COMMERCIAL LOAN AGREEMENT
This Commercial Loan Agreement dated as of September 27, 1996
("Agreement") is between THE SUMITOMO BANK OF CALIFORNIA ("Bank") and AB
PLASTICS CORPORATION, a California corporation ("Borrower").
▇.▇▇▇▇▇▇ FACILITIES, AMOUNT AND TERMS.
Bank agrees to make available to Borrower the following line(s) of
credit and/or credit accommodations (collectively, the "Loans") on the following
terms, covenants and conditions:
1Line of Credit Amount.
(a)Accounts Receivable/Inventory Revolving Line of Credit. During the
Availability Period, Bank will, on a revolving basis, make advances to Borrower,
which may not at any time exceed, in the aggregate outstanding, the lesser of
TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) (the "Commitment") or the
Borrowing Base. Borrower's obligation to repay advances under this revolving
line of credit (the "Revolving Line of Credit") is evidenced by a promissory
note, substantially in the form of Exhibit A attached hereto (the "Revolving
Line Note").
(i)"Borrowing Base" shall mean the sum of (A) eighty-five percent (85%) of the
net face amount of Borrower's Eligible Accounts, after deduction of such
reserves as Bank deems necessary and proper in its good faith judgment, plus (B)
fifty percent (50%) of Borrower's Eligible Inventory, after deduction of such
reserves as Bank deems necessary and proper in its good faith judgment, plus (C)
the Borrowing Base Supplemental Amount, but such advances combined shall not, at
any time, exceed the Commitment.
(ii)"Borrowing Base Supplemental Amount" shall mean, from the Closing Date to
October 30, 1996, an amount equal to $6,000,000, and thereafter, as of the last
day of each month (commencing with October 31, 1996), an amount equal to the
Borrowing Base Supplemental Amount in effect during such month minus $100,000.
(iii)"Accounts Receivable" shall mean open accounts arising in the ordinary
course of Borrower's business from services performed or goods sold by Borrower.
(iv)"Account Debtor" shall mean the obligor on any Accounts Receivable.
(v)"Eligible Accounts" shall mean Accounts Receivable, excluding the following:
(A)Accounts Receivable which remain uncollected more than 90 days from the date
they are first invoiced.
(B)Accounts Receivable due from an Account Debtor which suspends business,
suffers a business failure or the termination of its existence, or makes an
assignment for the benefit of creditors, or as to which a dissolution,
insolvency or bankruptcy proceeding has been commenced, or as to whose property
a trustee, receiver or conservator has been appointed.
(C)Accounts Receivable due from an Account Debtor affiliated with Borrower, such
as a stockholder, owner, parent, subsidiary, officer, director, agent or
employee of Borrower.
(D)Accounts Receivable with respect to which payment is contingent or
conditional.
(E)Accounts Receivable due from an Account Debtor who is not a resident or
citizen of, located in, or subject to service of process in the United States of
America.
(F)Accounts Receivable to the extent there is asserted thereagainst a defense,
counterclaim, discount or setoff.
(G)Accounts Receivable due from an Account Debtor which is any national,
federal, state, county or municipal government, including, without limitation,
any instrumentality, division, agency, body or department thereof.
(H)Accounts Receivable commonly known as "▇▇▇▇ and hold" or subject to any
repurchase or return agreement, or which relate to goods on consignment or on
approval or any similar arrangement.
(I)Accounts Receivable relating to an Account Debtor with respect to which
twenty-five percent (25%) or more of the total Accounts Receivable owing by such
Account Debtor are over 90 days delinquent.
(J)Accounts Receivable due from an Account Debtor (excluding Sony Corporation
and its affiliates) which, in the aggregate, exceed twenty-five percent (25%) of
the aggregate amount of all Eligible Accounts, but only to the extent of such
excess.
(K)Accounts Receivable due from Sony Corporation and its affiliates which, in
the aggregate, exceed sixty percent (60%) of the aggregate amount of all
Eligible Accounts.
(L)Accounts Receivable as to which Borrower is or may become liable to an
Account Debtor for services rendered or sales made or for any other reason,
except to the extent that such Accounts Receivable exceed the amount of such
liability.
(M)Accounts Receivable which are not owned by Borrower or are not free of all
liens, encumbrances, charges, rights or interests of any kind, except in favor
of Bank.
(N)Accounts Receivable which are evidenced by chattel paper or an instrument of
any kind.
(O)Accounts Receivable which are not evidenced by an invoice or other
documentation in form reasonably acceptable to Bank.
(P)Accounts Receivable which are otherwise unacceptable to Bank in its
reasonable judgment.
(vi)"Eligible Inventory" shall mean those items of Inventory consisting of raw
materials, and finished goods which are in good condition and currently saleable
in the ordinary course of Borrower's business and are not otherwise unacceptable
to Bank in its reasonable discretion. Such Inventory shall not be subject to any
other lien or claim, shall not have been consigned or sold to any person (nor
have been purchased by Borrower) as part of any bulk sale unless there was
compliance with all applicable bulk sale or transfer laws. Such Inventory shall
be located at such locations as are acceptable to Bank and shall, at all times,
be subject to and covered by, Bank's perfected security interest.
(vii)"Inventory" shall mean all inventory (as that term is defined in the
Commercial Code of the State of California) wherever located, which is or may at
any time be held for sale or lease, furnished under any contract of service or
held as raw materials, work in process, supplies or materials used or consumed
in Borrower's business or which are or might be used in connection with the
manufacturing, shipping, advertising or selling or finishing of such goods,
merchandise and other personal property and all documents of title or documents
representing the same, and all such property, the sale or other disposition of
which has given rise to Accounts Receivable and which has been returned to or
repossessed or stopped in transit by Borrower.
(b)Collection of Accounts Receivable. Borrower shall have the privilege, subject
to revocation at the sole discretion of Bank, to collect, at Borrower's expense,
the payments due on Accounts Receivable upon the express condition that all such
collections shall be received by Borrower in trust for Bank. Upon demand by
Bank, whether before or after an Event of Default, Borrower shall promptly
deliver to Bank, at the location specified in this Agreement, in kind, all
remittances received by Borrower on Accounts Receivable, or if sales are made
for cash, the identical checks, cash, or other form of payment. The receipt of
any check or other item of payment by Bank shall not be considered a payment in
reduction of the Loan Balance until such check or other item of payment is
honored and finally paid. At any time during the continuance of an Event of
Default, Bank in its sole discretion may, but is not obligated to, notify any
Account Debtor to make payment directly to Bank, and exercise any and all of
Borrower's rights regarding the Account Receivable or the Account Debtor.
(c)Revolving Line. This is a revolving Line of Credit. During the Availability
Period, Borrower may repay principal amounts and reborrow them.
(d)Minimum Advance. Each advance must be for at least fifty thousand dollars
($50,000), or for the amount of the remaining available Revolving Line of
Credit, if less.
(e)Maximum Loan Balance. Borrower agrees not to permit the outstanding
principal balance of the Revolving Line of Credit (such sum is the "Loan
Balance") to exceed the lesser of the Commitment or the Borrowing Base.
2Availability Period. The period under which Borrower may draw on the Revolving
Line of Credit ("Availability Period") is between the date of this Agreement and
July 31, 2001 (the "Maturity Date"), provided, however, that Bank need not make
any advances upon the occurrence or during the continuance of any Event of
Default or any other event which, with the giving of notice or the passage of
time (or both), would constitute an Event of Default.
3Interest Rate.
(a)Unless Borrower elects an Optional Interest Rate as described below, the
interest rate is Bank's Prime Rate in effect from time to time plus one-half of
one percent (.50%) per annum.
(b)The "Prime Rate" equals the rate of interest set from time to time by Bank at
its head office in San Francisco, California as its Prime Rate. The Prime Rate
is determined by Bank as a means of pricing credit extensions to some customers
and
is neither tied to any external rate of interest or index nor is it necessarily
the lowest rate of interest charged by Bank at any given time for any particular
class of customers or credit extensions. Any changes in the interest rate
resulting from a change in the Prime Rate shall take effect without notice on
the date specified at the time the Prime Rate is set.
(c)Optional Interest Rate. Instead of the interest rate based on Bank's Prime
Rate, Borrower may elect to have all or portions of the Revolving Line of Credit
(during the Availability Period) bear interest at the rate(s) described below
(each an "Optional Interest Rate") during an interest period agreed to by Bank
and Borrower (subject to the limitations set forth below). Each interest rate is
a rate per annum. Interest will be paid monthly in arrears and shall be due on
the first day of each month. At the end of any interest period, the interest
rate will revert to the rate based on the Prime Rate, unless Borrower has
designated another Optional Interest Rate for that portion.
(d)Offshore Rate/Rate Plus Disclosed Spread. Borrower may elect to have all or
portions of the principal balance of the Revolving Line of Credit bear interest
at the Offshore Rate plus two and three quarters percent (2.75%) per annum.
Designation of an Offshore Rate portion is subject to the following
requirements:
(i)The interest period during which the Offshore Rate will be in effect will be
a period of thirty (30), sixty (60) or ninety (90) days as selected by Borrower
with consent of Bank, provided that no interest period shall extend beyond the
Maturity Date. The last day of the interest period will be determined by Bank
using the practices of the offshore dollar inter-bank market.
(ii)Each Offshore Rate portion will be for an amount not less than one million
dollars ($1,000,000.).
(iii)The "Offshore Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts in the
calculation will be determined by Bank as of the first day of interest period.)
Offshore Rate = Eurodollar Rate
------------------
------
(1.00 - Reserve
Percentage)
Where,
(A)"Eurodollar Rate" means the interest rate (rounded upward to the nearest
1/16th of one percent) at which Bank's Nassau Branch, Nassau, Bahamas, would
offer U.S. dollar deposits for the applicable interest period to other major
banks in the offshore dollar inter-bank market.
(B)"Reserve Percentage" means the total of the maximum reserve percentages for
determining the reserves to be maintained by member banks of the Federal Reserve
System for Eurocurrency Liabilities, as defined in the Federal Reserve Board
Regulation D, rounded upward to the nearest 1/100 of one percent. The percentage
will be expressed as a decimal, and will include, but not be limited to,
marginal, emergency, supplemental, special, and other reserve percentages.
(iv)Borrower may not elect an Offshore Rate with respect to any portion of the
principal balance of the Revolving Line of Credit which is scheduled to be
repaid before the last day of the applicable interest period.
(v)No portion of the principal balance of the Revolving Line of Credit already
bearing interest at the Offshore Rate may be converted to a different rate
during its interest period.
(vi)Each prepayment of an Offshore Rate option, whether voluntary, by reason of
acceleration or otherwise, will be accompanied by the amount of accrued interest
on the amount prepaid, and a prepayment fee equal to the amount (if any) by
which
(A)the additional interest which would have been payable on the amount prepaid
had it not been paid until the last day of the interest period, exceeds
(B)the interest which would have been recoverable by Bank by placing the amount
prepaid on the deposit in the offshore dollar market for a period starting on
the date on which it was prepaid and ending on the last day of the interest
period for such portion.
(vii)Bank will have no obligation to accept an election of an Offshore Rate
portion if any of the following described events has occurred and is continuing:
(A)Dollar deposits in the principal amount, and for periods equal to the
interest period, of an Offshore Rate portion are not available in the offshore
Dollar interbank market; or
(B)the Offshore Rate does not accurately reflect the cost of an Offshore Rate
portion.
4Repayment Terms/Revolving Line of Credit.
(a)Borrower will pay interest in arrears commencing on November 1, 1996, and on
the first day of each month thereafter until payment in full of all amounts
outstanding under the Revolving Line of Credit.
(b)Borrower will repay in full, all principal, interest and other charges
outstanding under the Revolving Line of Credit no later than the Maturity Date.
5Equipment Line. During the Equipment Line Availability Period, Borrower may
request equipment loans (each an "Equipment Loan") from Bank under this
equipment line of credit (the "Equipment Line") in an aggregate principal amount
not to exceed, at any one time outstanding, TWO MILLION AND NO/100 DOLLARS
($2,000,000.00) (the "Equipment Line Commitment") . Borrower's obligation to
repay advances under this Equipment Line is evidenced by a promissory note
substantially in the form of Exhibit B attached hereto (the "Equipment Line
Note"). Any advances made under the Equipment Line that are repaid may not be
reborrowed.
(a)Equipment Line Availability Period. The period under which Borrower may draw
on the Equipment Line (the "Equipment Line Availability Period") is between the
date of this Agreement and July 31, 1997, provided that Bank need not make any
Equipment Loan upon the occurrence and during the continuance of any Event of
Default or any other event which, with the giving of notice or the passage of
time (or both), would constitute and Event of Default.
(b)Interest Rate. During the Equipment Line Availability Period, each Equipment
Loan outstanding under the Equipment Line will bear interest at a rate per annum
equal to the Bank's Prime Rate in effect from time to time. Commencing August 1,
1997, each Equipment Loan outstanding under the Equipment Line will bear
interest at a rate per annum equal to the Bank's Prime Rate in effect from time
to time plus one quarter of one percent (.25%).
(c)Purpose/Advance Rates. Each Equipment Loan shall be used solely to purchase
new capital equipment for use in Borrower's business and operations as currently
conducted, or to reimburse Borrower for previous purchases of such capital
equipment occurring between January 1, 1996 and the Closing Date; provided,
however, that the aggregate principal amount of Equipment Loans made to finance
the purchase of tenant improvements and refurbishments for Borrower's leased
office space and office furniture shall not exceed $200,000. All equipment
acquired with the proceeds of such Equipment Loan shall be free and clear of any
security
interests, liens, encumbrances or rights of others except the security interests
of Bank under any security agreements required under this Agreement. Each
request for an Equipment Loan shall be accompanied by a copy of the purchase
order or invoice for the equipment to be purchased with the proceeds of the
advance. The amount of each Equipment Loan shall not exceed eighty percent (80%)
of the purchase price of such equipment.
(d)Repayment Terms.
(i)Borrower will pay interest monthly in arrears on the first day of each month
commencing with the first day of the month following the month in which the
first Equipment Loan is made, and then on the first day of each month thereafter
until payment in full of all amounts outstanding under the Equipment Line.
(ii)The aggregate principal amount outstanding under the Equipment Line shall be
repaid by Borrower in thirty-six (36) equal monthly payments, with the first
such payment to be made on September 1, 1997 and then on the first day of each
month thereafter, provided that the last such payment shall be made on July 31,
2000.
(e)Voluntary Repayment. Borrower may prepay all or any portion of the
outstanding principal balance of the Equipment Line at any time. Any such
prepayment will be applied first to interest charges and then to the most remote
installments of principal due in respect of the Equipment Line.
2.FEES, EXPENSES AND DEPOSITS.
1Fees.
(a)Facility Fee. Borrower agrees to pay a Fifty Thousand Dollar ($50,000)
facility fee due on the Closing Date.
(b)Unused Revolving Line of Credit Commitment Fee. Borrower agrees to pay a
quarterly fee on any difference between the Revolving Line of Credit Commitment
and the amount of credit it actually uses under the Revolving Line of Credit,
determined by the weighted average Loan Balance maintained during the preceding
calendar quarter. The fee will be calculated at .25% per year. This fee is due
on January 1, 1997 and on the first day of each calendar quarter thereafter,
with the last such payment due July 31, 2001 (which final payment shall be based
upon the portion of the then current calendar quarter ending July 31).
(c)Unused Equipment Line Commitment Fee. Borrower agrees to pay a quarterly
fee on any difference between the Equipment Line Commitment and the amount of
credit it actually uses under the Equipment Line, determined by the weighted
average of the aggregate outstanding principal balance of all Equipment Loans
maintained during the preceding calendar quarter. The fee will be calculated at
.25% per year. This fee is due on January 1, 1997 and on the first day of each
calendar quarter thereafter, with the last such payment due August 1, 1997
(which final payment shall be based upon the portion of the then current
calendar quarter ending July 31).
2Expenses.
(a)Borrower agrees to immediately repay Bank for reasonable, out-of-pocket
expenses incurred in connection with the transactions contemplated by this
Agreement, including filing, recording and search fees, appraisal fees, audit
fees, title report fees and documentation fees. Such costs and expenses may
include the allocated costs of Bank's in-house staffs, such as legal, appraisal
and audit.
(b)Borrower agrees to reimburse Bank for any reasonable expenses it incurs in
the negotiation and preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of Bank's in-house
counsel.
(c)Borrower agrees to reimburse Bank for the reasonable cost of periodic audits
and appraisals of the personal property collateral securing Borrower's
obligations under the Loan Documents, at such intervals as Bank may reasonably
require. The audits and appraisals may be performed by employees of Bank or by
independent appraisers.
3.COLLATERAL.
1All Personal Property. Borrower's obligations to Bank under this Agreement are
secured by, and Borrower hereby grants Bank a security interest in, all personal
property Borrower now owns or will own in the future, including Borrower's
Accounts Receivable, Inventory, equipment, general intangibles and other
property described in Exhibit C attached hereto (collectively, the
"Collateral"), and as is further described in a security agreement of even date
herewith executed by Borrower in favor of Bank (the "Security Agreement").
2Stock of Borrower Supporting Guaranty. Borrower's obligations under the Loan
Documents shall be guaranteed by AB Plastics Holding Corporation, a Delaware
corporation ("AB Plastics Holding Corp."), pursuant to the terms of a guaranty
(the "Guaranty") of even date herewith executed by AB Plastics Holding Corp. in
favor of Bank. The obligations of AB Plastics Holding Corp. under the Guaranty
will be
secured by a pledge of 100% of the capital stock of Borrower held by AB Plastics
Holding Corp., in accordance with the terms of a stock pledge agreement ("Stock
Pledge Agreement") of even date herewith executed by AB Plastics Holding Corp.
in favor of Bank.
4.DISBURSEMENTS, PAYMENTS AND COSTS.
1Request for Credit. Each request for an extension of credit will be made in
writing in a manner reasonably acceptable to Bank, or by another means
reasonably acceptable to Bank.
2Disbursements and Payments. Each disbursement by Bank and each payment by
Borrower will be:
(a)made at Bank's branch (or other location) selected by Bank from time to time.
(b)made for the account of Bank's branch selected by Bank from time to time.
(c)made in immediately available funds, or such other type of funds selected by
Bank.
(d)evidenced by records kept by Bank. In addition, Bank may, at its discretion,
require Borrower to sign one or more promissory notes.
3Telephone Authorization.
(a)Bank may honor telephone instructions for advances or repayments or for the
designation of Optional Interest Rates given by any officer of Borrower or a
person or persons so authorized by any officer of Borrower.
(b)Advances will be deposited in, and repayments will be withdrawn from,
Borrower's account number 05815113070 (the "Account"), or such other account(s)
with Bank as designated in writing by Borrower.
(c)Bank will provide written confirmation to Borrower of transactions made based
on telephone instructions. Borrower agrees to notify Bank promptly of any
discrepancy between the confirmation and telephone instructions. If there is a
discrepancy and Bank has already acted on the telephone instructions, the
telephone instructions will prevail over the written confirmation.
(d)Borrower indemnifies and holds harmless Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection with
any act resulting
from compliance with telephone instructions it reasonably believes are made by
an officer of Borrower or a person authorized by an officer of Borrower. This
indemnity and agreement to hold harmless will survive this Agreement's
termination.
4Direct Debit.
(a)Borrower agrees that interest and principal payments and any fees will be
deducted automatically on the due date from the Account.
(b)Bank will debit the Account on the dates the payments become due. If a due
date does not fall on a Banking Day, Bank will debit the Account on the first
Banking Day following the due date.
(c)Borrower will maintain sufficient funds in the Account on the dates Bank
enters debits authorized by this Agreement. If there are insufficient funds in
the Account on the date Bank enters any debit authorized by this Agreement
Borrower shall immediately pay such shortfall to Bank.
5Banking Days. Unless otherwise provided in this Agreement, a "Banking Day" is a
day other than a Saturday or a Sunday, on which Bank is open for business in
California. For amounts bearing interest at an Offshore Rate (if any), a Banking
Day is a day other than a Saturday or a Sunday on which Bank is open for
business in California and dealing in offshore dollars. All payments and
disbursements which would be due on a day which is not a Banking Day will be due
on the next Banking Day. All payments received on a day which is not a Banking
Day will be applied to the Revolving Line of Credit or the Equipment Line (as
applicable) on the next Banking Day.
6Taxes. Borrower will not deduct any taxes from any payments made to Bank. If
any government authority imposes any taxes or charges on any payments made by
the Borrower (other than taxes based on Bank's income), Borrower will pay the
taxes or charges. Upon request by Bank, Borrower will confirm that it has paid
the taxes by giving Bank official tax receipts (or notarized copies) within 30
days after the due date.
7Additional Costs. Borrower will pay Bank, on demand, for Bank's costs or losses
arising from the adoption or amendment of any statute or regulation subsequent
to the date hereof, or any request or requirement of a regulatory agency which
is applicable to Bank. The costs and losses will be allocated to the loans in a
manner determined by Bank, using any reasonable method. The costs include the
following:
(a)any reserve or deposit requirements; and
(b)any capital requirements relating to Bank's assets and commitments for
credit.
8Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used.
9Interest on Late Payments. At Bank's sole option in each instance, any amount
not paid when due under this Agreement (including interest) shall bear interest
from the due date until paid at the Default Rate described below. This may
result in compounding of interest.
10Default Rate. Upon the occurrence and during the continuance of any Event of
Default, at Bank's sole option Borrower shall pay interest on the outstanding
principal and interest at the Bank's Prime Rate plus two and one-half percent
(2.50%) (the "Default Rate"). This will not constitute a waiver of any Event of
Default.
11Overdrafts. At Bank's sole option in each instance, Bank may make advances
under this Agreement to prevent or cover an overdraft on any account of Borrower
with Bank. Each such advance will accrue interest from the date of the advance
or the date on which the account is overdrawn, whichever occurs first, at the
interest rate described in this Agreement.
12Overadvances. If at any time the Loan Balance exceeds the lesser of the
Commitment or the Borrowing Base, at Bank's option the amount over-advanced
shall be immediately due and payable on demand. If at any time the aggregate
outstanding principal balance of the Equipment Line exceeds the Equipment Line
Commitment, at Bank's option the amount over-advanced shall be immediately due
and payable on demand.
5.CONDITIONS.
1Initial Advance. Bank must have received the following items, in form and
content acceptable to Bank, before it is required to extend any credit to
Borrower under this Agreement:
(a)Authorizations. Evidence that the execution, delivery and performance by
Borrower and each guarantor or subordinating creditor of this Agreement and any
instrument or agreement required under this Agreement have been duly authorized.
(b)Notes. The fully executed Revolving Line Note and Equipment Line Note.
(c)Security Agreements. Signed original Security Agreement and such other
security agreements and financing statements which Bank requires. Borrower shall
also have delivered to Bank all such Collateral in which Bank requires a
possessory security interest.
(d)Evidence of Priority. Evidence that security interests and liens in favor of
Bank are valid, enforceable and prior to all other rights and interests, except
those Bank consents to in writing.
(e)Landlord's/Mortgagee Waivers. For any personal property Collateral located on
real property which is subject to a mortgage or deed of trust or which is not
owned by the Borrower, a Landlord's and/or Mortgagee's Waiver from the
owner/lessor of the real property and the holder of any mortgage or deed of
trust.
(f)Insurance. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
(g)Environmental Questionnaire. A completed Bank form Environmental
Questionnaire and Disclosure Statement, together with an environmental site
assessment concerning any potential toxic or hazardous condition.
(h)Guaranty and Stock Pledge Agreement. The Guaranty and the Stock Pledge
Agreement signed by AB Plastics Holding Corp.
(i)Subordination Agreement. Subordination Agreement ("Subordination Agreement")
of even date herewith in favor of Bank signed by Sirrom Investments, Inc., a
Tennessee corporation ("Sirrom"). The Subordination Agreement pertains to the
obligations of Borrower and AB Plastics Corp. to Sirrom (the "Subordinate Debt
Obligations") arising under a Loan Agreement of even date herewith by and among
Borrower, AB Plastics Holding Corp. and Sirrom, and the other "Loan Documents"
described therein (collectively, the "Subordinate Debt Documents").
(j)Legal Opinion. A written opinion from Borrower's legal counsel, covering such
matters as Bank may require. The legal counsel and the terms of the opinion must
be acceptable to Bank.
(k)Good Standing. Certificates of good standing for Borrower from its state of
incorporation and from any other state in which Borrower is required to qualify
to conduct its business.
(l)Accounts. The Account shall have been opened, and Borrower shall have
established with Bank all of Borrower's primary operating and business accounts.
(m)Solvency Certificate. A Solvency Certificate, in form and substance
satisfactory to Bank, signed by Borrower's chief financial officer.
(n)Consummation of Acquisition. The Stock Purchase Agreement dated as of July
11, 1996 by and between the prior stockholders of Borrower, as seller, and AB
Plastics Corp., as buyer, and all other instruments, documents and agreements to
be executed in connection therewith (collectively, the "Purchase Documents"),
shall have been fully executed and delivered, and all conditions to the
consummation of the transactions contemplated thereby necessary to complete such
transaction (other than funding under this Agreement) shall have been satisfied
or waived with Bank's consent.
(o)Sources and Uses of Funds Certificate. A certificate executed by the chief
executive officer and chief financial officer of Borrower, setting forth in
reasonable detail the sources and uses of funds in the transactions contemplated
herein and in the Subordinate Debt Documents, including without limitation
consummation of the transactions contemplated by the Purchase Documents.
(p)Pay Proceeds Letter. A letter executed by Borrower directing Bank to disburse
approximately $4,478,950.50 under the Revolving Line of Credit directly to
Manufacturers Bank, to repay certain existing indebtedness of Borrower.
(q)Stock Certificates. The stock certificate(s) evidencing the shares of
Borrower's capital stock pledged to Bank pursuant to the Stock Pledge Agreement,
together with a duly endorsed stock power for each such certificate (endorsed in
blank), with the signature thereto guaranteed by a commercial bank, a trust
company or a member firm of any registered national securities exchange.
(r)Other Required Documentation. Such other documents, instruments and
agreements as Bank may reasonable require, including the UCC-2 financing
statement termination previously provided to Borrower by Bank.
The date on which all of the foregoing conditions have been
satisfied is the "Closing Date." As used in this Agreement, "Loan Documents"
shall mean, collectively, this Agreement, the Revolving Line Note, the Equipment
Line Note, the Security Agreement, the Guaranty, the Stock Pledge Agreement, the
Subordination Agreement and any other certificates, documents or agreements of
any type or nature heretofore or hereafter executed or delivered by Borrower, AB
Plastics Holding Corp. and/or any other party to Bank in any way relating to or
in
the furtherance of this Agreement, in each case either as originally executed or
as the same may from time to time be supplemented, modified, amended, restated
or extended.
2Conditions to Each Advance. Before each extension of credit, including the
first:
(a)With respect to advances under the Revolving Line of Credit, a Borrowing Base
Certificate signed by Borrower and delivered to Bank.
(b)An invoice detailing the items being purchased with the proceeds of each
advance.
(c)Bank's most recent audit of Borrower's records must be satisfactory to Bank
in its reasonable discretion.
(d)The Representations and Warranties hereunder must be true and correct in all
material respects.
(e)Any other items that Bank reasonably requires.
6.REPRESENTATIONS AND WARRANTIES.
When Borrower signs this Agreement, and until Bank is repaid in full,
Borrower makes the following representations and warranties. Each request for an
extension of credit constitutes a renewed representation.
1Organization of Borrower. Borrower and AB Plastics Holding Corp. are each a
corporation duly formed and validly existing under the laws of the state where
organized.
2Authorization. This Agreement, and any instrument or agreement required
hereunder, are within Borrower's powers, have been duly authorized, and do not
conflict with any of its organizational papers.
3Enforceable Agreement. This Agreement and the other Loan Documents are legal,
valid and binding agreements of Borrower or AB Plastics Holding Corp., as
applicable, enforceable against Borrower and AB Plastics Holding Corp., as
applicable, in accordance with their terms, and any instrument or agreement
required hereunder or thereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable, except in each case as may be limited by
bankruptcy, insolvency and other laws affecting creditors' rights generally, and
subject to judicial discretion in the award of equitable remedies.
4Good Standing. In each state in which Borrower does business, it is properly
licensed, in good standing, and, where required, in compliance with fictitious
name statutes.
5No Conflicts. The Loan Documents do not conflict with any law, agreement, or
obligation by which Borrower or AB Plastics Holding Corp. is bound.
6Financial Information. All financial and other information that has been or
will be supplied to Bank, including Borrower's financial statement dated as of
April 30, 1996, is:
(a)sufficiently complete to give Bank accurate knowledge of Borrower's financial
condition;
(b)in form and content required by Bank; and
(c)in compliance with all government regulations that apply.
Since the date of the financial statements specified above,
there has been no material adverse change in the assets or the financial
condition of Borrower.
7Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened
against Borrower except as disclosed on Schedule 6.7 attached hereto.
8Collateral. All Collateral required in this Agreement is owned by the grantor
of the security interest, free of any title defects or any liens or interests of
others except as disclosed on Schedule 6.8 attached hereto, (collectively , the
"Permitted Encumbrances").
9Permits, Franchises. Borrower possesses all permits, memberships, franchises,
contracts and licenses required and all trademark rights, trade name rights,
patent rights and fictitious name rights necessary to enable it to conduct the
business in which it is now engaged without conflict with the rights of others.
10Other Obligations. Borrower is not in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment,
contract, instrument or obligation.
11Income Tax Returns. Borrower has filed all required tax returns and has no
knowledge of any pending assessments or adjustments of its income tax for any
year.
12No Event of Default. No event has occurred which is, or with notice or lapse
of time or both would be, an Event of Default under this Agreement.
13ERISA Plans.
(a)Borrower has fulfilled its obligations, if any, under the minimum funding
standards of ERISA and the Code with respect to each Plan and is in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code, and has not incurred any liability with respect to any Plan under
Title IV of ERISA.
(b)No reportable event has occurred under Section 4043(b) of ERISA for which the
PBGC requires 30 day notice.
(c)No action by Borrower to terminate or withdraw from any Plan has been taken
and no notice of intent to terminate a Plan has been filed under Section 4041 of
ERISA.
(d)No proceeding has been commenced with respect to a Plan under Section 4042 of
ERISA, and no event has occurred or condition exists which might constitute
grounds for the commencement of such a proceeding.
(e)The following terms have the meanings indicated for purposes of this
Agreement:
(i)"Code" means the Internal Revenue Code of 1986, as amended from time to time.
(ii)"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
(iii)"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
(iv)"Plan" means any employee pension benefit plan maintained or contributed to
by Borrower and insured by the Pension Benefit Guaranty Corporation under Title
IV of ERISA.
7.COVENANTS.
Borrower agrees, so long as credit is available under this
Agreement and until Bank is repaid in full:
1Use of Proceeds. To use the proceeds of the Revolving Line of Credit only for
repayment of existing debt owed by Borrower, working capital purposes, payment
of up to $1,000,000 to the sellers under the Purchase Documents, and payment of
certain costs (not to exceed $1,000,000) associated with the transactions
contemplated by the Purchase Documents.
2Financial Information. To provide the following financial information and
statements and such additional information as requested by Bank from time to
time:
(a)Within 120 days of Borrower's fiscal year end, Borrower's annual financial
statements. These financial statements must be audited (with an unqualified
opinion) by a Certified Public Accountant ("CPA") reasonably acceptable to Bank.
The statements shall be prepared on an unconsolidated basis.
(b)Within 30 days of the period's end, Borrower's monthly financial statements
(including a balance sheet, income statement and statement of cash flows). These
financial statements may be Borrower prepared. The statements shall be prepared
on an unconsolidated basis, and shall reflect the results for the month just
ended as well as the results from the beginning of the current fiscal year
through the month just ended.
(c)Within 15 days of period end, a monthly detailed aging of Borrower's accounts
receivable and accounts payable, a detailed analysis of Borrower's Inventory and
a Borrowing Base Certificate.
(d)Within 60 days after the start of each of Borrower's fiscal years, a 2-year
operating plan covering the current fiscal year and the next fiscal year. Such
plan will detail, on a monthly basis for the then current fiscal year and
annually for the subsequent fiscal year, Borrower's best estimate of revenues,
expenses and balance sheet categories, and will be presented in the customary
form of balance sheets and income statements.
3Quick Ratio. To maintain on an unconsolidated basis as of the last day of each
month, a ratio of quick assets to current liabilities (exclusive of amounts
outstanding under the Revolving Line of Credit) of at least 1.0:1.0.
"Quick Assets" means cash, short-term cash investments, net
trade receivables and marketable securities not classified as long-term
investments.
4Tangible Net Worth. To maintain on an unconsolidated basis as of the last day
of each month, Tangible Net Worth equal to at least the sum of the following:
(a)$5,000,000;
(b)the sum of 50% of the cumulative net income after income taxes earned after
October 31, 1996;
(c)the net proceeds from any equity securities issued after the date of the
Agreement; and
(d)any increase in stockholders' equity resulting from the conversion of debt
securities to equity securities after the date of this Agreement.
"Tangible Net Worth" means the gross book value of Borrower's
assets (excluding goodwill, patents, trademarks, trade names, organization
expense, treasury stock, unamortized debt discount and expense, deferred
research and development costs, deferred marketing expenses, and other like
intangibles), plus debt subordinated to Bank in a manner acceptable to Bank,
less total liabilities, including, without limitation, accrued and deferred
income taxes, and any reserves against assets.
5Total Liabilities to Tangible Net Worth. To maintain on an unconsolidated basis
as of the last day of each month, a ratio of Total Liabilities not subordinated
to Tangible Net Worth not exceeding the amounts indicated for each period
specified below:
Period Ratio
------ -----
prior to 10/31/96 3.00 : 1.00
10/31/96 - 9/30/97 2.25 : 1.00
10/31/97 - Maturity Date 2.00 : 1.00
"Total Liabilities not subordinated" means the sum of current
liabilities plus long term liabilities, excluding debt subordinated to
Borrower's obligations to Bank in a manner acceptable to Bank.
6Fixed Charge Coverage Ratio. To maintain on an unconsolidated basis as of the
last day of each month a ratio of EBITDA to Fixed Charges of at least the
amounts indicated for each period specified below:
Period Ratio
------ -----
11/1/96 - 10/31/98 1.10 : 1.00
11/1/98 - Maturity Date 1.25 : 1.00
"EBITDA" means, for any period, (a) net income for that
period, plus (b) interest expense for that period, plus (c) provision for income
tax expense for that period, plus (d) depreciation and depletion expense for
that period, plus (e) amortization expense for that period.
"Fixed Charges" means, for any period, (a) interest expense
for that period, plus (b) capital expenditures (net of new purchase money
financing) during such period, plus (c) income taxes paid for such period, plus
(d) the current portion of long-term debt paid during such period.
During the 1997 fiscal year, the ratio of EBITDA to Fixed
Charges will be calculated at the end of each month using fiscal year-to-date
results on an annualized basis. Thereafter, this ratio will be calculated at the
end of each month, using the results of that month and each of the 11
immediately preceding months. For any month, the current portion of long term
debt will be measured as of the date of calculation.
7Profitability. To maintain on an unconsolidated basis a positive net income
before taxes and extraordinary items and a positive net income after taxes and
extraordinary items as of the end of each of Borrower's fiscal years. In
addition, Borrower shall not experience, on an unconsolidated basis, a negative
net income (either before or after taxes and extraordinary items) in each of any
two (2) consecutive fiscal quarters.
8Other Debts. Not to have outstanding or incur any direct or contingent debts or
lease obligations (other than those to Bank), or become liable for the debts of
others without Bank's written consent. This does not prohibit:
(a)Acquiring goods, supplies, or merchandise on normal trade credit.
(b)Endorsing negotiable instruments received in the usual course of business.
(c)Debts in existence on the date of this Agreement disclosed in writing to Bank
prior to the date of this Agreement in Borrower's financial statement dated
April 30, 1996.
(d)Additional debts and lease obligations for the acquisition of fixed or
capital assets, to the extent permitted elsewhere in this Agreement.
(e)Subject to the terms of the Subordination Agreement, the Subordinate Debt.
9Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property Borrower now or later owns, except:
(a)Liens or security interests in favor of Bank.
(b)Liens for taxes not yet due, which are being contested in good faith by
appropriate proceedings (so long as Borrower has established and maintains
adequate reserves for the payment of the same and by reason of which nonpayment
and contest no material item or portion of Borrower's property is in jeopardy of
being seized, levied upon or forfeited).
(c)The Permitted Encumbrances outstanding on the date of this Agreement.
(d)Additional purchase money security interests in fixed assets acquired after
the date of this Agreement.
(e)Liens or security interests granted to Sirrom to secure the Subordinate Debt,
which liens or security interests (and the Subordinate Debt) shall be
subordinate to the liens and security interest in favor of Bank and to
Borrower's obligations to Bank, all in accordance with the terms of the
Subordination Agreement.
10Leases. Not to permit the aggregate payments due in any fiscal year under all
leases (including capital and operating leases for real or personal property) to
exceed one million dollars ($1,000,000).
11Dividends/Distributions. Not to declare or pay any dividends or distributions
on any of its shares and not to purchase, redeem or otherwise acquire for value
any of its shares, or create any sinking fund in relation thereto.
12Loans to Officers. Not to make any loans, advances or other extensions of
credit to any of Borrower's executives, officers, directors, shareholders or
employees (or any relatives of any of the foregoing) which, together with all
other such loans, advances and other extensions of credit, exceed $100,000 at
any time outstanding.
13Change of Ownership. Not to cause, permit, or suffer any change, direct or
indirect, in Borrower's ownership in excess of 50%.
14Notices to Bank. To promptly notify Bank in writing of:
(a)any lawsuit over five hundred thousand dollars ($500,000) against Borrower or
AB Plastics Holding Corp.;
(b)any substantial dispute between Borrower or AB Plastics Holding Corp. and any
government authority;
(c)any failure to comply with this Agreement;
(d)any material adverse change in Borrower's or AB Plastics Holding Corp.
financial condition or operations;
(e)any change in Borrower's name, address, or legal structure; and
(f)the occurrence of any Event of Default.
15Books and Records. To maintain adequate books and records.
16Audits. To allow Bank and its agents to inspect Borrower's properties and
examine, audit and make copies of books and records at any reasonable time upon
reasonable prior notice. If any of Borrower's properties, books or records are
in the possession of a third party, Borrower authorizes that third party to
permit Bank or its agents to have access to perform inspections or audits and to
respond to Bank's requests for information concerning such properties, books and
records.
17Compliance with Laws. To comply with the laws, regulations, and orders of any
government body with authority over Borrower's business (including any
fictitious name statute and all statutes regarding the processing, manufacture,
storage, transportation, sale or use of hazardous or toxic materials).
18Preservation of Rights. To maintain and preserve all rights, privileges, and
franchises Borrower now has which are necessary to carry on Borrower's business.
19Maintenance of Properties. To make any repairs, renewals, or replacements to
keep Borrower's properties in good working condition (reasonable wear and tear
excepted).
20Perfection of Liens. To help Bank perfect and protect its security interests
and liens, and reimburse the Bank for related costs incurred to protect its
security interests and liens.
21Cooperation. To take any action reasonably requested by Bank to carry out the
intent of this Agreement.
22Insurance.
(a)Insurance Covering Collateral. To maintain all risk property damage insurance
policies covering the tangible property comprising the Collateral. Each
insurance policy must be for the full replacement cost of the Collateral and
include a replacement cost endorsement. The insurance must be issued by an
insurance company reasonably acceptable to Bank and must include a lender's loss
payable endorsement in favor of Bank in a form acceptable to Bank.
(b)General Business Insurance. To maintain insurance as is usual for the
business it is in.
(c)Evidence of Insurance. Upon the request of Bank, to deliver to Bank a copy of
each insurance policy, or, if permitted by Bank, a certificate of insurance
listing all insurance in force.
23Operating/Business Accounts. Establish and maintain with Bank all of
Borrower's operating and business accounts and all other banking services
associated with the operation of Borrower's business, including without
limitation any demand deposit accounts.
24Additional Negative Covenants. Not to, without Bank's prior written consent:
(a)engage in any business activities substantially different from Borrower's
present business.
(b)liquidate or dissolve Borrower's business.
(c)enter into any consolidation, merger, pool, joint venture, syndicate or other
combination which involves a business activity unrelated to Borrower's business
activity (as presently conducted), or after which Borrower is not the surviving
legal entity.
(d)sell, lease or dispose of all or (in Bank's reasonable opinion) a substantial
part of Borrower's business or Borrower's assets.
(e)acquire or purchase a business or its assets (provided that Bank will not
unreasonably withhold or delay its consent to any such transaction).
(f)sell or otherwise dispose of any assets for less than fair market value, or
enter into any sale and leaseback agreement covering any of its fixed or capital
assets.
(g)voluntarily suspend its business for more than five days in any seven day
period, other than a routine shutdown, not to exceed fourteen (14) consecutive
days, consistent with past practice.
(h)enter into any transaction with AB Plastics Holding Corp. or any other
affiliate of Borrower on terms less favorable than those available to Borrower
from other persons or entities in the ordinary course of such persons' and
entities' business.
25No Consumer Purpose. Not to use any loans or advances hereunder for personal,
family or household purposes.
26ERISA Plans. To give prompt written notice to Bank of:
(a)The occurrence of any reportable event under Section 4043(b) of ERISA for
which the PBGC requires 30 day notice.
(b)Any action by Borrower to terminate or withdraw from a Plan or the filing of
any notice of intent to terminate under Section 4041 of ERISA.
(c)Any notice of noncompliance made with respect to a Plan under Section 4041(b)
of ERISA.
(d)The commencement of any proceeding with respect to a Plan under Section 4042
of ERISA.
27Appointment of Bank as Attorney in Fact. Until all the obligations of Borrower
to Bank have been paid in full, Borrower irrevocably appoints Bank as its
attorney in fact and authorizes and empowers it to:
(a)Endorse and affix Borrower's name to or upon any check, draft, note,
instrument or other writing relating to the collection of Accounts Receivable,
or relating to any other Collateral, or upon any check or other instrument given
in payment thereof, or upon any omitted assignment, notification of assignment,
demand or auditor's verification relating to Collateral and upon all other
instruments and writings required to assert and protect Bank's rights in the
Collateral.
(b)Upon the occurrence and during the continuance of an Event of Default,
receive, open and dispose of all mail addressed to Borrower and notify the Post
Office authorities to change the address for the delivery of mail addressed to
Borrower to such address as Bank may designate. These powers, being coupled with
an interest, are irrevocable while Borrower's obligations to Bank remain unpaid.
8.DEFAULT.
1Events of Default. The occurrence of any one or more of the following events
shall constitute an "Event of Default":
(a)Failure to Pay. Borrower fails to make a payment under this Agreement when
due.
(b)Non-Compliance. Borrower or any other party (other than Bank) fails to meet
the conditions of, or fails to perform any obligation under:
(i)this Agreement,
(ii)any other Loan Document, or
(iii)any other agreement Borrower has with Bank or any affiliate of Bank;
which in any case is not cured within ten (10) days after the
occurrence thereof, provided that if such failure cannot be cured with
ten days but Borrower has commenced within such 10-day period to cure
such failure and is otherwise diligently pursuing such cure, then
Borrower shall have such additional time as is reasonably necessary to
effect such cure, but in no event more than twenty (20) days beyond the
initial 10-day cure period. The foregoing notwithstanding, in the event
any other Loan Document specifically sets forth events which constitute
a "Default" or "Event of Default" thereunder, then the occurrence of
any such "Default" or "Event of Default" shall constitute an Event of
Default hereunder and the foregoing cure period shall not apply
thereto.
(c)Other Defaults. Any default occurs under the Subordinate Debt Documents or
any other agreement in connection with any credit Borrower or AB Plastics
Holding Corp. has obtained from any other creditor(s) or which Borrower or AB
Plastics Holding Corp. has guaranteed if the default consists of failing to make
a payment when due or gives the other creditor(s) the right to accelerate any
obligations in an aggregate amount in excess of five hundred thousand dollars
($500,000).
(d)Lien Priority. Bank fails to have an enforceable first lien (except for any
liens to which Bank has consented in writing) on or security interest in any
Collateral (other than "Emission Rights," as defined in the Security Agreement).
(e)False Information. Any representation or warranty under this Agreement or
any agreement, instrument or certificate executed pursuant to this Agreement or
in
connection with any transaction contemplated hereby shall prove to have been
false or misleading in any material respect when made or when deemed to have
been made.
(f)Bankruptcy. Borrower or AB Plastics Holding Corp. files a bankruptcy
petition, a bankruptcy petition is filed against Borrower or AB Plastics Holding
Corp., or Borrower or AB Plastics Holding Corp. makes a general assignment for
the benefit of creditors. The default will be deemed cured if any bankruptcy
petition filed against Borrower or AB Plastics Holding Corp. is dismissed within
a period of sixty (60) days after the filing; provided, however, that Bank will
not be obligated to extend any additional credit to Borrower during any
bankruptcy period.
(g)Receivers. Borrower's or AB Plastics Holding Corp.'s business is terminated,
or a receiver or similar official is appointed for Borrower's or AB Plastics
Holding Corp.'s business and, in the event such appointment is the result of an
involuntary action or proceeding, such appointment is not terminated, dismissed
or discharged within sixty (60) days.
(h)Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more trade
creditors against Borrower or AB Plastics Holding Corp. in an aggregate amount
of five hundred thousand dollars ($500,000) or more in excess of any insurance
coverage, and such lawsuit or lawsuits are not dismissed or fully bonded within
ten (10) calendar days after service of process upon Borrower or AB Plastics
Holding Corp. (as applicable).
(i)Judgments. Any judgments or arbitration awards in an aggregate amount in
excess of five hundred thousand dollars ($500,000) are entered against Borrower
or AB Plastics Holding Corp. and, absent procurement of a stay of execution,
such judgment or award remains unbonded or unsatisfied for ten (10) calendar
days after the date of entry; or Borrower or AB Plastics Holding Corp. enters
into any settlement agreement with respect to any litigation or arbitration, in
an aggregate amount of five hundred thousand dollars ($500,000) or more in
excess of any insurance coverage.
(j)Government Action. Any government authority takes action that Bank believes
adversely affects Borrower's or AB Plastics Holding Corp.'s financial condition
or ability to repay.
(k)Default under Guaranty or Subordination Agreement. The Guaranty, the Stock
Pledge Agreement, the Subordination Agreement, or any other security agreement,
deed of trust, or other document required by this Agreement is revoked or no
longer in effect.
(l)Material Adverse Change. A material adverse change occurs in Borrower's or AB
Plastics Holding Corp.'s financial condition, properties or prospects, or
ability to repay the obligations hereunder.
(m)ERISA Plans. The occurrence of a reportable event with respect to a Plan
which is, in the reasonable judgment of Bank, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, or could reasonably
be expected, in the reasonable judgment of Bank, to subject Borrower to any tax,
penalty or liability (or any combination of the foregoing) which, in the
aggregate, would exceed $500,000.
2Remedies. Upon the occurrence and during the continuance of an Event of
Default, Bank shall have all of the following rights and remedies:
(a)All obligations and indebtedness hereunder may, at the option of Bank and
without demand, notice, or legal process of any kind, be declared, and
immediately shall become, due and payable;
(b)The Loans shall bear interest at the Default Rate;
(c)All of the rights and remedies of a secured party under the California
Commercial Code or other applicable law, all of which rights and remedies shall
be cumulative, and not exclusive, to the extent permitted by law, in addition to
any other rights and remedies contained in this Agreement or in any of the
documents or agreements executed in connection herewith or which Bank may
otherwise have under any applicable law or in equity;
(d)The right to (i) peacefully enter upon the premises of Borrower or any other
place or places where the Collateral is located, without any obligation to pay
rent to Borrower or any other person, through self-help and without judicial
process or first obtaining a final judgment or giving Borrower notice and
opportunity for a hearing on the validity of Bank's claim, and remove the
Collateral from such premises and places to the premises of Bank or any agent of
Bank, for such time as Bank may require to collect or liquidate the Collateral,
and/or (ii) require Borrower to assemble and deliver the Collateral to Bank at a
place to be designated by Bank;
(e)The right to (i) open Borrower's mail and collect any and all amounts due
from Account Debtors or direct that Borrower's mail be diverted to a post office
box or other location as determined by Bank, (ii) notify Account Debtors that
the Accounts Receivable have been assigned to Bank and that Bank has a security
interest therein and (iii) direct such Account Debtors to make all payments due
from them upon the Accounts Receivable, directly to Bank or to a lock box
designated by Bank. Bank shall promptly furnish Borrower with a copy of any such
notice sent and Borrower
hereby agrees that any such notice in Bank's sole discretion, may be sent on
Bank's stationery, in which event, Borrower shall, upon demand, co-sign such
notice with Bank; and
The right to sell, lease or to otherwise dispose of all or
any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or
sales, in lots or in bulk, for cash or on credit, all as Bank, in its
sole discretion, may deem advisable. At any such sale or sales of the
Collateral, the Collateral need not be in view of those present and
attending the sale, nor at the same location at which the sale is being
conducted. Bank shall have the right to conduct such sales on
Borrower's premises or elsewhere and shall have the right to use
Borrower's premises without charge for such sales for such time or
times as Bank may see fit. Bank is hereby granted a license or other
right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks and
advertising matter, or any property of a similar nature, as it pertains
to the Collateral, in advertising for sale and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements
shall inure to Bank's benefit but Bank shall have no obligations
thereunder. Bank may purchase all or any part of the Collateral at
public or, if permitted by law, private sale and, in lieu of actual
payment of such purchase price, may setoff the amount of such price
against amounts due under this Agreement. The proceeds realized from
the sale of any Collateral shall be applied first to the costs and
expenses, including reasonable attorneys' fees, incurred by Bank for
collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the Collateral; second to interest due
upon the Loans; and third to the principal of the Loans. Bank shall
account to Borrower for any surplus. If any deficiency shall arise,
Borrower shall remain liable to Bank therefor.
3Costs and Expenses. Bank shall be entitled to recover all costs, expenses, and
attorneys' fees (including any allocated costs of in-house counsel) in
connection with the administering or enforcing of this Agreement following the
occurrence and during the continuance of any Event of Default, whether or not an
action is filed.
9.MISCELLANEOUS.
1GAAP. Except as otherwise stated in this Agreement, all financial information
provided to Bank and all financial covenants will be made under generally
accepted accounting principles consistently applied.
2California Law. This Agreement is governed by California law.
3Successors and Assigns. This Agreement is binding on Borrower's and Bank's
successors and assignees. Borrower agrees that it may not assign this Agreement
without Bank's prior written consent. Bank may sell participations in or assign
these loans, or any portion thereof, and may exchange financial information
about Borrower with actual or potential participants or assignees. If a
participation is sold or any portion of the loans is assigned, the purchaser
will have the right of set-off against Borrower.
4Severability; Waivers. If any part of this Agreement is not enforceable, the
rest of the Agreement may be enforced. No failure on the part of Bank to
exercise, and no delay in exercising, any right, power, or remedy under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. Any consent or waiver under
this Agreement must be in writing. If Bank waives a default, it may enforce a
later default.
5Costs and Expenses. In addition to the recovery of costs and expenses upon an
occurrence of an Event of Default, if Bank incurs any reasonable out-of-pocket
expenses in connection with the preparation, administering or enforcing of this
Agreement, Borrower shall pay Bank all such costs and reasonable attorneys'
fees, including any allocated costs of Bank's in-house staffs, such as legal,
appraisal and audit.
6Multiple Borrowers. If two or more borrowers sign this Agreement, each will be
individually obligated to repay Bank in full, and all will be obligated
together.
7Individual Liability. If this Agreement is signed by a sole proprietor or
general partner, Bank may proceed against that person's business and
non-business property in enforcing this and other agreements relating to the
obligations hereunder.
8Entire Agreement. This Agreement and any related security or other agreements
required by this Agreement, collectively:
(a)represent the sum of the understandings and agreements between Bank and
Borrower concerning this credit; and
(b)replace any prior oral or written agreements between Bank and Borrower
concerning this credit; and
(c)are intended by Bank and Borrower as the final, complete and exclusive
statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any
other agreements required by this Agreement, this Agreement will prevail.
9Notices. Except as otherwise provided herein, all notices required under this
Agreement shall be personally delivered or sent by first class mail, postage
prepaid, to the addresses on the signature page of this Agreement, or to such
other addresses as Bank and Borrower may specify from time to time in writing.
10Headings; Construction. Article and paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement. As used in this Agreement and the other Loan Documents, the term
"include(s)" means "include(s), without limitation," and the term "including"
means "including, but not limited to."
11Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
12Further Assurances. Borrower shall, at its expense and without expense to
Bank, do, execute and deliver such further acts and documents as Bank from time
to time reasonably requires for the assuring to Bank the rights created or
intended to be created by this Agreement, the perfection or priority of Bank's
liens and security interests, and for carrying out the intention or facilitating
the performance of the terms of this Agreement or any document executed in
connection with this Agreement.
13Hazardous Waste Indemnification. Borrower will indemnify and hold harmless
Bank from any loss or liability directly or indirectly arising out of the use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance by Borrower (or its
agents, or subtenants) or on or emanating from Borrower's premises. This
indemnity will apply whether the hazardous substance is on, under or about
Borrower's property or operations or property leased to Borrower. The indemnity
includes but is not limited to reasonable attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff). The
indemnity extends to Bank, its parent, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys and assigns. For these
purposes, the term "hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any federal, state or local
law. This indemnity will survive repayment of Borrower's obligations to Bank.
Upon demand by Bank, Borrower will defend any investigation,
action or proceeding alleging the presence of any hazardous substance in any
such location, which affects any of Borrower's property or operations or
property leased to Borrower or which is brought or commenced against Bank,
whether alone or together with Borrower or any other person, all at Borrower's
own cost and by counsel to be approved by Bank in the exercise of its reasonable
judgment. In the alternative, Bank may elect to conduct its own defense at the
expense of Borrower.
14Waiver of Jury Trial. The parties to this Agreement acknowledge that jury
trials often entail additional expenses and delays not occasioned by nonjury
trials. The parties to this Agreement further agree and stipulate that a fair
trial may be had before a state or federal judge by means of a bench trial
without a jury. In view of the foregoing, and as a specifically negotiated
provision of this Agreement, each party to this Agreement hereby expressly
waives any right to trial by jury of any claim, demand, action or cause of
action (1) arising under this Agreement or any other instrument, document or
agreement executed or delivered in connection herewith, or (2) in any way
connected with or related or incidental to the dealings of the parties hereto or
any of them with respect to this Agreement or any other instrument, document or
agreement executed or delivered in connection herewith, or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether sounding in contract or tort or otherwise; and each party
hereby agrees and consents that any such claim, demand, action or cause of
action shall be decided by court trial without a jury, and that any party to
this Agreement may file an original counterpart or a copy of this section with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
This Agreement is executed as of the date stated at the top of
the first page.
"Borrower"
AB PLASTICS CORPORATION, a California
corporation
By /s/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman and Vice
President
[Printed Name and Title]
By /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
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[Printed Name and Title]
Address where notices to Borrower are to be sent:
AB Plastics Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With a courtesy copy to:
Greenberg, Traurig, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
Citicorp Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
"Bank"
THE SUMITOMO BANK OF CALIFORNIA
By /s/▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇, Vice President
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[Printed Name and Title]
Address where notices to Bank are to be sent:
The Sumitomo Bank of California
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇
