing of such information.
Section 9.14 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.15 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.16 Governing Law; Jurisdiction, Venue; Waiver of
Jury Trial. The Loan Documents shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of Minnesota.
This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Minnesota. The
parties hereto hereby (i) consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waives any argument that venue in
any such forum is not convenient, (iii) agrees that any litigation initiated by
the Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court of Hennepin County,
Minnesota, or the United States District Court, District of Minnesota, Fourth
Division; and (iv) agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. THE PARTIES WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO
THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
NORWEST CREDIT, INC. ULTRA PAC, INC.
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇ ▇. ▇▇▇▇
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Its Vice President Its Chief Financial Officer