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EXHIBIT 10.33
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COAST
LOAN AND SECURITY AGREEMENT
Borrower: RPI Acquisition Corporation
Cycle Masters Corporation
EnviroPlastics Corporation
Earth Care Products of Tennessee, Inc.
Chesapeake Plastic Lumber Company, Inc.
Earth Care Products of Midwest, Inc.
Environmental Specialty Products, Inc.
Clean Earth of New Castle, Inc.
Carteret Biocycle Corporation
Consolidated Technologies, Inc.
GCI Acquisition Corporation
Waste Concepts, Inc.
Green Horizon Environmental, Inc.
Integrated Technical Services, Inc.
Address: % ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Date: September ____, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"), a California
corporation, with offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the borrower(s) named above (JOINTLY AND SEVERALLY, the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 1 below.
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable or General
Intangible.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"AUDIT" means to inspect, audit and copy Borrower's books and records
and the Collateral.
"BORROWER" has the meaning set forth in the introduction to this
Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the introduction to
this Agreement.
"BUSINESS DAY" means a day on which Coast is open for business.
"CHANGE OF CONTROL" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than twenty percent
(20%) of the total voting power of all classes of stock or other ownership
interests then outstanding of any Borrower normally entitled to vote in the
election of directors or analogous governing body, provided that mergers between
one or more of the Borrowers or with any Guarantor (as defined in the Schedule)
with 30 days prior written notice to Coast shall not be deemed a Change of
Control.
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"CLEAN EARTH" shall mean Clean Earth, Inc., Clean Earth of New Castle,
Inc., Carteret Biocycle Corporation, Consolidated Technologies, Inc., GCI
Acquisition Corporation, Waste Concepts, Inc., Green Horizon Environmental,
Inc., Integrated Technical Services, Inc.
"CLOSING DATE" date of the initial funding under this Agreement.
"COAST" has the meaning set forth in the introduction to this
Agreement.
"CODE" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"COLLATERAL" has the meaning set forth in Section 4 hereof.
"CONSOLIDATED TANGIBLE NET WORTH" means consolidated shareholder's
equity, LESS goodwill, patents, trademarks, copyrights, franchises, formulas,
leasehold interests, leasehold improvements, non-compete agreements, engineering
plans, deferred tax benefits, organization costs, prepaid items and any other
assets of U.S. Plastic Lumber Corporation that would be treated as intangible
assets on U.S. Plastic Lumber Corporation's balance sheet prepared in accordance
with GAAP.
"CREDIT LIMIT" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the
Code.
"DOLLARS or $" means United States dollars.
"EARLY TERMINATION FEE" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"EXCESS CASH FLOW" shall mean Operating Cash Flow/Permitted less each
of (i) Total Contractual Debt Service (as defined in the Schedule); and (ii)
cash dividends actually paid, to the extent permitted hereunder.
"ELIGIBLE FOREIGN RECEIVABLES" means Receivables arising from
Borrower's customers located outside the United States which Coast otherwise
approves for borrowing in its sole and absolute discretion. Without limiting the
foregoing, Coast will consider the following in determining the eligibility of
such receivables: (i) whether the Borrower's goods are shipped backed by an
irrevocable letter of credit satisfactory to Coast (as to form, substance, and
issuer or domestic confirming bank) that has been delivered to Coast and is
directly drawable by Coast, or (ii) whether the Borrower's customer is a large
or rated company having a verifiable credit history, or (iii) whether Borrower's
customer is a foreign subsidiary of a customer of Borrower that is a company
that was formed and has its primary place of business within the United States,
or (iv) whether Borrower's customer is a large foreign corporation, or (v)
whether Borrower's customer is a foreign company with a Dun & Bradstreet rating
acceptable to Coast in its discretion, or (vi) whether Borrower's goods are
shipped to a company that has credit insurance acceptable to Coast in its
discretion.
"ELIGIBLE INVENTORY" means Inventory which Coast, in its sole judgment,
deems eligible for borrowing, based on such considerations as Coast may from
time to time deem appropriate. Without limiting the fact that the determination
of which Inventory is eligible for borrowing is a matter of Coast's discretion,
Inventory which does not meet the following requirements will not be deemed to
be Eligible Inventory: Inventory which (i) consists of raw material or finished
goods, in good, new and salable condition which is not perishable, not obsolete
or unmerchantable, and is not comprised of work in process, packaging materials
or supplies; (ii) meets all applicable governmental standards; (iii) has been
manufactured in compliance with the Fair Labor Standards Act; (iv) conforms in
all respects to the warranties and representations set forth in this Agreement;
(v) is at all times subject to Coast's duly perfected, first priority security
interest; and (vi) is situated at a one of the locations set forth on the
Schedule.
"ELIGIBLE RECEIVABLES" means Receivables and Eligible Foreign
Receivables arising in the ordinary course of Borrower's business from the sale
of goods or rendition of services, which Coast, in its sole judgment, shall deem
eligible for borrowing, based on such considerations as Coast may from time to
time deem appropriate. Eligible Receivables shall not include the following:
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(a) Receivables that the Account Debtor has failed to pay
within 90 days (120 days for Clean Earth Receivables and Eligible Foreign
Receivables and 120 days for U.S. government Receivables if there has been
compliance with the Federal Assignment of Claims Act) of invoice date or
Accounts with selling terms of more than 60 days, or with respect to dating
Receivables, subject to a sublimit of $1,500,000 and which are otherwise
acceptable to Coast in its discretion reasonable exercised, Receivables for
which the Account Debtor has failed to pay within 30 days past due date not to
exceed 150 days from invoice date;
(b) Receivables owed by an Account Debtor or its Affiliates
where twenty five percent (25%) or more of all Receivables owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above;
(c) Receivables with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
(d) Receivables with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional or Receivables which are subject to bonding;
(e) Receivables, other than Eligible Foreign Receivables, that
are not payable in Dollars or with respect to which the Account Debtor: (i) does
not maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United States or any State thereof, or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Receivable is supported by an irrevocable letter of credit satisfactory
to Coast (as to form, substance, and issuer or domestic confirming bank) that
has been delivered to Coast and is directly drawable by Coast, or (z) the
Receivable is covered by credit insurance in form and amount, and by an insurer,
satisfactory to Coast;
(f) Receivables with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Coast, with the Assignment of
Claims Act, 31 U.S.C. " 3727), or (ii) any State of the United States
(exclusive, however, of Receivables owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Receivables with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Receivables;
(h) Receivables with respect to an Account Debtor whose total
obligations owing to Borrower in the aggregate exceed twenty five percent (25%)
of all Eligible Receivables or owing to any individual Borrower in excess of
thirty percent (30%) of all Eligible Receivables owing to such individual
Borrower, to the extent of the obligations owing by such Account Debtor in
excess of such percentage. In order to exceed the above referenced limits,
Borrower must obtain the prior written approval of Coast, which approval is
subject to the discretion of Coast on an Account Debtor by Account Debtor basis;
(i) Receivables with respect to which the Account Debtor is
subject to any reorganization, bankruptcy, insolvency, arrangement, readjustment
of debt, dissolution or liquidation proceeding, or becomes insolvent, or goes
out of business;
(j) Receivables the collection of which Coast, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Receivables with respect to which the goods giving rise to
such Receivable have not been shipped and billed to the Account Debtor, the
services giving rise to such Receivable have not been performed and accepted by
the Account Debtor, or the Receivable otherwise does not represent a final sale;
(l) Receivables with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement; and
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(m) Receivables that represent progress payments or other
advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by Borrower
of the subject contract for goods or services unless Coast has obtained a no
offset letter from the account debtor in form and substance acceptable to Coast
in its discretion.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"EQUIPMENT ACQUISITION LOANS" means the Loans described in Section 2(d)
of the Schedule.
"EVENT OF DEFAULT" means any of the events set forth in Section 10.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, investment property, inventions, designs,
drawings, blueprints, patents, patent applications, trademarks and the goodwill
of the business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit, and including without limitation all farm products), and all materials
and supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"INVENTORY LOANS" means the Loans described in Section 2(b) of the
Schedule.
"INVESTMENT PROPERTY" has the meaning set forth in Section 9115 of the
Code as in effect as of the date hereof.
"LOAN DOCUMENTS" means this Agreement, the agreements and documents
listed on Section 5 of the Schedule, and any other agreement, instrument or
document executed in connection herewith or therewith.
"LOANS" has the meaning set forth in Section 2.1 hereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
Borrower or any subsidiary of Borrower or any guarantor of any of the
Obligations, (ii) the ability of Borrower or any guarantor of any of the
Obligations to perform its obligations under this Agreement (including, without
limitation, repayment of the Obligations as they come due) or (iii) the validity
or enforceability of this Agreement or any other agreement or document entered
into by any party in connection herewith, or the rights or remedies of Coast
hereunder or thereunder.
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"MATURITY DATE" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"MAXIMUM DOLLAR AMOUNT" has the meaning set forth in Section 2 of the
Schedule.
"MINIMUM MONTHLY INTEREST" has the meaning set forth in Section 3 of
the Schedule.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Coast, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
"OPERATING CASH FLOW/PERMITTED" means, for any period, U.S. Plastic
Lumber Corporation's net income or loss (excluding the effect of any
extraordinary gains or losses), determined in accordance with GAAP, plus or
minus each of the following items, to the extent deducted from or added to the
revenues in the calculation of net income or loss: (i) depreciation; (ii)
amortization and other non-cash charges; (iii) interest expense paid or accrued;
and (iv) total federal and state income tax expense determined as the accrued
liability in respect of such period, regardless of what portion of such expense
has actually been paid during such period, and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income; and (c) all permitted capital expenditures actually
made during such period and not financed.
"PERMITTED LIENS" means the following:
(a) purchase money security interests in specific items of
Equipment;
(b) leases of specific items of Equipment;
(c) liens for taxes not yet payable;
(d) additional security interests and liens consented to in
writing by Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially
concurrently with this Agreement;
(f) liens of materialmen, mechanics, warehousemen, carriers,
or other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(g) liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by liens of the type described above
in clauses (a) or (b) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; or
(h) liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods.
Coast will have the right to require, as a condition to its consent under
subparagraph (d) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Coast's then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of
Coast, and agree not to take any action to enforce its subordinate security
interest so long as any Obligations remain outstanding, and that Borrower agree
that any uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, general
partnership, limited partnership, limited liability partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, government, or any agency or political division
thereof, or any other entity.
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"PRIME RATE" means the actual "Reference Rate" or the substitute
therefor of the Bank of America NT & SA whether or not that rate is the lowest
interest rate charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published in
the Wall Street Journal on the first business day of the applicable month, as
the base rate on corporate loans at large U.S. money center commercial banks.
"REAL PROPERTY" means Carteret Biocycle Corporation's facility on
leased land located at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇.
"RECEIVABLE LOANS" means the Loans described in Section 2(a) of the
Schedule.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.
"RENEWAL DATE" shall mean the Maturity Date if this Agreement is
renewed pursuant to Section 9.1 hereof, and each anniversary thereafter that
this Agreement is renewed pursuant to Section 9.1 hereof.
"RENEWAL FEE" means the fee that Borrower must pay Coast upon renewal
of this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"SOLVENT" means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"TERM LOAN" means the Loans described in Section 2(c) of the Schedule.
"YEAR 2000 PROBLEM" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
"OTHER TERMS" All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
2. CREDIT FACILITIES.
2.1 LOANS. Coast will make loans to Borrower (the "Loans"), in amounts and in
percentages to be determined by Coast in its good faith discretion, up to the
Credit Limit, provided no Default or Event of Default has occurred and is
continuing. In addition, Coast may create reserves against or reduce its advance
rates based upon Eligible Receivables or Eligible Inventory without declaring a
Default or an Event of Default if it determines that there has occurred a
Material Adverse Effect.
3. INTEREST AND FEES.
3.1 INTEREST. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement. Interest shall be payable monthly, on the last day
of the month. Interest may, in Coast's discretion, be charged to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as the
other Loans. Regardless of the amount of Obligations that may be outstanding
from time to time, Borrower shall pay Coast Minimum Monthly Interest during the
term of this Agreement with respect to the Receivable Loans and the Inventory
Loans in the amount set forth on the Schedule.
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3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule, which are
in addition to all interest and other sums payable to Coast and are deemed fully
earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when
due, Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Receivables, Inventory, Equipment, Investment Property, and General
Intangibles, including, without limitation, all of Borrower's Deposit Accounts,
and all money, and all property now or at any time in the future in Coast's
possession (including claims and credit balances), and all proceeds of any of
the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral")
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the
satisfaction, in the sole discretion of Coast, at or prior to the first advance
of funds hereunder, of each, every and all of the following conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. No accounts payable shall be due and unpaid
one hundred twenty (120) days past its due date except for such accounts payable
being contested in good faith in appropriate proceedings and for which adequate
reserves have been provided.
5.2 MINIMUM AVAILABILITY. Borrower shall have minimum availability immediately
following the initial funding in the amount set forth on the Schedule.
5.3 LANDLORD WAIVER. Coast shall have received duly executed
(a) landlord waivers and access agreements in form and
substance satisfactory to Coast, in Coast's sole and absolute discretion, and,
when deemed appropriate by Coast, in form for recording in the appropriate
recording office, with respect to all leased locations where Borrower maintains
any inventory or equipment.
(b) warehouse waivers in form and substance satisfactory to
Coast, in Coast's sole and absolute discretion, and when deemed appropriate by
Coast, in form for recording in the appropriate recording office, with respect
to all warehouse locations where Borrower maintains any inventory or equipment.
5.4 REAL PROPERTY. Coast shall have received duly executed mortgages and/or
deeds of trust in form and substance satisfactory to Coast, in Coast's sole and
absolute discretion, in form for recording in the appropriate recording office,
with respect to the Real Property.
5.5 EXECUTED AGREEMENT. Coast shall have received this Agreement duly executed
and in form and substance satisfactory to Coast in its sole and absolute
discretion.
5.6 OPINION OF BORROWER'S COUNSEL. Coast shall have received an opinion of
Borrower's counsel, in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.7 PRIORITY OF COAST'S LIENS. Coast shall have received the results of "of
record" searches satisfactory to Coast in its sole and absolute discretion,
reflecting its Uniform Commercial Code filings against Borrower indicating that
Coast has a perfected, first priority lien in and upon all of the Collateral,
subject only to Permitted Liens.
5.8 INSURANCE. Coast shall have received copies of the insurance binders or
certificates evidencing Borrower's compliance with Section 8.2 hereof, including
lender's loss payee endorsements.
5.9 BORROWER'S EXISTENCE. Coast shall have received copies of Borrower's
articles or certificate of incorporation and all amendments thereto, and a
Certificate of Good Standing, each certified by the Secretary of State of the
state of Borrower's organization, and dated a recent date prior to the Closing
Date, and Coast shall have received Certificates of Foreign Qualification for
Borrower from the Secretary of State of each state wherein the failure to be so
qualified could have a Material Adverse Effect.
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5.10 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of Borrower's
By-laws and all amendments thereto, and Coast shall have received copies of the
resolutions of the board of directors of Borrower, authorizing the execution and
delivery of this Agreement and the other documents contemplated hereby, and
authorizing the transactions contemplated hereunder and thereunder, and
authorizing specific officers of Borrower to execute the same on behalf of
Borrower, in each case certified by the Secretary or other acceptable officer of
Borrower as of the Closing Date.
5.11 TAXES. Coast shall have received evidence from Borrower that Borrower has
complied with all tax withholding and Internal Revenue Service regulations, in
form and substance satisfactory to Coast in its sole and absolute discretion.
5.12 DUE DILIGENCE. Coast shall have completed its due diligence with respect to
Borrower.
5.13 YEAR 2000 PROBLEM ASSESSMENT CERTIFICATE. Coast shall have received a
certificate from the relevant officer of Borrower to the effect that Borrower
knows of no facts which would cause Borrower to reasonably believe that the Year
2000 Problem will cause a Material Adverse Effect. Without limiting the
foregoing, Borrower hereby represents that its computer systems, software and
applications will be Year 2000 compliant by April 1, 1999 and that it will
complete its assessments of Year 2000 compatibility of its vendors and
customer's by June 30, 1999.
5.14 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such other
agreements, instruments and documents as Coast may require in connection with
the transactions contemplated hereby, all in form and substance satisfactory to
Coast in Coast's sole and absolute discretion, and in form for filing in the
appropriate filing office, including, but not limited to, those documents listed
in Section 5 of the Schedule.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make
Loans, Borrower represents and warrants to Coast as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a Material Adverse Effect. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (a) have
been duly and validly authorized, (b) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), and (c) do not violate Borrower's
articles or certificate of incorporation or Borrower's by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property, and (d) do not constitute grounds for acceleration of any material
indebtedness or obligation under any material agreement or instrument which is
binding upon Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the heading
to this Agreement is its correct name. Listed on the Schedule are all prior
names of Borrower and all of Borrower's present and prior trade names. Borrower
shall give Coast thirty (30) days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Coast at least thirty (30) days'
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth on the Schedule. Any
additional location for which Coast has received notice hereunder shall be
deemed added to the Schedule provide that Coast has a first priority security
interest in the assets at such location.
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6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all times
in the future be, the sole owner of all the Collateral, except for items of
Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Coast now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Borrower will at all
times defend Coast and the Collateral against all claims of others. None of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any of the Collateral and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises. Whenever any Collateral is located upon
premises in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Coast, use its best efforts to cause such third party to execute
and deliver to Coast, in form acceptable to Coast, such waivers and
subordinations as Coast shall specify, so as to ensure that Coast's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party. Borrower will keep in full force and effect, and will comply with
all the terms of, any lease of real property where any of the Collateral now or
in the future may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Coast in writing of any material loss
or damage to the Collateral.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at Borrower's
Address complete and accurate books and records, comprising an accounting system
in accordance with GAAP.
6.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements now or
in the future delivered to Coast have been, and will be, prepared in conformity
with GAAP (except, in the case of unaudited financial statements, for the
absence of footnotes and subject to normal year-end adjustments) and now and in
the future will fairly reflect the financial condition of Borrower, at the times
and for the periods therein stated. Between the last date covered by any such
statement provided to Coast and the date hereof, there has been no Material
Adverse Effect. Borrower is now and will continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely filed,
and will timely file, all tax returns and reports required by foreign, federal,
state and local law, and Borrower has timely paid, and will timely pay, all
foreign, federal, state and local taxes, assessments, deposits and contributions
now or in the future owed by Borrower. Borrower may, however, defer payment of
any contested taxes, provided that Borrower (i) in good faith contests
Borrower's obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (ii) notifies Coast in writing of the
commencement of, and any material development in, the proceedings, and (iii)
posts bonds or takes any other steps required to keep the contested taxes from
becoming a lien upon any of the Collateral. As of the date hereof, Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
6.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all material
respects, with all provisions of all material foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, the
Fair Labor Standards Act, and those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and
environmental matters.
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6.10 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in a Material Adverse Effect.
Borrower will promptly inform Coast in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
Borrower involving an amount set forth on the Schedule.
6.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for lawful
business purposes. Borrower is not purchasing or carrying any "margin stock" (as
defined in Regulation G of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan 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."
7. RECEIVABLES.
7.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and warrants to
Coast as follows: Each Receivable with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct in all material respects and
all such invoices, instruments and other documents and all of Borrower's books
and records are and shall be genuine and in all respects what they purport to
be. All sales and other transactions underlying or giving rise to each
Receivable shall fully comply with all applicable laws and governmental rules
and regulations. All signatures and indorsements on all documents, instruments,
and agreements relating to all Receivables are and shall be genuine, and all
such documents, instruments and agreements are and shall be legally enforceable
in accordance with their terms.
7.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver to
Coast via facsimile, unless otherwise directed by Coast, at such locations and
at such intervals as Coast may request, transaction reports and loan requests,
schedules of Receivables, and schedules of collections, all on Coast's standard
forms; provided, however, that Borrower's failure to execute and deliver the
same shall not affect or limit Coast's security interest and other rights in all
of Borrower's Receivables, nor shall Coast's failure to advance or lend against
a specific Receivable affect or limit Coast's security interest and other rights
therein. Loan requests received after 10:30 A.M. Los Angeles, California time,
will not be considered by Coast until the next Business Day. Together with each
such schedule, or later if requested by Coast, Borrower shall furnish Coast with
copies (or, at Coast's request, originals) of all contracts, orders, invoices,
and other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Receivables, and Borrower
warrants the genuineness of all of the foregoing. Borrower shall also furnish to
Coast an aged accounts receivable trial balance in such form and at such
intervals as Coast shall request. In addition, Borrower shall deliver to Coast
the originals of all instruments, chattel paper, security agreements, guarantees
and other documents and property evidencing or securing any Receivables, upon
receipt thereof and in the same form as received, with all necessary
indorsements, all of which shall be with recourse. Borrower shall also provide
Coast with copies of all credit memos as and when requested by Coast.
7.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all
Receivables, unless and until an Event of Default has occurred. Borrower shall
hold all payments on, and proceeds of, Receivables in trust for Coast, and
Borrower shall deliver all such payments and proceeds to Coast within one (1)
Business Day after receipt by Borrower, in their original form, duly endorsed to
Coast, to be applied to the Obligations in such order as Coast shall determine.
Coast may, in its discretion, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other "blocked account" as
Coast may specify, pursuant to a blocked account agreement in such form as Coast
may specify. Coast or its designee may, at any time, notify Account Debtors that
Coast has been granted a security interest in the Receivables, provided in the
absence of the occurrence and continuance of an Event of Default after any cure
period has expired, Coast will give the form of written notice to Borrower which
it proposes to send to any Account Debtor at least two Business Days prior to
such notice actually being sent to such Account Debtor(s). Borrower may give
Coast during such two Business Day period suggestions on the form of such
notice, which suggestion however shall not be binding on Coast.
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7.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of any
Collateral shall be delivered to Coast within one (1) Business Day after receipt
by Borrower, in their original form, duly endorsed to Coast, to be applied to
the Obligations in such order as Coast shall determine. Borrower agrees that it
will not commingle proceeds of Collateral with any of Borrower's other funds or
property, but will hold such proceeds separate and apart from such other funds
and property and in an express trust for Coast. Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
7.6 DISPUTES. Borrower shall notify Coast promptly of all disputes or claims
relating to Receivables in excess of $2,500. Borrower shall not forgive
(completely or partially), compromise or settle any Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower may
do so, provided that: (a) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, and in arm's length
transactions, which are reported to Coast on the regular reports provided to
Coast; (b) no Default or Event of Default has occurred and is continuing; and
(c) taking into account all such discounts settlements and forgiveness, the
total outstanding Loans will not exceed the Credit Limit. Coast may, at any time
after the occurrence of an Event of Default, settle or adjust disputes or claims
directly with Account Debtors for amounts and upon terms which Coast considers
advisable in its reasonable credit judgment and, in all cases, Coast shall
credit Borrower's Loan account with only the net amounts received by Coast in
payment of any Receivables.
7.7 RETURNS. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory to Borrower in the ordinary course of its
business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount. In the event any attempted return occurs after the occurrence of any
Event of Default, Borrower shall (a) hold the returned Inventory in trust for
Coast, (b) segregate all returned Inventory from all of Borrower's other
property, (c) conspicuously label the returned Inventory as subject to Coast's
security interest, and (d) immediately notify Coast of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Coast's request deliver such returned Inventory
to Coast.
7.8 VERIFICATION. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Coast or such other name as Coast may choose.
7.9 NO LIABILITY. Coast shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Coast be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve Coast from liability for its own gross negligence or willful
misconduct.
8. ADDITIONAL DUTIES OF THE BORROWER.
8.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.
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8.2 INSURANCE. Borrower shall, at all times insure all of the tangible personal
property Collateral and carry such other business insurance, with insurers
reasonably acceptable to Coast, in such form and amounts as Coast may reasonably
require, and Borrower shall provide evidence of such insurance to Coast, so that
Coast is satisfied that such insurance is, at all times, in full force and
effect. All liability insurance policies of Borrower shall name Coast as an
additional insured, and all property casualty and related insurance policies of
Borrower shall name Coast as a loss payee thereon and Borrower shall cause a
lender's loss payee endorsement in form reasonably acceptable to Coast. Upon
receipt of the proceeds of any such insurance, Coast shall apply such proceeds
in reduction of the Obligations as Coast shall determine in its sole discretion,
except that, provided no Default or Event of Default has occurred and is
continuing, Coast shall release to Borrower insurance proceeds with respect to
Equipment totaling less than the amount set forth in Section 8 of the Schedule,
which shall be utilized by Borrower for the replacement of the Equipment with
respect to which the insurance proceeds were paid. Coast may require reasonable
assurance that the insurance proceeds so released will be so used. If Borrower
fails to provide or pay for any insurance, Coast may, but is not obligated to,
obtain the same at Borrower's expense. Borrower shall promptly deliver to Coast
copies of all reports made to insurance companies.
8.3 REPORTS. Borrower, at its expense, shall provide Coast with the written
reports set forth in Section 8 of the Schedule, and such other written reports
with respect to Borrower (including budgets, sales projections, operating plans
and other financial documentation), as Coast shall from time to time reasonably
specify.
8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but not less
frequently than quarterly and on one (1) Business Day's notice, Coast, or its
agents, shall have the right to perform Audits. Coast shall take reasonable
steps to keep confidential all confidential information obtained in any Audit,
but Coast shall have the right to disclose any such information to its auditors,
regulatory agencies, and attorneys, and pursuant to any subpoena or other legal
process. The Audits shall be at Borrower's expense and the charge for the Audits
shall be Seven Hundred Fifty Dollars ($750) per person per day (or such higher
amount as shall represent Coast's then current standard charge for the same),
plus reasonable out-of-pocket expenses. Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first notifying Coast of the same and obtaining the written agreement
from such accounting firm, service bureau or other third party to give Coast the
same rights with respect to access to books and records and related rights as
Coast has under this Loan Agreement. Borrower shall also take all necessary
steps to assure that this material accounting and software, systems and
applications, and those of its accounting firm, service bureau or any other
third party vendor or supplier, will on a timely basis, adequately and
completely address the Year 2000 Problem in all material aspects.
8.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior written
consent (which as to clause (b) below only shall be based on Coast's reasonable
business judgment), do any of the following:
(a) merge or consolidate with another entity, except in a
transaction in which (i) the owners of the Borrower hold at least fifty percent
(50%) of the ownership interest in the surviving entity immediately after such
merger or consolidation, and (ii) the Borrower is the surviving entity;
(b) acquire any assets, except (i) in the ordinary course of
business, or (ii) in a transaction or a series of transactions not involving the
payment of an aggregate amount in excess of the amount set forth in Section 8 of
the Schedule;
(c) enter into any other transaction outside the ordinary
course of business;
(d) sell or transfer any Collateral, except for the sale of
finished Inventory in the ordinary course of Borrower's business, and except for
the sale of obsolete or unneeded Equipment in the ordinary course of business;
(e) store any Inventory or other Collateral with any
warehouseman or other third party unless Coast has obtained a waiver in form
satisfactory to Coast;
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(f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i)
advances to customers or suppliers in the ordinary course of business, (ii)
travel advances, employee relocation loans and other employee loans and advances
in the ordinary course of business, and (iii) loans to employees, officers and
directors for the purpose of purchasing equity securities of the Borrower;
(h) incur any debts, outside the ordinary course of business,
which would have a Material Adverse Effect;
(i) guarantee or otherwise become liable with respect to the
obligations of another party or entity provided that unsecured guaranties by one
individual Borrower of another individual Borrower in which the guaranteed
amount is less than $500,000 shall not be prohibited hereunder and Coast will
consider increases to the $500,000 threshold in its discretion, reasonalby
exercised;
(j) pay or declare any dividends or distributions on the
ownership interests in Borrower (except for dividends or distributions payable
solely in stock form of ownership interests in Borrower);
(k) make any change in Borrower's capital structure which
would have a Material Adverse Effect; or
(l) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are
only permitted if no Default or Event of Default is continuing or would occur as
a result of such transaction.
8.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
8.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by Coast, to
execute all documents and take all actions, as Coast, may deem reasonably
necessary or useful in order to perfect and maintain Coast's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
9. TERM.
9.1 MATURITY DATE. This Agreement shall continue in effect until the Maturity
Date; provided that the Maturity Date shall automatically be extended, and this
Agreement shall automatically and continuously renew, for successive additional
terms of one year each, unless one party gives written notice to the other, not
less than one hundred twenty (120) days prior to the Maturity Date or the next
Renewal Date, that such party elects to terminate this Agreement effective on
the Maturity Date or such next Renewal Date. If this Agreement is renewed under
this Section 9.1, Borrower shall pay to Coast a Renewal Fee in the amount shown
in Section 3 of the Schedule. The Renewal Fee shall be due and payable on the
Renewal Date and thereafter shall bear interest at a rate equal to the rate
applicable to the Receivable Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the Maturity
Date as follows: (a) by Borrower, effective three (3) Business Days after
written notice of termination is given to Coast; or (b) by Coast at any time
after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under this
Section 9.2, Borrower shall pay to Coast an Early Termination Fee in the amount
shown in Section 3 of the Schedule. The Early Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Notwithstanding
any termination of this Agreement, all of Coast's security interests in all of
the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that, without limiting the fact that Loans are
subject to the discretion of Coast, Coast may, in its sole discretion, refuse to
make any further Loans after termination. No termination shall in any way affect
or impair any right or remedy of Coast, nor shall any such termination relieve
Borrower of any Obligation to Coast, until all of the Obligations have been paid
and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Coast shall promptly deliver to
Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Coast's security interests.
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10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT. The occurrence of any of the following events by any one
or more of the Borrowers shall constitute an "Event of Default" under this
Agreement, and Borrower shall give Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or
certificate made or delivered to Coast by Borrower or any of Borrower's
officers, employees or agents, now or in the future, shall be untrue or
misleading and results in a Material Adverse Effect; or
(b) Borrower shall fail to pay when due any Loan or any
interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any
time shall exceed the Credit Limit; or
(d) Borrower shall fail to deliver the proceeds of Collateral
to Coast as provided in Section 7.5 above, or shall fail to give Coast access to
its books and records or Collateral as provided in Section 8.4 above, or shall
breach any negative covenant set forth in Section 8.5 above; or
(e) Borrower shall fail to comply with the financial covenants
(if any) set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within five (5) Business Days after the
date due; or
(g) Any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of the
Collateral which is not cured within fifteen (15) days after the occurrence of
the same; or
(h) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or
(i) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a Material Adverse Effect; or
(j) Dissolution, termination of existence, insolvency or
business failure of Borrower or any guarantor of any of the Obligations; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or
(k) the commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is (i) not
timely controverted, or (ii) not cured by the dismissal thereof within sixty
(60) days after the date commenced; or
(l) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing, or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or
(m) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or
(n) Borrower or any guarantor of any of the Obligations makes
any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations, other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
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(o) except as permitted under Section 8.5(a), Borrower shall
suffer or experience any Change of Control without Coast's prior written
consent, which consent shall be in the discretion of Coast in the exercise of
its reasonable business judgment; or
(p) Borrower shall generally not pay its debts as they become
due, or Borrower shall conceal, remove or transfer any part of its property,
with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or
(q) there shall be any Material Adverse Effect. Coast may
cease making any Loans or extending any credit hereunder during any of the above
cure periods.
10.2 REMEDIES. Upon the occurrence, and during the continuance of any Event of
Default, and subsequent to any cure periods, Coast, at its option, and without
notice or demand of any kind (all of which are hereby expressly waived by
Borrower), may do any one or more of the following:
(a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations
to be immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation;
(c) Take possession of any or all of the Collateral wherever
it may be found, and for that purpose Borrower hereby authorizes Coast without
judicial process to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Coast deems it
reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, however, that should Coast seek
to take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives:
(i) any bond and any surety or security relating
thereto required by any statute, court rule or otherwise as an incident to such
possession;
(ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and
(iii) any requirement that Coast retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral
and make it available to Coast at places designated by Coast which are
reasonably convenient to Coast and Borrower, and to remove the Collateral to
such locations as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge. Coast is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to Coast's
benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale;
16
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Receivables and the like for less than face value; and
(h) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto.
All attorneys' fees, expenses, costs, liabilities and obligations
incurred by Coast (including attorneys' fees and expenses incurred in connection
with bankruptcy) with respect to the foregoing shall be due from the Borrower to
Coast on demand. Coast may charge the same to Borrower's loan account, and the
same shall thereafter bear interest at the same rate as is applicable to the
Receivable Loans. Without limiting any of Coast's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional three percent per annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and Coast
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable:
(a) Notice of the sale is given to Borrower at least five (5)
days prior to the sale, and, in the case of a public sale, notice of the sale is
published at least five (5) days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with
or without the Collateral being present if otherwise commercially reasonable to
do so;
(d) The sale commences at any time between 8:00 a.m. and 6:00
p.m. Los Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's
check or wire transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast
may (but is not obligated to) direct any prospective purchaser to ascertain
directly from Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
10.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable power of
attorney coupled with an interest, authorizing and permitting Coast (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise, but
Coast agrees to exercise the following powers in a commercially reasonable
manner and , as to clauses (b), (c), (f), (g) and (h), such powers shall only be
exercised after the occurrence and during the continuance of an Event of Default
(and subsequent to any cure periods) or if Coast is then directly collecting the
Receivables;
(a) Execute on behalf of Borrower any documents that Coast
may, in its sole discretion, deem advisable in order to perfect and maintain
Coast's security interest in the Collateral, or in order to exercise a right of
Borrower or Coast, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future agreements;
(b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part of
Coast's Collateral or in which Coast has an interest;
(c) Execute on behalf of Borrower, any invoices relating to
any Receivable, any draft against any Account Debtor and any notice to any
Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items
of payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
Coast's possession;
17
(e) Endorse all checks and other forms of remittances received
by Coast;
(f) Pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or any
judgment based thereon, or otherwise take any action to terminate or discharge
the same;
(g) Grant extensions of time to pay, compromise claims and
settle Receivables and General Intangibles for less than face value and execute
all releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to
secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance
claim that relates to any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast the same
rights of access and other rights with respect thereto as Coast has under this
Agreement; and
(k) Take any action or pay any sum required of Borrower
pursuant to this Agreement and any other present or future agreements.
Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by Coast (including attorneys' fees and
expenses incurred pursuant to bankruptcy) with respect to the foregoing shall be
added to and become part of the Obligations, and shall be payable on demand.
Coast may charge the foregoing to Borrower's loan account and the foregoing
shall thereafter bear interest at the same rate applicable to the Receivable
Loans. In no event shall Coast's rights under the foregoing power of attorney or
any of Coast's other rights under this Agreement be deemed to indicate that
Coast is in control of the business, management or properties of Borrower.
Borrower shall pay, indemnify, defend, and hold Coast and each of its officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all attorneys fees and disbursements and other
costs and expenses actually incurred in connection therewith (as and when they
are incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person hereunder with respect to any Indemnified Liability that a
court of competent jurisdiction finally determines to have resulted from the
gross negligence or willful misconduct of such Indemnified Person. This
provision shall survive the termination of this Agreement and the repayment of
the Obligations.
10.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale of
the Collateral shall be applied by Coast first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole discretion, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Coast of the cash therefor.
18
10.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Coast shall have all the other rights and remedies accorded a
secured party in equity, under the Code, and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into
between Coast and Borrower, and all of such rights and remedies are cumulative
and none is exclusive. Exercise or partial exercise by Coast of one or more of
its rights or remedies shall not be deemed an election, nor bar Coast from
subsequent exercise or partial exercise of any other rights or remedies. The
failure or delay of Coast to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force
and effect until all of the Obligations have been indefeasibly paid and
performed.
11. GENERAL PROVISIONS.
11.1 INTEREST COMPUTATION. In computing interest on the Obligations, all checks,
wire transfers and other items of payment received by Coast (including proceeds
of Receivables and payment of the Obligations in full) shall be deemed applied
by Coast on account of the Obligations three (3) Business Days after receipt by
Coast of immediately available funds, and, for purposes of the foregoing, any
such funds received after 10:30 AM Los Angeles, California time, on any day
shall be deemed received on the next Business Day. Coast shall be entitled to
charge Borrower's account for such three (3) Business Days of "clearance" or
"float" at the rate(s) set forth in Section 3 of the Schedule on all checks,
wire transfers and other items received by Coast, regardless of whether such
three (3) Business Days of "clearance" or "float" actually occur, and shall be
deemed to be the equivalent of charging three (3) Business Days of interest on
such collections. This across-the-board three (3) Business Day clearance or
float charge on all collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Coast's financing of Borrower. Coast shall
not, however, be required to credit Borrower's account for the amount of any
item of payment which is unsatisfactory to Coast in its sole discretion, and
Coast may charge Borrower's loan account for the amount of any item of payment
which is returned to Coast unpaid.
11.2 APPLICATION OF PAYMENTS. Subject to Section 7.5 hereof, all payments with
respect to the Obligations may be applied, and in Coast's sole discretion
reversed and re-applied, to the Obligations, in such order and manner as Coast
shall determine in its sole discretion.
11.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that Borrower
pay monetary Obligations in cash to Coast, or charge them to Borrower's Loan
account, in which event they will bear interest from the date due to the date
paid at the same rate applicable to the Loans.
11.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Coast), unless Borrower notifies Coast in
writing to the contrary within forty five (45) days after each account is
rendered, describing the nature of any alleged errors or omissions.
11.5 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, facsimile or certified mail return receipt
requested, addressed to Coast or Borrower at the addresses shown in the heading
to this Agreement, or at any other address designated in writing by one party to
the other party. Notices to Coast shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, faxed (at time of confirmation of
transmission), or at the expiration of one (1) Business Day following delivery
to the private delivery service, or two (2) Business Days following the deposit
thereof in the United States mail, with postage prepaid.
11.6 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
11.7 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Coast and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
19
11.8 WAIVERS. The failure of Coast at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any Default shall not waive or affect any other
Default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
11.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Coast, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast, but nothing herein shall relieve Coast from
liability for its own gross negligence or willful misconduct.
11.10 AMENDMENT. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer
of Coast.
11.11 TIME OF ESSENCE. Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.
11.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast for all
attorneys' fees (including attorneys' fees and expenses incurred pursuant to
bankruptcy) and all filing, recording, search, title insurance, appraisal,
audit, and other costs incurred by Coast, pursuant to, or in connection with, or
relating to this Agreement (whether or not a lawsuit is filed), including, but
not limited to, any attorneys' fees and costs (including attorneys' fees and
expenses incurred pursuant to bankruptcy) Coast incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Coast's security interest
in, the Collateral; and otherwise represent Coast in any litigation relating to
Borrower. If either Coast or Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its costs and attorneys' fees (including attorneys'
fees and expenses incurred pursuant to bankruptcy), including (but not limited
to) attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. Borrower shall also pay Coast's
standard charges for returned checks and for wire transfers, in effect from time
to time. All attorneys' fees, costs and charges (including attorneys' fees and
expenses incurred pursuant to bankruptcy) and other fees, costs and charges to
which Coast may be entitled pursuant to this Agreement may be charged by Coast
to Borrower's loan account and shall thereafter bear interest at the same rate
as the Receivable Loans.
20
11.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Coast; provided, however, that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Coast, and any prohibited assignment shall
be void. No consent by Coast to any assignment shall release Borrower from its
liability for the Obligations. Coast may assign its rights and delegate its
duties hereunder without the consent of Borrower. Cost reserves the right to
syndicate all or a portion of the transaction created herein or sell, assign,
transfer, negotiate, or grant participations in all or any part of, or any
interest in Coast's rights and benefits hereunder. In connection with any such
syndication, assignment or participation, Coast may disclose all documents and
information which Coast now or hereafter may disclose all documents and
information which Coast now or hereafter may have relating to Borrower or
Borrower's business. To the extent that Coast assigns its rights and obligations
hereunder to at third Person, Coast thereafter shall be released from such
assigned obligations to Borrower.
11.14 PUBLICITY. Coast is hereby authorized, at its expense, to issue
appropriate press releases and to cause a tombstone to be published announcing
the consummation of this transaction and the aggregate amount thereof.
11.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in this
Agreement for convenience. Borrower and Coast acknowledge that the headings may
not describe completely the subject matter of the applicable paragraph, and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. The term "including", whenever used in
this Agreement, shall mean "including (but not limited to)". This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Coast or Borrower under any rule of construction or otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the internal laws of the State of California, without
regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California, and
that the exclusive venue therefor shall be Los Angeles County; (b) consents to
the jurisdiction and venue of any such court and consents to service of process
in any such action or proceeding by personal delivery or any other method
permitted by law; and (c) waives any and all rights Borrower may have to object
to the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
11.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
21
BORROWER:
RPI Acquisition Corporation Clean Earth, Inc.
By_______________________________ By_____________________________________
President or Vice President President or Vice President
Cycle Masters Corporation Clean Earth of New Castle
By_______________________________ By_____________________________________
President or Vice President President or Vice President
EnviroPlastics Corporation Carteret Biocycle Corporation
By_______________________________ By_____________________________________
President or Vice President President or Vice President
Earth Care Products of Consolidated Technologies, Inc.
Tennessee, Inc.
By_______________________________ By_____________________________________
President or Vice President President or Vice President
Chesapeake Plastic Lumber GCI Acquisition Corporation
Company, Inc.
By_______________________________ By_____________________________________
President or Vice President President or Vice President
Earth Care Products of Waste Concepts, Inc.
Midwest, Inc.
By_______________________________ By_____________________________________
President or Vice President President or Vice President
Environmental Specialty Products, Green Horizon Environmental, Inc.
Inc.
By_______________________________ By_____________________________________
President or Vice President President or Vice President
22
COAST
Integrated Technical Services, Inc. COAST BUSINESS CREDIT, division of
Southern Pacific
By_______________________________ By_____________________________________
President or Vice President President or Vice President
Title:_________________________________
23
===============================================================================
COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: RPI ACQUISITION CORPORATION
CYCLE MASTERS CORPORATION
ENVIROPLASTICS CORPORATION
EARTH CARE PRODUCTS OF TENNESSEE, INC.
CHESAPEAKE PLASTIC LUMBER COMPANY, INC.
EARTH CARE PRODUCTS OF MIDWEST, INC.
ENVIRONMENTAL SPECIALTY PRODUCTS, INC.
CLEAN EARTH OF NEW CASTLE, INC.
CARTERET BIOCYCLE CORPORATION
CONSOLIDATED TECHNOLOGIES, INC.
GCI ACQUISITION CORPORATION
WASTE CONCEPTS, INC.
GREEN HORIZON ENVIRONMENTAL
INTEGRATED TECHNICAL SERVICES, INC.
ADDRESS: % ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: SEPTEMBER ___, 1998
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Bank, and the
above-borrower of even date.
===============================================================================
SECTION 2. CREDIT FACILITIES
SECTION 2.1 - CREDIT
LIMIT: Loans in a total amount at any time outstanding to
Borrower in the aggregate not to exceed the lesser of
a total of Thirty Million Dollars ($30,000,000) at
any one time outstanding (the "Maximum Dollar
Amount"), or the sum of (a), (b), (c), (d), (e) and
(f) below:
24
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
(a) Receivable Loans in an amount not to exceed
80%(1). of the amount of Borrower's Eligible
Receivables (as defined in Section 1 of the
Agreement). Eligible Foreign Receivables shall be
subject to a sublimit of $1,000,000 and dating
Eligible Receivables shall be subject to a
sublimit of $1,500,000, plus
(b) Inventory Loans in an amount not to exceed the
lesser of:
(1) 60% of the value of Borrower's Eligible
Inventory (as defined in Section 1 of the
Agreement) that has been appraised by Hilco
calculated at the lower of cost or market
value and determined on a first in, first out
basis, or
(2) Six Million Dollars ($6,000,000), PLUS
(c) A Term Loan in the original principal amount not
to exceed the lesser of:
(1) Eighty percent (80%) of the appraised
liquidation value of Borrower's existing
Equipment; or
(2) Six Million Five Hundred Thousand Dollars
($6,500,000). The Term Loan will be repayable
in eighty four (84) equal monthly
installments, commencing one (1) month after
the Closing Date, plus
(d) A Bridge Loan in the original principal amount of
up to Two Million Dollars ($2,000,000). Upon
receipt and approval by Coast of an appraisal of
the Real Property from an appraiser acceptable to
Coast (and review of any environmental matters)
and provided no Event of Default has occurred and
is continuing and provided Borrower then has a
Total Debt Service Coverage Ratio of not less
than 1.1:1, up to 65% of the appraised value of
the Real Property may be converted from the
Bridge Loan to a Real Estate Loan repayable over
a 240 month amortization. Prior to conversion,
the Bridge Loan will be repayable in eighteen
(18) equal monthly installments. The Bridge Loan
and the Real Estate Loan shall be subject to an
annual prepayment of 15% of Excess Cash Flow
based on U.S. Plastic Lumber Corp.'s year end
certified financial statements. Such Excess Cash
Flow payment will be due within 90 days of the
end of each fiscal year of U.S. Plastic Lumber
Corp. and shall be applied to the last
installments owing in the inverse order of
maturity of payments. To the extent the appraisal
of the Real Property as described above reflects
that the unpaid balance of the Bridge Loan is in
excess of the appraised value, Borrower agrees
that up to the first $500,000 of any new equity
shall be used as a mandatory prepayment of the
Bridge Loan up to the amount of the deficiency
between the Bridge Loan balance and the appraised
value.
----------------
(1) Up to 85% so long as dilution, as reasonably determined by
Coast, is less than 5%
25
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
"EXCESS CASH FLOW" shall mean the Operating
Cash Flow/Permitted less each of (i) Total Debt
Service and (ii) cash dividends actually paid, to
the extent permitted hereunder.
"TOTAL DEBT SERVICE" shall mean the sum of
all principal, interest and other payments made
or required to be made by U.S. Plastic Lumber
Corp. on indebtedness during the applicable
period.
(e) Equipment Acquisition Loans, to be drawn within
four and one half years from the date hereof, in
minimum advances of One Hundred Thousand Dollars
($100,000) in a total amount not to exceed the
lesser of:
(1) Eighty percent (80%) of the cost of new
Equipment (after subtracting taxes,
engineering and installation charges), or up
to eighty (80%) of the appraised forced
liquidation value of used Equipment acquired
by Borrower (after subtracting taxes,
engineering and installation charges); and
(2) Three Million Dollars ($3,000,000).
The Equipment Acquisition Loans shall be
repayable based on either a 24 month or a 48
month amortization as determined by Coast on the
assets being purchased.
The Equipment Acquisition Loans shall not be
available unless Borrower has achieved and
maintains a Total Debt Service Coverage Ratio of
not less than 1.25:1 measured monthly.
Total Debt Service Coverage Ratio shall mean the
quotient of (x) EBITDA less all capital
expenditures except that portion which is
financed, less taxes paid during such period,
divided by (y) the sum of all principal, interest
and other payments made or required to be made by
Borrower on indebtedness during such period,
including any fees and charges owed by Borrower
in connection with any such indebtedness.
"EBITDA" shall mean, for any period, the net
income for such period of Borrower determined in
accordance with GAAP (excluding any extraordinary
income items, including, without limitation, gain
on sale of assets, income relating to foreign
exchange, swap or other derivative transactions
and changes in GAAP), plus the following items,
to the extent deducted form the revenues of
Borrower in the calculation of net income or
less: (i) depreciation, (ii) amortization of
intangibles and any other non-cash items, (iii)
cash interest expense (excluding any interest
paid-in-kind) and (iv) tax expense.
(f) Asset Acquisition Loans to be funded in the
discretion of Coast in connection with future
acquisitions by Borrower. Potential eligible
collateral includes accounts, inventory,
equipment and real estate of the target company.
Such advances are further subject to appraisal
and audit by Coast and approval by its credit
committee.
26
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
===============================================================================
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST A rate equal to the Prime Rate plus the following
RATE: percentage per annum, calculated on the basis of a
360-day year for the actual number of days elapsed:
Loan Percentage Over Prime
---- ---------------------
Receivables and Inventory one (1)
Term and Equipment Acquisition one and one
quarter (1.25)
Real Estate two (2)
Bridge two and one
half (2.5)
The interest rate applicable to all Loans shall be
adjusted monthly as of the first day of each month,
and the interest to be charged for each month shall
be based on the highest Prime Rate in effect during
the prior month, but in no event shall the rate of
interest charged on any Loans in any month be less
than 8.5% per annum.
SECTION 3.1 - MINIMUM
MONTHLY based on $10,000,000 measured on a daily basis.
INTEREST:
SECTION 3.2 - LOAN FEE: 1.25% based on $20,000,000 payable concurrently
herewith plus $125,000 on the first day of the sixth
month following the Closing Date plus .25% on each
anniversary of this Agreement based on the average
outstanding Loans measured on a daily basis for the
then prior 12 months.
SECTION 3.2 - MONITORING $500 per each entity which is a Borrower hereunder
FEE: payable on the first day of each month, provided that
if the number of Borrower's is seven or less, the
total fee shall be $2,500 per month. If any new
borrowers are added hereunder (which is otherwise
subject to Coast's prior written consent), the
Monitoring Fee for such new borrowers shall be $250
per month for each environmental type business and
$500 per month for each non environmental type
business.
SECTION 3.2 - FACILITY $5,000 per quarter payable on the Closing Date
FEE: (prorated for any partial quarter at the beginning
of the term of this Agreement) and continuing on the
first day of each quarter thereafter.
27
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
SECTION 9.1 - RENEWAL 0.5% of the Maximum Dollar Amount beginning in year
FEE: 6 of the Agreement.
SECTION 9.2 - EARLY An amount equal to three percent (3%) of the Maximum
TERMINATION Dollar Amount (as defined in the Schedule), if
FEE: termination occurs on or before the first anniversary
of the effective date of this Agreement; two percent
(2%) of the Maximum Dollar Amount, if termination
occurs after the first anniversary and on or before
the second anniversary of the effective date of this
Agreement; one percent (1%) of the Maximum Dollar
Amount, if termination occurs after the second
anniversary and on or before the third anniversary of
the effective date of this Agreement, one half of one
percent (.5%) of the Maximum Dollar Amount, if
termination occurs after the third anniversary and on
or before the fourth anniversary of the effective
date of this Agreement and one quarter of one percent
(.25%) if termination occurs after the fourth
anniversary of the effective date of this Agreement.
Prepayment of the Bridge Loan or the Real Estate Loan
and any mandatory prepayments of such loans shall not
be subject to any prepayment charge provided that
Borrower hereby grants to Coast a right of first
refusal with respect to any refinancing of the Real
Estate Loan by another lender. Borrower agrees to
give Coast 30 days prior written notice of the terms
and conditions of any competing offer and Coast must
commit to the loan, if at all, within the same 30 day
time period. Such commitment shall be on
substantially the same terms and conditions
(including the funding date) as the competing lender.
Prepayments of the Term Loan and Equipment
Acquisition Loans may only be made with the prior
written consent of Coast.
===============================================================================
SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM $1,000,000 at funding
AVAILABILITY:
28
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
SECTION 5.14 - OTHER DOCUMENTS 1. Cross Guaranties;
AND
AGREEMENTS: 2. UCC-1 financing statements, fixture
filings and termination statements;
3. Security Agreements (including those
covering copyrights, patents and
trademarks).
4. Mortgage on the Real Property;
5. Secured guaranty from U. S. Plastic
Lumber Corporation, U.S. Plastic
Lumber, Ltd. and Clean Earth, Inc.
(collectively "Guarantor"); and
6. Such other documents as reasonably
requested by Coast.
29
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
SECTION 5.15 - OTHER CONDITIONS: 1. All collections shall be a through a
combination of blocked accounts and/or
lockboxes approved by Coast.
2. No accounts payable shall be over 120
days past invoice date.
3. All applicable taxes shall be current.
4. Coast shall have a first priority
security interest in all of the assets
of Borrower and each guarantor
including, without limitation, on all
intellectual property of Borrower and
Guarantor.
5. Subordination of shareholder and
investor debt in form and substance
acceptable to Coast.
6. All facilities to be cross guarantied
and cross collateralized.
7. Upon the closing of the Eaglebrook
acquisition, there shall be a
concurrent capital contribution of not
less than $5,000,000.
8. If applicable, Coast shall have
reviewed and approved of the
acquisition documents for the purchase
of Eaglebrook.
9. Coast shall have received such
assurances as Coast shall require
confirming that Borrower is in
compliance with all environmental laws
and regulations.
10. Coast shall have reviewed and approved
of all contracts of Borrower including,
without limitation, those involving
milestone ▇▇▇▇▇▇▇▇, bonding, the Bio
Carteret facility lease etc.
11. Coast shall have received no offset
agreements acceptable to Coast with
respect to all milestone contracts.
12. Coast shall have reviewed, approved and
received an assignment of the Rutger's
license and royalty agreement in form
and substance acceptable to Coast.
13. Coast shall have reviewed and approved
of the Borrower's environmental
liability insurance and Coast shall be
named as an additional insured of said
policy.
14. Review and approval by Coast and
assignment of the landlord lease and
purchase option for the Bio Carteret
facility and a first mortgage on the
Bio Carteret facility provided that if
the Real Estate Loan is not funded on
the Closing Date, this condition shall
be required to be satisfied within 30
days after the Closing Date or in any
event prior to funding of the Real
Estate Loan..
15. Borrower shall have obtained landlord
waivers and/or Coast shall have created
rent reserves acceptable to Coast.
===============================================================================
30
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF See Schedule 1 hereto.
BORROWER:
SECTION 6.2 - PRIOR TRADE NAMES See Schedule 1 hereto.
OF BORROWER:
SECTION 6.2 - EXISTING TRADE See Schedule 1 hereto.
NAMES OF BORROWER:
SECTION 6.3 - OTHER LOCATIONS AND See Schedule 1 hereto.
ADDRESSES:
SECTION 6.10 - MATERIAL ADVERSE None.
LITIGATION:
SECTION 6.10 - FUTURE CLAIMS AND Borrower will promptly inform Coast in
LITIGATION: writing of any claim, proceeding,
litigation or investigation in the
future threatened or instituted by or
against Borrower involving any single
claim of Fifty Thousand Dollars
($50,000) or more, or involving One
Hundred Thousand Dollars ($100,000) or
more in the aggregate.
===============================================================================
31
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
SECTION 8.1 - OTHER PROVISIONS 1. All taxes shall be current at all
AND COVENANTS: times.
2. Subject to the terms of payment of the
Bridge Loan, any equity raised by
Borrower or Guarantor in addition to
the $5,000,000 referenced in the
conditions precedent may be used to pay
shareholder and investor debt so long
no Event of Default has occurred and is
continuing.
3. Borrower and Guarantor shall use its
best efforts to merge the subsidiaries
into the holding companies prior to
January, 1999.
4. Borrower shall maintain job files with
all required supporting documentation.
5. Neither Borrower nor Guarantor shall
pay any dividends except with after tax
profits and so long as no Event of
Default has occurred and is continuing.
6. U. S. Plastics Lumber Corporation shall
at all times maintain a Consolidated
Tangible Net Worth of not less than 80%
of the Consolidated Tangible Net Worth
on the Closing Date.
7. Except with the prior consent of Coast,
which consent shall not be unreasonably
with held, at all times ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
shall be the CEO of U.S. Plastic Lumber
Corp., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be the CFO
and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be the general
counsel.
8. Notwithstanding anything to the
contrary herein, for the first six
months from the Closing Date, otherwise
Eligible Receivables for the Clean
Earth portion of the business shall be
eligible for up to 180 days from
invoice date and otherwise Eligible
Receivables for the U.S. Plastic
portion of the business shall be
eligible for up to 120 days from
invoice date. All other terms of
eligibility of the Receivables shall
otherwise continue to apply.
SECTION 8.2 - INSURANCE: Subject to the limitations set forth in
Section 8.2 of the Agreement, Coast shall
release to Borrower insurance proceeds with
respect to Equipment totaling less than
Fifty Thousand Dollars ($50,000).
32
Coast Business Credit Schedule to Loan and Security Agreement
-------------------------------------------------------------------------------
SECTION 8.3 - REPORTING: Borrower shall provide Coast with the
following:
1. Daily changes to the milestone and
affiliate Receivables.
2. Weekly price trends form Plastic News
Journal.
3. Monthly Receivable agings, aged by
invoice date and by customer in
alphabetical order, within five (5)
Business Days after the end of each
month together with a monthly deferred
revenue listing to be sorted by
customer in alphabetical order and a
monthly Receivables collection detail.
4. Monthly accounts payable agings, aged
by invoice date, and outstanding or
held check registers within five (5)
Business Days after the end of each
month.
5. Monthly inventory reports for the
Inventory valued on a first-in,
first-out basis at the lower of cost or
market (in accordance with GAAP) with a
summary of inventory by categories of
type and by entity or such other
inventory reports as are reasonably
requested by Coast, all within five (5)
Business Days after the end of each
month.
6. Monthly internally prepared financial
statements, as soon as available, and
in any event within thirty (30) days
after the end of each month.
7. Monthly collection reports broken down
by type of collection.
8. Quarterly internally prepared financial
statements, as soon as available, and
in any event within forty-five (45)
days after the end of each fiscal
quarter of Borrower.
9. Quarterly customer lists, including
customer name, address, and phone
number.
10. Annual audited financial statements, as
soon as available, and in any event
within ninety (90) days following the
end of Borrower's fiscal year,
containing the unqualified opinion of,
and certified by, an independent
certified public accountant acceptable
to Coast.
SECTION 8.5 - NEGATIVE COVENANTS Fifty Thousand Dollars ($50,000)
(ACQUIRED ASSETS):
================================================================================
SECTION 9 - TERM
SECTION 9.1 - MATURITY DATE: the last Business Day of the month five (5)
years from the Closing Date, subject to
automatic renewal as provided in Section
9.1 of the Agreement, and early termination
as provided in Section 9.2 of the
Agreement.
33
===============================================================================
LOAN AND SECURITY AGREEMENT
by and between
RPI ACQUISITION CORPORATION
CYCLE MASTERS CORPORATION
ENVIROPLASTICS CORPORATION
EARTH CARE PRODUCTS OF TENNESSEE, INC.
CHESAPEAKE PLASTIC LUMBER COMPANY, INC.
EARTH CARE PRODUCTS OF MIDWEST, INC.
ENVIRONMENTAL SPECIALTY PRODUCTS, INC.
CLEAN EARTH OF NEW CASTLE, INC.
CARTERET BIOCYCLE CORPORATION
CONSOLIDATED TECHNOLOGIES, INC.
GCI ACQUISITION CORPORATION
WASTE CONCEPTS, INC.
GREEN HORIZON ENVIRONMENTAL, INC.
INTEGRATED TECHNICAL SERVICES, INC.
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
Dated as of September ____, 1998
===============================================================================
34
TABLE OF CONTENTS
(CONTINUED)
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS.................................................... 1
2. CREDIT FACILITIES.............................................. 7
2.1 Loans................................................. 7
3. INTEREST AND FEES.............................................. 7
3.1 Interest.............................................. 7
3.2 Fees.................................................. 7
4. SECURITY INTEREST.............................................. 7
5. CONDITIONS PRECEDENT........................................... 8
5.1 Status of Accounts at Closing......................... 8
5.2 Minimum Availability.................................. 8
5.3 Landlord Waiver....................................... 8
5.4 Real Property......................................... 8
5.5 Executed Agreement.................................... 8
5.6 Opinion of Borrower's Counsel......................... 8
5.7 Priority of Coast's Liens............................. 8
5.8 Insurance............................................. 8
5.9 Borrower's Existence.................................. 8
5.10 Organizational Documents.............................. 8
5.11 Taxes................................................. 8
5.12 Due Diligence......................................... 9
5.13 Year 2000 Problem Assessment Certificate.............. 9
5.14 Other Documents and Agreements........................ 9
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER...... 9
6.1 Existence and Authority............................... 9
6.2 Name; Trade Names and Styles.......................... 9
6.3 Place of Business; Location of Collateral............. 9
6.4 Title to Collateral; Permitted Liens.................. 9
6.5 Maintenance of Collateral............................. 10
6.6 Books and Records..................................... 10
6.7 Financial Condition, Statements and Reports........... 10
6.8 Tax Returns and Payments; Pension Contributions....... 10
6.9 Compliance with Law................................... 10
6.10 Litigation............................................ 10
6.11 Use of Proceeds....................................... 11
6.12 Year 2000 Compliance.................................. 11
7. RECEIVABLES.................................................... 11
7.1 Representations Relating to Receivables............... 11
7.2 Representations Relating to Documents and Legal
Compliance.......................................... 11
7.3 Schedules and Documents relating to Receivables....... 11
7.4 Collection of Receivables............................. 11
7.5 Remittance of Proceeds................................ 12
7.6 Disputes.............................................. 12
7.7 Returns............................................... 12
7.8 Verification.......................................... 12
7.9 No Liability.......................................... 12
35
PAGE
----
8. ADDITIONAL DUTIES OF THE BORROWER.............................. 12
8.1 Financial and Other Covenants......................... 12
8.2 Insurance............................................. 13
8.3 Reports............................................... 13
8.4 Access to Collateral, Books and Records............... 13
8.5 Negative Covenants.................................... 13
8.6 Litigation Cooperation................................ 14
8.7 Further Assurances.................................... 14
9. TERM........................................................... 14
9.1 Maturity Date......................................... 14
9.2 Early Termination..................................... 14
9.3 Payment of Obligations................................ 14
10. EVENTS OF DEFAULT AND REMEDIES................................. 15
10.1 Events of Default..................................... 15
10.2 Remedies.............................................. 16
10.3 Standards for Determining Commercial Reasonableness... 17
10.4 Power of Attorney..................................... 18
10.5 Application of Proceeds............................... 19
10.6 Remedies Cumulative................................... 19
11. GENERAL PROVISIONS............................................. 19
11.1 Interest Computation.................................. 19
11.2 Application of Payments............................... 20
11.3 Charges to Accounts................................... 20
11.4 Monthly Accountings................................... 20
11.5 Notices............................................... 20
11.6 Severability.......................................... 20
11.7 Integration........................................... 20
11.8 Waivers............................................... 20
11.9 No Liability for Ordinary Negligence.................. 20
11.10 Amendment............................................. 21
11.11 Time of Essence....................................... 21
11.12 Attorneys Fees, Costs and Charges..................... 21
11.13 Benefit of Agreement.................................. 21
11.14 Publicity............................................. 21
11.15 Paragraph Headings; Construction...................... 21
11.16 Governing Law; Jurisdiction; Venue.................... 22
11.17 Mutual Waiver of Jury Trial........................... 22
36
AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Amendment is entered into as of this ___ of November,
1998 among RPI ACQUISITION CORPORATION, ENVIROPLASTICS CORPORATION, CYCLE
MASTERS CORPORATION, CHESAPEAKE PLASTIC LUMBER COMPANY, INC., EARTH CARE
PRODUCTS OF TENNESSEE, INC., ENVIRONMENTAL SPECIALTY PRODUCTS, INC., EARTH CARE
PRODUCTS OF MIDWEST, INC., CARTERET BIOCYCLE CORPORATION, CLEAN EARTH OF NEW
CASTLE, GCI ACQUISITION CORPORATION, CONSOLIDATED TECHNOLOGIES, INC., WASTE
CONCEPTS, INC., GREEN HORIZON ENVIRONMENTAL, INC., INTEGRATED TECHNICAL
SERVICES, INC., (collectively, "Borrower") and COAST BUSINESS CREDIT, a division
of Southern Pacific Bank ("Coast") in reference to that certain Loan and
Security Agreement dated September 30,1998 between Borrower and Coast, as
amended and that certain Secured Promissory Note-Term Loan in the face amount of
$6,900,000 ("Secured Note") also dated September 30, 1998.
The parties desire to amend the terms of the Secured Note as
follows:
1. The face amount of the Secured Note is hereby changed from
$6,900,000 to $6,125,000.
2. The monthly payments of principal under the Secured Note
are hereby changed from $82,143 to $72,916.
3.Except as provided herein, the Secured Note remains in full
force and effect in accordance with its terms. This Amendment shall be governed
by the laws of the State of California.
RPI ACQUISITION CORPORATION ENVIROPLASTICS CORPORATON
By By
----------------------------------- ------------------------------
Its Its
---------------------------------- -----------------------------
CYCLE MASTERS CORPORATION CHEASAPEAKE PLASTIC LUMBER
COMPANY, INC.
By By
----------------------------------- ------------------------------
Its Its
---------------------------------- -----------------------------
37
EARTH CARE PRODUCTS OF TENNESSEE, INC. ENVIRONMENTAL SPECIALTY
PRODUCTS, INC.
By By
----------------------------------- ------------------------------
Its Its
---------------------------------- -----------------------------
EARTH CARE PRODUCTS OF MIDWEST, INC. CARTERET BIOCYCLE CORPORATION
By By
----------------------------------- ------------------------------
Its Its
---------------------------------- -----------------------------
CLEAN EARTH OF NEW CASTLE GCI ACQUISITION CORPORATION
By By
----------------------------------- ------------------------------
Its Its
---------------------------------- -----------------------------
CONSOLIDATED TECHNOLOGIES, INC. GREEN HORIZON ENVIRONMENTAL, INC.
By By
----------------------------------- ------------------------------
Its Its
---------------------------------- -----------------------------
WASTE CONCEPTS, INC. INTEGRATED TECHNICAL
SERVICES, INC.
By By
----------------------------------- ------------------------------
Its Its
---------------------------------- -----------------------------
------------------------------------- --------------------------------
COAST BUSINESS CREDIT
By
-----------------------------------
Its
----------------------------------
2
38
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of this 30th day of December 1998, between Coast Business
Credit, a division of Southern Pacific Bank ("Coast"), RPI Acquisition
Corporation, Cycle Masters Corporation, EnviroPlastics Corporation, Earth Care
Products of Tennessee, Inc., Chesapeake Plastic Lumber, Inc., Earth Care
Products of the Midwest, Inc., Environmental Specialty Products, Inc., Clean
Earth of New Castle, Inc., Carteret Biocycle Corporation, Consolidated
Technologies, Inc., GCI Acquisition Corporation, Waste Concepts, Incorporated,
Green Horizon Environmental, Inc., Integrated Technical Services, Inc. and S&W
Waste, Inc. (jointly and severally, the "Proposed Borrower"), is made in
reference to the following facts:
A. Each Proposed Borrower except S & W Waste, Inc. (jointly
and severally, the "Current Borrower") previously entered into a Loan and
Security Agreement with Coast dated September 30, 1998 (as amended, the "Loan
Agreement").
B. Clean Earth, Inc. has formed a subsidiary corporation under
the laws of the State of New Jersey by the name of S & W Acquisition Corporation
("S & W") for the purpose of merging with S & W Waste, Inc., a New Jersey
corporation, with S & W Acquisition Corporation being the surviving corporation.
Effective upon such merger, S & W Acquisition Corporation will change its name
to "S & W Waste, Inc." In connection with such merger, S & W will purchase
certain real property owned by Melon Leasing Corporation, Inc. commonly known as
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Property"). In order
to finance such real property acquisition, S & W plans to execute a secured
promissory note in favor of Melon Leasing Corporation, Inc. in the aggregate
amount of $2,500,000 payable in equal monthly installments of principal over an
eleven year period secured by the Property and guarantied by United States
Plastic Lumber Corp. The transactions described in this Paragraph B shall be
collectively referred to herein as the "S & W Acquisition."
C. Current Borrower has requested that Coast approve the S & W
Acquisition, and to provide financing in connection therewith. Coast is willing
to agree to said requests and to amend the Loan Agreement on the terms and
subject to the conditions set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing and the terms
and conditions hereof, the parties do hereby agree as follows:
1. DEFINITIONS. Terms used herein, unless otherwise defined
herein, shall have the meanings set forth in the Loan Agreement.
2. S & W ACQUISITION.
(a) Subject to the terms and conditions of this Amendment,
Coast hereby consents to the S & W Acquisition.
(b) Effective upon the consummation of the S & W Acquisition,
the Loan Agreement is hereby amended by adding S & W as a
borrower thereunder. All of the terms and conditions
applicable to each of the borrowers under the Loan
Agreement are fully applicable to and assumed by S & W.
Without limiting the generality of the foregoing, S & W
hereby grants a security interest in its assets to Coast
as more particularly set forth in the Loan Agreement.
39
3. S & W AVAILABILITY.
(a) Coast hereby agrees to advance an Asset Acquisition Loan
in the amount of $490,000 to S & W. Such Asset Acquisition
Loan shall be amortized on a straight-line basis over 48
months and shall be evidenced by a Secured Promissory Note
in form and substance satisfactory to Coast in its sole
discretion.
(b) Any Receivables of S & W existing on the date that the
conditions to this Amendment are satisfied shall be
ineligible for borrowing purposes under the Loan Agreement
until such Receivables are reviewed and approved by Coast
as Eligible Receivables. Such review shall include,
without limitation, an audit of the Receivables, books and
records of S & W performed at Proposed Borrower's expense
by an auditor and otherwise in form and substance
satisfactory to Coast in its discretion.
4. ASSET ACQUISITION LOAN FEE. In consideration of this
Amendment and the Asset Acquisition Loan granted by Coast to S & W hereunder,
and in addition to all other fees and charges, Proposed Borrower shall pay to
Coast on the date hereof a fee of $4,900, which fee shall be fully earned as of
the date hereof.
5. CONDITIONS PRECEDENT. The effectiveness of this Amendment
is subject to Proposed Borrower's satisfaction of the following conditions:
(a) Proposed Borrower shall provide Coast and its agents with
all financial information, projections, budgets, business
plans, cash flows and availability projections requested
by Coast showing the viability of Proposed Borrower before
and after the S & W Acquisition, all of which shall be
satisfactory to Coast in its sole discretion.
(b) The S & W Acquisition shall have been completed in the
form contemplated by the Agreement and Plan of
Reorganization by and between Clean Earth, Inc., S & W,
U.S. Plastic Lumber Corporation, S & W Waste, Inc., and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ dated as of November 25, 1998, and
Proposed Borrower shall have provided Coast with the
merger agreements and/or stock purchase agreements for the
S & W Acquisition and any and all documents and
instruments executed or delivered or to be executed or
delivered in connection therewith, all of which shall be
satisfactory to Coast in its sole discretion.
(c) Proposed Borrower shall execute and cause any applicable
third parties to execute any and all security documents,
including without limitation, security agreements,
guaranty agreements, subordination agreements, mortgages,
pledges, UCC financing statements and UCC amendments, as
requested by Coast and in form and substance satisfactory
to Coast in its sole discretion to maintain or establish,
as applicable, the first priority perfected status of
Coast's security interests in the assets of Proposed
Borrower, including, without limitation, an intercreditor
and subordination agreement with Melon Leasing
Corporation, Inc. (if required by Coast).
2
40
(d) In connection with the addition of S & W as an additional
borrower under the Loan Agreement, S & W shall have
satisfied all of the applicable conditions set forth in
Section 5 of the Loan Agreement, as determined by Coast in
its sole discretion.
(e) Concurrent with Coast's additional advances against the
assets being acquired in connection with the S & W
Acquisition, S & W shall have title to such assets free
and clear of liens except for a first priority lien and
security interest in favor of Coast.
(f) Coast shall have reviewed and found acceptable in its sole
discretion the environmental risks and potential
environmental liabilities to Proposed Borrower involved in
connection with the S & W Acquisition.
(g) Coast shall have received an opinion of borrower's counsel
regarding the S & W Acquisition in form and substance
satisfactory to Coast in its sole discretion, including,
without limitation, an opinion confirming the due
authorization, completion and conformity with applicable
law of the S & W Acquisition.
(h) No Event of Default shall have occurred and be continuing.
6. GUARANTEES. Each Continuing Guaranty executed by the
Current Borrowers in favor of Coast is hereby amended by adding S & W as a
borrower thereunder, and as modified in the preceding sentence remains in full
force and effect.
7. REAFFIRMATION. Except as modified by the terms herein, the
Loan Agreement, the promissory note evidencing the Asset Acquisition Loan
contemplated hereby, and the loan documents executed in connection therewith
remain in full force and effect. If there is any conflict between the terms and
provisions of this Amendment and the terms and provisions of the Loan Agreement
or documents related thereto, the terms and provisions of this Amendment shall
govern.
8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9. GOVERNING LAW. This Amendment shall be governed by and
construed according to the laws of the State of California.
3
41
10. ATTORNEYS' FEES; COSTS; JURY TRIAL WAIVER. Proposed
Borrower agrees to pay, on demand and on a joint and several basis, all
attorneys' fees and costs incurred in connection with the negotiation,
documentation and execution of this Amendment. If any legal action or proceeding
shall be commenced at any time by any party to this Amendment in connection with
its interpretation or enforcement, the prevailing party or parties in such
action or proceeding shall be entitled to reimbursement of its reasonable
attorneys' fees and costs in connection therewith, in addition to all other
relief to which the prevailing party or parties may be entitled. Each of Coast
and Proposed Borrower hereby waives its right to a jury trial in any such action
or proceeding.
The foregoing Second Amendment to Loan and Security Agreement is hereby agreed
and accepted:
"Proposed Borrower"
S & W WASTE, INC.
By:__________________________________
President or Vice President
CARTERET BIOCYCLE CORPORATION CLEAN EARTH OF NEW CASTLE, INC.
By:____________________________ By:____________________________
President or Vice President President or Vice President
CONSOLIDATED TECHNOLOGIES, INC. INTEGRATED TECHNICAL SERVICES, INC.
By:____________________________ By:____________________________
President or Vice President President or Vice President
GCI ACQUISITION CORPORATION RPI ACQUISITION CORPORATION
By:____________________________ By:____________________________
President or Vice President President or Vice President
4
42
EARTH CARE PRODUCTS OF EARTH CARE PRODUCTS OF
TENNESSEE, INC. MIDWEST, INC.
By:____________________________ By:____________________________
President or Vice President President or Vice President
ENVIRONMENTAL SPECIALTY ENVIROPLASTICS CORPORATION
PRODUCTS, INC.
By:____________________________ By:____________________________
President or Vice President President or Vice President
CHESAPEAKE PLASTIC LUMBER, INC. CYCLE MASTERS CORPORATION
By:____________________________ By:____________________________
President or Vice President President or Vice President
WASTE CONCEPTS, INCORPORATED GREEN HORIZON ENVIRONMENTAL, INC.
By:____________________________ By:____________________________
President or Vice President President or Vice President
"Coast"
COAST BUSINESS CREDIT, a division of
Southern Pacific Bank
By:____________________________________
Title:_________________________________
5
43
Each of the undersigned hereby acknowledges and consents to
the foregoing Amendment, and agrees that the Continuing Guaranty executed by it
in favor of Coast is hereby amended by adding S & W as a borrower thereunder.
Each of the undersigned agrees that its Continuing Guaranty in favor of Coast as
modified in the preceding sentence remains in full force and effect.
U.S. PLASTIC LUMBER CORP. U.S. PLASTIC LUMBER LTD.
By_________________________________ By_______________________________
President or Vice President President or Vice President
CLEAN EARTH, INC.
By_________________________________
President or Vice President
6
44
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of the 1st day of February 1999, between Coast Business
Credit, a division of Southern Pacific Bank ("Coast"), U.S. PLASTIC LUMBER LTD.,
CARTERET BIOCYCLE CORPORATION, CLEAN EARTH OF NEW CASTLE, CONSOLIDATED
TECHNOLOGIES, INC., INTEGRATED TECHNICAL SERVICES, INC., S&W WASTE, INC.,
EAGLEBROOK PLASTICS, INC. and EAGLEBROOK PRODUCTS, INC. (jointly and severally,
the "Proposed Borrower"), is made in reference to the following facts:
A. Except for U.S. Plastic Lumber Ltd., Eaglebrook Plastics, Inc., and
Eaglebrook Products, Inc., each Proposed Borrower, RPI Acquisition Corporation,
Earth Care Products of Tennessee, Inc., Earth Care Products of the Midwest,
Inc., Environmental Specialty Products, Inc., EnviroPlastics Corporation,
Chesapeake Plastic Lumber, Inc., Waste Concepts, Incorporated, Green Horizon
Environmental, Inc., GCI Acquisition Corporation and Cycle Masters Corporation
(jointly and severally, the "Current Borrower") previously entered into a Loan
and Security Agreement with Coast dated September 30, 1998 (as amended, the
"Loan Agreement").
B. Current Borrower has restructured its corporate organization as
follows (collectively, the "Corporate Reorganization"):
1. Each of RPI Acquisition Corporation, Earth Care Products of
Tennessee, Inc., Earth Care Products of the Midwest, Inc., Environmental
Specialty Products, Inc., EnviroPlastics Corporation, Chesapeake Plastic Lumber,
Inc., and Cycle Masters Corporation has merged with U.S. Plastic Lumber Ltd.,
with U.S. Plastic Lumber Ltd. being the surviving entity.
2. Each of Waste Concepts, Incorporated, Green Horizon
Environmental, Inc., and GCI Acquisition Corporation has merged with Integrated
Technical Services, Inc., with Integrated Technical Services, Inc. being the
surviving corporation.
3. United States Plastic Lumber Corp. has formed two
subsidiary corporations under the laws of the State of Delaware with the names
of "U.S. Plastic Lumber Finance Corp." and "US Plastic Lumber IP Corp." U.S.
Plastic Lumber Corp. plans to transfer all intellectual property rights
currently owned by it to US Plastic Lumber IP Corp.
C. U.S. Plastic Lumber Ltd. and U.S. Plastic Lumber Corp., on the one
hand, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇ (collectively, the
"Eaglebrook Products Shareholders"), on the other hand, are parties to that
certain Stock Purchase Agreement dated as of February __ , 1999 pursuant to
which the Eaglebrook Products Shareholders have agreed to sell and U.S. Plastic
Lumber Ltd. has agreed to purchase all of the issued and outstanding capital
stock of Eaglebrook Products, Inc. U.S. Plastic Lumber Ltd. and U.S. Plastic
Lumber Corp., on the one hand, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(collectively, the "Eaglebrook Plastics Shareholders"), on the other hand, are
parties to that certain Stock Purchase Agreement dated as of February __ , 1999
pursuant to which the Eaglebrook Plastics Shareholders have agreed to sell and
U.S. Plastic Lumber Ltd. has agreed to purchase all of the issued and
outstanding capital stock of Eaglebrook Plastics, Inc. The transactions
described in this Paragraph B shall be collectively referred to herein as the
"Eaglebrook Acquisition"; the stock purchase agreements described in this
Paragraph B shall be collectively referred to herein as the "Eaglebrook
Agreements"; and Eaglebrook Products, Inc. and Eaglebrook Plastics, Inc. shall
be collectively referred to herein as the "Eaglebrook Companies."
45
Current Borrower has requested that Coast approve the
Corporate Reorganization, the Eaglebrook Acquisition, and to provide certain
financing in connection with the Eaglebrook Acquisition. Coast is willing to
agree to said requests and to amend the Loan Agreement on the terms and subject
to the conditions set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing and the terms
and conditions hereof, the parties do hereby agree as follows:
1. DEFINITIONS. Terms used herein, unless otherwise defined
herein, shall have the meanings set forth in the Loan Agreement.
2. CORPORATE REORGANIZATION AND EAGLEBROOK ACQUISITION.
(a) Subject to the terms and conditions of this Amendment,
Coast hereby consents to the Eaglebrook Acquisition and
the Corporate Reorganization.
(b) Effective upon the consummation of the Corporate
Reorganization and the Eaglebrook Acquisition, the Loan
Agreement is hereby amended by adding as borrowers
thereunder each of the Eaglebrook Companies and U.S.
Plastic Lumber Ltd. and by deleting as borrowers
thereunder RPI Acquisition Corporation, Earth Care
Products of Tennessee, Inc., Earth Care Products of the
Midwest, Inc., Environmental Specialty Products, Inc.,
EnviroPlastics Corporation, Chesapeake Plastic Lumber,
Inc., Waste Concepts, Incorporated, Green Horizon
Environmental, Inc., GCI Acquisition Corporation, and
Cycle Masters Corporation. All of the terms, covenants and
conditions applicable to each of the borrowers under the
Loan Agreement are fully applicable to and assumed by each
of the Eaglebrook Companies and U.S. Plastic Lumber Ltd.
Without limiting the generality of the foregoing, each of
the Eaglebrook Companies and U.S. Plastic Lumber Ltd.
hereby grants a security interest in its assets to Coast
as more particularly set forth in the Loan Agreement
3. EAGLEBROOK AVAILABILITY.
(a) Loans based on the Collateral of the Eaglebrook Companies
shall be made to the separate accounts of such companies.
(b) Coast hereby agrees to advance an Asset Acquisition Loan
to the Eaglebrook Companies. Such Asset Acquisition Loan
shall:
(i) be amortized on a straight-line basis over 60
months and bear interest at a rate equal to the Prime Rate
plus 1.25%;
2
46
(ii) be in an amount not to exceed the lesser of (x)
eighty percent (80%) of the Orderly Liquidation Value--In
Place (6 months) of the machinery and equipment of the
Eaglebrook Companies, as determined by and subject to the
prior completion of an appraisal conducted at the Eaglebrook
Companies' expense by Hilco and otherwise in form and
substance acceptable to Coast in its sole discretion, or (y)
Four Million One Hundred Fifty Thousand Dollars ($4,150,000);
and
(iii) be evidenced by a Secured Promissory Note in
form and substance satisfactory to Coast in its sole
discretion.
(c) The Eaglebrook Companies shall provide Coast with an
appraisal of the Inventory of the Eaglebrook Companies
within 90 days of the date that the Eaglebrook Companies
are added as borrowers under the Loan Agreement pursuant
to the terms hereof (the "Effective Date"), which
appraisal shall be conducted by Hilco at Proposed
Borrower's expense and shall be in form and substance
satisfactory to Coast in its sole discretion. Upon review
of said appraisal and based upon such factors as it
considers appropriate, Coast shall have the right in its
discretion reasonably exercised to reduce the 60% advance
rate against the Eligible Inventory of the Eaglebrook
Companies.
(d) The aggregate outstanding loans owing by the Eaglebrook
Companies to Coast at any one time shall not exceed
$7,000,000, subject to such reserves as Coast may
establish in its discretion as set forth in Section 5
below and in the Loan Agreement.
4. DEFAULTS UNDER MATERIAL CONTRACTS. Any default by the
Proposed Borrowers under the Eaglebrook Agreements or any agreements executed in
connection therewith, including, without limitation, the Convertible Secured
Debenture between U.S. Plastic Lumber Ltd., on the one hand, and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, on the other hand, dated as of
February __ , 1999 (the "Debenture"), shall constitute an Event of Default under
the Loan Agreement.
5. RESERVES. Coast shall have the right in its discretion to
establish the following reserves:
(a) A reserve against the borrowing availability of the
Eaglebrook Companies in an amount up to six months' rent
for the leased locations of the Eaglebrook Companies.
(b) A reserve against the borrowing availability of US Plastic
Lumber Ltd. for future payments required under the
Debenture.
6. MONITORING FEE. Under the terms of the Loan Agreement, the
Monitoring Fee is calculated based on the number of borrowers thereunder. If,
however, Proposed Borrower has not consolidated its monthly accounts receivables
agings so that the number of such agings is equal to or less than the number of
borrowers under the Loan Agreement no later than 6 months after the Effective
Date, the Section of the Schedule entitled "Section 3.2 -- Monitoring Fee" shall
at such time be automatically amended to provide that the Monitoring Fee shall
be based on the number of monthly accounts receivable agings or the number of
borrowers, whichever is greater, provided however, that the initial shift, if
any, to a Monitoring Fee based on the number of monthly accounts receivable
agings rather than borrowers 6 months after the Effective Date shall be
implemented incrementally over a three month period so that, by way of example,
if Proposed Borrower has not consolidated its accounts receivable agings as set
forth above, for the first month after the 6 month grace period the Monitoring
Fee shall equal the sum of (i) a fee based on the number of borrowers plus (ii)
one-third of the difference between the fee based on the number of accounts
receivable agings and the fee based on the number of borrowers.
3
47
7. CONSOLIDATED TANGIBLE NET WORTH. Paragraph 6 of the Section
of the Schedule entitled "Section 8.1 - Other Provisions and Covenants" is
hereby amended and restated as follows:
"U. S. Plastics Lumber Corporation shall at all times maintain
a Consolidated Tangible Net Worth as follows:
(a) At all times up to and including February 27, 1999 -- not
less than 80% of the Consolidated Tangible Net Worth on
the Closing Date.
(b) On February 28, 1999 and at all times thereafter - not
less than 80% of the Consolidated Tangible Net Worth on
February 28, 1999."
8. CONDITIONS PRECEDENT. The effectiveness of this Amendment
is subject to Proposed Borrower's satisfaction of the following conditions:
(a) Proposed Borrower shall provide Coast and its
agents with all financial information, projections, audits,
budgets, business plans, cash flows and availability
projections requested by Coast showing the viability of
Proposed Borrower before and after the Eaglebrook Acquisition
and the Corporate Reorganization, all of which shall be
satisfactory to Coast in its sole discretion.
(b) The Eaglebrook Acquisition shall have been
completed in the form contemplated by the Eaglebrook
Agreements, and Proposed Borrower shall have provided Coast
with the Eaglebrook Agreements and any and all documents and
instruments executed or delivered or to be executed or
delivered in connection therewith, all of which shall be
satisfactory to Coast in its sole discretion.
(c) The Corporate Reorganization shall have been
completed in accordance with law and the articles of
incorporation and by-laws of the participating entities, and
Proposed Borrower shall have provided Coast with the merger
agreements, asset acquisition agreements, and/or stock
purchase agreements for the Corporate Reorganization and any
and all documents and instruments executed or delivered or to
be executed or delivered in connection therewith, all of which
shall be satisfactory to Coast in its sole discretion.
(d) Proposed Borrower shall execute and cause any
applicable third parties to execute any and all security
documents, including without limitation, security agreements,
guaranty agreements, subordination agreements, mortgages,
pledges, UCC financing statements, UCC amendments, and related
documents as requested by Coast and in form and substance
satisfactory to Coast in its sole discretion to maintain or
establish, as applicable, the first priority perfected status
of Coast's security interests in the assets of Proposed
Borrower. Without limiting the generality of the foregoing,
Coast shall have received duly executed Collateral
Intercreditor Agreements from the Eaglebrook Plastics
Shareholders and the Eaglebrook Products Shareholders in form
and substance satisfactory to Coast in its discretion (the
"Collateral Intercreditor Agreement"), including provisions,
without limitation, wherein (i) such shareholders agree to
subordinate their respective liens and security interests to
Coast's security interest in the assets of the Eaglebrook
Companies; and (ii) such shareholders agree to forbear from
exercising any rights under any security agreement or stock
pledge with respect to the assets or stock of the Eaglebrook
Companies for a period of no less than ninety (90) days after
notice to Coast.
4
48
(e) Coast shall have received duly executed landlord
waivers for the facility premises of the Eaglebrook Companies
in form and substance satisfactory to Coast in its sole
discretion including, without limitation, provision that the
personal property of the Eaglebrook Companies may remain on
such premises and Coast may occupy such premises for up to six
months after any foreclosure or other exercise of rights by
Coast under or pursuant to the Loan Agreement.
(f) Proposed Borrower shall have caused the
establishment of such lockbox or blocked accounts as are
required by Coast in its sole discretion for the deposit by
the Eaglebrook Companies of all Collateral proceeds.
(g) In connection with the addition of the Eaglebrook
Companies and U.S. Plastic Lumber Ltd. as additional borrowers
under the Loan Agreement, each of the Eaglebrook Companies and
U.S. Plastic Lumber Ltd. shall have satisfied all of the
applicable conditions set forth in Section 5 of the Loan
Agreement, as determined by Coast in its sole discretion.
(h) Concurrent with Coast's additional advances
against the assets being acquired in connection with the
Eaglebrook Acquisition, the Eaglebrook Companies shall have
title to such assets free and clear of liens except for a
first priority lien and security interest in favor of Coast
and, subject to the Collateral Intercreditor Agreement, the
liens and security interests of the Eaglebrook Products
Shareholders and the Eaglebrook Plastics Shareholders.
(i) Coast shall have received a secured continuing
corporate guaranty by U.S. Plastic Lumber Finance Corp.
(j) Coast shall have received a continuing limited
personal guaranty in favor of Coast by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(i) The liability of the guarantor under the
guaranty shall be limited to an amount equal to the
outstanding Loans advanced to the Eaglebrook
Companies by Coast.
(ii) The guaranty shall terminate
automatically upon Coast's receipt of certified UCC
searches that demonstrate that Coast has a first
priority, perfected lien on all of the personal
property assets of the Eaglebrook Companies.
5
49
(k) Coast shall have received a warrant in form and
substance satisfactory to Coast for 55,000 shares of common
stock of US Plastic Lumber Corp. with an exercise price of $5
per share and a exercise period of 2 years.
(l) Coast shall have received an opinion of
borrower's counsel regarding the Eaglebrook Acquisition and
the Corporate Reorganization in form and substance
satisfactory to Coast in its sole discretion, including,
without limitation, an opinion confirming the due
authorization, completion and conformity with applicable law
of the Eaglebrook Acquisition and the Corporate
Reorganization.
(m) No Event of Default shall have occurred and be
continuing.
9. MISCELLANEOUS. Each of the Loan Documents previously
executed by US Plastic Lumber IP Corp. or US Plastic Lumber Finance Corp. and
dated as of December __ , 1998 is hereby amended (i) to provide that it is dated
as of even date herewith and (ii) to the extent applicable, to include and
identify the Eaglebrook Companies as Borrowers under the Loan Agreement.
10. REAFFIRMATION. Except as modified by the terms herein, the
Loan Agreement and the other Loan Documents remain in full force and effect. If
there is any conflict between the terms and provisions of this Amendment and the
terms and provisions of the Loan Agreement or documents related thereto, the
terms and provisions of this Amendment shall govern.
11. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12. GOVERNING LAW. This Amendment shall be governed by and
construed according to the laws of the State of California.
13. ATTORNEYS' FEES; COSTS; JURY TRIAL WAIVER. Proposed
Borrower agrees to pay, on demand and on a joint and several basis, all
attorneys' fees and costs incurred in connection with the negotiation,
documentation and execution of this Amendment. If any legal action or proceeding
shall be commenced at any time by any party to this Amendment in connection with
its interpretation or enforcement, the prevailing party or parties in such
action or proceeding shall be entitled to reimbursement of its reasonable
attorneys' fees and costs in connection therewith, in addition to all other
relief to which the prevailing party or parties may be entitled. Each of Coast
and Proposed Borrower hereby waives its right to a jury trial in any such action
or proceeding.
6
50
The foregoing Third Amendment to Loan and Security Agreement
is hereby agreed and accepted:
EAGLEBROOK PLASTICS, INC. EAGLEBROOK PRODUCTS, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
CARTERET BIOCYCLE CORPORATION CLEAN EARTH OF NEW CASTLE, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
CONSOLIDATED TECHNOLOGIES, INC. INTEGRATED TECHNICAL SERVICES, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
U.S. PLASTIC LUMBER FINANCE CORP. U.S. PLASTIC LUMBER IP CORP.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
U.S. PLASTIC LUMBER LTD. S&W WASTE, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
7
51
"Coast"
COAST BUSINESS CREDIT, a division of
Southern Pacific Bank
By:_________________________________
Title:______________________________
Each of the undersigned hereby acknowledges and consents to
the foregoing Amendment, and agrees that the Continuing Guaranty executed by it
in favor of Coast is hereby amended by adding as borrowers thereunder the
Eaglebrook Companies and U.S. Plastic Lumber Ltd. and by deleting as borrowers
thereunder RPI Acquisition Corporation, Earth Care Products of Tennessee, Inc.,
Earth Care Products of the Midwest, Inc., Environmental Specialty Products,
Inc., EnviroPlastics Corporation, Chesapeake Plastic Lumber, Inc., Waste
Concepts, Incorporated, Green Horizon Environmental, Inc., GCI Acquisition
Corporation and Cycle Masters Corporation. Each of the undersigned agrees and
acknowledges that the Continuing Guaranty executed by it in favor of Coast as
modified in the preceding sentence remains in full force and effect.
EAGLEBROOK PLASTICS, INC. EAGLEBROOK PRODUCTS, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
CARTERET BIOCYCLE CORPORATION CLEAN EARTH OF NEW CASTLE, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
CONSOLIDATED TECHNOLOGIES, INC. INTEGRATED TECHNICAL SERVICES, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
8
▇▇
▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LTD. S&W WASTE, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
CLEAN EARTH, INC. U.S. PLASTIC LUMBER CORP.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
9
53
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of the 26th day of February 1999, between Coast Business
Credit, a division of Southern Pacific Bank ("Coast"), U.S. Plastic Lumber Ltd.,
Carteret Biocycle Corporation, Clean Earth of New Castle, Inc., Consolidated
Technologies, Inc., Integrated Technical Services, Inc., S&W Waste, Inc.,
Eaglebrook Plastics, Inc. and Eaglebrook Products, Inc. (jointly and severally,
the "Borrower"), is made in reference to the following facts:
A. Borrower and Coast are parties to that certain Loan and Security
Agreement dated as of September 30, 1998, as amended (the "Loan Agreement");
B. Borrower and Coast have entered into that certain Third Amendment to
Loan and Security Agreement dated as of February 1, 1999 (the "Third Amendment";
the Third Amendment and all of the Loan Documents executed in connection
therewith are collectively referred to as the "Third Amendment Loan Documents").
NOW THEREFORE, in consideration of the foregoing and the terms
and conditions hereof, the parties do hereby agree as follows:
1. DEFINITIONS. Terms used herein, unless otherwise defined
herein, shall have the meanings given to them in the Loan Agreement.
2. GUARANTOR INDEBTEDNESS. The Loan Agreement is hereby
amended to provide that it shall be an Event of Default under the Loan Agreement
if:
(a) any Guarantor, as defined in the Loan Agreement, of any of
the Obligations, defaults under any instrument for
indebtedness now existing or hereafter arising; and
(b) such default has not been cured within the time period, if
any, permitted by the holder of the instrument and the
holder is permitted as a result of such default to
accelerate the indebtedness owed to it by such guarantor
in an amount in excess of $1,000,000, and
(c) the Borrower or the Guarantor have not cured the Default
on such indebtedness within 10 business days from its
Default
3. CONDITIONS PRECEDENT. The effectiveness of this Amendment
is subject to Borrower's satisfaction of the following conditions:
(a) Borrower shall have provided Coast with a subordination
agreement in form and substance acceptable to Coast in its
discretion reasonably exercised from each existing and
future creditor (excluding trade creditors, landlords,
lessors of leased equipment and lenders whose proceeds are
used to purchase equipment or to finance real estate) of
any guarantor of any of the Obligations, provided that no
subordination agreement shall be required from any such
creditor if the amount of all debt which has not been
subordinated to Coast (in form approved by Coast) is less
than $1,500,000 in the aggregate for all such creditors of
a specific guarantor. Without limiting the foregoing,
Coast shall have received (i) a subordination agreement in
form and substance acceptable to Coast in its discretion
with regard to those certain Convertible Debenture
Purchase Agreements dated December 22, 1998 and January
26, 1999 between US Plastic Lumber Corp., Halifax Fund
L.P., and Societe General; and (ii) an amendment to
intercreditor and subordination agreement in form and
substance acceptable to Coast in its discretion with
regard to the New Note in favor of ▇▇▇▇▇▇▇▇.
54
(b) No Event of Default shall have occurred and be continuing.
4. MISCELLANEOUS. Each reference in the Third Amendment Loan
Documents to the date of the Eaglebrook Agreements (as such term is defined in
the Third Amendment) is hereby amended to state the date of January 28, 1999.
Coast is hereby authorized to modify the Third Amendment Loan Documents, where
applicable, to reflect such amendment.
5. REAFFIRMATION. Except as modified by the terms herein, the
Loan Agreement and the other Loan Documents remain in full force and effect. If
there is any conflict between the terms and provisions of this Amendment and the
terms and provisions of the Loan Agreement or documents related thereto, the
terms and provisions of this Amendment shall govern.
6. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7. GOVERNING LAW. This Amendment shall be governed by and
construed according to the laws of the State of California.
8. ATTORNEYS' FEES; COSTS; JURY TRIAL WAIVER. Borrower agrees
to pay, on demand and on a joint and several basis, all attorneys' fees and
costs incurred in connection with the negotiation, documentation and execution
of this Amendment. If any legal action or proceeding shall be commenced at any
time by any party to this Amendment in connection with its interpretation or
enforcement, the prevailing party or parties in such action or proceeding shall
be entitled to reimbursement of its reasonable attorneys' fees and costs in
connection therewith, in addition to all other relief to which the prevailing
party or parties may be entitled. Each of Coast and Borrower hereby waives its
right to a jury trial in any such action or proceeding.
The foregoing Fourth Amendment to Loan and Security Agreement
is hereby agreed and accepted:
EAGLEBROOK PLASTICS, INC. EAGLEBROOK PRODUCTS, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
CARTERET BIOCYCLE CORPORATION CLEAN EARTH OF NEW CASTLE, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
2
55
CONSOLIDATED TECHNOLOGIES, INC. INTEGRATED TECHNICAL SERVICES, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
U.S. PLASTIC LUMBER LTD. S&W WASTE, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
"Coast"
COAST BUSINESS CREDIT, a division of
Southern Pacific Bank
By:_________________________________
Title:______________________________
Each of the undersigned hereby acknowledges and consents to
the foregoing Amendment, and agrees that the Continuing Guaranty executed by it
in favor of Coast remains in full force and effect.
EAGLEBROOK PLASTICS, INC. EAGLEBROOK PRODUCTS, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
U.S. PLASTIC LUMBER FINANCE CORP. U.S. PLASTIC LUMBER IP CORP.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
3
56
CONSOLIDATED TECHNOLOGIES, INC. INTEGRATED TECHNICAL SERVICES, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
U.S. PLASTIC LUMBER LTD. S&W WASTE, INC.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
CLEAN EARTH, INC. U.S. PLASTIC LUMBER CORP.
By:_________________________________ By:________________________________
President or Vice President President or Vice President
4