Exhibit 10.1
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CREDIT AND SECURITY AGREEMENT
BY AND AMONG
RONSON CORPORATION,
RONSON AVIATION, INC.,
RONSON CONSUMER PRODUCTS CORPORATION AND
RONSON CORPORATION OF CANADA LTD.
AND
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
Acting through its ▇▇▇▇▇ Fargo Business Credit operating division
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May 30, 2008
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS....................................................................................4
Section 1.1. Definitions.........................................................................4
Section 1.2. Other Definitional Terms; Rules of Interpretation..................................19
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY......................................................19
Section 2.1. Revolving Advances.................................................................19
Section 2.2. Procedures for Requesting Advances.................................................19
Section 2.3. LIBOR Advances.....................................................................20
Section 2.4. Letters of Credit..................................................................21
Section 2.5. Special Account....................................................................22
Section 2.6. Term Advances......................................................................22
Section 2.7. Payment of Term Notes..............................................................22
Section 2.8. Interest; Default Interest Rate; Application of Payments; Participations; Usury....23
Section 2.9. Fees...............................................................................24
Section 2.10. Time for Interest Payments; Payment on Non-Business Days; Computation of Interest
and Fees ..........................................................................26
Section 2.11. Lockbox and Collateral Account; Sweep of Funds.....................................26
Section 2.12. Voluntary Prepayment; Reduction of the Maximum Line Amount; Termination of the
Credit Facility by the Borrower....................................................27
Section 2.13. Mandatory Prepayment...............................................................27
Section 2.14. Revolving Advances to Pay Indebtedness.............................................28
Section 2.15. Use of Proceeds....................................................................28
Section 2.16. Liability Records..................................................................28
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF........................................................28
Section 3.1. Grant of Security Interest.........................................................28
Section 3.2. Notification of Account Debtors and Other Obligors.................................28
Section 3.3. Assignment of Insurance............................................................29
Section 3.4. Occupancy..........................................................................29
Section 3.5. License............................................................................30
Section 3.6. Financing Statement................................................................30
Section 3.7. Setoff.............................................................................31
Section 3.8. Collateral.........................................................................31
ARTICLE IV CONDITIONS OF LENDING........................................................................31
Section 4.1. Conditions Precedent to the Initial Advances and Letter of Credit..................31
Section 4.2. Conditions Precedent to All Advances and Letters of Credit.........................33
ARTICLE V REPRESENTATIONS AND WARRANTIES................................................................34
Section 5.1. Existence and Power; Name Chief Executive Office; Inventory and Equipment
Locations; Federal Employer Identification Number and Organizational
Identification Number..............................................................34
Section 5.2. Capitalization.....................................................................34
Section 5.3. Authorization of Borrowing; No Conflict as to Law or Agreements....................34
Section 5.4. Legal Agreements...................................................................35
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Section 5.5. Subsidiaries.......................................................................35
Section 5.6. Financial Condition; No Adverse Change.............................................35
Section 5.7. Litigation.........................................................................35
Section 5.8. Regulation U.......................................................................35
Section 5.9. Taxes..............................................................................35
Section 5.10. Titles and Liens...................................................................35
Section 5.11. Intellectual Property Rights.......................................................35
Section 5.12. Plans..............................................................................36
Section 5.13. Default............................................................................37
Section 5.14. Intentionally Omitted..............................................................37
Section 5.15. Submissions to Lender..............................................................37
Section 5.16. Financing Statements...............................................................37
Section 5.17. Rights to Payment..................................................................37
Section 5.18. Financial Solvency.................................................................37
Section 5.19. Inactive Subsidiaries..............................................................38
ARTICLE VI COVENANTS....................................................................................38
Section 6.1. Reporting Requirements.............................................................38
Section 6.2. Financial Covenants................................................................41
Section 6.3. Permitted Liens; Financing Statements..............................................42
Section 6.4. Indebtedness.......................................................................43
Section 6.5. Guaranties.........................................................................43
Section 6.6. Investments and Subsidiaries.......................................................43
Section 6.7. Dividends and Distributions........................................................44
Section 6.8. Salaries...........................................................................44
Section 6.9. Intentionally Omitted..............................................................44
Section 6.10. Books and Records; Collateral Examination, Inspection and Appraisals...............44
Section 6.11. Account Verification...............................................................45
Section 6.12. Compliance with Laws...............................................................45
Section 6.13. Payment of Taxes and Other Claims..................................................45
Section 6.14. Maintenance of Properties..........................................................45
Section 6.15. Insurance..........................................................................46
Section 6.16. Preservation of Existence..........................................................46
Section 6.17. Delivery of Instruments, etc.......................................................46
Section 6.18. Sale or Transfer of Assets; Suspension of Business Operations......................46
Section 6.19. Consolidation and Merger; Asset Acquisitions.......................................46
Section 6.20. Sale and Leaseback.................................................................46
Section 6.21. Restrictions on Nature of Business.................................................46
Section 6.22. Accounting.........................................................................46
Section 6.23. Discounts, etc.....................................................................47
Section 6.24. Plans..............................................................................47
Section 6.25. Place of Business; Name............................................................47
Section 6.26. Constituent Documents; S Corporation Status........................................47
Section 6.27. Performance by the Lender..........................................................48
Section 6.28. Affiliate Transactions.............................................................48
ARTICLE VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES......................................................48
Section 7.1. Events of Default..................................................................48
Section 7.2. Rights and Remedies................................................................50
Section 7.3. Right of Redemption with Respect to Owned Intellectual Property....................51
Section 7.4. Certain Notices....................................................................51
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ARTICLE VIII MISCELLANEOUS..............................................................................51
Section 8.1. No Waiver; Cumulative Remedies; Compliance with Laws...............................51
Section 8.2. Amendments, Etc....................................................................51
Section 8.3. Notices; Communication of Confidential Information; Requests for Accounting........51
Section 8.4. Further Documents..................................................................52
Section 8.5. Costs and Expenses.................................................................52
Section 8.6. Indemnity..........................................................................52
Section 8.7. Participants.......................................................................53
Section 8.8. Execution in Counterparts; Telefacsimile Execution.................................53
Section 8.9. Retention of Loan Party's Records..................................................53
Section 8.10. Binding Effect; Assignment; Complete Agreement; Sharing Information;
Confidentiality....................................................................53
Section 8.11. Severability of Provisions.........................................................54
Section 8.12. Headings...........................................................................54
Section 8.13. Cross Guaranty; Subordination......................................................54
Section 8.14. Judgment Currency..................................................................56
Section 8.15. Appointment of Borrower Representative; Reliance on Notices........................57
Section 8.16. Governing Law; Jurisdiction, Venue; Waiver of Jury Trial...........................57
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CREDIT AND SECURITY AGREEMENT
DATED MAY 30, 2008
RONSON CORPORATION, a New Jersey Corporation ("Parent"), RONSON
CONSUMER PRODUCTS CORPORATION, a New Jersey corporation, ("RCPC"), RONSON
AVIATION, INC., a New Jersey Corporation ("RAI") and RONSON CORPORATION OF
CANADA LTD., an Ontario corporation ("Ronson Canada") (RCPC and RAI are
collectively and individually referred to as the "Domestic Borrower" or
"Domestic Borrowers"; the Domestic Borrower and Ronson Canada are collectively
and individually referred to as the "Borrower" or "Borrowers"), and ▇▇▇▇▇ FARGO
BANK, NATIONAL ASSOCIATION (as more fully defined in Article I herein, the
"Lender") acting through its ▇▇▇▇▇ Fargo Business Credit operating division,
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Except as otherwise expressly provided in
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this Agreement, the following terms shall have the meanings given them in this
Section:
"Accounts" shall have the meaning given it under the UCC or the PPSA,
as applicable.
"Accounts Advance Rate" means up to eighty-five percent (85%), or such
lesser rate as the Lender in its sole discretion may deem appropriate from time
to time; provided that, as of any date of determination, the Accounts Advance
Rate shall be reduced by one (1) percentage point for each percentage by which
Dilution is in excess of five percent (5.0%).
"Advance" means a Revolving Advance, an Equipment Term Advance or Real
Estate Term Advance.
"Affiliate" or "Affiliates" means Parent and any other Person
controlled by, controlling or under common control with the Borrowers, including
any Subsidiary of the Borrowers. For purposes of this definition, "control,"
when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
"Aggregate Face Amount" means the aggregate amount that may then be
drawn under each outstanding Letter of Credit, assuming compliance with all
conditions for drawing.
"Agreement" means this Credit and Security Agreement.
"Availability" means the amount, if any, by which the Borrowing Base
exceeds the sum of (i) the outstanding principal balance of the Revolving Notes
and (ii) the L/C Amount.
"Bonus Factors" means the factors and formulas of Parent's Management
Incentive Plan, based on the annually budgeted sales and earnings amounts for
each of the Borrowers, upon which the annual bonus amounts of the Borrowers'
officers are calculated.
"Borrower Representative" is defined in Section 8.15.
"Book Net Worth" means the aggregate of the Owners' equity in the Loan
Parties, on a consolidated basis, determined in accordance with GAAP.
"Borrowing Base" means the Domestic Borrower Borrowing Base and the
Ronson Canada Borrowing Base.
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"Business Day" means a day on which the Federal Reserve Bank of New
York is open for business and, if such day relates to a LIBOR Advance, a day on
which dealings are carried on in the London interbank eurodollar market.
"Canada Borrowing Base Reserve" means, as of any date of determination,
such amounts (expressed as either a specified amount or as a percentage of a
specified category or item) as the Lender may from time to time establish and
adjust in reducing Availability (a) to reflect events, conditions, contingencies
or risks which, as determined by the Lender, do or may affect (i) the Collateral
of Ronson Canada, or its value, including without limitation Priority Payables,
(ii) the assets, business or prospects of Ronson Canada, or (iii) the security
interests and other rights of the Lender in the Collateral of Ronson Canada
(including the enforceability, perfection and priority thereof), or (b) to
reflect the Lender's reasonable judgment that any collateral report or financial
information furnished by or on behalf of the Borrower to the Lender is or may
have been incomplete, inaccurate or misleading in any material respect, or (c)
in respect of any state of facts that constitutes a Default or an Event of
Default.
"Canada L/C Amount" means the sum of (i) the Aggregate Face Amount of
any outstanding Letters of Credit for which Ronson Canada was the applicant,
plus (ii) the amount of each Obligation of Reimbursement attributable to Ronson
Canada that either remains unreimbursed or has not been paid through a Revolving
Advance on the Credit Facility.
"Canadian Benefit Plans" means any plan, fund, program, or policy,
whether oral or written, formal or informal, funded or unfunded, insured or
uninsured, providing employee benefits, including medical, hospital care,
dental, sickness, accident, disability, life insurance, pension, retirement or
savings benefits, under which a Loan Party has any liability with respect to any
employee or former employee, but excluding any Canadian Pension Plans.
"Canadian Insolvency Statutes" includes the Bankruptcy and Insolvency
Act (Canada), the Companies' Creditors Arrangement Act (Canada) and the
Winding-up and Restructuring Act (Canada) and any other present or future law
relative to bankruptcy, insolvency or other relief for debtors or for or against
the benefit of creditors, as amended from time to time.
"Canadian Pension Plans" means each pension plan required to be
registered under Canadian federal or provincial pension benefits law that is
maintained or contributed to by a Loan Party for its employees or former
employees, but does not include the Canada Pension Plan or the Quebec Pension
Plan as maintained by the Government of Canada or the Province of Quebec,
respectively.
"Capital Expenditures" means for a period, any expenditure of money
during such period for the lease, purchase or other acquisition of any capital
asset which is capitalized on a balance sheet in accordance with GAAP, whether
payable currently or in the future.
"Change of Control" means the occurrence of any of the following
events:
(a) Any Person or "group" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) who is not a Five Percent Owner on
the Funding Date is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, except that a Person will
be deemed to have "beneficial ownership" of all securities that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than twenty percent
(20%) of the voting power of all classes of equity securities of a Borrower;
(b) Any Person or "group" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) who is not a Five Percent Owner on
the Funding Date is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, except that a Person will
be deemed to have "beneficial ownership" of all securities that such Person has
the right to acquire, whether such
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right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than twenty percent (20%) of the voting power of all classes
of equity securities of Parent;
(c) During any consecutive two-year period, individuals who at the
beginning of such period constituted the board of Directors of the Borrower
(together with any new Directors whose election to such board of Directors, or
whose nomination for election by the Owners of the Borrower, was approved by a
vote of two thirds of the Directors then still in office who were either
Directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of Directors of the Borrower then in office;
(d) During any consecutive two-year period, individuals who at the
beginning of such period constituted the board of Directors of the Parent
(together with any new Directors whose election to such board of Directors, or
whose nomination for election by the Owners of the Borrower, was approved by a
vote of a majority of the Directors then still in office who were either
Directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of Directors of the Parent then in office; or
(e) Any one or more of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇ shall cease
to actively manage the Borrower's day-to-day business activities; provided
however, a Change of Control shall not be deemed to have occurred if ▇▇▇▇▇ ▇.
▇▇▇▇ shall cease to actively manage the Borrower's day-to-day business
activities and a replacement officer, reasonably acceptable to Lender, assumes
the duties and responsibilities vacated by ▇▇▇▇▇ ▇. ▇▇▇▇ within thirty (30) days
thereafter.
"Collateral" means all right of title and interest of the Borrower in
and to Accounts, chattel paper and electronic chattel paper, deposit accounts,
documents, documents of title, Equipment, General Intangibles, goods,
instruments, Inventory, Investment Property, letter-of-credit rights, letters of
credit, all sums on deposit in any Collateral Account, and any items in any
Lockbox; together with (i) all substitutions and replacements for and products
of any of the foregoing; (ii) in the case of all goods, all accessions; (iii)
all accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any goods; (iv) all warehouse
receipts, bills of lading and other documents of title now or hereafter covering
such goods; (v) all collateral subject to the Lien of any Security Document;
(vi) any money, or other assets of the Borrower that now or hereafter come into
the possession, custody, or control of the Lender; (vii) all sums on deposit in
the Special Account; (viii) proceeds of any and all of the foregoing; (ix) books
and records of the Borrower, including all mail or electronic mail addressed to
the Borrower; and (x) all of the foregoing, whether now owned or existing or
hereafter acquired or arising or in which the Borrower now has or hereafter
acquires any rights.
"Collateral Account" means the "Lender Account" as defined in the
Wholesale Lockbox and Collection Account Agreement, and any similar account
established from time to time by any Borrower with a depositary bank acceptable
to Lender and which is subject to an agreement among Lender, such Borrower and
such depositary bank, in form and substance acceptable to Lender.
"Commercial Letter of Credit Agreement" means an agreement governing
the issuance of documentary letters of credit by the Lender entered into between
the Borrower as applicant and the Lender as issuer, in Lender's customary form.
"Commitment" means the Lender's commitment to make Advances to , and to
issue Letters of Credit for the account of, the Borrower.
"Constituent Documents" means with respect to any Person, as
applicable, such Person's certificate of incorporation, articles of
incorporation, by-laws, certificate of formation, articles of organization,
limited liability company agreement, management agreement, operating agreement,
shareholder agreement, partnership agreement or similar document or agreement
governing such Person's existence, organization or management or concerning
disposition of ownership interests of such Person or voting rights among such
Person's owners.
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"Credit Facility" means the credit facility under which Revolving
Advances and Letters of Credit may be made available to the Borrower by the
Lender under Article II.
"Current Maturities of Long Term Debt" means during a period beginning
and ending on designated dates, the amount of the Borrower's long-term debt and
capitalized leases which became due during that period.
"Cut-off Time" means 11:59 a.m. Central Time.
"Debt" means of a Person as of a given date, all items of indebtedness
or liability which in accordance with GAAP would be included in determining
total liabilities as shown on the liabilities side of a balance sheet for such
Person and shall also include the aggregate payments required to be made by such
Person at any time under any lease that is considered a capitalized lease under
GAAP.
"Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the day a
Default or Event of Default occurs and ending on the date identified by the
Lender in writing as the date that such Default or Event of Default has been
cured or waived.
"Default Rate" means an annual interest rate in effect during a Default
Period or following the Termination Date, which interest rate shall be equal to
three percent (3%) over the applicable Floating Rate or the LIBOR Advance Rate,
as the case may be, as such rate may change from time to time.
"Deposit Account Control Agreement" means each deposit account control
agreement relating to each deposit account maintained by a Borrower with a
depository bank, among Lender, such Borrower and such depositary bank, in form
and substance acceptable to Lender.
"Dilution" means, as of any date of determination, a percentage, based
upon the experience of the trailing six (6)month period ending on the date of
determination, which is the result of dividing (a) actual bad debt write-downs,
discounts, advertising allowances, credits, or other dilutive items with respect
to the Accounts as determined by Lender in its sole discretion during such
period, by (b) the Borrower's net sales during such period (excluding
extraordinary items) plus the amount of clause (a).
"Director" means a director if the Loan Party is a corporation, a
governor or manager if the Loan Party is a limited liability company, or a
general partner if the Loan Party is a partnership.
"Dollars" or "$" means lawful currency of the United States of America.
"Domestic Borrower Borrowing Base" means at any time the lesser of:
(a) The Maximum Line Amount (less Advances made to or for the benefit
of Ronson Canada under this Agreement); or
(b) Subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) The product of the Accounts Advance Rate times Eligible
Accounts owned by the Domestic Borrowers, plus
(ii) The lesser of (A) sixty percent (60%), or such lesser rate as
the Lender in its sole discretion may deem appropriate from time to time, of
Eligible Inventory owned by the Domestic Borrowers, (b) eighty-five percent
(85%), or such lesser rate as the Lender in its sole discretion may deem
appropriate from time to time, of the Net Orderly Liquidation Value of Eligible
Inventory owned by the Domestic Borrowers, or (C)
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$2,250,000 less Advances made to or for the benefit of Ronson Canada against
Eligible Inventory owned by Ronson Canada, less
(iii) The L/C Amount (less the Ronson Canada L/C Amount), less
(iv) The Domestic Borrowing Base Reserve, less
(v) Indebtedness that the Domestic Borrowers owe to the Lender
that has not yet been advanced on the Revolving Note, and an amount that the
Lender in its reasonable discretion finds on the date of determination to be
equal to the Lender's net credit exposure with respect to any swap, derivative,
foreign exchange, hedge, deposit, treasury management or other similar
transaction or arrangement extended to the Domestic Borrowers by the Lender that
is not described in Article II of this Agreement and any indebtedness owed by
the Domestic Borrowers to ▇▇▇▇▇ Fargo Merchant Services, L.L.C.
"Domestic Borrowing Base Reserve" means, as of any date of
determination, such amounts (expressed as either a specified amount or as a
percentage of a specified category or item) as the Lender may from time to time
establish and adjust in reducing Availability (a) to reflect events, conditions,
contingencies or risks which, as determined by the Lender, do or may affect (i)
the Collateral of RCPC and/or RAI, or its value, (ii) the assets, business or
prospects of the Borrower, or (iii) the security interests and other rights of
the Lender in the Collateral (including the enforceability, perfection and
priority thereof), or (b) to reflect the Lender's reasonable judgment that any
collateral report or financial information furnished by or on behalf of the
Borrower to the Lender is or may have been incomplete, inaccurate or misleading
in any material respect, or (c) in respect of any state of facts that
constitutes a Default or an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group which includes the Borrower and which
is treated as a single employer under Section 414 of the IRC.
"Eligible Accounts" means all unpaid Accounts of a Borrower arising
from the sale or lease of goods or the performance of services, net of any
credits, but excluding any such Accounts having any of the following
characteristics:
(i) That portion of Accounts unpaid 90 days or more after the
invoice date;
(ii) That portion of Accounts related to goods or services with
respect to which the Borrower has received notice of a claim or dispute, which
are subject to a claim of offset or a contra account, or which reflect a
reasonable reserve for warranty claims or returns;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or that portion of Accounts not yet earned by the final
rendition of services by the Borrower to the account debtor, including with
respect to both goods and services, progress ▇▇▇▇▇▇▇▇, and that portion of
Accounts for which an invoice has not been sent to the applicable account
debtor;
(iv) Accounts constituting (i) proceeds of copyrightable material
unless such copyrightable material shall have been registered with the United
States Copyright Office or Canadian Intellectual Property Office, as applicable,
or (ii) proceeds of patentable inventions unless such patentable inventions have
been registered with the United States Patent and Trademark Office or Canadian
Intellectual Property Office, as applicable;
(v) Accounts owed by any unit of government, whether foreign or
domestic (except that there shall be included in Eligible Accounts that portion
of Accounts owed by such units of government for which the Borrower has provided
evidence satisfactory to the Lender that (A) the Lender has a first priority
perfected
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security interest and (B) such Accounts may be enforced by the Lender directly
against such unit of government under all applicable laws and (C) as to any
Accounts due from any Canadian governmental unit, the applicable Borrower has
complied with the Financial Administration Act (Canada); provided, however, that
at no time shall Eligible Accounts due from the United States government exceed
$100,000);
(vi) Accounts denominated in any currency other than United States
dollars or Canadian dollars;
(vii) Accounts owed by (1) an account debtor located in the
Province of Quebec, Canada or (2) an account debtor located outside the United
States or any Province in Canada (other than Quebec) which are not (A) backed by
a bank letter of credit naming the Lender as beneficiary or assigned to the
Lender, in the Lender's possession or control, and with respect to which a
control agreement concerning the letter-of-credit rights is in effect, and
acceptable to the Lender in all respects, in its sole discretion, or (B) covered
by a foreign receivables insurance policy acceptable to the Lender in its sole
discretion;
(viii) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(ix) Accounts owed by a Five Percent Owner, Subsidiary, Affiliate,
Officer or employee of the Borrower, including, without limitation, any Accounts
owed from a Loan Party to another Loan Party;
(x) Accounts not subject to a duly perfected security interest in
the Lender's favor or which are subject to any Lien (other than a Permitted Lien
described in Section 6.3(a)(iii) and 6.3(a)(vii)) in favor of any Person other
than the Lender;
(xi) That portion of Accounts that has been restructured,
extended, amended or modified;
(xii) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xiii) Accounts owed by an account debtor, regardless of whether
otherwise eligible, to the extent that the aggregate balance of such Accounts
exceeds twenty percent (20%) of the aggregate amount of all Eligible Accounts;
(xiv) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if twenty-five percent (25%) or more of the total amount of
Accounts due from such debtor is ineligible under clauses (i), (ii), or (xi)
above; and
(xv) Accounts, or portions thereof, otherwise deemed ineligible by
the Lender in its sole discretion.
"Eligible Equipment" means Equipment of the Domestic Borrowers
designated by the Lender as eligible from time to time in its sole discretion
but excluding any Equipment having any of the following characteristics:
(i) Equipment that is subject to any Lien other than in favor of
the Lender (other than a Permitted Lien described in Section 6.3(a)(iii) and
6.3(a)(vii));
(ii) Equipment that has not been delivered to the Premises;
(iii) Equipment in which the Lender does not hold a first priority
security interest;
(iv) Equipment that is obsolete or not currently saleable;
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(v) Equipment that is not covered by standard "all risk" insurance
for an amount equal to its forced liquidation value;
(vi) Equipment that requires proprietary software in order to
operate in the manner in which it is intended when such software is not freely
assignable to the Lender or any potential purchaser of such Equipment;
(vii) Equipment consisting of computer hardware, software,
tooling, or molds; and
(viii) Equipment otherwise deemed unacceptable by the Lender in
its sole discretion.
"Eligible Inventory" means all Inventory of a Borrower, valued at the
lower of cost or market in accordance with GAAP; but excluding any Inventory
having any of the following characteristics:
(i) Inventory that is: in-transit (other than in-transit Inventory
subject to a Letter of Credit issued by the Lender); located at any warehouse,
job site or other premises not approved by the Lender in writing; not subject to
a duly perfected first priority security interest in the Lender's favor; subject
to any lien or encumbrance (other than a Permitted Lien described in Section
6.3(a)(iii) and 6.3(a)(vii)), that is subordinate to the Lender's first priority
security interest; covered by any negotiable or non-negotiable warehouse
receipt, ▇▇▇▇ of lading or other document of title; on consignment from any
Person; on consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender;
(ii) Supplies, packaging, maintenance parts or sample Inventory,
or customer supplied parts or Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, defective, obsolete, slow moving
or not currently saleable in the normal course of the Borrower's operations, or
the amount of such Inventory that has been reduced by shrinkage;
(v) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the vendor
thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant to a license
unless the applicable licensor has agreed in writing to permit the Lender to
exercise its rights and remedies against such Inventory;
(viii) Inventory that is subject to a Lien (other than a Permitted
Lien described in Section 6.3(a)(iii) and 6.3(a)(vii)) in favor of any Person
other than the Lender;
(ix) Inventory stored at locations not owned or leased by
Borrower;
(x) Inventory stored at locations owned or leased by Borrower
holding less than ten (10%) of the aggregate value of the Borrower's Inventory,
other than Inventory of RAI; and
(xi) Inventory otherwise deemed ineligible by the Lender in its
sole discretion.
"Environmental Law" means any federal, state, provincial, local or
other governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
"Equipment" shall have the meaning given it under the UCC or the PPSA,
as applicable.
10
"Equipment Term Advance" has the meaning set forth in Section 2.6.1.
"Equipment Term Note" means the Domestic Borrower's promissory note,
payable to the order of the Lender, in substantially the form of Exhibit B-1
hereto, as same may be renewed and amended from time to time, and all
replacements therefor.
"Event of Default" is defined in Section 7.1.
"Excess Cash Flow" means for a given period, on a consolidated basis
for the Loan Parties, the difference between (i) sum of (1) Net Income and (2)
depreciation and amortization, minus, (ii) the sum of (1) unfinanced Capital
Expenditures to the extent permitted herein, (2) regularly scheduled principal
payments on the Equipment Term Note, the Real Estate Term Note, other long term
Debt and capital leases to the extent permitted under this Agreement and (3)
dividends, to the extent permitted herein; each as determined for such period in
accordance with GAAP.
"Executive Officer" means, when used with reference to a Loan Party,
its president, its chief executive officer, its chief financial officer and any
vice president of the Parent in charge of a principal business unit, division or
function (such as sales, administration or finance).
"Existing Capital One Mortgage" means that certain Mortgage made by
RCPC to North Fork Bank (now known as Capital One, N.A.) dated September 27,
2006 and recorded with the Clerk of Middlesex County, New Jersey on October 10,
2006 in Mortgage Book 11875, Page 534 and re-recorded in the same office on
October 22, 2007 in Mortgage Book 12672, Page 0459, as modified by the Note and
Mortgage Modification Agreement dated March 26, 2008 and recorded April 8, 2008
with the Clerk of Middlesex County, New Jersey in Book 147 at Page 617, a copy
of which is attached hereto as Exhibit E.
"Financial Covenants" means the covenants set forth in Section 6.2.
"Five Percent Owner" means the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or
indirectly, of an amount equal or greater than five percent (5%) of the voting
power of all classes of equity securities of Parent.
"Floating Rate" means with respect to (i) Revolving Advances evidenced
by the Revolving Note, an annual interest rate equal to the sum of the Prime
Rate plus one-half of one percent (.50%), (ii) Equipment Term Advances evidenced
by the Equipment Term Note, the Prime Rate plus three-quarters of one percent
(.75%) and (iii) Real Estate Term Advances evidenced by the Real Estate Term
Note, the Prime Rate plus one percent (1.00%).
"Floating Rate Advance" means an Advance bearing interest at the
Floating Rate.
"Funding Date" is defined in Section 2.1.
"Funds from Operations" means for a given period, on a consolidated
basis for the Loan Parties, the sum of (i) Net Income, (ii) depreciation and
amortization, (iii) any increase (or decrease) in deferred income taxes, (iv)
any increase (or decrease) in lifo reserves, and (v) other non-cash items, each
as determined for such period in accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.6.
"General Intangibles" means "general intangibles" as defined in under
the UCC and "intangibles" as defined in the PPSA, as applicable.
11
"Guarantor" means Parent and every other Person now or in the future
who agrees to guaranty the Indebtedness.
"Guaranty" means each unconditional continuing guaranty executed by a
Guarantor in favor of the Lender.
"Hazardous Substances" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and all other
chemicals, wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
"Inactive Subsidiaries" means Prometcor and Ronson Hydraulics.
"Indebtedness" is used herein in its most comprehensive sense and means
any and all advances, debts, obligations and liabilities of the Borrower to the
Lender, heretofore, now or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, including
under any swap, derivative, foreign exchange, hedge, deposit, treasury
management or other similar transaction or arrangement at any time entered into
by the Borrower with the Lender or with ▇▇▇▇▇ Fargo Merchant Services, L.L.C.,
and whether the Borrower may be liable individually or jointly with others, or
whether recovery upon such Indebtedness may be or hereafter becomes
unenforceable.
"Indemnified Liabilities" is defined in Section 8.6
"Indemnitees" is defined in Section 8.6.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time.
"Infringement" or "Infringing" when used with respect to Intellectual
Property Rights means any infringement or other violation of Intellectual
Property Rights.
"Intangible Assets" means all intangible assets as determined in
accordance with GAAP and including Intellectual Property Rights, goodwill,
accounts due from Affiliates, Directors, Officers or employees, customer lists,
deferred charges or any securities or Debt of the Borrower or any other
securities unless the same are readily marketable in the US or entitled to be
used as a credit against federal income tax liabilities, non-compete agreements
and any other assets designated from time to time by the Lender, in its sole
discretion.
"Intellectual Property Rights" means all actual or prospective rights
arising in connection with any intellectual property or other proprietary
rights, including all rights arising in connection with copyrights, patents,
service marks, trade dress, trade secrets, trademarks, trade names, designs or
mask works.
"Interest Payment Date" is defined in Section 2.10(a).
"Interest Period" means the period that commences on (and includes) the
Business Day on which either a LIBOR Advance is made or continued or on which a
Floating Rate Advance is converted to a LIBOR Advance and ending on (but
excluding) the Business Day numerically corresponding to such date that is one,
three or six months thereafter as designated by the Borrower, during which
period the outstanding principal balance of the LIBOR Advance shall bear
interest at the LIBOR Advance Rate; provided, however, that:
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(a) No Interest Period may be selected for an Advance for a principal
amount less than Five-Hundred Thousand Dollars ($500,000), and no more than
three (3) different Interest Periods may be outstanding at any one time;
12
(b) If an Interest Period would otherwise end on a day which is not a
Business Day, then the Interest Period shall end on the next Business Day
thereafter, unless that Business Day is the first Business Day of a month, in
which case the Interest Period shall end on the last Business Day of the
preceding month);
(c) No Interest Period applicable to a Revolving Advance may end later
than the Maturity Date; and
(d) In no event shall the Borrower select Interest Periods with respect
to Advances which, in the aggregate, would require payment of a contracted funds
breakage fee under this Agreement in order to make required principal payments.
"Inventory" shall have the meaning given it under the UCC or the PPSA,
as applicable.
"Investment Property" shall have the meaning given it under the UCC or
the PPSA, as applicable.
"L/C Amount" means the sum of (i) the Aggregate Face Amount of any
outstanding Letters of Credit, plus (ii) the amount of each Obligation of
Reimbursement that either remains unreimbursed or has not been paid through a
Revolving Advance on the Credit Facility.
"L/C Application" means an application for the issuance of standby or
documentary letters of credit pursuant to the terms of a Standby Letter of
Credit Agreement or a Commercial Letter of Credit Agreement in form acceptable
to the Lender.
"Lender" means ▇▇▇▇▇ Fargo Bank, National Association in its broadest
and most comprehensive sense as a legal entity, and is not limited in its
meaning to Lender's ▇▇▇▇▇ Fargo Business Credit operating division, or to any
other operating division of Lender.
"Letter of Credit" is defined in Section 2.4(a).
"LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8th of one percent (1%)) determined pursuant to the following
formula:
LIBOR = Base LIBOR
------------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by the Lender as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by the Lender for the purpose of
calculating effective rates of interest for loans making reference thereto, on
the first day of a Interest Period for delivery of funds on said date for a
period of time approximately equal to the number of days in such Interest Period
and in an amount approximately equal to the principal amount to which such
Interest Period applies. The Borrower understands and agrees that the Lender may
base its quotation of the Inter-Bank Market Offered Rate upon such offers or
other market indicators of the Inter-Bank Market as the Lender in its discretion
deems appropriate including the rate offered for U.S. dollar deposits on the
London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by the Lender for expected changes
in such reserve percentage during the applicable Interest Period.
"LIBOR Advance" means a Revolving Advance or a portion of the Real
Estate Term Advance bearing interest at the LIBOR Advance Rate.
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"LIBOR Advance Rate" means with respect to (i) Revolving Advances
evidenced by the Revolving Note, an annual interest rate equal to the sum of
LIBOR plus three-percent (3%) and (ii) Real Estate Term Advances, annual
interest rate equal to the sum of LIBOR plus three and one-half percent (3.5%).
"Licensed Intellectual Property" is defined in Section 5.11(c).
"Lien" means any security interest, mortgage, deed of trust, pledge,
lien, charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or subsequently acquired
and whether arising by agreement or operation of law.
"Loan Documents" means this Agreement, the Revolving Notes, the Term
Notes, each Guaranty, each L/C Application, each Standby Letter of Credit
Agreement, each Commercial Letter of Credit Agreement and the Security
Documents, together with every other agreement, note, document, contract or
instrument to which a Loan Party now or in the future may be a party and which
is required by the Lender.
"Loan Party" or "Loan Parties" shall mean individually and
collectively, Parent and the Borrowers.
"Lockbox" means "Lockbox" as defined in the Wholesale Lockbox and
Collection Account Agreement, and any other lockbox established from time to
time by any Borrower with a lockbox agent acceptable to Lender and which is
subject to an agreement among Lender, such Borrower and such lockbox agent, in
form and substance acceptable to Lender.
"Material Adverse Effect" means any of the following:
(i) A material adverse effect on the business, operations, results
of operations, assets, liabilities or financial condition of any Loan Party;
(ii) A material adverse effect on the ability of any Loan Party to
perform its obligations under the Loan Documents;
(iii) A material adverse effect on the ability of the Lender to
enforce the Indebtedness or to realize the intended benefits of the Security
Documents, including a material adverse effect on the validity or enforceability
of any Loan Document or of any rights against any Guarantor, or on the status,
existence, perfection, priority (subject to Permitted Liens) or enforceability
of any Lien securing payment or performance of the Indebtedness; or
(iv) Any claim against any Loan Party or threat of litigation
which if determined adversely to such Loan Party would cause such Loan Party to
be liable to pay an amount, after allowance for all applicable insurance
coverage, exceeding $75,000 or would result in the occurrence of an event
described in clauses (i), (ii) or (iii) above.
"Maturity Date" means May 30, 2013.
"Maximum Line Amount" means $4,000,000, unless this amount is reduced
pursuant to Section 2.12, in which event it means such lower amount.
"Mortgage" means that certain Leasehold Mortgage and Assignment of
Rents and Leases of even date herewith upon the Mortgaged Property, as the same
may be modified, amended or restated from time to time.
14
"Mortgaged Property" means that certain real property located in ▇▇▇▇▇▇
County, New Jersey subject to that certain lease between Ronson Helicopters,
Inc. (now known as Ronson Aviation, Inc.), as lessee, and County of ▇▇▇▇▇▇, as
lessor, dated May 14, 1975, as amended, as more particularly described in the
Mortgage.
"Multiemployer Plan" means a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) to which the Borrower or any ERISA Affiliate contributes or
is obligated to contribute.
"Net Cash Flow" means for a given period, on a consolidated basis for
the Loan Parties, Net Income, plus depreciation and amortization, minus the sum
of (a) unfinanced Capital Expenditures, (b) Current Maturities of Long Term Debt
and (c) distributions and dividends paid by Borrowers, to the extent permitted
under this Agreement.
"Net Cash Proceeds" means in connection with any asset sale, the cash
proceeds (including any cash payments received by way of deferred payment
whether pursuant to a note, installment receivable or otherwise, but only as and
when actually received) from such asset sale, net of (i) attorneys' fees,
accountants' fees, investment banking fees, brokerage commissions and amounts
required to be applied to the repayment of any portion of the Debt secured by a
Lien not prohibited hereunder on the asset which is the subject of such sale,
and (ii) taxes paid or reasonably estimated to be payable as a result of such
asset sale.
"Net Forced Liquidation Value" means a professional opinion of the
estimated most probable Net Cash Proceeds which could typically be realized at a
properly advertised and conducted public auction sale without reserve, held
under forced sale conditions and under economic trends current within 60 days of
the appraisal. The opinion may consider physical location, difficulty of
removal, adaptability, specialization, marketability, physical condition,
overall appearance and psychological appeal.
"Net Income" means for a given period, on a consolidated basis for the
Loan Parties, fiscal year-to-date after-tax net income from continuing
operations, including extraordinary losses but excluding extraordinary gains,
all as determined in accordance with GAAP; provided, however, to the extent that
option expenses have been deducted in calculating Net Income, the amount of such
expenses shall be added back to Net Income for purposes of computing compliance
with Financial Covenants.
"Net Loss" means for a given period, on a consolidated basis for the
Loan Parties, fiscal year-to-date after-tax net loss from continuing operations
as determined in accordance with GAAP; provided, however, to the extent that
option expenses have been deducted in calculating Net Loss, the amount of such
expenses shall be added back to Net Loss for purposes of computing compliance
with Financial Covenants.
"Net Orderly Liquidation Value" means a professional opinion of the
estimated most probable Net Cash Proceeds which could typically be realized at a
properly advertised and professionally managed liquidation sale, conducted under
orderly sale conditions for an extended period of time (usually six to nine
months), under the economic trends existing at the time of the appraisal.
"Obligation of Reimbursement" means the obligation of the Borrower to
reimburse the Lender pursuant to the terms of the Standby Letter of Credit
Agreement and the Commercial Letter of Credit Agreement and any applicable L/C
Application.
"Officer" means with respect to the Loan Parties, an officer if the
applicable Loan Party is a corporation, a manager if the applicable Loan Party
is a limited liability company, or a partner if the applicable Loan Party is a
partnership.
"OFAC" is defined in Section 6.12(c).
15
"Overadvance" means the amount, if any, by which the outstanding
principal balance of the Revolving Note, plus the L/C Amount, is in excess of
the then-existing Domestic Borrower Borrowing Base or the Ronson Canada
Borrowing Base, as applicable.
"Owned Intellectual Property" is defined in Section 5.11(a).
"Owner" means with respect to the Loan Parties, each Person having
legal or beneficial title to an ownership interest in the Loan Parties or a
right to acquire such an interest.
"PPSA" means the Personal Property Security Act (Ontario) as in effect
from time to time.
"Parent" means Ronson Corporation, a New Jersey corporation.
"Patent and Trademark Security Agreement" means each Patent and
Trademark Security Agreement now or hereafter executed by a Loan Party in favor
of the Lender.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) maintained for employees of the Borrower or any ERISA Affiliate and
covered by Title IV of ERISA.
"Permitted Lien" and "Permitted Liens" are defined in Section 6.3(a).
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) maintained for employees of the Borrower or any ERISA Affiliate.
"Premises" means all locations where the Borrower conducts its business
and has any rights of possession, including the locations legally described in
Exhibit D attached hereto.
"Prime Rate" means at any time the rate of interest most recently
announced by the Lender at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of the Lender's base rates, and serves
as the basis upon which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the recording thereof in
such internal publication or publications as the Lender may designate. Each
change in the rate of interest shall become effective on the date each Prime
Rate change is announced by the Lender.
"Priority Payables" means amounts due under applicable law and not paid
for vacation pay or other employee benefits, amounts due and not paid under any
legislation relating to workers' compensation, mechanics liens or employment
insurance, all amounts deducted or withheld and not paid and remitted when due
under the Income Tax Act (Canada) or other provincial taxation statutes, amounts
currently or past due and not contributed, remitted or paid to any Plan or under
the Canada Pension Plan, the Quebec Pension Plan, the Pension Benefits Act
(Ontario), or any similar legislation and amounts determined by the Lender from
time to time in respect of such portion of the Collateral as represents a sales
tax, excise tax, goods and services tax or harmonized tax.
"Prometcor" means Prometcor, Inc., a New Jersey corporation.
"Real Estate Term Advance" has the meaning set forth in Section 2.6.2.
"Real Estate Term Note" means the Domestic Borrower's promissory note,
payable to the order of the Lender, in substantially the form of Exhibit B-2
hereto, as same may be renewed and amended from time to time, and all
replacements therefor.
16
"Reportable Event" means a reportable event (as defined in Section 4043
of ERISA), other than an event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the Pension Benefit Guaranty
Corporation.
"Revolving Advance" is defined in Section 2.1.
"Revolving Note" means the Domestic Borrower's revolving promissory
note, payable to the order of the Lender in substantially the form of Exhibit
A-1 hereto, as same may be renewed and amended from time to time, and all
replacements thereto.
"Revolving Notes" means the Revolving Note and the Ronson Canada
Revolving Note.
"Ronson Canada Borrowing Base" means, at any time the lesser of:
(a) $700,000; or
(b) Subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) The product of the Accounts Advance Rate times Eligible
Accounts owned by Ronson Canada, plus
(ii) The lesser of (A) sixty percent (60%), or such lesser rate as
the Lender in its sole discretion may deem appropriate from time to time, of
Eligible Inventory owned by Ronson Canada, (b) eighty-five percent (85%),or such
lesser rate as the Lender in its sole discretion may deem appropriate from time
to time, of the Net Orderly Liquidation Value of Eligible Inventory owned by
Ronson Canada, or (C) $700,000, less
(iii) The Canada L/C Amount, less
(iv) The Canada Borrowing Base Reserve, less
(v) Indebtedness that Ronson Canada owes to the Lender that has
not yet been advanced on the Ronson Canada Revolving Note, and an amount that
the Lender in its reasonable discretion finds on the date of determination to be
equal to the Lender's net credit exposure with respect to any swap, derivative,
foreign exchange, hedge, deposit, treasury management or other similar
transaction or arrangement extended to Ronson Canada by the Lender that is not
described in Article II of this Agreement and any indebtedness owed by Ronson
Canada to ▇▇▇▇▇ Fargo Merchant Services, L.L.C.
"Ronson Canada Indebtedness" is used herein in its most comprehensive
sense and means any and all advances, debts, obligations and liabilities of
Ronson Canada to the Lender, heretofore, now or hereafter made, incurred or
created, whether voluntary or involuntary and however arising, whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, including under any swap, derivative, foreign exchange, hedge,
deposit, treasury management or other similar transaction or arrangement at any
time entered into by Ronson Canada with the Lender or with ▇▇▇▇▇ Fargo Merchant
Services, L.L.C., and whether Ronson Canada may be liable individually or
jointly with others, or whether recovery upon such Indebtedness may be or
hereafter becomes unenforceable.
"Ronson Canada Revolving Note" means the revolving promissory note of
Ronson Canada, payable to the order of the Lender in substantially the form of
Exhibit A-2 hereto, as same may be renewed and amended from time to time, and
all replacements thereto.
"Ronson Hydraulics" means Ronson Hydraulics Units Corporation, a North
Carolina corporation.
17
"Security Agreements" means each Security Agreement or Collateral
Pledge Agreement now or hereafter executed by a Loan Party in favor of the
Lender dated the same date as this Agreement
"Security Documents" means this Agreement, the Wholesale Lockbox and
Collection Account Agreement, the Deposit Account Control Agreement(s), the
Security Agreement(s), the Mortgage, the Patent Security Agreement(s), and the
Trademark Security Agreement(s), and any other document delivered to the Lender
from time to time to secure the Indebtedness.
"Security Interest" is defined in Section 3.1.
"Special Account" means a specified cash collateral account maintained
with Lender or another financial institution acceptable to the Lender in
connection with Letters of Credit, as contemplated by Section 2.5.
"Standby Letter of Credit Agreement" means an agreement governing the
issuance of standby letters of credit by Lender entered into between the
Borrower as applicant and Lender as issuer, in Lender's customary form.
"Subordinated Creditors" means every Person now or in the future who
agrees to subordinate indebtedness of the Borrower held by that Person to the
payment of the Indebtedness.
"Subordinated Indebtedness" means indebtedness subject to a
Subordination Agreement acceptable to Lender in its discretion.
"Subordination Agreement" means a subordination agreement executed by a
Subordinated Creditor in favor of the Lender and acknowledged by the Borrower.
"Subsidiary" means any Person of which more than fifty percent (50%) of
the outstanding ownership interests having general voting power under ordinary
circumstances to elect a majority of the board of directors or the equivalent of
such Person, regardless of whether or not at the time ownership interests of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency, is at the time directly or indirectly owned by the
Borrower, by the Borrower and one or more other Subsidiaries, or by one or more
other Subsidiaries.
"Tangible Net Worth" means Book Net Worth, plus Subordinated
----
Indebtedness of the Loan Parties, on a consolidated basis, minus Intangible
-----
Assets of the Loan Parties, on a consolidated basis.
"Term Advances" or "Term Advances" means collectively and individually
the Equipment Term Advance and the Real Estate Term Advance.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Indebtedness, following an Event of Default,
pursuant to Section 7.2.
"Term Note" or "Term Notes" means collectively and individually the
Equipment Term Note and the Real Estate Term Note.
"Trademark Security Agreement" means each Trademark Security Agreement
now or hereafter executed by a Loan Party in favor of the Lender dated the same
date as this Agreement.
"UCC" means the Uniform Commercial Code in effect in the state
designated in this Agreement as the state whose laws shall govern this
Agreement, or in any other state whose laws are held to govern this Agreement or
any portion of this Agreement.
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"Unused Amount" is defined in Section 2.9(b).
"Wholesale Lockbox and Collection Account Agreement" means the
Wholesale Lockbox and Collection Account Agreement by and between the Borrower
and the Lender.
Section 1.2. Other Definitional Terms; Rules of Interpretation. The
----------------------------------------------------
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP. All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections of,
or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". Unless the context in which used
herein otherwise clearly requires, "or" has the inclusive meaning represented by
the phrase "and/or". Defined terms include in the singular number the plural and
in the plural number the singular. Reference to any agreement (including the
Loan Documents), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof (and, if applicable, in accordance with the terms hereof
and the other Loan Documents), except where otherwise explicitly provided, and
reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor. Reference
to any law, rule, regulation, order, decree, requirement, policy, guideline,
directive or interpretation means as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect on the determination date,
including rules and regulations promulgated thereunder.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1. Revolving Advances. The Lender agrees, subject to the
-------------------
terms and conditions of this Agreement, to make advances ("Revolving Advances")
to (a) the Borrower Representative on behalf of the Domestic Borrowers, and (b)
to Ronson Canada on behalf of Ronson Canada, from time to time from the date
that all of the conditions set forth in Section 4.1 are satisfied (the "Funding
Date") to and until (but not including) the Termination Date in an amount not in
excess of the Maximum Line Amount. The Lender shall have no obligation (a) to
make a Revolving Advance to the extent that the amount of the requested
Revolving Advance exceeds Availability or (b) to make a Revolving Advance to or
for the benefit of the Domestic Borrowers to the extent the amount of the
requested Revolving Advance exceeds the Domestic Borrower Borrowing Base or (c)
make a Revolving Advance to or for the benefit of Ronson Canada to the extent
the amount of the Revolving Advance exceeds the Ronson Canada Borrowing Base.
The Borrower's obligation to pay the Revolving Advances shall be evidenced by
the Revolving Notes and shall be secured by the Collateral. Within the limits
set forth in this Section 2.1, the Borrower may borrow, prepay pursuant to
Section 2.12, and reborrow. Notwithstanding any other provision contained in
this Agreement or in any other Loan Document, Ronson Canada shall be liable
under this Agreement and under the other Loan Documents for the Ronson Canada
Indebtedness only.
Section 2.2. Procedures for Requesting Advances. The Borrower shall
------------------------------------
comply with the following procedures in requesting Revolving Advances:
(a) Type of Advances. Each Advance shall be funded as either a Floating
Rate Advance or a LIBOR Advance, as the Borrower shall specify in a request
delivered to the Lender conforming to the requirements of Section 2.2(b);
Floating Rate Advances and LIBOR Advances may be outstanding at the same time.
Each request for a LIBOR Advance shall be in multiples of $100,000, with a
minimum request of at least $500,000. LIBOR Advances shall not be available
during Default Periods.
19
(b) Time for Requests. The Borrower shall request each Advance so that
it is received by Lender not later than the Cut-off Time on the Business Day on
which the Advance is to be made. Each request that conforms to the terms of this
Agreement shall be effective upon receipt by the Lender, shall be in writing or
by telephone or telecopy transmission, and shall be confirmed in writing by the
Borrower if so requested by the Lender, by (i) an Officer of the Borrower; or
(ii) a Person designated as the Borrower's agent by an Officer of the Borrower
in a writing delivered to the Lender; or (iii) a Person whom the Lender
reasonably believes to be an Officer of the Borrower or such a designated agent
, which confirmation shall specify whether the Advance shall be a Floating Rate
Advance or a LIBOR Advance and, with respect to any LIBOR Advance, shall specify
the principal amount of the LIBOR Advance and the Interest Period applicable
thereto. The Borrower shall repay all Advances even if the Lender does not
receive such confirmation and even if the Person requesting an Advance was not
in fact authorized to do so. Any request for an Advance, whether written or
telephonic, shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 4.2 have been satisfied as of the time of the
request.
(c) Disbursement. Upon fulfillment of the applicable conditions set
forth in Article IV, the Lender shall disburse the proceeds of the requested
Advance by crediting the Borrower's operating account maintained with the Lender
unless the Lender and the Borrower shall agree to another manner of
disbursement. The Lender may also initiate an Advance and disburse the proceeds
to any third Person in such amounts as the Lender, in its sole discretion, deems
necessary to protect its interest in any Collateral or to purchase Collateral or
to exercise any other rights granted to it by the Borrower under Section 6.27.
Section 2.3. LIBOR Advances.
--------------
(a) Converting Floating Rate Advances to LIBOR Advances; Procedures. So
long as no Default Period is in effect, the Borrower may convert all or any part
of the principal amount of any outstanding Floating Rate Advance into a LIBOR
Advance by requesting that the Lender convert same no later than the Cut-off
Time on the Business Day immediately preceding the Business Day on which the
Borrower wishes the conversion to become effective. Each request that conforms
to the terms of this Agreement shall be effective upon receipt by the Lender and
shall be confirmed in writing by the Borrower if the Lender so requests by any
Officer or designated agent identified in Section 2.2(b) or Person reasonably
believed by the Lender to be such an Officer or designated agent, which request
shall specify the Business Day on which the conversion is to occur, the total
amount of the Floating Rate Advance to be converted, and the applicable Interest
Period. Each such conversion shall occur on a Business Day, and the aggregate
amount of Floating Rate Advances converted to LIBOR Advances shall be in
multiples of $100,000, with a minimum conversion amount of at least $500,000;
provided, however that at no time shall LIBOR Advances constitute more than
seventy-five percent (75%) of the aggregate outstanding principal amount of
Advances.
(b) Procedures at End of an Interest Period. Unless the Borrower
requests a new LIBOR Advance in accordance with the procedures set forth below,
or prepays the principal of an outstanding LIBOR Advance at the expiration of an
Interest Period, the Lender shall automatically and without request of the
Borrower convert each LIBOR Advance to a Floating Rate Advance on the last day
of the relevant Interest Period. So long as no Default exists, the Borrower may
cause all or any part of any maturing LIBOR Advance to be renewed as a new LIBOR
Advance by requesting that the Lender continue the maturing Advance as a LIBOR
Advance no later than the Cut-off Time on the Business Day immediately preceding
the Business Day constituting the first day of the new Interest Period. Each
such request shall be confirmed in writing by the Borrower upon the Lender's
request by any Officer or designated agent identified in Section 2.2(b), which
confirmation shall be effective upon receipt by the Lender, and which shall
specify the amount of the expiring LIBOR Advance to be continued and the
applicable Interest Period. Each new Interest Period shall begin on a Business
Day and the amount of each LIBOR Advance shall be in multiples of $100,000, with
a minimum Advance of at least $500,000.
20
(c) Setting and Notice of Rates. The Lender shall, with respect to any
request for a LIBOR Advance under Section 2.2 or a conversion or renewal of a
LIBOR Advance under this Section 2.3, provide the Borrower with a LIBOR quote
for each Interest Period identified by the Borrower on the Business Day on which
the request was made, if the request is received by the Lender prior to the
Cut-off Time, or for requests received by the Lender after the Cut-off Time, on
the next Business Day or on the Business Day on which the Borrower has requested
that the LIBOR Advance be made effective. If the Borrower does not immediately
accept a LIBOR quote, the quoted rate shall expire and any subsequent request
from Borrower for a LIBOR quote shall be subject to redetermination by the
Lender of the applicable LIBOR for the LIBOR Advance.
(d) Taxes and Regulatory Costs. The Borrower shall pay the Lender with
respect to any Advance, upon demand and in addition to any other amounts due or
to become due hereunder, any and all (i) withholdings, interest equalization
taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by
any domestic or foreign governmental authority and related in any manner to
LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR
Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by the Lender with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR. In determining which
of the foregoing are attributable to any LIBOR option available to the Borrower
hereunder, any reasonable allocation made by the Lender among its operations
shall be conclusive and binding upon the Borrower.
Section 2.4. Letters of Credit.
-----------------
(a) The Lender agrees, subject to the terms and conditions of this
Agreement, to issue, at any time after the Funding Date and prior to the
Termination Date, one or more irrevocable standby or documentary letters of
credit (each, a "Letter of Credit") for the Borrower's account. The Lender will
not issue any Letter of Credit if the face amount of the Letter of Credit to be
issued would exceed the lesser of:
(i) $500,000 less the L/C Amount, or
(ii) Availability.
Each Letter of Credit, if any, shall be issued pursuant to a separate
L/C Application made by the Borrower. The terms and conditions set forth in each
such L/C Application shall supplement the terms and conditions of the Standby
Letter of Credit Agreement or the Commercial Letter of Credit Agreement, as
applicable.
(b) No Letter of Credit shall be issued with an expiry date later than
one (1) year from the date of issuance or the Maturity Date in effect as of the
date of issuance, whichever is earlier.
(c) Any request for issuance of a Letter of Credit shall be deemed to
be a representation by the Borrower that the conditions set forth in Section 4.2
have been satisfied as of the date of the request.
(d) If a draft is submitted under a Letter of Credit when the Borrower
is unable, because a Default Period exists or for any other reason, to obtain a
Revolving Advance to pay the Obligation of Reimbursement, the Borrower shall pay
to the Lender on demand and in immediately available funds, the amount of the
Obligation of Reimbursement together with interest, accrued from the date of the
draft until payment in full at the Default Rate. Notwithstanding the Borrower's
inability to obtain a Revolving Advance for any reason, the Lender may, in its
sole discretion, make a Revolving Advance in an amount sufficient to discharge
any outstanding Obligation of Reimbursement and any accrued but unpaid interest
and fees payable with respect to same.
21
Section 2.5. Special Account. If the Credit Facility is terminated for
---------------
any reason while any Letter of Credit is outstanding, the Borrower shall
thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount plus any anticipated fees and
costs. If the Borrower fails to promptly make any such payment in the amount
required hereunder, then the Lender may make a Revolving Advance against the
Credit Facility in an amount sufficient to fulfill this obligation and deposit
the proceeds to the Special Account. The Special Account shall be an interest
bearing account either maintained with the Lender or with a financial
institution acceptable to the Lender. Any interest earned on amounts deposited
in the Special Account shall be credited to the Special Account. The Lender may
apply amounts on deposit in the Special Account at any time or from time to time
to the Indebtedness in the Lender's sole discretion. The Borrower may not
withdraw any amounts on deposit in the Special Account as long as the Lender
maintains a security interest therein. The Lender agrees to transfer any balance
in the Special Account to the Borrower when the Lender is required to release
its security interest in the Special Account under applicable law.
Section 2.6. Term Advances.
-------------
2.6.1 Equipment Term Advance.
----------------------
(a) The Lender agrees, subject to the terms and conditions of this
Agreement, to make a single advance to the Domestic Borrower on the Funding Date
in the amount of $837,500 (the "Equipment Term Advance"). The Domestic
Borrower's obligation to pay the Equipment Term Advance shall be evidenced by
the Equipment Term Note and shall be secured by the Collateral as provided in
Article III.
(b) Upon fulfillment of the applicable conditions set forth in Article
IV, the Lender shall deposit the proceeds of the requested Equipment Term
Advance by crediting the same to the Borrower's demand deposit account specified
in Section 2.2(c). Upon the Lender's request, the Domestic Borrower shall
promptly confirm each request for an Equipment Term Advance or any alternative
method of disbursing a Equipment Term Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Domestic Borrower shall
be obligated to repay all Equipment Term Advances notwithstanding the Lender's
failure to receive such confirmation and notwithstanding the fact that the
Person requesting the same was not in fact authorized to do so. Any request for
a Equipment Term Advance, whether written or telephonic, shall be deemed to be a
representation by the Domestic Borrower that the Domestic Borrower is in
compliance with the conditions set forth in Section 4.2 as of the time of the
request.
2.6.2 Real Estate Term Advance.
------------------------
(a) The Lender agrees, subject to the terms and conditions of this
Agreement, to make a single advance to the Domestic Borrower on the Funding Date
in the amount of $2,922,500 (the "Real Estate Term Advance"). The Domestic
Borrower's obligation to pay the Real Estate Term Advance shall be evidenced by
the Real Estate Term Note and shall be secured by the Collateral as provided in
Article III.
(b) Upon fulfillment of the applicable conditions set forth in Article
IV, the Lender shall deposit the proceeds of the requested Real Estate Term
Advance by crediting the same to the Borrower's demand deposit account specified
in Section 2.2(c). Upon the Lender's request, the Domestic Borrower shall
promptly confirm each request for a Real Estate Term Advance or any alternative
method of disbursing a Real Estate Term Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Domestic Borrower shall
be obligated to repay all Real Estate Term Advances notwithstanding the Lender's
failure to receive such confirmation and notwithstanding the fact that the
Person requesting the same was not in fact authorized to do so. Any request for
a Real Estate Term Advance, whether written or telephonic, shall be deemed to be
a representation by the Domestic Borrower, upon which the Lender may rely, that
the Domestic Borrower is in compliance with the conditions set forth in Section
4.2 as of the time of the request.
Section 2.7. Payment of Term Notes. The outstanding principal balance
---------------------
of the Term Notes shall be due and payable as follows:
22
2.7.1 Equipment Term Note.
-------------------
(a) In equal monthly installments of $13,954.17, beginning on July 1,
2008, and on the first day of each month thereafter.
(b) If the Lender at any time obtains an appraisal of Eligible
Equipment as permitted under Section 6.10(d) herein, and the appraisal shows the
aggregate outstanding principal balance of the Equipment Term Note to exceeds
(i) 85% of the Net Orderly Liquidation Value of Eligible Equipment or (ii) 100%
of the Net Forced Liquidation Value of Eligible Equipment, then the Domestic
Borrower, upon demand by the Lender, shall immediately prepay the Equipment Term
Note in the amount of such excess.
(c) All prepayments of principal with respect to the Equipment Term
Note shall be applied to the most remote principal installment or installments
then unpaid; and
(d) On the Termination Date, the entire unpaid principal balance of the
Equipment Term Note, and all unpaid interest accrued thereon, shall also be
fully due and payable.
2.7.2 Real Estate Term Note.
---------------------
(a) In equal monthly installments of $16,236.12, beginning on July 1,
2008, and on the first day of each month thereafter.
(b) If the Lender at any time obtains an appraisal of the Mortgaged
Property, as permitted under Section 6.10(d) herein, and the appraisal shows the
aggregate outstanding principal balance of the Real Estate Term Note to exceed
70% of the fair market value of such Mortgaged Property, then the Domestic
Borrower, upon demand by the Lender, shall immediately prepay the Real Estate
Term Note in the amount of such excess.
(c) All prepayments of principal with respect to the Real Estate Term
Note shall be applied to the most remote principal installment or installments
then unpaid; and
(d) On the Termination Date, the entire unpaid principal balance of the
Real Estate Term Note, and all unpaid interest accrued thereon, shall also be
fully due and payable.
Section 2.8. Interest; Default Interest Rate; Application of Payments;
----------------------------------------------------------
Participations; Usury.
---------------------
(a) Interest. Except as provided in Section 2.3, Section 2.8(b) and
Section 2.8(e), the principal amount of each Advance shall bear interest as a
Floating Rate Advance.
(b) Default Interest Rate. At any time during any Default Period or
following the Termination Date, in the Lender's sole discretion and without
waiving any of its other rights or remedies, the principal of the Revolving Note
and the Term Notes shall bear interest at the Default Rate or such lesser rate
as the Lender may determine, effective as of the first day of the fiscal quarter
in which any Default Period begins through the last day of such Default Period,
or any shorter time period that the Lender may determine. The decision of the
Lender to impose a rate that is less than the Default Rate or to not impose the
Default Rate for the entire duration of the Default Period shall be made by the
Lender in its sole discretion and shall not be a waiver of any of its other
rights and remedies, including its right to retroactively impose the full
Default Rate for the entirety of any such Default Period or following the
Termination Date.
(c) Application of Payments. Payments shall be applied to the
Indebtedness on the Business Day of receipt by the Lender in the Lender's
general account, but the amount of principal paid shall continue to accrue
interest at the interest rate applicable under the terms of this Agreement from
the calendar day the Lender receives the payment, and continuing through the end
of the first Business Day following receipt of the payment.
23
(d) Participations. If any Person shall acquire a participation in the
Advances or the Obligation of Reimbursement, the Borrower shall (subject, as to
Ronson Canada, to the final sentence of Section 2.1) be obligated to the Lender
to pay the full amount of all interest calculated under this Section 2.8, along
with all other fees, charges and other amounts due under this Agreement,
regardless if such Person elects to accept interest with respect to its
participation at a lower rate than that calculated under this Section 2.8, or
otherwise elects to accept less than its pro rata share of such fees, charges
and other amounts due under this Agreement.
(e) Usury. In any event no rate change shall be put into effect which
would result in a rate greater than the highest rate permitted by law.
Notwithstanding anything to the contrary contained in any Loan Document, all
agreements which either now are or which shall become agreements between the
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed by
any applicable usury laws. If any payments in the nature of interest, additional
interest and other charges made under any Loan Document are held to be in excess
of the limits imposed by any applicable usury laws, it is agreed that any such
amount held to be in excess shall be considered payment of principal hereunder,
and the indebtedness evidenced hereby shall be reduced by such amount so that
the total liability for payments in the nature of interest, additional interest
and other charges shall not exceed the applicable limits imposed by any
applicable usury laws, in compliance with the desires of the Borrower and the
Lender. This provision shall never be superseded or waived and shall control
every other provision of the Loan Documents and all agreements between the
Borrower and the Lender, or their successors and assigns.
Section 2.9. Fees.
----
(a) Origination Fee. The Borrower shall pay the Lender a fully earned
and non-refundable origination fee of $50,000, due and payable upon the
execution of this Agreement.
(b) Unused Line Fee. For the purposes of this Section 2.9(b), "Unused
Amount" means the Maximum Line Amount reduced by outstanding Revolving Advances
and the L/C Amount. The Borrower agrees to pay to the Lender an unused line fee
at the rate of one-quarter of one percent (.25%) per annum on the average daily
Unused Amount from the date of this Agreement to and including the Termination
Date, due and payable monthly in arrears on the first day of the month and on
the Termination Date.
(c) Collateral Monitoring Fee. The Borrower agrees to pay to the Lender
a monthly monitoring fee in the amount of $1,000 per month, due and payable
monthly in arrears on the first day of each month and on the Termination Date.
(d) Collateral Exam Fees. The Borrower shall pay the Lender fees in
connection with any collateral exams, audits or inspections conducted by or on
behalf of the Lender of any Collateral or of the Borrower's operations or
business at the rates established from time to time by the Lender (which fees
are currently $950 per day per collateral examiner), together with any related
out-of-pocket costs and expenses incurred by the Lender.
(e) Collateral Monitoring Service Fees. The Borrower shall pay the
Lender fees in connection with any service conducted by or on behalf of the
Lender for purposes of identifying ineligible Collateral, calculating the
Borrowing Base, and performing related collateral monitoring services at the
rates established from time to time by the Lender (which fees currently include
an initial set-up fee of $1,000 and a monthly fee of $100 for each such aging),
together with any out-of-pocket costs and expenses incurred by Lender, which
fees shall be due and payable monthly in arrears on the first day of the month
and on the Termination Date.
(f) Letter of Credit Fees. The Domestic Borrowers shall pay to the
Lender a fee with respect to each Letter of Credit that has been issued to any
Borrower, and Ronson Canada shall be obligated pay to the Lender (to the extent
not paid by the Domestic Borrowers) a fee with respect to each Letter of Credit
that has been issued to it, which fee shall be calculated on a per diem basis at
an annual rate equal to (i) one and one-half
24
percent (1.5%) of the Aggregate Face Amount of documentary letters of credit and
(ii) two percent (2%) of the Aggregate Face Amount of standby letters of credit,
from and including the date of issuance of the Letter of Credit until the date
that the Letter of Credit terminates or is returned to the Lender, which fee
shall be due and payable monthly in arrears on the first day of each month and
on the date that the Letter of Credit terminates or is returned to the Lender;
provided, however, effective as of the first day of the fiscal quarter in which
any Default Period begins through the last day of such Default Period, or any
shorter time period that the Lender may determine, in the Lender's sole
discretion and without waiving any of its other rights and remedies, such fee
shall increase to five percent (5.0%) of the Aggregate Face Amount. The
foregoing fee shall be in addition to any other fees, commissions and charges
imposed by Lender with respect to such Letter of Credit.
(g) Letter of Credit Administrative Fees. The Domestic Borrowers shall
pay all administrative fees charged by Lender in connection with the honoring of
drafts under any Letter of Credit issued on the application of a Borrower,
amendments thereto, transfers thereof and all other activity with respect to
such Letters of Credit at the then - current rates published by Lender for such
services rendered on behalf of customers of Lender generally, and Ronson Canada
shall pay all administrative fees charged by Lender in connection with the
honoring of drafts under any Letter of Credit issues on the application of
Ronson Canada, amendments thereto, transfers thereof and all other activity with
respect to such Letters of Credit at the then - current rates published by
Lender for such services rendered on behalf of customers of Lender generally, to
the extent not paid by the Domestic Borrowers.
(h) Termination and Line Reduction Fees. If (i) the Lender terminates
the Credit Facility during a Default Period, or if (ii) the Borrower terminates
or reduces the Credit Facility on a date prior to the Maturity Date, then the
Borrower shall pay the Lender as liquidated damages and not as a penalty a
termination fee in an amount equal to a percentage of the Maximum Line Amount
(or the reduction of the Maximum Line Amount, as the case may be) calculated as
follows: (A) two percent (2%) if the termination or reduction occurs on or
before the first anniversary of the Funding Date; (B) one percent (1) if the
termination or reduction occurs after the first anniversary of the Funding Date,
but on or before the second anniversary of the Funding Date; and (C) one-half of
one percent (.50%) if the termination or reduction occurs after the second
anniversary of the Funding Date.
(i) Prepayment Fees and Contracted Funds Breakage Fees. The Borrower
may prepay the principal amount of any LIBOR Advance and the Term Notes at any
time in any amount, whether voluntarily or by acceleration, subject to the
payment of fees as follows:
(i) If the Equipment Term Note and/or the Real Estate Term Note is
prepaid for any reason other than because of any mandatory prepayment required
pursuant to Section 2.13(b) of this Agreement, the Domestic Borrowers shall pay
to the Lender a prepayment fee in an amount equal to (i) two percent (2.0%) of
the amount prepaid, if prepayment occurs on or before the first anniversary of
the Funding Date; (ii) one percent (1.0%) of the amount prepaid, if prepayment
occurs after the first anniversary of the Funding Date but on or before the
second anniversary of the Funding Date; and (iii) one-half of one percent (.50%)
of the amount prepaid, if prepayment occurs after the second anniversary of the
Funding Date.
(ii) If the principal amount of any LIBOR Advance is prepaid, the
Borrowers shall pay to the Lender immediately upon demand a contracted funds
breakage fee equal to the sum of the discounted monthly differences for each
month from the month of prepayment through the month in which such Interest
Period matures, calculated as follows for each such month:
(A) Determine the amount of interest which would have accrued
each month on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the applicable Interest
Period.
25
(B) Subtract from the amount determined in (A) above the
amount of interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Interest Period at LIBOR in effect on the
date of prepayment for new loans made for such term and in a principal amount
equal to the amount prepaid.
(C) If the result obtained in (B) for any month is greater
than zero, discount that difference by LIBOR used in (B) above.
The Borrower acknowledges that prepayment of any LIBOR Advance or the
Term Notes may result in the Lender incurring additional costs, expenses or
liabilities, and that it is difficult to ascertain the full extent of such
costs, expenses or liabilities. The Borrower therefore agrees to pay the
above-described prepayment fee and contracted funds breakage fee and agrees that
said amounts represent a reasonable estimate of the prepayment costs, contracted
funds breakage costs, expenses and/or liabilities of the Lender.
(j) Overadvance Fees. The Borrower shall pay an Overadvance fee in the
amount of $500.00 for each day or portion thereof during which an Overadvance
exists, unless the Overadvance has been agreed to in writing in advance by the
Lender without payment of any fee. The acceptance of payment of an Overadvance
fee by the Lender shall not be deemed to constitute either consent to the
Overadvance or a waiver of the resulting Event of Default, unless the Lender
specifically consents to the Overadvance in writing and waives the Event of
Default on whatever conditions the Lender deems appropriate.
(k) Other Fees and Charges. The Lender may from time to time impose
additional fees and charges as consideration for Advances made in excess of
Availability or for other events that constitute an Event of Default or a
Default hereunder, including fees and charges for the administration of
Collateral by the Lender, and fees and charges for the late delivery of reports,
which may be assessed in the Lender's sole discretion on either an hourly,
periodic, or flat fee basis, and in lieu of or in addition to imposing interest
at the Default Rate.
Section 2.10. Time for Interest Payments; Payment on Non-Business Days;
---------------------------------------------------------
Computation of Interest and Fees.
--------------------------------
(a) Time For Interest Payments. Accrued and unpaid interest accruing on
Floating Rate Advances shall be due and payable on the first day of each month
and on the Termination Date (each an "Interest Payment Date"), or if any such
day is not a Business Day, on the next succeeding Business Day. Interest will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of advance to the Interest Payment Date.
If an Interest Payment Date is not a Business Day, payment shall be made on the
next succeeding Business Day. Interest accruing on each LIBOR Advance shall be
due and payable on the last day of the applicable Interest Period; provided,
however, for Interest Periods that are longer than one month, interest shall
nevertheless be due and payable monthly on the last day of each month, and on
the last day of the Interest Period.
(b) Payment on Non Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
(c) Computation of Interest and Fees. Interest accruing on the
outstanding principal balance of the Advances and fees hereunder outstanding
from time to time shall be computed on the basis of actual number of days
elapsed in a year of 360 days.
Section 2.11. Lockbox and Collateral Account; Sweep of Funds.
----------------------------------------------
(a) Lockbox and Collateral Account.
26
(i) The Borrower shall instruct all account debtors to pay all
Accounts directly to the Lockbox. If, notwithstanding such instructions, the
Borrower receives any payments on Accounts, the Borrower shall deposit such
payments into the Collateral Account. The Borrower shall also deposit all other
cash proceeds of Collateral regardless of source or nature directly into the
Collateral Account. Until so deposited, the Borrower shall hold all such
payments and cash proceeds in trust for and as the property of the Lender and
shall not commingle such property with any of its other funds or property. All
deposits in the Collateral Account shall constitute proceeds of Collateral and
shall not constitute payment of the Indebtedness.
(ii) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the Borrower
will immediately pay the Lender, or, for items deposited in the Collateral
Account, the bank maintaining such account, the amount of that item, or such
bank at its discretion may charge any uncollected item to the Borrower's
commercial account or other account. The Borrower shall be liable as an endorser
on all items deposited in the Collateral Account, whether or not in fact
endorsed by the Borrower.
(b) Sweep of Funds. The Lender shall from time to time, in accordance
with the Wholesale Lockbox and Collection Account Agreement, cause funds in the
Collateral Account to be transferred to the Lender's general account for payment
of the Indebtedness. Amounts deposited in the Collateral Account shall not be
subject to withdrawal by the Borrower, except after payment in full and
discharge of all Indebtedness.
Section 2.12. Voluntary Prepayment; Reduction of the Maximum Line
-------------------------------------------------------
Amount; Termination of the Credit Facility by the Borrower. Except as otherwise
-----------------------------------------------------------
provided herein, the Borrower may prepay the Advances in whole at any time or
from time to time in part. The Borrower may terminate the Credit Facility or
reduce the Maximum Line Amount at any time if it (i) gives the Lender at least
60 days advance written notice prior to the proposed Termination Date, and (ii)
pays the Lender applicable termination prepayment and contracted funds breakage
fees, and Maximum Line Amount reduction fees in accordance with the terms of
this Agreement. Any reduction in the Maximum Line Amount shall be in multiples
of $100,000, and with a minimum reduction of at least $500,000. If the Borrower
terminates the Credit Facility or reduces the Maximum Line Amount to zero, all
Indebtedness shall be immediately due and payable, and if the Borrower gives the
Lender less than the required 60 days advance written notice, then the interest
rate applicable to borrowings evidenced by Revolving Note shall be the Default
Rate for the period of time commencing 60 days prior to the proposed Termination
Date through the date that the Lender actually receives such written notice. If
the Borrower does not wish the Lender to consider renewal of the Credit Facility
on the next Maturity Date, then the Borrower shall give the Lender at least 60
days written notice prior to the Maturity Date that it will not be requesting
renewal. If the Borrower fails to give the Lender such timely notice, then the
interest rate applicable to borrowings evidenced by the Revolving Note shall be
the Default Rate for the period of time commencing 60 days prior to the Maturity
Date through the date that the Lender actually receives such written notice.
Section 2.13. Mandatory Prepayment.
--------------------
(a) Without notice or demand, unless the Lender shall otherwise consent
in a written agreement that sets forth the terms and conditions which the Lender
in its discretion may deem appropriate, including without limitation the payment
of an Overadvance fee, if an Overadvance shall at any time exist with respect to
the Credit Facility, then the Borrower shall (i) first, immediately prepay the
Revolving Advances to the extent necessary to eliminate such excess; and (ii) if
prepayment in full of the Revolving Advances is insufficient to eliminate such
excess (due, for example, to the L/C Amount), pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess. Any voluntary or mandatory prepayment received by the Lender
may be applied to the Indebtedness, in such order and in such amounts as the
Lender in its sole discretion may determine from time to time.
(b) Within 30 days after receipt by the Lender of the audited annual
financial statements of the Parent as required under Section 6.1(a) of this
Agreement, the Domestic Borrower shall pay to the Lender as a prepayment of the
Real Estate Term Note an amount equal to 25% of the Loan Parties' Excess Cash
Flow. Any
27
payment received by the Lender under this Section 2.13(b) shall be applied in
the inverse order of the installment due dates and in such order and in such
amounts as the Lender, in its discretion, may from time to time determine.
Section 2.14. Revolving Advances to Pay Indebtedness. Notwithstanding
--------------------------------------
the terms of Section 2.1, the Lender may, in its discretion at any time or from
time to time, without the Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, make a Revolving Advance in an
amount equal to the portion of the Indebtedness from time to time due and
payable and may deliver the proceeds of any such Revolving Advance to ▇▇▇▇▇
Fargo Merchant Services, L.L.C. in satisfaction of any unpaid obligations due to
▇▇▇▇▇ Fargo Merchant Services, L.L.C.
Section 2.15. Use of Proceeds. The Borrower shall use the proceeds of
---------------
initial Advances under this Agreement to fully repay obligations due to Bank of
the West, The CIT Group/Commercial Services, Inc., EPIC Aviation, LLC, Banc of
America Leasing and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇, and thereafter shall use the proceeds
of Advances and each Letter of Credit for ordinary working capital purposes.
Section 2.16. Liability Records. The Lender may maintain from time to
-----------------
time, at its discretion, records as to the Indebtedness. All entries made on any
such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Indebtedness that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within 30 days after
receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1. Grant of Security Interest. The Borrower hereby pledges,
---------------------------
assigns and grants to the Lender, for the benefit of itself and as agent for
▇▇▇▇▇ Fargo Merchant Services, L.L.C., a lien and security interest
(collectively referred to as the "Security Interest") in the Collateral, as
security for the payment and performance of: (a) all present and future
Indebtedness of the Borrower to the Lender; (b) all obligations of the Borrower
and rights of the Lender under this Agreement; and (c) all present and future
obligations of the Borrower to the Lender of other kinds. Upon request by the
Lender, the Borrower will grant to the Lender, for the benefit of itself and as
agent for ▇▇▇▇▇ Fargo Merchant Services, L.L.C., a security interest in all
commercial tort claims that the Borrower may have against any Person.
Notwithstanding the foregoing, the Security Interest of Lender upon Borrower's
Intellectual Property Rights shall only secure the Indebtedness consisting of
and arising out of both the Real Estate Term Advance, up to a limit of
$1,000,000, and the Equipment Term Advance and shall be subject to the terms and
provisions of Section 7.3 of this Agreement. Notwithstanding any provision to
the contrary contained in this Agreement, (a) the Security Interest granted by
Parent in its interest in Ronson Canada shall be limited as provided in the
Security Agreement by Parent in favor of Lender and (b) the Security Interest
granted by Ronson Canada hereunder (including, without limitation, the rights
under Section 3.3 hereof) shall secure the Ronson Canada Indebtedness only.
3.1.1 Existing Capital One Mortgage. Nothing in this Agreement shall
------------------------------
create a Security Interest in (a) the "Mortgaged Property" as such term is
defined in the Existing Capital One Mortgage or (b) the "Leases" or "Rents" as
such terms are defined in the Assignment of Rents and Leases made by RCPC to
North Fork Bank (now known as Capital One, N.A.) dated September 27, 2006 and
recorded with the Clerk of Middlesex County, New Jersey on recorded in Book
11875, Page 560, a copy of which is attached hereto as Exhibit F.
Section 3.2. Notification of Account Debtors and Other Obligors. The
---------------------------------------------------
Lender may at any time (whether or not a Default Period then exists) notify any
account debtor or other Person obligated to pay the amount due that such right
to payment has been assigned or transferred to the Lender for security and shall
be paid directly to the Lender. The Borrower will join in giving such notice if
the Lender so requests. At any time
28
after the Borrower or the Lender gives such notice to an account debtor or other
obligor, the Lender may, but need not, in the Lender's name or in the Borrower's
name, demand, ▇▇▇ for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to payment, or
grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor. Upon the occurrence of
an Event of Default and during the continuation thereof, the Lender may, in the
Lender's name or in the Borrower's name, as the Borrower's agent and
attorney-in-fact, notify the United States Postal Service and/or Canada Post to
change the address for delivery of the Borrower's mail to any address designated
by the Lender, provided that Lender shall also notify Borrower promptly after it
provides such notice to the United States Postal Service and/or Canada Post,
otherwise intercept the Borrower's mail, and receive, open and dispose of the
Borrower's mail, applying all Collateral as permitted under this Agreement and
holding all other mail for the Borrower's account or forwarding such mail to the
Borrower's last known address.
Section 3.3. Assignment of Insurance. As additional security for the
-----------------------
payment and performance of the Indebtedness, the Borrower hereby assigns to the
Lender any and all monies (including proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy. Any monies received as payment
for any loss under any insurance policy mentioned above (other than liability
insurance policies) or as payment of any award or compensation for condemnation
or taking by eminent domain, shall be paid over to the Lender to be applied, at
the option of the Lender, either to the prepayment of the Indebtedness or shall
be disbursed to the Borrower under staged payment terms reasonably satisfactory
to the Lender for application to the cost of repairs, replacements, or
restorations. Any such repairs, replacements, or restorations shall be effected
with reasonable promptness and shall be of a value at least equal to the value
of the items or property destroyed prior to such damage or destruction.
Section 3.4. Occupancy.
---------
(a) The Borrower hereby irrevocably grants to the Lender the right to
take possession of the Premises at any time during a Default Period without
notice or consent, to the exclusion of Borrower.
(b) The Lender may use the Premises only to hold, process, manufacture,
sell, use, store, liquidate, realize upon or otherwise dispose of items that are
Collateral and for other purposes that the Lender may in good ▇▇▇▇▇ ▇▇▇▇ to be
related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all Indebtedness and
termination of the Credit Facility, and (ii) final sale or disposition of all
items constituting Collateral and delivery of all such items to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent or
other compensation for the possession, occupancy or use of any of the Premises;
provided, however, that if the Lender does pay or account for any rent or other
compensation for the possession, occupancy or use of any of the Premises, the
Borrower shall reimburse the Lender promptly for the full amount thereof. In
addition, the Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or imposed upon
the Lender by reason of the execution, delivery, existence, recordation,
performance or enforcement of this Agreement or the provisions of this Section
3.4.
29
Section 3.5. License. Without limiting the generality of any other
-------
Security Document, each Loan Party hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of the Loan Party for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such
materials become saleable Inventory, all in accordance with the same quality
standards previously adopted by the Loan Party for its own manufacturing and
subject to the Loan Party's reasonable exercise of quality control; and (b)
selling, leasing or otherwise disposing of any or all Collateral during any
Default Period.
Section 3.6. Financing Statement. Each Loan Party authorizes the Lender
-------------------
to file from time to time, such financing statements pursuant to the UCC and the
PPSA against collateral described as "all personal property" or "all assets" or
describing specific items of collateral including commercial tort claims as the
Lender deems necessary or useful to perfect the Security Interest. All financing
statements filed pursuant to the UCC and the PPSA before the date hereof to
perfect the Security Interest were authorized by the Loan Party and are hereby
re-authorized. A carbon, photographic or other reproduction of this Agreement or
of any financing statements signed by the Loan Party is sufficient as a
financing statement and may be filed as a financing statement in any state or
province to perfect the security interests granted hereby. For this purpose,
each Loan Party represents and warrants that the following information is true
and correct:
Name and address of Debtor:
Ronson Corporation
Corporate Park III, Campus Drive
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. 7693250000
Ronson Consumer Products Corporation
Corporate Park III, Campus Drive
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. 0100153715
Ronson Aviation, Inc.
Corporate Park III, Campus Drive
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. 7693211000
Ronson Corporation of Canada Ltd.
Corporate Park III, Campus Drive
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. 12177 8682 RC0001
Organizational Identification No. 629727
Name and address of Secured Party:
▇▇▇▇▇ Fargo Bank, National Association
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
30
Section 3.7. Setoff. The Lender may at any time or from time to time,
------
at its sole discretion and without demand and without notice to anyone (but
subject, as to Ronson Canada, to the final sentence of Section 2.1 hereof),
setoff any liability owed to the Borrower by the Lender, whether or not due,
against any Indebtedness, whether or not due. In addition, each other Person
holding a participating interest in any Indebtedness shall have the right to
appropriate or setoff any deposit or other liability then owed by such Person to
the Borrower, whether or not due, and apply the same to the payment of said
participating interest, as fully as if such Person had lent directly to the
Borrower the amount of such participating interest, subject, as to Ronson
Canada, to the final sentence of Section 2.1 hereof.
Section 3.8. Collateral. This Agreement does not contemplate a sale of
----------
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third Person, exercises reasonable care in
the selection of the bailee or other third Person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. The Borrower waives any right it may have to require the
Lender to pursue any third Person for any of the Indebtedness.
ARTICLE IV
CONDITIONS OF LENDING
Section 4.1. Conditions Precedent to the Initial Advances and Letter of
----------------------------------------------------------
Credit. The Lender's obligation to make the initial Advances or to cause any
------
Letters of Credit to be issued shall be subject to the condition precedent that
the Lender shall have received all of the following, each properly executed by
the appropriate party and in form and substance satisfactory to the Lender:
(a) This Agreement.
(b) The Revolving Notes and the Term Notes.
(c) A Standby Letter of Credit Agreement and a Commercial Letter of
Credit Agreement, and L/C Application for each Letter of Credit that the
Borrower wishes to have issued thereunder.
(d) A true and correct copy of any and all leases pursuant to which the
Borrower is leasing the Premises, together with a landlord's disclaimer and
consent with respect to each such lease.
(e) A true and correct copy of any and all mortgages pursuant to which
the Borrower has mortgaged the Premises, together with a mortgagee's disclaimer
and consent with respect to each such mortgage.
(f) A true and correct copy of any and all agreements pursuant to which
the Borrower's property is in the possession of any Person other than the
Borrower, together with, in the case of any goods held by such Person for
resale, (i) a consignee's acknowledgment and waiver of Liens, (ii) UCC financing
statements and PPSA financing statements sufficient to protect the Borrower's
and the Lender's interests in such goods, and (iii) UCC searches and PPSA
searches showing that no other secured party has filed a financing statement
against such Person and covering property similar to the Borrower's other than
the Borrower, or if there exists any such secured party, evidence that each such
secured party has received notice from the Borrower and the Lender sufficient to
protect the Borrower's and the Lender's interests in the Borrower's goods from
any claim by such secured party.
31
(g) An acknowledgment and waiver of Liens from each warehouse in which
the Borrower is storing Inventory.
(h) A true and correct copy of any and all agreements pursuant to which
the Borrower's property is in the possession of any Person other than the
Borrower, together with, (i) an acknowledgment and waiver of Liens from each
subcontractor who has possession of the Borrower's goods from time to time, (ii)
UCC financing statements and PPSA financing statements sufficient to protect the
Borrower's and the Lender's interests in such goods, and (iii) UCC searches and
PPSA searches showing that no other secured party has filed a financing
statement covering such Person's property other than the Borrower, or if there
exists any such secured party, evidence that each such secured party has
received notice from the Borrower and the Lender sufficient to protect the
Borrower's and the Lender's interests in the Borrower's goods from any claim by
such secured party.
(i) An acknowledgment and agreement in favor of the Lender from each
licensor (i) to the extent Borrowers desire to include any Inventory provided
pursuant to a license agreement with such licensor as Eligible Inventory and
(ii) of rights that are material to the operation of Borrowers' business,
together with a true, correct and complete copy of all license agreements
material to the operation of Borrowers' business.
(j) The Wholesale Lockbox and Collection Account Agreement.
(k) Control agreements with each bank at which the Borrower maintains
deposit accounts.
(l) Each Patent Security Agreement.
(m) Each Trademark Security Agreement.
(n) Each other Loan Document.
(o) Current searches of appropriate filing offices showing that (i) no
Liens have been filed and remain in effect against a Loan Party except Permitted
Liens or Liens held by Persons who have agreed in writing that upon receipt of
proceeds of the initial Advances, they will satisfy, release or terminate such
Liens in a manner satisfactory to the Lender, and (ii) the Lender has duly filed
all financing statements necessary to perfect the Security Interest, to the
extent the Security Interest is capable of being perfected by filing.
(p) A certificate of the Loan Party's Secretary or Assistant Secretary
certifying that attached to such certificate are (i) the resolutions of the Loan
Party's Directors and, if required, Owners, authorizing the execution, delivery
and performance of the Loan Documents, (ii) true, correct and complete copies of
the Loan Party's Constituent Documents, and (iii) examples of the signatures of
the Loan Party's Officers or agents authorized to execute and deliver the Loan
Documents and other instruments, agreements and certificates, including Advance
requests, on the Borrower's behalf.
(q) A current certificate issued by the Secretary of State of New
Jersey, certifying that the Parent, RCPC and RAI are in compliance with all
applicable organizational requirements of the State of New Jersey and current
certificates issued by the Companies and Personal Property Security Branch of
the Province of Ontario certifying the corporate status of Ronson Canada.
(r) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by it makes such licensing or
qualification necessary.
(s) A certificate of an Officer of the Borrower confirming the
representations and warranties set forth in Article V.
32
(t) Certificates of the insurance required hereunder, with all hazard
insurance containing a lender's loss payable endorsement in the Lender's favor
and with all liability insurance naming the Lender as an additional insured.
(u) A separate Guaranty from each Guarantor, pursuant to which each
Guarantor unconditionally guarantees the full and prompt payment of all
Indebtedness.
(v) An opinion of counsel to the Loan Parties, addressed to the Lender.
(w) Payment of all fees due under the terms of this Agreement through
the date of the initial Advance or the issuance of any Letter of Credit
hereunder, and payment of all expenses incurred by the Lender through such date
and that are required to be paid by the Borrower under this Agreement.
(x) Evidence that after making the initial Revolving Advance,
satisfying all obligations owed to the Borrower's prior lender, satisfying all
trade payables older than 90 days from invoice date, book overdrafts and closing
costs, Availability shall be not less than $600,000.
(y) A Customer Identification Information form and such other forms and
verification as the Lender may need to comply with the U.S.A. Patriot Act.
(z) With respect to the real estate that is encumbered by the mortgage
of the Lender (i) an appraisal ordered by the Lender or its agent of said real
property and all improvements thereon, conforming to Uniform Standards of
Professional Appraisal Practice and issued by a real estate appraiser acceptable
to the Lender, reflecting values acceptable to the Lender in its discretion,
(ii) an American Land Title Association policy of title insurance, with such
endorsements as the Lender may require, issued by an insurer in such amounts as
the Lender may require, insuring the Lender's lien on said real estate, subject
only to such exceptions as the Lender in its discretion may approve, together
with such evidence relating to the payment of liens or potential liens as the
Lender may require, and (iii) an American Land Title Association survey
certified to the Lender and to the title company that is acceptable to the
Lender.
(aa) With respect to the real estate that is encumbered by the mortgage
of the Lender a current environmental site assessment indicating that the real
property is subject to no "recognized environmental conditions", as that term is
defined by the American Society for Testing and Materials, in its standards for
environmental due diligence and is not in need of remedial action to avoid
subjecting its owner to any present or future liability or contingent liability
with respect to the release of toxic or hazardous wastes or substances.
(bb) With respect to the real estate that is encumbered by the mortgage
of the Lender (i) a flood hazard determination form, confirming whether or not
the parcel is in a flood hazard area and whether or not flood insurance must be
obtained, and, if the real estate is located in a flood hazard area, (ii) a
policy of flood insurance.
(cc) With respect to the real estate that is encumbered by the mortgage
of the Lender, copies of management services and maintenance contracts, fire,
health and safety reports, certificates of occupancy, leases and rent rolls, and
such other information relating to the real estate and the improvements thereon
that the Lender in its discretion deems necessary.
(dd) Such other documents as the Lender in its sole discretion may
require.
Section 4.2. Conditions Precedent to All Advances and Letters of
--------------------------------------------------------
Credit. The Lender's obligation to make each Advance or to cause the issuance of
------
a Letter of Credit shall be subject to the further conditions precedent that:
33
(a) The representations and warranties contained in Article V are
correct in all material respects on and as of the date of such Advance or
issuance of a Letter of Credit as though made on and as of such date, except to
the extent that such representations and warranties relate solely to an earlier
date; and
(b) No event has occurred and is continuing, or would result from such
Advance or issuance of a Letter of Credit which constitutes a Default or an
Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each Loan Party represents and warrants to the Lender as follows:
Section 5.1. Existence and Power; Name Chief Executive Office;
-------------------------------------------------------
Inventory and Equipment Locations; Federal Employer Identification Number and
--------------------------------------------------------------------------------
Organizational Identification Number. Parent, RCPC and RAI are corporations,
--------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and are duly licensed or qualified to transact business in
all jurisdictions where the character of the property owned or leased or the
nature of the business transacted by it makes such licensing or qualification
necessary, except where failure so to be licensed or qualified would not have a
Material Adverse Effect. Ronson Canada is a corporation, duly organized, validly
existing and in good standing under the laws of the Province of Ontario and is
duly licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary, except where
failure so to be licensed or qualified would not have a Material Adverse Effect.
Each Loan Party has all requisite power and authority to conduct its business,
to own its properties and to execute and deliver, and to perform all of its
obligations under, the Loan Documents. During the seven (7) years preceding the
Funding Date, each Loan Party has done business solely under the names set forth
in Schedule 5.1. Each Loan Party's chief executive office and principal place of
business is located at the address set forth in Schedule 5.1, and all of the
Loan Party's records relating to its business or the Collateral are kept at that
location. All Inventory and Equipment is located at that location or at one of
the other locations listed in Schedule 5.1. The Loan Party's federal employer
identification number and organization identification number are correctly set
forth in Section 3.6.
Section 5.2. Capitalization. Schedule 5.2 constitutes a correct and
--------------
complete list of all ownership interests of the Borrowers and rights to acquire
ownership interests including the record holder, number of interests and
percentage interests on a fully diluted basis, and an organizational chart
showing the ownership structure of all Subsidiaries of the Loan Parties.
Section 5.3. Authorization of Borrowing; No Conflict as to Law or
--------------------------------------------------------
Agreements. The execution, delivery and performance by the Loan Parties of the
----------
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Loan Parties' Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including Regulation X of the
Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to any Loan Party
or of any Loan Party's Constituent Documents; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which any Loan Party is a party
or by which it or its properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by any Loan Party.
34
Section 5.4. Legal Agreements. This Agreement constitutes and, upon due
----------------
execution by each Loan Party, the other Loan Documents will constitute the
legal, valid and binding obligations of the Loan Parties, enforceable against
the Loan Parties in accordance with their respective terms.
Section 5.5. Subsidiaries. Except as set forth in Schedule 5.5 hereto,
------------
the Loan Parties have no Subsidiaries.
Section 5.6. Financial Condition; No Adverse Change. The Loan Parties
----------------------------------------
have furnished to the Lender their audited consolidated financial statements for
their fiscal year ended December 31, 2007 and unaudited consolidated financial
statements for the fiscal-year-to-date period ended March 31, 2008 and those
statements fairly present in all material respects the Loan Parties'
consolidated financial condition on the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended and were
prepared in accordance with GAAP. Since the date of the most recent financial
statements, there has been no change in the Loan Parties' business, properties
or condition (financial or otherwise) which has had a Material Adverse Effect.
Section 5.7. Litigation. There are no actions, suits or proceedings
----------
pending or, to the Loan Parties' knowledge, threatened against or affecting any
Loan Party or any of their Affiliates or the properties of the any Loan Party or
any of their Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which is
reasonably likely to have a Material Adverse Effect, except as set forth on
Schedule 5.7.
Section 5.8. Regulation U. The Borrower is not engaged in the business
------------
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
Section 5.9. Taxes. The Loan Parties have paid or caused to be paid to
-----
the proper authorities when due all federal, state, provincial, and local taxes
required to be withheld by each of them. The Loan Parties have filed all
federal, provincial, state and local tax returns which to the knowledge of the
Officers of the Borrower, are required to be filed, and, except as set forth on
Schedule 5.9, the Loan Parties have paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on any assessment
received by any of them to the extent such taxes have become due.
Section 5.10. Titles and Liens. The Loan Parties have good and absolute
----------------
title to all Collateral free and clear of all Liens other than Permitted Liens.
No financing statement filed pursuant to the UCC or the PPSA naming any Loan
Party as debtor is on file in any office except to perfect only Permitted Liens.
Section 5.11. Intellectual Property Rights.
----------------------------
(a) Owned Intellectual Property. Schedule 5.11 is a complete list of
all patents, applications for patents, registered trademarks, applications to
register trademarks, registered service marks, applications to register service
marks, registered designs, mask works, trade dress and copyrights for which a
Loan Party is an owner of record as of the date hereof (the "Owned Intellectual
Property"). Except as disclosed on Schedule 5.11, (i) the Loan Parties own the
Owned Intellectual Property free and clear of all restrictions (including
covenants not to ▇▇▇ a third party), court orders, injunctions, decrees, writs
or Liens, whether by written agreement or otherwise, other than Permitted Liens
(ii) no Person other than the Loan Parties owns or, except in the ordinary
course of business and set forth on Schedule 5.11, has been granted any right in
the Owned Intellectual Property, (iii) all material Owned Intellectual Property
is valid, subsisting and enforceable and (iv) the Loan Parties have taken all
commercially reasonable action necessary to maintain and protect the Owned
Intellectual Property.
(b) Agreements with Employees and Contractors. Each Loan Party has
entered into a legally enforceable agreement with each of its employees and
subcontractors obligating each such Person to assign to
35
the Loan Party, without any additional compensation, any Intellectual Property
Rights created, discovered or invented by such Person in the course of such
Person's employment or engagement with the Loan Party (except to the extent
prohibited by law), and further requiring such Person to cooperate with the Loan
Party, without any additional compensation, in connection with securing and
enforcing any Intellectual Property Rights therein; provided, however, that the
foregoing shall not apply with respect to employees and subcontractors whose job
descriptions are of the type such that no such assignments are reasonably
foreseeable.
(c) Intellectual Property Rights Licensed from Others. Schedule 5.11 is
a complete list of all agreements under which the Loan Parties have licensed
Intellectual Property Rights from another Person ("Licensed Intellectual
Property")as of the date hereof other than readily available, non-negotiated
licenses of computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative tasks
("Off-the-shelf Software") and a summary of any ongoing payments the Loan
Parties are obligated to make with respect thereto. Except as disclosed on
Schedule 5.11 and in written agreements, copies of which have been given to the
Lender, the Loan Parties' licenses to use the Licensed Intellectual Property are
free and clear of all restrictions, Liens (other than Permitted Liens), court
orders, injunctions, decrees, or writs, whether by written agreement or
otherwise. Except as disclosed on Schedule 5.11, the Loan Parties are not
obligated or under any liability whatsoever to make any payments of a material
nature by way of royalties, fees or otherwise to any owner of, licensor of, or
other claimant to, any Intellectual Property Rights.
(d) Other Intellectual Property Needed for Business. Except for
Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned Intellectual
Property and the Licensed Intellectual Property constitute all Intellectual
Property Rights as of the date hereof used or necessary to conduct the Loan
Parties' business in all material respects as it is presently conducted or as
the Loan Parties reasonably foresees conducting it.
(e) Infringement. Except as disclosed on Schedule 5.11, the Loan
Parties have no knowledge of, and have not received any written claim or notice
alleging, any Infringement of another Person's Intellectual Property Rights
(including any written claim that any Loan Party must license or refrain from
using the Intellectual Property Rights of any third party) nor, to the Loan
Parties' knowledge, is there any threatened claim, in each case insofar as would
reasonably be likely to have a Material Adverse Effect.
Section 5.12. Plans.
-----
(a) Except as set forth on Schedule 5.12 hereto, as of the date hereof
no Loan Party nor any ERISA Affiliate (a) maintains or has, during the past
seven (7) years, maintained any Pension Plan, (b) contributes or has
contributed, during the past seven (7) years, to any Multiemployer Plan or (c)
provides or has provided, during the past seven (7) years, post-retirement
medical or insurance benefits with respect to employees or former employees
(other than benefits required under Section 601 of ERISA, Section 4980B of the
IRC or applicable state law). No Loan Party nor any ERISA Affiliate has received
any notice that remains outstanding or has any knowledge to the effect that it
is not in full compliance in all material respects, with any of the requirements
of ERISA, the IRC or applicable state law with respect to any Plan. No
Reportable Event exists in connection with any Pension Plan. Each Plan which is
intended to qualify under the IRC is so qualified (or may be modified to be
qualified without material liability to any loan Party), and no fact or
circumstance exists which may have an adverse effect in any material respect on
the Plan's tax qualified status. No Loan Party nor any ERISA Affiliate has (i)
any accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 430 of the IRC) under any Plan, whether or not waived, (ii) any
liability under Section 4201 or 4243 of ERISA for any withdrawal, partial
withdrawal, reorganization or other event under any Multiemployer Plan or (iii)
any liability or knowledge of any facts or circumstances which could result in
any liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than routine claims for benefits under the Plan).
36
(b) The Canadian Pension Plans are duly registered under the Income Tax
Act (Canada) and all other applicable laws which require registration. Ronson
Canada has complied with and performed in all material respects all of its
obligations under and in respect of the Canadian Pension Plans and Canadian
Benefit Plans under the terms thereof, any funding agreements and all applicable
laws (including any fiduciary, funding, investment and administration
obligations). All employer and employee payments, contributions or premiums to
be remitted, paid to or in respect of each Canadian Pension Plan or Canadian
Benefit Plan have been paid in a timely fashion in all material respects in
accordance with the terms thereof, any funding agreement and all applicable
laws. There have been no improper withdrawals or applications of the assets of
the Canadian Pension Plans or the Canadian Benefit Plans. As of the date hereof,
there are no outstanding disputes (except for routine claims for payment of
benefits that do not exceed in the aggregate C$25,000) concerning the assets of
the Canadian Pension Plans or the Canadian Benefit Plans. Each of the Canadian
Pension Plans is fully funded on a solvency basis as disclosed in the valuations
last filed with the applicable governmental authorities and which valuations are
consistent with generally accepted actuarial principles.
Section 5.13. Default. Each Loan Party is in compliance with all
-------
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which would reasonably be likely to have a Material Adverse Effect.
Section 5.14. Intentionally Omitted.
---------------------
Section 5.15. Submissions to Lender. All financial and other
------------------------
information provided to the Lender by or on behalf of a Loan Party in connection
with the Borrower's request for the credit facilities contemplated hereby (i)
except as to projections, valuations or pro forma financial statements, is true
and correct in all material respects, (ii) does not omit any material fact
necessary, in light of the circumstances under which provided, to make such
information not misleading and, (iii) as to projections, valuations or pro forma
financial statements, present a good faith opinion as to such projections,
valuations and pro forma condition and results.
Section 5.16. Financing Statements. Each Loan Party has authorized the
--------------------
filing of financing statements pursuant to the UCC and the PPSA sufficient when
filed to perfect the Security Interest and the other security interests created
by the Security Documents. When such financing statements are filed in the
offices noted therein, the Lender will have a valid and perfected security
interest in all Collateral which is capable of being perfected by filing
financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
Section 5.17. Rights to Payment. Each right to payment and each
-------------------
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.18. Financial Solvency. Both before and after giving effect
------------------
to all of the transactions contemplated in the Loan Documents, no Loan Party:
(a) Was or will be "insolvent", as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act;
(b) Has unreasonably small capital or is engaged or about to engage in
a business or a transaction for which any remaining assets of the Loan Party are
unreasonably small;
(c) By executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to, nor believes that it will, incur debts beyond
its ability to pay them as they mature;
37
(d) By executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to hinder, delay or defraud either its present or
future creditors; and
(e) At this time contemplates filing a petition in bankruptcy or for an
arrangement or reorganization or similar proceeding under any law of any
jurisdiction, nor, to the best knowledge of the Loan Party, is the subject of
any actual, pending or threatened bankruptcy, insolvency or similar proceedings
under any law of any jurisdiction.
Section 5.19. Inactive Subsidiaries. None of the Inactive Subsidiaries
---------------------
own any assets, perform or conduct, or shall perform or conduct, any business
activities whatsoever, unless (a) Borrowers provide Lender with prior written
notice of the intent to purchase assets or conduct business through an Inactive
Subsidiary and (b) such Inactive Subsidiary shall become a co-borrower hereunder
or a guarantor of the Indebtedness, at Lender's discretion.
ARTICLE VI
COVENANTS
So long as the Indebtedness shall remain unpaid or the Credit Facility
shall remain outstanding (other than in respect of any issued and outstanding
Letters of Credit which have been cash collateralized pursuant to Section 2.5
hereof at times when the Credit Facility has otherwise been terminated and all
other Indebtedness has been fully paid and satisfied), the Loan Parties will
comply with the following requirements, unless the Lender shall otherwise
consent in writing:
Section 6.1. Reporting Requirements. The Loan Parties will deliver, or
----------------------
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) Annual Financial Statements. As soon as available, and in any event
within 90 days after the end of each fiscal year of the Parent, the Parent's
audited financial statements with the unqualified opinion of independent
certified public accountants selected by the Parent and acceptable to the
Lender, which annual financial statements shall include the Parent's balance
sheet as at the end of such fiscal year and the related statements of the
Parent's income, retained earnings and cash flows for the fiscal year then
ended, prepared on a consolidating and consolidated basis to include any
Subsidiaries, all in reasonable detail and prepared in accordance with GAAP,
together with (i) copies of all management letters prepared by such accountants;
and (ii) a certificate of the Parent's chief financial officer stating that such
financial statements have been prepared in accordance with GAAP, fairly present
in all material respects the Parent's financial position and the results of its
operations, whether or not such Officer has knowledge of the occurrence of any
Default or Event of Default and, if so, stating in reasonable detail the facts
with respect thereto, and the computations as to whether or not the Parent is in
compliance with the Financial Covenants.
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of quarterly fiscal period, the
unaudited/internal balance sheet and statements of income and retained earnings
of the Parent as at the end of and for such quarter and for the year to date
period then ended, prepared on a consolidating and consolidated basis to include
any Subsidiaries, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments and
which fairly present in all material respects the Parent's financial position
and the results of its operations; and accompanied by a certificate of the
Parent's chief financial officer, substantially in the form of Exhibit C hereto
stating (i) that such financial statements have been prepared in accordance with
GAAP, subject to year-end audit adjustments, and fairly present in all material
respects the Parent's financial position and the results of its operations, (ii)
whether or not such Officer has knowledge of the occurrence of any Default or
Event of Default not theretofore reported and remedied and,
38
if so, stating in reasonable detail the facts with respect thereto, and (iii)
all relevant facts in reasonable detail to evidence, and the computations as to,
whether or not the Parent is in compliance with the Financial Covenants.
(c) Monthly Financial Statements. As soon as available and in any event
within 30 days after the end of monthly period, the unaudited/internal balance
sheet and statements of income and retained earnings of the Parent as at the end
of and for such month and for the year to date period then ended, prepared on a
consolidating and consolidated basis to include any Subsidiaries, in reasonable
detail and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with GAAP, subject
to year-end audit adjustments and which fairly present in all material respects
the Parent's financial position and the results of its operations; and
accompanied by a certificate of the Parent's chief financial officer,
substantially in the form of Exhibit C hereto stating (i) that such financial
statements have been prepared in accordance with GAAP, subject to year-end audit
adjustments, and fairly present in all material respects the Parent's financial
position and the results of its operations, (ii) whether or not such Officer has
knowledge of the occurrence of any Default or Event of Default not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto, and (iii) all relevant facts in reasonable detail to evidence,
and the computations as to, whether or not the Parent is in compliance with the
Financial Covenants.
(d) Collateral Reports. Within 10 days after the end of each month or
more frequently if the Lender so requires, each Borrower's accounts receivable
and its accounts payable, a detailed perpetual inventory report, an inventory
certification report, and a calculation of each Borrower's Accounts, Eligible
Accounts, Inventory and Eligible Inventory as at the end of such month or
shorter time period.
(e) Projections. No later than thirty (30) days after the beginning of
each fiscal year, the Loan Parties' projected balance sheets, income statements,
statements of cash flow and projected Availability, prepared on a quarterly
basis, for each quarter of the then current fiscal year, each in reasonable
detail. Such items will be certified by the Officer who is the Parent's chief
financial officer as being the most accurate projections available and identical
to the projections used by the Parent for internal planning purposes and be
delivered with a statement of underlying assumptions and such supporting
schedules and information as the Lender may in its discretion reasonably
require.
(f) Supplemental Reports. On the first Business Day of each calendar
week, or more frequently if the Lender so requires, (a) the Domestic Borrower's
"daily collateral reports", an inventory report, receivables schedules,
collection reports, credit memos, cash receipts, copies of invoices to account
debtors in excess of $25,000, signed and dated shipment documents for goods sold
to said account debtors in excess of $25,000 and (b) Ronson Canada's "daily
collateral reports", an inventory report, receivables schedules, collection
reports, credit memos, cash receipts, copies of invoices to account debtors in
excess of $25,000, signed and dated shipment documents and delivery receipts for
goods sold to said account debtors in excess of $25,000.
(g) Litigation. Immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any governmental or
regulatory agency affecting the Loan Parties which seek a monetary recovery
against any Loan Party in excess of $50,000.
(h) Defaults. When any Officer of a Loan Party becomes aware of the
probable occurrence of any Default or Event of Default, and no later than 3 days
after such Officer becomes aware of such Default or Event of Default, notice of
such occurrence, together with a detailed statement by an Executive Officer of
the Loan Party stating whether the Default or Event of Default can be cured, and
if so, the steps being taken by the Loan Party to cure such Default or Event of
Default.
(i) Plans. As soon as possible, and in any event within 30 days after a
Loan Party knows or has reason to know that any Reportable Event with respect to
any Pension Plan has occurred, a statement signed by the Officer who is the Loan
Party's chief financial officer setting forth details as to such Reportable
Event and
39
the action which the Loan Party proposes to take with respect thereto, together
with a copy of the notice of such Reportable Event to the Pension Benefit
Guaranty Corporation. As soon as possible, and in any event within 10 days after
the Loan Party fails to make any quarterly contribution required with respect to
any Pension Plan under Section 412(m) of the IRC, the Loan Party will deliver to
the Lender a statement signed by the Officer who is the Loan Party's chief
financial officer setting forth details as to such failure and the action which
the Loan Party proposes to take with respect thereto, together with a copy of
any notice of such failure required to be provided to the Pension Benefit
Guaranty Corporation. As soon as possible, and in any event within ten days
after the Loan Party knows or has reason to know that it has or is reasonably
expected to have any liability under Sections 4201 or 4243 of ERISA for any
withdrawal, partial withdrawal, reorganization or other event under any
Multiemployer Plan, the Loan Party will deliver to the Lender a statement of the
Loan Party's chief financial officer setting forth details as to such liability
and the action which the Loan Party proposes to take with respect thereto.
(j) Disputes. Promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers exceeding $20,000 individually or
$50,000 in the aggregate during any fiscal year; (ii) credit memos; and (iii)
any goods returned to or recovered by the Borrower.
(k) Officers and Directors. Promptly upon knowledge thereof, notice of
any change in the persons constituting the Loan Parties' Executive Officers and
Directors.
(l) Collateral. Promptly upon knowledge thereof, notice of any loss of
or material damage to any Collateral or of any substantial adverse change in any
Collateral or the prospect of payment thereof.
(m) Commercial Tort Claims. Promptly upon knowledge thereof, notice of
any commercial tort claims it may bring against any Person, including the name
and address of each defendant, a summary of the facts, an estimate of the Loan
Party's damages, copies of any complaint or demand letter submitted by the Loan
Party, and such other information as the Lender may request.
(n) Intellectual Property.
(i) 30 days prior written notice of Loan Party's intent to acquire
material Intellectual Property Rights; except for transfers permitted under
Section 6.18, the Loan Party will give the Lender 30 days prior written notice
of its intent to dispose of material Intellectual Property Rights and upon
request shall provide the Lender with copies of all proposed documents and
agreements concerning such rights.
(ii) Promptly upon knowledge thereof, notice of (A) any
Infringement of its material Intellectual Property Rights by others reasonably
likely to result in a Material Adverse Effect, (B) claims that a Loan Party is
Infringing another Person's Intellectual Property Rights and (C) any threatened
cancellation, termination or material limitation of its material Intellectual
Property Rights.
(iii) Promptly upon receipt, copies of all registrations with
respect to its Intellectual Property Rights.
(o) Reports to Owners. Promptly upon their distribution, copies of all
financial statements, reports and proxy statements which the Parent shall have
sent to its Owners.
(p) SEC Filings. Promptly after the sending or filing thereof (but not
later than (i) 45 days after the then ending fiscal quarter with respect to Form
10-Q and (ii) 90 days after the end of each fiscal year with respect to Form
10-K) copies of all regular and periodic reports which Parent shall file with
the Securities and Exchange Commission or any national securities exchange.
40
(q) Tax Returns of Loan Parties. As soon as possible, and in any event
no later than fifteen days after they are due to be filed, copies of the state,
provincial and federal income tax returns and all schedules thereto of the Loan
Parties.
(r) Violations of Law. Promptly upon knowledge thereof, notice of the
Loan Party's violation of any law, rule or regulation, the non-compliance with
which would reasonably be likely to result in a Material Adverse Effect on the
Loan Party.
(s) Other Reports. From time to time, with reasonable promptness, any
and all receivables schedules, inventory reports, collection reports, deposit
records, equipment schedules, copies of invoices to account debtors, shipment
documents and delivery receipts for goods sold, and such other material,
reports, records or information as the Lender may request.
(t) Reporting in Dollars. All financial statements, reports and other
financial information provided by Borrowers to Lender pursuant to this Agreement
shall be reported in Dollars and to the extent any amounts are converted into
Dollars from any other currency for purposes of reporting pursuant to this
Agreement, Borrower shall provide to Lender with the conversion rates used by
Borrowers for such reporting and supporting calculations and other information
as Lender may request from time to time.
Section 6.2. Financial Covenants.
-------------------
(a) Minimum Tangible Net Worth (non-cumulative). The Parent will
maintain, during each period described below, its Tangible Net Worth, determined
as of the end of each such period, in an amount not less than the amount set
forth for each such period (numbers appearing between "< >" are negative):
-----------------------------------------------------
Quarter Ending Minimum Tangible Net
Worth
-----------------------------------------------------
June 30, 2008 <$1,650,000>
-----------------------------------------------------
September 30, 2008 <$1,500,000>
-----------------------------------------------------
December 31, 2008 <$1,150,000>
-----------------------------------------------------
(b) Minimum Net Income (cumulative). The Parent will achieve, for each
period described below on a cumulative fiscal year to date basis, Net Income of
not less than the amount set forth for each such period (numbers appearing
between "< >" are negative):
-----------------------------------------------------
Quarter Ending Minimum Net Income
-----------------------------------------------------
June 30, 2008 <$530,000>
-----------------------------------------------------
September 30, 2008 <$437,000>
-----------------------------------------------------
December 31, 2008 <$50,000>
-----------------------------------------------------
(c) Minimum Net Cash Flow (cumulative). The Parent will achieve, for
each period described below on a cumulative fiscal year to date basis, Net Cash
Flow of not less than the amount set forth for each such period (numbers
appearing between "< >" are negative):
-----------------------------------------------------
Quarter Ending Minimum Net Cash Flow
-----------------------------------------------------
June 30, 2008 <$355,000>
-----------------------------------------------------
September 30, 2008 <$280,000>
-----------------------------------------------------
December 31, 2008 $50,000
-----------------------------------------------------
(d) Capital Expenditures. The Loan Parties will not incur or contract
to incur Capital Expenditures of more than $500,000 in the aggregate during any
fiscal year.
41
(e) Establishing Future Financial Covenants. The Loan Parties
acknowledge and agrees that, upon Lender's receipt of projections, satisfactory
to Lender in its sole discretion, for the fiscal year ending December 31, 2009
and each fiscal year thereafter from the Loan Parties, Lender shall consult with
Parent and thereafter reset the foregoing Financial Covenants in its reasonable
discretion. The Loan Parties agree to comply with such Financial Covenants, as
reset.
(f) Consolidated and Consolidating Reports. All financial covenants
have been calculated based upon the consolidated results of Parent and Borrowers
and all financial statements provided pursuant to this Agreement shall be
prepared and reported as the consolidated and consolidating statements of
Parent, which statements will include the financial condition and results of
operations of Borrowers.
Section 6.3. Permitted Liens; Financing Statements.
-------------------------------------
(a) The Loan Parties will not create, incur or suffer to exist any Lien
upon or of any of its assets, now owned or hereafter acquired, to secure any
indebtedness; excluding, however, from the operation of the foregoing, the
following (each a "Permitted Lien"; collectively, "Permitted Liens"):
(i) In the case of any Mortgaged Property, covenants,
restrictions, rights, easements and minor irregularities in title reflected on
Schedule B to a title policy covering such Mortgaged Property and acceptable to
Lender and which do not materially interfere with the Loan Party's business or
operations as presently conducted;
(ii) Liens in existence on the date hereof and listed in Schedule
6.3 hereto;
(iii) The Security Interest and Liens created by the Security
Documents;
(iv) Purchase money Liens relating to the acquisition of machinery
and equipment of the Borrower not exceeding the lesser of cost or fair market
value thereof not exceeding $100,000 for any one purchase or $200,000 in the
aggregate during any fiscal year, and so long as no Default Period is then in
existence and none would exist immediately after such acquisition;
(v) Statutory Liens of landlords and Liens of carriers,
warehousemen, bailees, mechanics, materialmen and other like Liens imposed by
law, created in the ordinary course of business and securing amounts not yet due
(or which are being contested in good faith, by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of such
Liens), and with respect to which adequate reserves or other appropriate
provisions are being maintained by the Loan parties in accordance with GAAP;
provided, that Loan Parties shall immediately pay and satisfy such Lien in the
event there is any risk of forfeiture of any Collateral but may after paying and
satisfying such Lien continue to prosecute any contest relating thereto;
(vi) Deposits made in the ordinary course of business of any Loan
Party (including, without limitation, security deposits of leases, indemnity
bonds, surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to secure
the performance of tenders, bids, contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), statutory
obligations and other similar obligations arising as a result of progress
payments under government contracts, in an aggregate amount not to exceed
$50,000;
(vii) Liens for taxes not yet due and payable or for taxes being
contested in good faith by appropriate proceedings which are sufficient to
prevent imminent foreclosure of such Liens; provided, that Borrower shall
immediately pay and satisfy such Lien in the event there is any risk of
forfeiture of any Collateral but may after paying and satisfying such Lien
continue to prosecute any contest relating thereto; and
(viii) Statutory, common law or contractual rights of set-off or
Liens on money coming into possession of any depository or other financial
institution in the ordinary course of business.
42
(b) The Loan Parties will not amend any financing statements in favor
of the Lender except as permitted by law.
Section 6.4. Indebtedness. The Loan Parties will not incur, create,
------------
assume or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money or letters of credit issued
on any Loan Party's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) Any existing or future Indebtedness or any other obligations of the
Loan Parties to the Lender;
(b) Any indebtedness of the Loan Parties in existence on the date
hereof and listed in Schedule 6.4 hereto;
(c) Any indebtedness relating to Permitted Liens;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business;
(e) Deferred taxes, to the extent permitted or required to be accounted
for under GAAP; and
(f) Indebtedness or advances to the Parent or to any Subsidiary
thereof, a summary of which as of the date hereof is set forth on Schedule 6.28.
Section 6.5. Guaranties. The Loan Parties will not assume, guarantee,
----------
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) The endorsement of negotiable instruments by the Loan Parties for
deposit or collection or similar transactions in the ordinary course of
business;
(b) Guaranties, endorsements and other direct or contingent liabilities
in connection with the obligations of other Persons, in existence on the date
hereof and listed in Schedule 6.4 hereto; and
(c) Guaranties of any indebtedness or other obligation of any Loan
Party, such as long-term equipment leases, or any other Subsidiary of Parent,
consented to in writing by Lender.
Section 6.6. Investments and Subsidiaries. The Loan Parties will not
-----------------------------
make or permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person or Affiliate, including any
partnership or joint venture, nor purchase or hold beneficially any stock or
other securities or evidence of indebtedness of any other Person or Affiliate,
except:
(a) Investments in direct obligations of the United States of America
or any agency or instrumentality thereof whose obligations constitute full faith
and credit obligations of the United States of America having a maturity of one
year or less, commercial paper issued by U.S. corporations rated "A 1" or "A 2"
by Standard & Poor's Ratings Services or "P 1" or "P 2" by ▇▇▇▇▇'▇ Investors
Service or certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System having deposits
in excess of $100,000,000 (which certificates of deposit or bankers' acceptances
are fully insured by the Federal Deposit Insurance Corporation);
(b) Travel advances or loans to the Borrower's Officers and employees
not exceeding at any one time an aggregate of $50,000;
(c) Prepaid rent not exceeding one month or security deposits;
(d) Investments in Subsidiaries in existence on the date hereof and
listed on Schedule 5.5 hereto;
43
(e) Investments in, or advances to, the Subsidiaries of Parent,
including, without limitation, loans and advances to Ronson Hydraulics and
Prometcor in an aggregate amount not in excess of $20,000 per annum solely for
the payment of taxes and other amounts required by Ronson Hydraulics and
Prometcor to otherwise comply with all laws;
(f) Advances on behalf of Officers and Directors under applicable
indemnification agreements; and
(g) Investments in marketable securities in the amounts listed on
Schedule 6.6 hereto.
Section 6.7. Dividends and Distributions. No Loan Party shall declare
----------------------------
or pay any dividends (other than dividends payable solely in stock of the Loan
Parties) on any class of its stock, or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock, or other
securities or evidence of its indebtedness or make any distribution in respect
thereof, either directly or indirectly; provided however, that the Loan Parties
may declare and pay cash dividends if, (i) Lender gives its prior written
consent and (ii) after giving effect to any such payment, the Loan Parties would
remain in compliance with the terms of this Agreement.
Section 6.8. Salaries. The Loan Parties shall not pay excessive or
--------
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, Bonus Factors, commissions, consultant
fees or other compensation of any Director, Officer or consultant, or any member
of their families, by more than ten percent (10%) in any one year, either
individually or for all such persons in the aggregate, or pay any such increase
from any source other than profits earned in the year of payment. The Loan
Parties shall not revise the Bonus Factors in any material respect; provided,
however, the Loan Parties shall not be authorized to pay bonuses if an Event of
Default exists.
Section 6.9. Intentionally Omitted.
---------------------
Section 6.10. Books and Records; Collateral Examination, Inspection and
---------------------------------------------------------
Appraisals.
----------
(a) Each Loan Party will keep accurate books of record and account for
itself pertaining to the Collateral and pertaining to the its business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with GAAP
and, upon the Lender's request, will permit any officer, employee, attorney,
accountant or other agent of the Lender to audit, review, make extracts from or
copy any and all company and financial books and records of the Borrower at all
times during ordinary business hours, to send and discuss with account debtors
and other obligors requests for verification of amounts owed to the Loan Party,
and to discuss the Loan Party's affairs with any of its Directors or Executive
Officers.
(b) Each Loan Party hereby irrevocably authorizes all accountants and
third parties to disclose and deliver to the Lender or its designated agent, at
the Loan Party's expense, all financial information, books and records, work
papers, management reports and other information in their possession regarding
the Loan Party.
(c) Each Loan Party will permit the Lender or its employees,
accountants, attorneys or agents, to examine and inspect any Collateral, the
Mortgaged Property or any other property of any Loan Party at any time during
ordinary business hours.
(d) The Lender may also, from time to time, obtain at the Borrower's
expense an appraisal of Collateral and the Mortgaged Property by an appraiser
acceptable to the Lender in its sole discretion. Borrower's obligation to
reimburse Lender for the costs of such appraisals shall be limited to one
appraisal of each Mortgaged Property and one appraisal of the other Collateral
per calendar year, provided that Borrower shall also be obligated for the costs
of any appraisals obtained by Lender during a Default Period.
44
Section 6.11. Account Verification.
--------------------
(a) The Lender or its agent may at any time and from time to time send
or require the Loan Party to send requests for verification of accounts or
notices of assignment to account debtors and other obligors. The Lender or its
agent may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
(b) Each Loan Party shall pay when due each account payable due to a
Person holding a Permitted Lien (as a result of such payable) on any Collateral.
Section 6.12. Compliance with Laws.
--------------------
(a) The Loan Parties shall (i) comply, and cause each Subsidiary to
comply, with the requirements of applicable laws and regulations, the non
compliance with which would materially and adversely affect its business or its
financial condition and (ii) use and keep the Collateral, and require that
others use and keep the Collateral, only for lawful purposes, without violation
of any federal, state, provincial or local law, statute or ordinance.
(b) The Loan Parties shall (i) ensure, and cause each Subsidiary to
ensure, that no Owner shall be listed on the Specially Designated Nationals and
Blocked Person List or other similar lists maintained by the Office of Foreign
Assets Control ("OFAC"), the Department of the Treasury or included in any
Executive Orders, (ii) not use or permit the use of the proceeds of the Credit
Facility or any other financial accommodation from the Lender to violate any of
the foreign asset control regulations of OFAC or other applicable law, (iii)
comply, and cause each Subsidiary to comply, with all applicable Bank Secrecy
Act laws and regulations, as amended from time to time, and (iv) otherwise
comply with the USA Patriot Act as required by federal law and the Lender's
policies and practices.
Section 6.13. Payment of Taxes and Other Claims. The Loan Parties will
---------------------------------
pay or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach thereto, (b) all federal, state, provincial and local taxes
required to be withheld by it, and (c) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon any properties of
the Loan Parties; provided, that the Loan Parties shall not be required to pay
any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and for
which proper reserves have been made.
Section 6.14. Maintenance of Properties.
-------------------------
(a) The Loan Parties will keep and maintain the Collateral and all of
their other properties necessary or useful in its business in all material
respects in good condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any material worn,
defective or broken parts; provided, however, that nothing in this covenant
-------- -------
shall prevent the Loan Parties from discontinuing the operation and maintenance
of any of their properties if such discontinuance is, in the Loan Parties'
judgment, desirable in the conduct of the Loan Parties' business and not
disadvantageous in any material respect to the Lender. Each Loan Party will take
all commercially reasonable steps necessary to protect and maintain its material
Intellectual Property Rights.
(b) The Loan Parties will defend the Collateral against all Liens
(other than Permitted Liens), claims or demands of all Persons (other than the
Lender) claiming the Collateral or any interest therein. The Loan Parties will
keep all Collateral free and clear of all Liens except Permitted Liens. Each
Loan Party will take all commercially reasonable steps necessary to prosecute
any Person Infringing its material Intellectual Property Rights and to defend
itself against any Person accusing it of Infringing any Person's Intellectual
Property Rights which would reasonably be likely to result in a Material Adverse
Effect.
45
Section 6.15. Insurance. The Loan Parties will obtain and at all times
---------
maintain insurance with insurers acceptable to the Lender, in such amounts, on
such terms (including any deductibles) and against such risks as may from time
to time be required by the Lender, but in all events in such amounts and against
such risks as is usually carried by companies engaged in similar business and
owning similar properties in the same general areas in which the Loan Parties
operate. Without limiting the generality of the foregoing, the Loan Parties will
at all times maintain business interruption insurance, and keep all tangible
Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
any loss payable to the Lender to the extent of its interest, and all policies
of such insurance shall contain a lender's loss payable endorsement for the
Lender's benefit consistent with this Agreement.
Section 6.16. Preservation of Existence. Each Loan Party will preserve
-------------------------
and maintain its existence and all of its material rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in all material respects in an orderly, efficient and
regular manner.
Section 6.17. Delivery of Instruments, etc. Upon request by the Lender,
----------------------------
each Loan Party will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral, duly endorsed or assigned
by the Borrower.
Section 6.18. Sale or Transfer of Assets; Suspension of Business
-------------------------------------------------------
Operations. No Loan Party will sell, lease, assign, transfer or otherwise
----------
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. No Loan Party will transfer any part of
its ownership interest in any material Intellectual Property Rights or permit
any agreement under which it has licensed material Licensed Intellectual
Property to lapse, except that the Loan Party may transfer such rights or permit
such agreements to lapse if it shall have reasonably determined that the
applicable Intellectual Property Rights are no longer useful in its business. If
the Loan Party transfers any Intellectual Property Rights for value, the Loan
Party will pay over the proceeds to the Lender for application to the
Indebtedness. No Loan Party will license any other Person to use any of the Loan
Party's Intellectual Property Rights, except that the Loan Parties may (i) grant
licenses in the ordinary course of their business in connection with sales of
Inventory or provision of services to their customers, and (ii) otherwise
license their Intellectual Property Rights with the prior written consent of
Lender, which consent shall not be unreasonably withheld.
Section 6.19. Consolidation and Merger; Asset Acquisitions. The Loan
---------------------------------------------
Parties will not consolidate or amalgamate with or merge into any Person, or
permit any other Person to merge into it, or acquire (in a transaction analogous
in purpose or effect to a consolidation, amalgamation or merger) all or
substantially all the assets of any other Person.
Section 6.20. Sale and Leaseback. The Loan Parties will not enter into
------------------
any arrangement, directly or indirectly, with any other Person whereby any Loan
Party shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Loan Party intends to use
for substantially the same purpose or purposes as the property being sold or
transferred.
Section 6.21. Restrictions on Nature of Business. The Loan Parties will
----------------------------------
not engage in any line of business materially different from that presently
engaged in by the Loan Parties and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 6.22. Accounting. The Loan Parties will not adopt any material
----------
change in accounting principles other than as required by GAAP. The Loan Parties
will not adopt, permit or consent to any change in its fiscal year.
46
Section 6.23. Discounts, etc. After notice from the Lender during a
---------------
Default Period, the Loan Parties will not grant any discount, credit or
allowance to any customer of the Loan Parties or accept any return of goods
sold. If a Default Period does not exist, Loan Parties will not grant any
discount, credit or allowance to any customer of the Loan Parties or accept any
return of goods sold other than in the ordinary course of their business in
accordance with past practices and Borrower shall include reference to such
amounts in its reports provided to Lender under Section 6.1 hereof. The Loan
Parties will not at any time modify, amend, subordinate, cancel or terminate the
obligation of any account debtor or other obligor of the Loan Parties.
Section 6.24. Plans.
-----
(a) Except as disclosed to the Lender in writing prior to the date
hereof, neither the Loan Parties nor any ERISA Affiliate will (i) adopt, create,
assume or become a party to any Pension Plan, (ii) incur any obligation to
contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations other than as
required by law.
(b) For each existing, or hereafter adopted, Canadian Pension Plan and
Canadian Benefit Plan, Borrowers shall in a timely fashion comply with and
perform in all material respects all of their obligations under and in respect
of such Canadian Pension Plan or Canadian Benefit Plan, including under any
funding agreements and all applicable laws (including any fiduciary, funding,
investment and administration obligations).
(i) All employer or employee payments, contributions or premiums
required to be remitted, paid to or in respect of each Canadian Pension Plan or
Canadian Benefit Plan shall be paid or remitted by Borrower in a timely fashion
in accordance with the terms thereof, any funding agreements and all applicable
laws.
(ii) Borrower shall not permit its unfunded pension fund and other
employee benefit plan obligations and liabilities to remain unfunded other than
in accordance with applicable law.
(iii) Borrower shall deliver to Lender (i) if requested by Lender,
copies of each annual and other return, report or valuation with respect to each
Canadian Pension Plan as filed with any applicable Governmental Authority; (ii)
promptly after receipt thereof, a copy of any direction, order, notice or ruling
that a Borrower may receive from any applicable Governmental Authority with
respect to any Canadian Pension Plan; and (iii) notification within 30 days of
any increases having a cost to Borrower in excess of $50,000 per annum in the
aggregate, in the benefits of any existing Canadian Pension Plan or Canadian
Benefit Plan, or the establishment of any new Canadian Pension Plan or Canadian
Benefit Plan, or the commencement of contributions to any such plan to which
Borrower was not previously required to contribute.
Section 6.25. Place of Business; Name. No Loan Party will transfer its
------------------------
chief executive office or principal place of business, or move, relocate, close
or sell any business location except upon 30 days' prior written notice to
Lender. No Loan Party will permit any tangible Collateral or any records
pertaining to the Collateral to be located in any state, province or area in
which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order to
perfect the Security Interest. No Loan Party will change its name or
jurisdiction of organization except upon 30 days' prior written notice to
Lender.
Section 6.26. Constituent Documents; S Corporation Status. No Loan
----------------------------------------------
Party will become an S Corporation. None of RCPC, RAI or Ronson Canada will
amend its Constituent Documents except to comply with applicable law and shall
promptly provide Lender with copies of any required amendments after execution
of same.
47
Section 6.27. Performance by the Lender. If any Loan Party at any time
-------------------------
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten Business Days after the Lender gives the Loan Parties written notice
thereof (or in the case of the agreements contained in Section 6.13 and Section
6.15, immediately upon the occurrence of such failure, without notice or lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Loan Party (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including the payment of taxes, the satisfaction of Liens, the
performance of obligations owed to account debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and
the Loan Party shall thereupon pay to the Lender on demand the amount of all
monies expended and all costs and expenses (including reasonable attorneys' fees
and legal expenses) incurred by the Lender in connection with or as a result of
the performance or observance of such agreements or the taking of such action by
the Lender, together with interest thereon from the date expended or incurred at
the Default Rate. To facilitate the Lender's performance or observance of such
covenants of the Loan Parties, each Loan Party hereby irrevocably appoints the
Lender, or the Lender's delegate, acting alone, as the Loan Party's attorney in
fact (which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements required to be obtained, executed, delivered
or endorsed by the Loan Party hereunder.
Section 6.28. Affiliate Transactions. No Loan Party shall enter into or
----------------------
be a party to any agreement or transaction with any Affiliate (including without
limitation any other Loan Party) except in the ordinary course of, and pursuant
to the reasonable requirements of, such Loan Party's business and upon fair and
reasonable terms that are no less favorable to such Loan Party than it would
obtain in a comparable arms length transaction with a Person not an Affiliate of
such Loan Party, and except as set forth on Schedule 6.28. Notwithstanding the
foregoing and provided a Default Period does not exist, Parent, RAI or RCPC may
make intercompany loans, advances and extensions of credit as hereinabove
contemplated provided that, in the case of loans to Ronson Canada (i) any such
loans, advances and extensions of credit are evidenced by loan documents
reasonably acceptable to Lender, Lender's approval thereof not to be
unreasonably withheld or delayed, (ii) the sole originals of the loan documents
relating thereto are delivered to the Lender, and (iii) outstanding principal
balance of any such loans, advances and extensions of credit made to Ronson
Canada shall not at any time exceed $550,000.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 7.1. Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events:
(a) Default in the payment of the Revolving Notes, the Equipment Term
Note, the Real Estate Term Note, any Obligation of Reimbursement, or any default
with respect to payment of any other Indebtedness due from the Loan Parties to
Lender as such Indebtedness becomes due and payable;
(b) Default in the performance, or breach, of (i) Sections 6.1(a)
through (e) of this Agreement and such breach is not cured within five (5)
Business Days after notice by Lender or (ii) any other covenant or agreement of
the Borrower contained in this Agreement;
(c) An Overadvance arises as the result of any reduction in the
Borrowing Base, or arises in any manner on terms not otherwise approved of in
advance by the Lender in writing, and such Overadvance continues for three (3)
Business Days;
48
(d) A Change of Control shall occur;
(e) Any Financial Covenant shall become inapplicable due to the lapse
of time and the failure of the Lender and the Loan Parties to come to any
agreement to amend any such covenant to cover future periods that is acceptable
to the Lender in the Lender's sole discretion;
(f) Any Loan Party or any Guarantor shall be or become insolvent, or
admit in writing its or his inability to pay its or his debts as they mature, or
make an assignment for the benefit of creditors; or any Loan Party or any
Guarantor shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or him or for all or any substantial part of
its or his property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of the Loan Party or such
Guarantor, as the case may be; or the Loan Party or any Guarantor shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against the Loan Party or any such
Guarantor; or any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Loan Party or any Guarantor;
(g) A petition shall be filed by or against any Loan Party or any
Guarantor under the United States Bankruptcy Code, any Canadian Insolvency
Statutes or the laws of any other jurisdiction naming any Loan Party or such
Guarantor as debtor;
(h) Intentionally omitted;
(i) Any representation or warranty made by any Loan Party in this
Agreement, by any Guarantor in any Guaranty delivered to the Lender, or by any
Loan Party (or any of its Officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement or any
such Guaranty shall be incorrect in any material respect;
(j) The rendering against any Loan Party of an arbitration award, a
final judgment, decree or order for the payment of money in excess of $25,000
and the continuance of such arbitration award, judgment, decree or order
unsatisfied and in effect for any period of 30 consecutive days without a stay
of execution;
(k) A default under any bond, debenture, note or other evidence of
material indebtedness of the Loan Parties owed to any Person other than the
Lender, or under any indenture or other instrument under which any such evidence
of indebtedness has been issued or by which it is governed, or under any
material lease or other material contract, and the expiration of the applicable
period of grace, if any, specified in such evidence of indebtedness, indenture,
other instrument, lease or contract;
(l) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Pension Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Pension Plan, shall have occurred and be continuing 30 days after
written notice to such effect shall have been given to a Loan Party by the
Lender; or a trustee shall have been appointed by an appropriate United States
District Court to administer any Pension Plan; or the Pension Benefit Guaranty
Corporation shall have instituted proceedings to terminate any Pension Plan or
to appoint a trustee to administer any Pension Plan; or a Loan Party or any
ERISA Affiliate shall have filed for a distress termination of any Pension Plan
under Title IV of ERISA; or a Loan Party or any ERISA Affiliate shall have
failed to make any quarterly contribution required with respect to any Pension
Plan under Section 412(m) of the IRC, which the Lender determines in good faith
may, by itself, or in combination with any such failures that the Lender may
determine are likely to occur in the future, result in the imposition of a Lien
on a Loan Party's assets in favor of the Pension Plan; or any withdrawal,
partial withdrawal, reorganization or other event occurs with respect to a
49
Multiemployer Plan which results or could reasonably be expected to result in a
material liability of a Loan Party to the Multiemployer Plan under Title IV of
ERISA;
(m) An event of default shall occur and be continuing under any
Security Document;
(n) Default in the payment of any amount owed by a Loan Party to the
Lender other than any Indebtedness arising hereunder and all applicable cure
periods shall have expired without cure thereof;
(o) Any Guarantor shall repudiate, purport to revoke or fail to perform
any obligation under such Guaranty in favor of the Lender, any individual
Guarantor shall die or any other Guarantor shall cease to exist;
(p) The Lender believes in good faith that the prospect of payment in
full of any part of the Indebtedness, or that full performance by a Loan Party
under the Loan Documents, is impaired, or that there has occurred any material
adverse change in the business or financial condition of a Loan Party;
(q) There has occurred any breach, default or event of default by or
attributable to, any Owner of at least twenty percent (20%) of the issued and
outstanding common stock of a Loan Party, Director, Executive Officer, Guarantor
or Subsidiary of the Parent under any agreement between such person and Lender
and all applicable notice and cure periods have expired; or
(r) The indictment of any Director, Executive Officer, Guarantor, or
any Owner of at least twenty percent (20%) of the issued and outstanding common
stock of a Loan Party for a felony offence under state, provincial or federal
law.
Section 7.2. Rights and Remedies. During any Default Period, the Lender
-------------------
may exercise any or all of the following rights and remedies:
(a) The Lender may, by notice to the Loan Parties, declare the
Commitment to be terminated, whereupon the same shall forthwith terminate;
(b) The Lender may, by notice to the Loan Parties, declare the
Indebtedness to be forthwith due and payable, whereupon all Indebtedness shall
become and be forthwith due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which the Loan Parties
hereby expressly waive;
(c) The Lender may, without notice to the Loan Parties and without
further action, apply any and all money owing by the Lender to the Loan Parties
to the payment of the Indebtedness;
(d) The Lender may exercise and enforce any and all rights and remedies
available upon default to a secured party under the UCC and/or the PPSA, as
applicable, including the right to take possession of Collateral, or any
evidence thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Loan Parties hereby
expressly waive) and the right to sell, lease or otherwise dispose of any or all
of the Collateral (with or without giving any warranties as to the Collateral,
title to the Collateral or similar warranties), and, in connection therewith,
the Loan Parties will on demand assemble the Collateral and make it available to
the Lender at a place to be designated by the Lender which is reasonably
convenient to both parties;
(e) The Lender may make demand upon the Borrower and, forthwith upon
such demand, the Borrower will pay to the Lender in immediately available funds
for deposit in the Special Account pursuant to Section 2.5 an amount equal to
the aggregate maximum amount available to be drawn under all Letters of Credit
then outstanding, assuming compliance with all conditions for drawing
thereunder;
(f) The Lender may exercise and enforce its rights and remedies under
the Loan Documents;
50
(g) The Lender may without regard to any waste, adequacy of the
security or solvency of the Loan Parties, apply for the appointment of a
receiver of the Collateral, to which appointment the Loan Parties hereby
consent, whether or not foreclosure proceedings have been commenced under the
Security Documents and whether or not a foreclosure sale has occurred; and
(h) The Lender may exercise any other rights and remedies available to
it by law or agreement.
(i) Notwithstanding the foregoing, upon the occurrence of an Event of
Default described in Section 7.1(f) or (g), the Indebtedness shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind. If the Lender sells any of the Collateral on credit, the
Indebtedness will be reduced only to the extent of payments actually received.
If the purchaser fails to pay for the Collateral, the Lender may resell the
Collateral and shall apply any proceeds actually received to the Indebtedness.
Section 7.3. Right of Redemption with Respect to Owned Intellectual
---------------------------------------------------------
Property. Lender agrees that if the Loan Parties have fully paid and satisfied
--------
in cash all Indebtedness consisting of and arising out of both the Real Estate
Term Advance (up to a limit of $1,000,000) and the Equipment Term Advance, not
later than ninety (90) days of the date Lender delivers a notice of an Event of
Default to the Loan Parties, Lender shall release its Security Interest in the
Owned Intellectual Property; provided, however, any such release by the Lender
of its Security Interest pursuant to this Section 7.3 shall not release or
otherwise impair the license granted to Lender pursuant to Section 3.5 of this
Agreement to use the Loan Parties' Intellectual Property Rights.
Section 7.4. Certain Notices. If notice to a Loan Party of any intended
---------------
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 8.3) at least ten calendar days before
the date of intended disposition or other action.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. No Waiver; Cumulative Remedies; Compliance with Laws. No
------------------------------------------------------
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state, provincial or federal law requirements in
connection with a disposition of the Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.
Section 8.2. Amendments, Etc. No amendment, modification, termination
---------------
or waiver of any provision of any Loan Document or consent to any departure by
the Loan Parties therefrom or any release of a Security Interest shall be
effective unless the same shall be in writing and signed by the Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No notice to or demand on the Loan Parties
in any case shall entitle the Loan Parties to any other or further notice or
demand in similar or other circumstances.
Section 8.3. Notices; Communication of Confidential Information;
--------------------------------------------------------
Requests for Accounting. Except as otherwise expressly provided herein, all
-----------------------
notices, requests, demands and other communications provided for under the Loan
Documents shall be in writing and shall be (a) personally delivered, (b) sent by
first class United States mail, (c) sent by overnight courier of national
reputation, (d) transmitted by telecopy, or (e) sent as electronic mail, in each
case delivered or sent to the party to whom notice is being given to the
business address, telecopier number, or e mail address set forth below next to
its signature or, as to each party, at such other business address, telecopier
number, or e mail address as it may hereafter designate in writing to the other
party
51
pursuant to the terms of this Section. All such notices, requests, demands and
other communications shall be deemed to be an authenticated record communicated
or given on (a) the date received if personally delivered, (b) when deposited in
the mail if delivered by mail, (c) the date delivered to the courier if
delivered by overnight courier, or (d) the date of transmission if sent by
telecopy or by e mail, except that notices or requests delivered to the Lender
pursuant to any of the provisions of Article II shall not be effective until
received by the Lender. All notices, financial information, or other business
records sent by any party to this Agreement may be transmitted, sent, or
otherwise communicated via such medium as the sending party may deem appropriate
and commercially reasonable; provided, however, that the risk that the
-------- -------
confidentiality or privacy of such notices, financial information, or other
business records sent by either party may be compromised shall be borne
exclusively by the Loan Parties. All requests for an accounting under Section
9-210 of the UCC (i) shall be made in a writing signed by a Person authorized
under Section 2.2(b), (ii) shall be personally delivered, sent by registered or
certified mail, return receipt requested, or by overnight courier of national
reputation, (iii) shall be deemed to be sent when received by the Lender and
(iv) shall otherwise comply with the requirements of Section 9-210 of the UCC.
The Loan Parties request that the Lender respond to all such requests which on
their face appear to come from an authorized individual and releases the Lender
from any liability for so responding. The Loan Parties shall pay the Lender the
maximum amount allowed by law for responding to such requests.
Section 8.4. Further Documents. The Loan Parties will from time to time
-----------------
execute, deliver, endorse and authorize the filing of any and all instruments,
documents, conveyances, assignments, security agreements, financing statements,
control agreements and other agreements and writings that the Lender may
reasonably request in order to secure, protect, perfect or enforce the Security
Interest or the Lender's rights under the Loan Documents (but any failure to
request or assure that a Loan Party executes, delivers, endorses or authorizes
the filing of any such item shall not affect or impair the validity, sufficiency
or enforceability of the Loan Documents and the Security Interest, regardless of
whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).
Section 8.5. Costs and Expenses. The Loan Parties shall pay on demand
------------------
all costs and expenses, including reasonable attorneys' fees, incurred by the
Lender in connection with the Indebtedness, this Agreement, the Loan Documents,
any Letter of Credit and any other document or agreement related hereto or
thereto, and the transactions contemplated hereby, including all such costs,
expenses and fees incurred in connection with the negotiation, preparation,
execution, amendment, administration, performance, collection and enforcement of
the Indebtedness and all such documents and agreements and the creation,
perfection, protection, satisfaction, foreclosure or enforcement of the Security
Interest.
Section 8.6. Indemnity. In addition to the payment of expenses pursuant
---------
to Section 8.5, the Loan Parties shall indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
(i) Any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of the Loan Documents or the making of the Advances;
(ii) Any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained herein proves to be
incorrect in any respect or as a result of any violation of the covenant
contained in Section 6.12(b) ; and
(iii) Any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel) in connection with
the foregoing and any other investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party thereto,
which may be imposed on, incurred by or asserted against
52
any such Indemnitee, in any manner related to or arising out of or in connection
with the making of the Advances and the Loan Documents or the use or intended
use of the proceeds of the Advances.
Notwithstanding the foregoing, the Borrower shall not be obligated to
indemnify any Indemnitee for any Indemnified Liability caused by the gross
negligence or willful misconduct of such Indemnitee, as finally determined by a
court of competent jurisdiction.
If any investigative, judicial or administrative proceeding arising
from any of the foregoing is brought against any Indemnitee, upon such
Indemnitee's request, the Loan Parties, or counsel designated by the Loan
Parties and satisfactory to the Indemnitee, will resist and defend such action,
suit or proceeding to the extent and in the manner directed by the Indemnitee,
at the Loan Parties' sole costs and expense. Each Indemnitee will use its best
efforts to cooperate in the defense of any such action, suit or proceeding. If
the foregoing undertaking to indemnify, defend and hold harmless may be held to
be unenforceable because it violates any law or public policy, the Loan Parties
shall nevertheless make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. The Loan Parties' obligations under this Section 8.6 shall survive the
termination of this Agreement and the discharge of the Loan Parties' other
obligations hereunder.
Section 8.7. Participants. The Lender and its participants, if any, are
------------
not partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
Section 8.8. Execution in Counterparts; Telefacsimile Execution. This
---------------------------------------------------
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement or any other Loan Document by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement or
such other Loan Document. Any party delivering an executed counterpart of this
Agreement or any other Loan Document by telefacsimile also shall deliver an
original executed counterpart of this Agreement or such other Loan Document but
the failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement or such other
Loan Document.
Section 8.9. Retention of Loan Party's Records. The Lender shall have
---------------------------------
no obligation to maintain any electronic records or any documents, schedules,
invoices, agings, or other papers delivered to the Lender by any Loan Party or
in connection with the Loan Documents for more than 30 days after receipt by the
Lender. If there is a special need to retain specific records, the Loan Parties
must inform the Lender of its need to retain those records with particularity,
which must be delivered in accordance with the notice provisions of Section 8.3
within 30 days of the Lender taking control of same.
Section 8.10. Binding Effect; Assignment; Complete Agreement; Sharing
---------------------------------------------------------
Information; Confidentiality. The Loan Documents shall be binding upon and inure
----------------------------
to the benefit of the Loan Parties and the Lender and their respective
successors and assigns, except that the Loan Parties shall not have the right to
assign their rights thereunder or any interest therein without the Lender's
prior written consent. To the extent permitted by law, the Loan Parties waive
and will not assert against any assignee any claims, defenses or set-offs which
the Loan Parties could assert against the Lender. This Agreement shall also bind
all Persons who become a party to this Agreement as a borrower. This Agreement,
together with the Loan Documents, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof. To the extent that
any provision of this Agreement contradicts other provisions of the Loan
Documents, this Agreement shall control. Without limiting the Lender's right to
share information regarding the Loan Parties and their Affiliates with the
Lender's participants, accountants, lawyers and other advisors, the Lender and
each direct and indirect subsidiary of ▇▇▇▇▇ Fargo & Company may share with each
53
other any information that they may have in their possession regarding the Loan
Parties and their Affiliates, and the Loan Parties waive any right of
confidentiality they may have with respect to all such sharing of information.
Any other provision of this Agreement or the other Loan Documents
notwithstanding, Lender and such other parties shall use reasonable efforts in
accordance with its policies and procedures in place from time to time to
maintain the confidentiality of the financial and business information it
obtains from the Loan Parties and to prevent the inappropriate dissemination and
disclosure thereof, provided, that nothing in this Agreement or the other Loan
Documents shall prohibit the Lender from providing any information regarding the
Borrower and its Affiliates to internal auditors, other operating divisions of
Lender, Lender affiliates, or in response to a request from a regulatory
authority having jurisdiction over Lender.
Section 8.11. Severability of Provisions. Any provision of this
----------------------------
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 8.12. Headings. Article, Section and subsection headings in
--------
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 8.13. Cross Guaranty; Subordination.
-----------------------------
(a) Parent and each Domestic Borrower hereby agrees that such Loan
Party is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to Lender, the full and prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of, all
Indebtedness owed or hereafter owing to Lender by each other Loan Party
(including, without limitation, Ronson Canada). Each Loan Party agrees that its
guaranty obligation hereunder is a continuing guaranty of payment and
performance and not of collection, that its obligations under this Section shall
not be discharged until payment and performance, in full, of the Indebtedness
has occurred, and that its obligations under this Section shall be absolute and
unconditional, irrespective of, and unaffected by:
(1) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in, this
Agreement, any other Loan Document or any other agreement,
document or instrument to which any Loan Party is or may
become a party;
(2) the absence of any action to enforce this
Agreement (including this Section) or any other Loan Document
or the waiver or consent by Lender with respect to any of the
provisions thereof;
(3) the existence, value or condition of, or failure
to perfect its security interest in or lien against, any
security for the Indebtedness or any action, or the absence of
any action, by Lender in respect thereof (including the
release of any such security);
(4) the insolvency of any Loan Party or Guarantor; or
(5) any other action or circumstances that might
otherwise constitute a legal or equitable discharge or defense
of a surety or guarantor.
Each Loan Party shall be regarded, and shall be in the same position,
as principal debtor with respect to the Indebtedness guaranteed hereunder.
(b) Waivers by Loan Parties. Each Loan Party expressly waives all
rights it may have now or in the future under any statute, or at common law, or
at law or in equity, or otherwise, to subrogation, to compel Lender to marshal
assets or to proceed in respect of the Indebtedness guaranteed hereunder against
any other Loan Party or Guarantor, any other party or against any security for
the payment and performance of the Indebtedness before proceeding against, or as
a condition to proceeding against, such Loan Party. It is agreed
54
among each Loan Party and Lender that the foregoing waivers are of the essence
of the transaction contemplated by this Agreement and the other Loan Documents
and that, but for the provisions of this Section and such waivers, the Lender
would decline to enter into this Agreement.
(c) Benefit of Guaranty. Each Loan Party agrees that the provisions of
this Section are for the benefit of the Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Loan Party and the Lender, the obligations of such other Loan Party under
the Loan Documents.
(d) Election of Remedies. If the Lender may, under applicable law,
proceed to realize its benefits under any of the Loan Documents giving Lender a
security interest in or lien upon any Collateral, whether owned by any Loan
Party or by any Guarantor, either by judicial foreclosure or by non judicial
sale or enforcement, the Lender may, at its sole option, determine which of its
remedies or rights it may pursue without affecting any of its rights and
remedies under this Section. If, in the exercise of any of its rights and
remedies, Lender shall forfeit any of its rights or remedies, including its
right to enter a deficiency judgment against any Loan Party or any other
Guarantor, whether because of any applicable laws pertaining to "election of
remedies" or the like, each Loan Party hereby consents to such action by Lender
and waives any claim based upon such action. Any election of remedies that
results in the denial or impairment of the right of Lender to seek a deficiency
judgment against any Loan Party shall not impair any other Loan Party's
obligation to pay the full amount of the Indebtedness. In the event Lender shall
bid at any foreclosure or trustee's sale or at any private sale permitted by law
or the Loan Documents, Lender may bid all or less than the amount of the
Indebtedness and the amount of such bid need not be paid by Lender but shall be
credited against the Indebtedness. The amount of the successful bid at any such
sale, whether Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Indebtedness
shall be conclusively deemed to be the amount of the Indebtedness guaranteed
under this Section, notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which Lender might otherwise be entitled but for such bidding at any
such sale.
(e) Liability Cumulative. The liability of each Loan Party under this
Section 8.13 is in addition to and shall be cumulative with all liabilities of
each Loan Party to Lender under this Agreement and the other Loan Documents to
which such Loan Party is a party or in respect of any Indebtedness or obligation
of the other Loan Party, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary.
(f) Subordination.
(1) Each Loan Party covenants and agrees that the
payment of all indebtedness, principal, interest (including
interest which accrues after the commencement of any case or
proceeding in bankruptcy, or for the reorganization of any
Loan Party or Guarantor), fees, charges, expenses, attorneys'
fees and any other sum, obligation or liability owing by any
other Loan Party to such Loan Party, including any
intercompany loans or trade payables or royalty or licensing
fees (collectively, the "Intercompany Obligations"), is
subordinated, to the extent and in the manner provided in this
Section 8.13(f), to the prior payment in full of all
Indebtedness (herein, the "Senior Obligations") and that the
subordination is for the benefit of the Lender, and Lender may
enforce such provisions directly.
(2) Each Loan Party executing this Agreement hereby
(i) authorizes Lender to demand specific performance of the
terms of this Section 8.13(f), whether or not any other Loan
Party shall have complied with any of the provisions hereof
applicable to it, at any time when such Loan Party shall have
failed to comply with any provisions of this Section 8.13
which
55
are applicable to it and (ii) irrevocably waives any defense
based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
(3) Upon any distribution of assets of any Loan Party
in any dissolution, winding up, liquidation or reorganization
(whether in bankruptcy, insolvency or receivership proceedings
or upon an assignment for the benefit of creditors or
otherwise):
(i) The Lender shall first be entitled to receive payment in
full in cash of the Senior Obligations before any Loan Party is entitled to
receive any payment on account of the Intercompany Obligations.
(ii) Any payment or distribution of assets of any Loan Party
of any kind or character, whether in cash, property or securities, to which any
other Loan Party would be entitled except for the provisions of this Section
8.13(f)(3), shall be paid by the liquidating trustee or agent or other person
making such payment or distribution directly to the Lender, to the extent
necessary to make payment in full of all Senior Obligations remaining unpaid
after giving effect to any concurrent payment or distribution or provisions
therefor to the Lender.
(iii) In the event that notwithstanding the foregoing
provisions of this Section 8.13(f)(3), any payment or distribution of assets of
any Loan Party of any kind or character, whether in cash, property or
securities, shall be received by any other Loan Party on account of the
Intercompany Obligations before all Senior Obligations are paid in full, such
payment or distribution shall be received and held in trust for and shall be
paid over to the Lender for application to the payment of the Senior Obligations
until all of the Senior Obligations shall have been paid in full, after giving
effect to any concurrent payment or distribution or provision therefor to the
Lender.
No right of the Lender or any other present or future holders of any Senior
Obligations to enforce the subordination provisions herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Loan Party or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by any Loan Party with the terms hereof,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with.
Section 8.14. Judgment Currency.
-----------------
(a) All Indebtedness shall be payable by the Borrowers in Dollars. The
Loan Parties' obligations under the Loan Documents to make payments to the
Lender in Dollars shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any other currency,
except to the extent that such tender or recovery results in the effective
receipt by the Lender of the full amount of the Dollars payable to the Lender
under the Loan Documents, and the Loan Parties shall indemnify the Lender (and
the Lender shall have an additional legal claim) for any difference between such
full amount and the amount effectively received by the Lender pursuant to any
such tender or recovery. The Lender's determination of amounts effectively
received by it shall be conclusive absent manifest error.
(b) If for the purpose of obtaining or enforcing any judgment against
the Loan Parties in any court in any jurisdiction, it becomes necessary to
convert into any currency other than Dollars (such currency being hereinafter in
this Section referred to as the "Judgment Currency"), the conversion shall be
made, at the option of the Lender, at the rate of exchange prevailing on the
Business Day immediately preceding the day on which the judgment is given (such
business day being hereinafter in this Section referred to as the "Conversion
Date").
(c) If there is a change in the rate of exchange prevailing between the
Conversion Date and the date of actual payment of the amount due, the Loan
Parties covenant and agree to pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the Judgment Currency, when converted at the rate of exchange prevailing on the
date of payment, will produce the amount of
56
Dollars which could have been purchased with the amount of Judgment Currency
stipulated in the judgment or judicial award at the rate of exchange prevailing
on the Conversion Date.
(d) Any amount due from the Loan Parties under Section 8.14(c) will be
due as a separate debt and shall not be affected by judgment being obtained for
any other sums due under or in respect of the Loan Documents.
(e) The term "rate of exchange" in this Section means the spot rate at
which the Lender in accordance with its normal practices is able on the relevant
date to purchase Dollars with the Judgment Currency and includes in either case
any premium and costs of exchange payable by in connection with such purchase.
Section 8.15. Appointment of Borrower Representative; Reliance on
-------------------------------------------------------
Notices. Each Loan Party hereby designates Parent as its representative and
-------
agent on its behalf (the "Borrower Representative") for the purposes of
executing and delivering any notice of borrowing, notice of conversion into or
continuation of a LIBOR Advance, request for issuance of a Letter of Credit or
similar notice, giving instructions with respect to the disbursement of the
proceeds of Advances, selecting interest rate options, effecting repayment of
Advances, requesting issuance of Letters of Credit, giving and receiving all
other notices and consents hereunder or under any of the other Loan Documents
and taking all other actions (including in respect of compliance with covenants)
on behalf of any Loan Party under the Loan Documents. Parent hereby accepts such
appointment. Lender may regard any notice or other communication pursuant to any
Loan Document from Borrower Representative as a notice or communication from all
Loan Parties and shall be entitled to rely upon, and shall be fully protected in
relying upon, any such notice or communication as such, and shall give any
notice or communication required or permitted to be given to any Loan Party
hereunder to Borrower Representative on behalf of such Loan Party. Each Loan
Party agrees that each notice, election, representation and warranty, covenant,
agreement and undertaking made on its behalf by Borrower Representative shall be
deemed for all purposes to have been made by such Loan Party and shall be
binding upon and enforceable against such Loan Party to the same extent as if
the same had been made directly by such Loan Party.
Section 8.16. Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
--------------------------------------------------------
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of New York, except
that at all times the provisions for the creation, perfection and enforcement of
the liens and security interests granted by Ronson Canada pursuant hereto and
pursuant to the other Loan Documents with respect to the Collateral owned by
Ronson Canada may be governed by, and construed according to, the laws of the
Province of Ontario, Canada, it being understood that, to the fullest extent
permitted by the laws of such Province, the laws of the State of New York shall
govern the construction, validity and enforceability of all Loan Documents and
all of the Indebtedness arising hereunder and thereunder. The parties hereto
hereby (i) consent to the personal jurisdiction of the state and federal courts
located in the State of New York in connection with any controversy related to
this Agreement; (ii) waive any argument that venue in any such forum is not
convenient; (iii) agree that any litigation initiated by the Lender or the Loan
Parties in connection with this Agreement or the other Loan Documents may be
venued in either the state or federal courts located in the City of New York,
New York County, New York; and (iv) agree that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each Borrower hereby irrevocably designates and appoints Parent as the designee,
appointee and agent of such Borrower to receive, accept and acknowledge for and
on behalf of such Borrower and its property service of any and all legal
process, summons, notices and documents which may be served in any such action,
suit or proceeding relating to the Loan Documents or the Indebtedness, which
service may be made on Parent in accordance with legal procedures prescribed for
such courts. Each Borrower agrees that service upon it or Parent as provided for
herein shall constitute a valid and effective personal service upon it and that
the failure of Parent to give any notice of such service to any Borrower shall
not impair or affect in any way the validity of such service. Nothing herein
contained shall, or shall be construed so as to, limit the right of the Lender
to bring actions, suits or proceedings with respect to the obligations and
liabilities of the Borrowers under, or any other
57
matter arising out of or in connection with, the Loan Documents, or for
recognition or enforcement of any judgment rendered in any such action, suit or
proceeding, in the courts of whatever jurisdiction in which the office of the
Lender may be located or assets of the Borrowers may be found or otherwise shall
to Parent seem appropriate, or to affect the right to service of process in any
jurisdiction in any other manner permitted by the law.
[Remainder of this page intentionally left blank]
58
THE LOAN PARTIES AND THE LENDER WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION AT LAW OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
set forth in the initial caption of this Agreement.
Ronson Corporation RONSON CORPORATION
Corporate Park III
Campus Drive
P.O. Box 6707 By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ -------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ Title: President & Chief Executive Officer
e-mail: ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
Ronson Consumer Products Corporation RONSON CONSUMER PRODUCTS CORPORATION
3 and ▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ ------------------------
e-mail: ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Title: President & Chief Executive Officer
Ronson Aviation, Inc. RONSON AVIATION, INC.
Corporate Park III
Campus Drive
P.O. Box 6707 By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ Title: President & Chief Executive Officer
e-mail: ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
Ronson Corporation of Canada Ltd. RONSON CORPORATION OF CANADA LTD.
Corporate Park III
Campus Drive
P.O. Box 6707 By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ Title: President & Chief Executive Officer
e-mail: ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
59
▇▇▇▇▇ Fargo Bank, National Association ▇▇▇▇▇ FARGO BANK,
▇▇▇▇▇ Fargo Business Credit NATIONAL ASSOCIATION
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Attention: Relationship Manager for Ronson Corporation --------------------
e-mail: ▇▇▇▇▇.▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇ ▇▇▇▇▇ ▇. Gannon,
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇ Vice President
60