Exhibit 10.9
LOAN AND SECURITY AGREEMENT
Dated: September 25, 1997
by and among
FIRST UNION NATIONAL BANK,
LEADING EDGE PACKAGING, INC.,
LEP PRODUCTS, INC., LEP MARKETING & SALES, INC.,
AND LEP DISTRIBUTORS, INC.
TABLE OF CONTENTS
Page
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I. DEFINITIONS................................................. 1
1.1 "ACCOUNT" or "ACCOUNTS RECEIVABLE" ................... 1
1.2 "ACCOUNT DEBTOR"...................................... 1
1.3 "ADJUSTED LIBO RATE .................................. 1
1.4 "ADJUSTED LIBO RATE ADVANCES ......................... 1
1.5 "ADVANCE(S) .......................................... 2
1.6 "AFFILIATE" .......................................... 2
1.7 "AGREEMENT" .......................................... 2
1.8 "BADR" ............................................... 2
1.9 "BANK" ............................................... 2
1.10 "BANKERS' ACCEPTANCES" ............................... 2
1.11 "BANKERS' ACCEPTANCE AGREEMENT" ...................... 2
1.12 "BANKERS' ACCEPTANCE OBLIGATIONS" .................... 2
1.13 "BASELINE ADVANCE LIMIT" ............................. 2
1.14 "BORROWER" ........................................... 2
1.15 "BORROWING DATE" ..................................... 3
1.16 "BUSINESS DAY" ....................................... 3
1.17 "CASH COLLATERAL" .................................... 3
1.18 "CASH SECURED ADVANCES" .............................. 3
1.19 "CHATTEL PAPER" ...................................... 3
1.20 "CLOSING DATE" ....................................... 3
1.21 "COLLATERAL" ......................................... 3
1.22 "COMMITMENT" ......................................... 3
1.23 "CONTINGENT OBLIGATION(S)" ........................... 3
1.24 "CONTRACTUAL OBLIGATIONS" ............................ 4
1.25 "CURRENT ASSETS" ..................................... 4
1.26 "CURRENT LIABILITIES" ................................ 4
1.27 "DEFAULT ............................................ 4
1.28 "DEFAULT RATE" ....................................... 4
1.29 "DIRECT ADVANCE" ..................................... 4
1.30 "DIRECT ADVANCE SUBLIMIT" ............................ 4
1.31 "DOCUMENT(S)" ........................................ 4
1.32 "ENVIRONMENTAL LAWS" ................................. 4
1.33 "EQUIPMENT" .......................................... 5
1.34 "ERISA" .............................................. 5
1.35 "EURODOLLAR RATE" .................................... 5
1.36 "EURODOLLAR RESERVE" ................................. 5
i
TABLE OF CONTENTS
(continued)
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1.37 "EVENT OF DEFAULT" ................................... 5
1.38 "FACILITIES" ......................................... 5
1.39 "FACILITY FEE" ....................................... 5
1.40 "FOREIGN EXCHANGE CONTRACTS" ......................... 5
1.41 "FOREIGN EXCHANGE CONTRACT OBLIGATIONS" .............. 6
1.42 "FOREIGN EXCHANGE FACILITY" .......................... 6
1.43 "GAAP" ............................................... 6
1.44 "GENERAL INTANGIBLES" ................................ 6
1.45 "GOODS" .............................................. 6
1.46 "GOVERNMENTAL BODY" .................................. 6
1.47 "GUARANTORS" ......................................... 6
1.48 "GUARANTY" ........................................... 6
1.49 "INDEBTEDNESS" ....................................... 6
1.50 "INSTRUMENT" ......................................... 7
1.51 "INTEREST PERIOD" .................................... 7
1.52 "INVENTORY" .......................................... 7
1.53 "INVESTMENT OBLIGATIONS" ............................. 7
1.54 "LETTER(S) OF CREDIT" ................................ 8
1.55 "LETTER OF CREDIT AGREEMENT" ......................... 8
1.56 "LETTER OF CREDIT OBLIGATIONS" ....................... 8
1.57 "LEVERAGE RATIO" ..................................... 8
1.58 "LIEN" ............................................... 8
1.59 "LOAN DOCUMENTS" ..................................... 8
1.60 "MATERIAL ADVERSE CHANGE" ............................ 8
1.61 "MATERIAL ADVERSE EFFECT" ............................ 8
1.62 "MARKETABLE SECURITIES" .............................. 9
1.63 "MATURITY DATE" ...................................... 9
1.64 "MAXIMUM AMOUNT" ..................................... 9
1.65 "NASDAQ" ............................................. 9
1.66 "OBLIGATION" or "OBLIGATIONS" ........................ 9
1.67 "OBLIGOR" ............................................ 9
1.68 "OVERAGE OBLIGATIONS" ................................ 9
1.69 "PBGC" ............................................... 9
1.70 "PERMITTED ADVANCES" ................................. 9
1.71 "PERMITTED ENCUMBRANCES" ............................. 9
1.72 "PERMITTED INDEBTEDNESS" ............................. 10
1.73 "PERMITTED LEASES" ................................... 10
1.74 "PERSON" ............................................. 10
1.75 "PLAN" ............................................... 10
ii
TABLE OF CONTENTS
(continued)
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1.76 "PRIME RATE" ......................................... 10
1.77 "PRIME RATE ADVANCES" ................................ 10
1.78 "QUICK RATIO" ........................................ 10
1.79 "REPAYMENT INDEMNITY" ................................ 10
1.80 "REPORTABLE EVENT" ................................... 11
1.81 "REVOLVING NOTE" ..................................... 11
1.82 "SEC" ................................................ 11
1.83 "SECURITIES ACTS" .................................... 11
1.84 "SUBSIDIARY" ......................................... 11
1.85 "TANGIBLE NET WORTH" ................................. 12
1.86 "TELERATE PAGE 3750" ................................. 12
1.87 "TOTAL ASSETS" ....................................... 12
1.88 "TOTAL LIABILITIES" .................................. 12
1.89 "UNIFORM COMMERCIAL CODE" ............................ 12
1.90 "WORKING DAY" ........................................ 12
1.91 "INTERPRETATION AND CONSTRUCTION" .................... 12
II FACILITIES.................................................. 13
2.1 FACILITIES............................................ 13
2.2 INTEREST.............................................. 14
2.3 REPAYMENT OF ADVANCES................................. 15
2.4 FEES.................................................. 16
2.5 PREPAYMENT............................................ 16
2.6 PROCEDURES FOR ADVANCES............................... 16
2.7 PROCEDURES FOR LETTERS OF CREDIT ..................... 16
2.8 BANKERS' ACCEPTANCES ................................. 18
2.9 PAYMENTS UNDER BANKERS' ACCEPTANCES AND
REIMBURSEMENT BY BORROWER............................. 19
2.10 OUTSTANDING BANKERS' ACCEPTANCE OBLIGATIONS........... 19
2.11 BANKERS' ACCEPTANCE REGULATION CHANGES................ 19
2.12 BANKER'S ACCEPTANCE DECLARED INELIGIBLE............... 19
2.13 FOREIGN EXCHANGE CONTRACTS............................ 20
2.14 USE OF PROCEEDS....................................... 20
2.15 CONDITIONS TO INITIAL ADVANCE......................... 20
2.16 CONDITIONS TO ALL ADVANCES............................ 22
2.17 REGULATORY CAPITAL REQUIREMENTS....................... 23
2.18 EXCESS ADVANCES....................................... 23
2.19 REQUIREMENTS OF LAW................................... 24
iii
TABLE OF CONTENTS
(continued)
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2.20 SALE, ASSIGNMENT OR PARTICIPATIONS.................... 24
III COLLATERAL.................................................. 26
3.1 CROSS COLLATERAL...................................... 26
3.2 ACCOUNTS RECEIVABLE................................... 26
3.3 INVENTORY ............................................ 26
3.4 GENERAL INTANGIBLES................................... 26
3.5 DEPOSIT ACCOUNTS...................................... 26
3.6 CHATTEL PAPER......................................... 26
3.7 INSTRUMENTS........................................... 26
3.8 DOCUMENTS............................................. 26
3.9 EQUIPMENT............................................. 27
3.10 PROCEEDS AND RECORDS.................................. 27
3.11 CONTINUING PERFECTION................................. 27
IV [RESERVED].................................................. 28
V REPRESENTATIONS AND WARRANTIES.............................. 29
5.1 GOOD STANDING......................................... 29
5.2 CORPORATE AUTHORITY................................... 29
5.3 COMPLIANCE WITH LAW................................... 29
5.4 NO LITIGATION......................................... 30
5.5 NO FINANCIAL CHANGE................................... 30
5.6 TAX COMPLIANCE........................................ 30
5.7 GOOD TITLE AND ABSENCE OF LIENS....................... 30
5.8 PLACE OF RECORDS, CHIEF EXECUTIVE OFFICE, INVENTORY
AND OTHER COLLATERAL.................................. 30
5.9 WARRANTIES AS TO ACCOUNTS............................. 31
5.10 ERISA................................................. 32
5.11 LICENSES, PERMITS AND LAWS............................ 32
5.12 ENVIRONMENTAL STATUS.................................. 32
5.13 REAFFIRMATION......................................... 32
5.14 PROCEEDS OF FACILITIES................................ 33
5.15 NO SUBSIDIARIES....................................... 33
5.16 SOLVENCY.............................................. 33
5.17 NO DEFAULT............................................ 33
5.18 FULL DISCLOSURE....................................... 33
iv
TABLE OF CONTENTS
(continued)
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5.19 DOCUMENTARY/STAMP TAXES............................... 34
5.20 SHAREHOLDERS' AGREEMENTS.............................. 34
5.21 PERFECTION OF SECURITY INTERESTS...................... 34
5.22 COMPLIANCE WITH SEC REQUIREMENTS...................... 34
VI AFFIRMATIVE COVENANTS....................................... 35
6.1 AUDIT AND OTHER REPORTS............................... 35
6.2 INSURANCE............................................. 36
6.3 PAYMENT OF EXPENSES................................... 37
6.4 [INTENTIONALLY OMITTED]............................... 37
6.5 LANDLORD'S WAIVER..................................... 37
6.6 GOOD WORKING CONDITION................................ 37
6.7 REPORTS OF COLLATERAL................................. 37
6.8 OBSERVANCE OF LEGAL REQUIREMENTS, LICENSES AND
PERMITS AND PROTECTION OF COLLATERAL.................. 37
6.9 INSPECTION............................................ 38
6.10 COLLATERAL REQUIREMENTS............................... 38
6.11 CONTROL OF ACCOUNTS................................... 39
6.12 CHANGE OF LOCATIONS................................... 39
6.13 DEPOSITORY RELATIONSHIPS ............................. 39
VII NEGATIVE COVENANTS.......................................... 40
7.1 LOANS, ADVANCES AND INVESTMENTS....................... 40
7.2 FINANCIAL COVENANTS .................................. 40
7.3 LIENS................................................. 40
7.4 LIMITATION ON INDEBTEDNESS............................ 40
7.5 CERTIFICATE OF INCORPORATION AND BY-LAWS.............. 40
7.6 TRANSACTIONS AMONG AFFILIATES......................... 41
7.7 SPECIAL COVENANTS AS TO ASSETS........................ 41
7.8 PREPAYMENTS OF INDEBTEDNESS........................... 42
7.9 FISCAL YEAR........................................... 42
7.10 CHANGE IN CONTROL..................................... 42
7.11 CHANGE IN ACCOUNTING PRINCIPLES....................... 42
7.12 SALE AND LEASEBACK.................................... 42
7.13 MAINTAIN CORPORATE EXISTENCE AND NATURE OF
BUSINESS.............................................. 43
7.14 DIVIDENDS; REDEMPTIONS................................ 43
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TABLE OF CONTENTS
(continued)
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7.15 DISCHARGE OF HAZARDOUS WASTE.......................... 43
7.16 LEASES................................................ 43
VIII EVENTS OF DEFAULT........................................... 44
8.1 NON-PAYMENT........................................... 44
8.2 NON-PERFORMANCE....................................... 44
8.3 MISREPRESENTATION..................................... 44
8.4 OTHER LIEN............................................ 44
8.5 INSOLVENCY............................................ 44
8.6 JUDGMENT OR LIEN...................................... 45
8.7 NONCOMPLIANCE WITH LEASES OR LAWS..................... 45
8.8 ORGANIZATIONAL CHANGE................................. 45
8.9 INSECURITY............................................ 45
8.10 IMPAIRMENT OF RESPONSIBILITY.......................... 45
8.11 ADVERSE CHANGE........................................ 45
8.12 MISREPRESENTATION OF FACT............................. 45
8.13 ERISA................................................. 45
8.14 DEFAULT IN OBLIGATIONS TO THIRD PARTIES............... 45
8.15 LICENSES.............................................. 46
IX CONSEQUENCE OF EVENT OF DEFAULT ............................ 47
9.1 ACCELERATION.......................................... 47
9.2 POSSESSION............................................ 47
9.3 METHODS OF SALE....................................... 47
9.4 RETENTION OF COLLATERAL............................... 48
9.5 SET-OFF............................................... 48
9.6 ATTORNEYS' FEES AND EXPENSES.......................... 48
9.7 INCREASE IN INTEREST/LATE CHARGE...................... 48
9.8 BANK'S PERFORMANCE OF OBLIGATIONS..................... 48
9.9 OTHER REMEDIES........................................ 48
X MISCELLANEOUS............................................... 49
10.1 NO WAIVER............................................. 49
10.2 MODIFICATION OR AMENDMENT............................. 49
10.3 WAIVER OF NOTICE...................................... 49
10.4 ONE INSTRUMENT........................................ 49
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TABLE OF CONTENTS
(continued)
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10.5 LAW OF NEW JERSEY.................................... 49
10.6 JURISDICTION......................................... 49
10.7 SUCCESSORS OR ASSIGNS................................ 49
10.8 RIGHTS CUMULATIVE.................................... 49
10.9 LIMITATION OF LIABILITY.............................. 50
10.10 NOTIFICATION OF DISPOSITION OF COLLATERAL............ 50
10.11 ADDRESSES OF NOTICES................................. 50
10.12 TITLES............................................... 51
10.13 DISCLOSURE........................................... 51
10.14 TERM................................................. 51
10.15 INTEREST LIMITATION.................................. 52
10.16 INDEMNIFICATION...................................... 52
10.17 WAIVER OF TRIAL BY JURY.............................. 53
10.18 ARBITRATION.......................................... 53
10.19 PRESERVATION AND LIMITATION OF REMEDIES.............. 53
vii
LOAN AND SECURITY AGREEMENT (this "Agreement"), dated September 25
between FIRST UNION NATIONAL BANK, with a place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, hereinafter called "Bank", LEADING EDGE PACKAGING,
INC., a Delaware corporation, with its chief executive office at Empire State
Building, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Borrower"), LEP PRODUCTS
INC., a Delaware corporation, with its chief executive office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 409, Raritan Center, Edison, New Jersey 08837, ("Products"),
LEP MARKETING & SALES, INC., a Delaware corporation having its chief executive
office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 409, Raritan Center, Edison, New
Jersey 08837 ("Sales") and LEP DISTRIBUTORS, INC., a Delaware corporation,
having its chief executive office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 409,
Raritan Center, Edison, New Jersey 08837 ("Distributors" and, collectively with
Products and Sales, "Guarantors"). The Borrower and Guarantors are hereinafter
referred to, collectively, as the "Obligors."
This Agreement specifies the terms of a revolving credit, letter of
credit and banker's acceptance facility of up to FOUR MILLION SEVEN HUNDRED
FIFTY THOUSAND AND 00/100 DOLLARS ($4,750,000.00) (the "Revolving Facility"),
and a foreign exchange contract facility in the amount of TWO HUNDRED FIFTY
THOUSAND AND 00/100 DOLLARS ($250,000.00) (the "Foreign Exchange Facility") and
further specifies the terms by which all Obligations, as defined herein, of
Borrower and Guarantor to Bank are to be secured by certain personal property
and assets, tangible and intangible, Obligors.
NOW, THEREFORE, in consideration of these premises and other good
and valuable consideration, the parties hereto agree as follows:
I
DEFINITIONS
1.1 "ACCOUNT" or "ACCOUNTS RECEIVABLE" means, in addition to the
definition of account as contained in the Uniform Commercial Code, the right of
any Obligor to receive payment for goods sold or leased or for services rendered
which are not evidenced by an instrument or chattel paper, whether or not it has
been earned by performance.
1.2 "ACCOUNT DEBTOR" means, in addition to the definition of account
debtor as contained in the Uniform Commercial Code, the person or persons
obligated to any Obligor on an Account, or who is represented by such Obligor to
be so obligated.
1.3 "ADJUSTED LIBO RATE" means, for each Interest Period, a per
annum interest rate equal to the product of (a) the Eurodollar Rate in effect
for such Interest Period and (b) Eurodollar Reserves, if any, imposed upon Bank.
1.4 "ADJUSTED LIBO RATE ADVANCES" means all Advances which bear
interest based upon the Adjusted LIBO Rate and any relevant margin.
1.5 "ADVANCE(S)" means an amount loaned by Bank to Borrower
hereunder, whether as Direct Advances or to reimburse the Bank for payments
under Letters of Credit and/or Bankers' Acceptances, and as evidenced by the
Revolving Note.
1.6 "AFFILIATE" means any Person which, directly or indirectly, owns
or controls, on an aggregate basis, including all beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, at least five
percent (5%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors (irrespective of whether, at the
time, stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) of
Borrower or any Subsidiary, or is controlled by or is under common control with
Borrower or any such Person, or any stockholders of Borrower or any such Person
or any Subsidiary. For the purpose of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies, whether through the ownership of voting
securities, by contract or otherwise.
1.7 "AGREEMENT" shall have the meaning set forth on the first page
hereof.
1.8 "BADR" means a per annum rate of interest established by Bank
as its "bankers' acceptance discount rate."
1.9 "BANK" means the party identified on the first page hereof as
Bank.
1.10 "BANKERS' ACCEPTANCES" means Bank's acceptance of one or more
drafts of Borrower drawn under any Bankers' Acceptance Agreement in connection
with purchases of Inventory from foreign sources.
1.11 "BANKERS' ACCEPTANCE AGREEMENT" means Bank's standard form
Continuing Bankers' Acceptance and Security Agreement, as the same may change
from time to time, the current form of which is attached hereto as Exhibit A.
Without limitation, this term shall include any Bankers' Acceptance Agreement
between Borrower and Bank in effect on the date hereof.
1.12 "BANKERS' ACCEPTANCE OBLIGATIONS" means the total amount of all
Bankers' Acceptances from time to time outstanding and all obligations of
Borrower reimburse Bank for its acceptance of any drafts drawn under any
Bankers' Acceptance Agreement.
1.13 "BASELINE ADVANCE LIMIT" means an amount equal to $3,750,000,
subject to increase as provided in Section 2.1(B) hereof.
1.14 "BORROWER" means the party identified on the first page hereof
as Borrower.
2
1.15 "BORROWING DATE" means the Business Day or Working Day on which
an Advance is to be made.
1.16 "BUSINESS DAY" means a day other than a Saturday or Sunday or
other day on which Bank is authorized or required to close under the laws of the
State of New Jersey or applicable Federal Law.
1.17 "CASH COLLATERAL" means any cash or cash equivalents which have
been pledged to Bank and actually delivered to Bank to secure the Obligations,
including without limitation the Overage Obligations.
1.18 "CASH SECURED ADVANCES" means any Direct Advances which are
secured by a valid, first priority, possessory security interest in Cash
Collateral in an amount not less than the aggregate principal amount of such
Direct Advances.
1.19 "CHATTEL PAPER" means, in addition to the definition of chattel
paper as contained in the Uniform Commercial Code, a writing or writings which
evidence both a money obligation and a security interest in, or a lease of,
specific Goods. When a transaction is evidenced both by such a security
agreement or a lease and by an Instrument or series of Instruments, the group of
writings taken together constitutes Chattel Paper.
1.20 "CLOSING DATE" means the date of this Agreement.
1.21 "COLLATERAL" means all of those present or future assets, real
or personal, of Borrower and Guarantors in which a security interest in or lien
on is granted to Bank hereunder or contemplated hereby or in any other Loan
Document, or under any other prior, present or future agreement by Borrower or
Guarantor to Bank.
1.22 "COMMITMENT" means Bank's commitment to make Direct Advances to
Borrower, to issue Bankers' Acceptances and Letters of Credit for the account of
Borrower and to enter into Foreign Exchange Contracts with Borrower.
1.23 "CONTINGENT OBLIGATION(S)" means, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent: (A) to purchase any such primary obligation or any
property constituting direct or indirect security therefor; (B) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor; (C) to
purchase property, securities or services primarily for the purpose of assuring
the beneficiary of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation; (D) for the obligations of a
partnership in which such Person is a general partner; or (E) otherwise to
assure or hold harmless the beneficiary of such primary
3
obligation against loss in respect thereof; provided, however, that the term
Contingent Obligations shall not include the endorsement of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by Bank in
good faith.
1.24 "CONTRACTUAL OBLIGATIONS" means, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking to which such Person is a party or by which it or any of
its assets are bound.
1.25 "CURRENT ASSETS" means the aggregate of Obligors' (all on a
consolidated basis) cash, marketable securities and Accounts Receivable, all as
valued in accordance with GAAP.
1.26 "CURRENT LIABILITIES" means the liabilities deemed to be
current liabilities on Obligors' consolidated financial statements as calculated
in accordance with GAAP.
1.27 "DEFAULT" means an event of the nature specified in Article
VIII hereof and which, with the giving of notice or passage of time, or both,
would become an Event of Default.
1.28 "DEFAULT RATE" means a per annum rate of interest equal to the
Prime Rate plus four percent (4%).
1.29 "DIRECT ADVANCE" means any Advance within the Facilities for
borrowed money.
1.30 "DIRECT ADVANCE SUBLIMIT" means Advances which are not Cash
Secured Advances in an amount not to exceed $250,000 (exclusive of Cash Secured
Advances).
1.31 "DOCUMENT(S)" shall have the meaning set forth in the Uniform
Commercial Code for such term.
1.32 "ENVIRONMENTAL LAWS" means (A) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et
seq. ("CERCLA"), as amended by the Superfund Amendment and Reauthorization Act
of 1986; (B) the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. 6901 et seq.; (C) the New Jersey Spill Compensation and Control Act, as
amended, N.J.S.A. 58:10-23.11b et seq.; (D) the New Jersey Industrial Site
Recovery Act, formerly known as the Environmental Cleanup Responsibility Act, as
amended, N.J.S.A. 13:1K-6 et seq.; (E) the New Jersey Underground Storage of
Hazardous Substances Act, N.J.S.A. 58:10A-21 et seq.; (F) the New Jersey Solid
Waste Management Act, as amended, N.J.S.A. 13:1E-1 et seq.; (G) the New Jersey
4
Water Pollution Control Act, as amended, N.J.S.A. 58:10A-1 et seq.; and (H) any
and all laws, regulations and executive orders, federal, state and local,
pertaining to environmental matters, as same may be amended or supplemented from
time to time.
1.33 "EQUIPMENT" means in addition to the definition of equipment as
contained in the Uniform Commercial Code, all equipment, machinery, fixtures,
furniture and other tangible assets including without limitation motor vehicles,
and all repairs, modifications, alterations, additions, controls and operating
accessories therefor, all substitutions and replacements therefor and all
accessories and additions thereto.
1.34 "ERISA" means the Employee Retirement Income Security Act of
1974 as amended from time to time.
1.35 "EURODOLLAR RATE" means with respect to any Advance or
outstanding portion of the Facilities (should Borrower choose the Adjusted LIBO
Rate option thereto), the rate of interest (rounded to the next higher 1/100 of
one percent (.01%)) for deposits in U.S. Dollars for a maturity equal to the
Interest Period therefor which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on the day that is two (2) Working Days prior to the commencement
of such Interest Period. If such rate does not appear on the Telerate Page 3750,
the rate utilized shall be the rate as determined by Bank from another
recognized source or interbank quotation.
1.36 "EURODOLLAR RESERVE" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the applicable statutory reserve requirements (rounded to the
next higher 1/100 of one percent (.01%) and expressed as a decimal) for Bank
(without duplication, but including, without limitation, basic, supplemental,
marginal and emergency reserves), from time to time in effect under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor) with
respect to eurocurrency funding currently referred to as "Eurocurrency
liabilities" in such Regulation D.
1.37 "EVENT OF DEFAULT" means an event of the nature specified in
Article VIII hereof.
1.38 "FACILITIES" means, collectively, the Revolving Facility and
the Foreign Exchange Facility.
1.39 "FACILITY FEE" means a facility fee in the amount of $12,500
which has been paid to Bank by Borrower, has been fully earned and is
non-refundable.
1.40 "FOREIGN EXCHANGE CONTRACTS" means, collectively, Borrower's
forward and spot contracts purchased through Bank relative to foreign currencies
on Bank's standard foreign exchange contract forms and under the Foreign
Exchange Facility.
5
1.41 "FOREIGN EXCHANGE CONTRACT OBLIGATIONS" means all of Borrower's
payment, repayment and other Obligations to Bank, whether direct or indirect,
absolute or contingent, under the Foreign Exchange Contracts and otherwise under
the Foreign Exchange Facility.
1.42 "FOREIGN EXCHANGE FACILITY" shall have the meaning ascribed to
it in the preamble hereto.
1.43 "GAAP" means generally accepted accounting principles in the
United States of America consistently applied and in effect for the relevant
time period.
1.44 "GENERAL INTANGIBLES" means, in addition to the definition of
general intangibles as contained in the Uniform Commercial Code, all rights of
any Obligor to property, choses in action and other rights of Borrower not
otherwise specifically included elsewhere in this Agreement, further including
but not limited to all present and future trademarks, goodwill symbolized by any
trademarks, trade names, trade secrets, trade dress, trade styles, service
marks, copyrights and patents, and all rights under license agreements for the
use of same, and all rights of any Obligor under any and all leases of property,
both real and personal.
1.45 "GOODS" means, in addition to the definition of goods as
contained in the Uniform Commercial Code, all articles of tangible personal
property, sold, supplied, leased or otherwise disposed of, represented by an
Account.
1.46 "GOVERNMENTAL BODY" means any nation or government, any state
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to government or any court or arbitrator.
1.47 "GUARANTORS" means the persons defined as such in the preamble
of this Agreement as well as each and every other Person who is or shall become
liable, responsible or obligated for any of the Borrower's or any other
Obligor's Obligations hereunder whether by loan, guaranty, suretyship or
otherwise.
1.48 "GUARANTY" means that certain guaranty agreement dated the date
hereof made by Guarantors in favor of Bank in the form attached hereto as
Exhibit B.
1.49 "INDEBTEDNESS" means, as to any Person, at a particular time,
all items which, in accordance with GAAP, would be classified as liabilities on
a balance sheet of such Person as at such time and which constitute, without
duplication: (A) indebtedness for borrowed money or the deferred purchase price
of property (other than credit extended to such Person for the purchase of goods
in the ordinary course of business to the extent the same would otherwise
constitute Indebtedness); (B) indebtedness evidenced by notes, bonds, debentures
or similar instruments; (C) obligations under leases which, in accordance with
GAAP, are required to be capitalized on a balance sheet, (D) obligations under
conditional sales or other title retention
6
agreements; (E) indebtedness arising under letters of credit (both documentary
and standby) and acceptance facilities and the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder to the extent such Person shall not have reimbursed the
issuer in respect of the issuer's payment of such drafts; (F) all liabilities
secured by any Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof (other than
carriers', warehousemen's, mechanics', course of business to the extent such
liens are Permitted Encumbrances) and liens for taxes, assessments or similar
charges incurred in the ordinary course of business to the extent such liens are
Permitted Encumbrances; (G) mandatory obligations of such Person to redeem or
purchase stock or to purchase or repay Indebtedness; (H) all Bankers Acceptance
Obligations and Foreign Exchange Contract Obligations, and (I) Contingent
Obligations of such Person in respect of any of the foregoing.
1.50 "INSTRUMENT" means, in addition to the definition of instrument
as contained in the Uniform Commercial Code, a negotiable instrument or a
security, or any other writing which evidences a right to the payment of money
and is not itself a security agreement or lease and is of the type which is, in
the ordinary course of business, transferred by delivery with any necessary
endorsement or assignment.
1.51 "INTEREST PERIOD" means, as to all Adjusted LIBO Rate Advances,
the period commencing on the Borrowing Date and ending on the numerically
corresponding day (or if there is no numerically corresponding day, the last
day) in the calendar month that is one (1) month thereafter, as selected by
Borrower in its notice of borrowing, and thereafter, the period commencing on
the last day of the first preceding Interest Period and ending on the
numerically corresponding day (or if there is no numerically corresponding day,
the last day) in the calendar month that is one (1) month thereafter, as
selected by Borrower in its notice of continuance of or conversion to an
Adjusted LIBO Rate Advance; provided, however, that if any Interest Period would
end on a day which shall not be a Working Day, such Interest Period shall be
extended to the next succeeding Working Day unless such Working Day would fall
in the next succeeding calendar month in which case the Interest Period shall
end on the first preceding Working Day and provided, further, that
notwithstanding anything to the contrary, (i) no Interest Period shall extend
beyond the Maturity Date and (ii) in all cases, no Interest Period shall extend
beyond any date on which principal is to be paid for that portion of principal
being paid on such date.
1.52 "INVENTORY" means, in addition to the definition of inventory
as contained in the Uniform Commercial Code, all Goods held by any Obligor for
resale or lease or furnished or to be furnished under contracts of service, and
shall include raw materials, goods and work in process and finished goods, and
all goods returned by or reclaimed from customers.
1.53 "INVESTMENT OBLIGATIONS" means any of the following: (A)
obligations of or guaranteed by the United States of America; (B) obligations
issued or guaranteed by any instrumentality or agency of the United States of
America; (C) obligations issued or guaranteed by any State of the United States
or the District of Columbia; (D) repurchase agreements fully secured by
obligations of a kind specified in subsections (A), (B) or (C) above;
7
(E) interest bearing accounts, certificates of deposit, bankers' acceptances or
commercial paper of Bank; and (F) commercial paper other than as specified in
subsection (E) above and which is rated at least "P1" by ▇▇▇▇▇'▇ Investors
Services or at least "A1" by Standard and Poor's Corporation.
1.54 "LETTER(S) OF CREDIT" means the one or more standby letters of
credit issued from time to time by Bank at the request and for the account of
Borrower in accordance with the terms hereof.
1.55 "LETTER OF CREDIT AGREEMENT" means Bank's standard form of
Application and Agreement for Irrevocable Standby Letter of Credit, as the same
may change from time to time, the current form of which is annexed hereto as
Exhibit C.
1.56 "LETTER OF CREDIT OBLIGATIONS" means the total amount of all
Letters of Credit as outstanding at any time and all obligations of Borrower to
reimburse Bank for any payments by Bank under any Letters of Credit.
1.57 "LEVERAGE RATIO" means the ratio of Borrower's Total
Liabilities to Tangible Net Worth.
1.58 "LIEN" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement, or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing) and the filing of any financing statement under
the Uniform Commercial Code (or comparable law) of any jurisdiction to evidence
any of the foregoing.
1.59 "LOAN DOCUMENTS" means this Agreement, the Revolving Note, any
Letter of Credit Agreement, Bankers' Acceptance Agreement, the Guaranty, Foreign
Exchange Contract, together with all notes or other documents executed and
delivered by any Obligor hereunder, and any amendments, renewals, modifications
or supplements thereto, or substitutions therefor.
1.60 "MATERIAL ADVERSE CHANGE" means, as to a Person, a material
adverse change in the financial condition, operations, business, prospects or
property of such Person.
1.61 "MATERIAL ADVERSE EFFECT" means, as to a Person, a material
adverse effect on the financial condition, operations, business, prospects or
property of such Person.
8
1.62 "MARKETABLE SECURITIES" means, collectively, Investment
Obligations and any other debt or equity security which is traded on any
national securities exchange and which securities are satisfactory to Bank in
its discretion.
1.63 "MATURITY DATE" means August 15, 1999.
1.64 "MAXIMUM AMOUNT" means at any time of measurement the lesser
of: $4,750,000; or the then Baseline Advance Limit.
1.65 "NASDAQ" means the National Association of Securities Dealers'
Automated Quotation System.
1.66 "OBLIGATION" or "OBLIGATIONS" means any and all loans, advances
and other financial accommodations made by Bank prior to, on and after the date
of this Agreement to, or on the account of any Obligor including without
limitation, the Facilities, and any and all interest, commissions, obligations,
liabilities, indebtedness, charges and expenses direct or indirect, primary,
secondary, contingent, joint or several which are due or to become due or that
may hereafter be contracted or acquired of any Obligor to Bank, no matter how or
when arising and whether under any present or future agreement or instrument
between any Obligor and Bank, or otherwise, and the amount due or to become due
upon any notes, reimbursement agreement or other obligations given to, or
received by, Bank or on account of any of the foregoing and the performance and
fulfillment by any Obligor of all the terms, conditions, promises, covenants and
provisions contained in the Loan Documents, or in any future agreement or
instrument between any Obligor and Bank. The Obligations include but are not
limited to all Advances, Letter of Credit Obligations, Bankers' Acceptance
Obligations and Foreign Exchange Contract Obligations.
1.67 "OBLIGOR" means Borrower, Guarantors and any other sureties and
guarantors and, if any debt due to Bank hereunder is evidenced by a note or
other instrument, the makers and endorsers thereof.
1.68 "OVERAGE OBLIGATIONS" means any Direct Advances which are in
excess of the Direct Advance Sublimit.
1.69 "PBGC" means the Pension Benefit Guaranty Corporation.
1.70 "PERMITTED ADVANCES" means, collectively, any reimbursement by
any of the Obligors in the ordinary course of its business to any employee or
agent for business travel and other reasonable business expenses.
1.71 "PERMITTED ENCUMBRANCES" means (A) Liens for taxes, assessments
or governmental charges or levies on property of any Obligor if the same shall
not at the time be delinquent or thereafter can be paid without penalty, or are
being diligently contested in good faith and by appropriate proceedings and
against which any Obligor has
9
established adequate reserves, (B) Liens imposed by law, such as carriers,
warehousemen and mechanics Liens, and Liens incurred in connection with
construction or other similar Liens arising in the ordinary course of business
provided same are not at the time due and payable, (C) Liens arising out of
pledge or deposits under workmen's compensation law, unemployment insurance, old
age pension or other social security or retirement benefit or similar
legislation, (D) Liens arising from judgments or awards with respect to which
any Obligor shall be diligently and in good faith prosecuting an appeal or
proceedings for review and shall have secured a stay of execution pending such
appeal or review, and (E) Liens in favor of Bank.
1.72 "PERMITTED INDEBTEDNESS" means Indebtedness (i) to Bank; and
(ii) other Indebtedness set forth on Schedule 1.72 hereto the amount of which
shall not exceed $500,000.
1.73 "PERMITTED LEASES" means those real property leases entered
into in the ordinary course of business consistent with past practice for which
Bank has received (A) ten (10) Business Days advance notice and (B) landlords'
waivers and any other documents deemed necessary or desirable by Bank.
1.74 "PERSON" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, party or government
(whether national, federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof). Without limitation, the term "Person" shall include
Borrower.
1.75 "PLAN" means an employee benefit plan or other plan maintained
for employees of Borrower covered by Title IV of ERISA.
1.76 "PRIME RATE" means the per annum rate of interest established
by Bank from time to time as its reference rate in making loans but which does
not reflect the rate of interest charged to any particular class of borrower,
such rate to change automatically and immediately as of the date Bank changes
its Prime Rate without notice to Borrower. The Prime Rate is not tied to any
external rate of interest or index.
1.77 "PRIME RATE ADVANCES" means all Advances which bear interest at
the Prime Rate.
1.78 "QUICK RATIO" means the ratio of Borrower's cash and cash
equivalents plus track Account, Current Liabilities, calculated on a
consolidated basis.
1.79 "REPAYMENT INDEMNITY" means any amounts required to compensate
Bank for any losses which it incurs as calculated below as a result of
repayments of Advances (including repayments on account of illegality as set
forth in Section 2.2(B)) other than on, with respect to the Adjusted LIBO Rate
Advances, the last day of an Interest Period. The amount of such loss shall be
calculated by multiplying the principal amount of the repayment or
10
prepayment by the per annum rate (expressed as a decimal and based on a 360-day
year and actual days elapsed) (the "Indemnity Rate"), determined by subtracting
(A) the highest asked yield most recently published in the Wall Street Journal
as of the date of repayment or prepayment for U.S. Treasury securities having a
term approximating the weighted average of the terms of each Advance or portion
thereof being repaid or prepaid (the "Average Term", said average to be
determined by reference to the period, for each Advance, commencing on the date
of the repayment or prepayment and ending on, with respect to the Adjusted LIBO
Rate Advances, the end of the then current Interest Period) from (B) the rate of
interest applicable to the principal amount being repaid or prepaid, said
Repayment Indemnity to accrue for a period from and including the date of the
repayment or prepayment to, but excluding, the date of expiration of the Average
Term, as if such term commenced on the date of repayment or prepayment; provided
that no Repayment Indemnity shall be payable unless the foregoing calculation of
the Indemnity Rate produces a positive number. Borrower agrees that the
Repayment Indemnity has been freely bargained between the parties to provide
Bank with compensation for the costs of reinvesting of the Facilities' proceeds
and the loss of the contracted-for return on the Facilities and such Repayment
Indemnity is reasonable and constitutes a means of providing Bank with a
substitute or alternate source of cash flow if any Advance is repaid or prepaid
as set forth above. Bank's determination of the Repayment Indemnity shall be
conclusive and binding in the absence of manifest error. The amount payable as
determined above shall be in addition to any amounts payable under any other
Section or Paragraph of this Agreement.
1.80 "REPORTABLE EVENT" has the meaning assigned to such term in
Title IV of ERISA, or regulations issued thereunder other than a Reportable
Event not subject to the provision for a thirty (30) day notice to the PBGC
under such regulations.
1.81 "REVOLVING NOTE" means that certain Revolving Note dated the
date hereof issued by Borrower evidencing the Revolving Facility and any
revolving note replacing such note.
1.82 "SEC" means the Securities and Exchange Commission and any
successor agency or commission thereto.
1.83 "SECURITIES ACTS" means, collectively, the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended. (the "Exchange Act") and any securities or similar laws under the laws
of any state or foreign jurisdiction having jurisdiction over any Obligor.
1.84 "SUBSIDIARY" means the Guarantors and any other corporation of
which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
by Borrower or any other Obligor or one or more Subsidiaries.
11
1.85 "TANGIBLE NET WORTH" means Total Assets, less (without
limitation and without duplication of deductions) the aggregate of the
liabilities and Indebtedness (including tax and other proper accruals) of a
Person and any reserves established by a Person for anticipated losses or
expenses.
1.86 "TELERATE PAGE 3750" means the display designated as "Page
3750" on the Dow ▇▇▇▇▇ Telerate Service (or such other page as may replace that
page on that service for the purpose of displaying London interbank offered
rates of major banks).
1.87 "TOTAL ASSETS" means, at any date, the amount shown on the
books and records of a Person, determined in accordance with GAAP, of all
property, both real and personal, of a Person, after deducting capitalized
research and development costs, capitalized interest, debt discounts and
expense, marketing expenses and customer and/or mailing lists, goodwill
(including any amounts, however designated on the balance sheet, representing
the cost of acquisition of business and investments in excess of underlying
tangible assets), patents, trademarks, trade name rights, copyrights,
franchises, licenses, amounts owing from employees, officers, directors,
shareholders, principals, partners, Subsidiaries or Affiliates of the Person and
any investments in any entities owned or controlled by any of the foregoing
Persons (including without limitation, any Affiliates and Subsidiaries) and such
other assets as are properly classified as "intangible assets".
1.88 "TOTAL LIABILITIES" means, at any date, the amount of all
liabilities which, in accordance with GAAP should be included in determining
total liabilities as shown on a liability side of a balance sheet of a Person at
such date, other than capital stock, capital surplus, retained earnings,
property interests, deferred credit and contingency reserves under GAAP.
1.89 "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as
adopted and in effect under the laws of the State of New Jersey.
1.90 "WORKING DAY" means any day other than a Saturday, Sunday,
public holiday, bank holiday or other day on which currencies are not traded in
the London interbank market.
1.91 "INTERPRETATION AND CONSTRUCTION"
(A) The terms "hereby," "hereof," "hereto," "herein," "hereunder"
and any similar terms, as used in this Agreement, refer to this Agreement in its
entirety and not any particular Article or paragraph, and the term "hereafter"
means after, and the term "heretofore" means before, the date of delivery of
this Agreement; and
(B) Words importing a particular gender mean and include every other
gender, and words importing the singular number mean and include the plural
number and vice versa.
12
(C) All accounting terms not defined herein shall have the meanings
used in GAAP and, unless otherwise noted, shall be deemed to mean GAAP as
prepared on a consolidated basis.
1.92 PREAMBLE DEFINITIONS The terms defined in the Preamble of this
Agreement are hereby incorporated by reference in this Article 1.
II
FACILITIES
2.1 FACILITIES (A) Subject to the terms and conditions hereinafter
set forth, and provided that no Default or Event of Default shall have occurred
and be continuing or would result from the making of any Direct Advance or
issuing any Letter of Credit or Bankers' Acceptance or entering into a Foreign
Exchange Contract, from time to time hereafter, through the Maturity Date, Bank
shall extend credit to Borrower by: (i) making Direct Advances; (ii) Letters of
Credit; (iii) issuing Bankers' Acceptances; and (iv) entering into Foreign
Exchange Contracts; provided that at no time may the aggregate amount of (a)
Direct Advances which are not Cash Secured Advances exceed the Direct Advance
Sublimit, or (b) Foreign Exchange Contracts exceed the maximum amount the
Foreign Exchange Facility. Notwithstanding the foregoing, at no time shall the
total amount of Letter of Credit Obligations, plus the total principal amount of
Direct Advances then outstanding, plus the amount of all Bankers' Acceptance
Obligations then outstanding exceed the Maximum Amount.
(B) On a semi-annual basis the Baseline Advance Limit shall be
subject to increase (but not in excess of the Maximum Amount) by an amount equal
to fifty percent (50%) of Borrower's after tax net income, provided that
Borrower's after tax net income shall be not less than $1,000,000 as evidenced
by the financial statements contained in Borrower's Form 10-K filing (which
shall be audited) and Form 10-Q (for its first two calendar quarters, which
shall be internally prepared) and further provided there is not then existing
any Event of Default or any event which with the giving of notice and/or the
passage of time would become an Event of Default. Any such increase shall be
effective upon presentation to the Bank of financial statements contained in the
Borrower's Form 10-K or Form 10-Q, as applicable, evidencing such after tax net
income.
13
2.2 INTEREST
(A) All Advances shall bear interest at a per annum rate equal to
the Adjusted LIBO Rate, plus two and one quarter percent (2.25%). Borrower shall
pay to Bank all accrued interest on the last day of the Interest Period but in
no event less than quarterly (in which case such payments shall be made on the
last Working Day of such calendar quarter), until all such Advances are paid in
full, which interest shall be computed on the basis of a 360 day year, for the
actual number of days elapsed, on the daily unpaid balance of such Advances.
(B) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation by any central bank or other governmental authority charged with the
administration or interpretation thereof shall make it unlawful, or any central
bank or other governmental authority shall assert that it is unlawful, for Bank
to perform its obligations hereunder (i) to make Adjusted LIBO Rate Advances or
(ii) to continue to fund or maintain Adjusted LIBO Rate Advances hereunder,
then, on notice thereof and demand therefor by Bank to Borrower, the obligation
of Bank to make any such Adjusted LIBO Rate Advances shall terminate and, if the
foregoing clause (ii) is applicable, Borrower shall, upon prior notice to Bank,
either (A) forthwith repay in full any such Adjusted LIBO Rate Advances then
outstanding, together with interest accrued thereon and the Repayment Indemnity
or (B) forthwith convert any such Adjusted LIBO Rate Advances then outstanding
into Prime Rate Advances and pay to Bank the Repayment Indemnity. If no such
notice is received by Bank within three (3) Working Days of the prior demand by
Bank, Borrower will be deemed to have made the election to convert any such
Adjusted LIBO Rate Advances then outstanding into Prime Rate Advances as of the
fourth day following such demand.
(C) If, with respect to any Interest Period, Bank determines that
(i) extraordinary circumstances affecting the relevant market make it
impracticable to ascertain the interest rate applicable for such Interest Period
or (ii) the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to Bank of making or maintaining the Facilities during
such Interest Period, Bank shall promptly notify Borrower of such determination
and no additional Adjusted LIBO Rate Advances shall be made nor shall there be
any conversions thereto until such notice is withdrawn. If any Adjusted LIBO
Rate Advance is outstanding on the date of such notice and such notice has not
been withdrawn on the last day of the then current Interest Period applicable
thereto, Borrower may on the last day of such Interest Period either convert
such Adjusted LIBO Rate Advance to a Prime Rate Advance or prepay the
outstanding principal balance thereof and accrued interest thereon in full. If
no such notice is received by Bank at least one (1) Business Day prior to the
last day of such Interest Period, Borrower will be deemed to have made the
election to convert any such Adjusted LIBO Rate Advances then outstanding into
Prime Rate Advances.
(D) From and after the occurrence of any Event of Default the entire
balance of the Facilities shall bear interest at the Default Rate.
14
2.3 REPAYMENT OF ADVANCES
(A) Borrower may repay an Adjusted LIBO Rate Advance or portion
thereof on the last day of the relevant Interest Period, provided, that (i)
Borrower shall provide Bank with one (1) Working Day's prior written notice of
its intent to so repay, and (ii) Borrower shall pay to Bank the amount repaid
together with accrued interest to the date of such payment on the amount repaid.
In the event Borrower for any reason repays any Adjusted LIBO Rate Advance on
the day which is not the end of an Interest Period, Borrower shall, upon written
demand by Bank, pay to Bank the Repayment Indemnity with respect to such
repayment.
(B) Provided no Event of Default occurs hereunder, all Direct
Advances shall be payable not later than (90) days after such Direct Advance is
made; provided, however, that no Direct Advance shall extend beyond the Maturity
Date. All Advances arising from payments under Letters of Credit or Bankers'
Acceptances, together with accrued and unpaid interest thereon, shall be due and
payable as provided in Section 2.7 and 2.8 hereof, respectively.
(C) Whenever any payment to be made hereunder or under any note
issued hereunder shall be stated to be due on other than a Business Day or, as
to Adjusted LIBO Rate Advances, a Working Day, such payment may be made on the
next succeeding Business Day or Working Day, as applicable, unless such Business
Day or Working Day, as applicable, falls in the next succeeding month, in which
case, such payment shall be made on the next preceding Business Day or Working
Day, as applicable. Any such alteration of time shall, in such case, be included
in the computation of payment of interest. All payments (including prepayments)
made by Borrower on account of principal of or interest on the Advances
hereunder shall be made without set-off or counterclaim and shall be made prior
to 3:00 p.m. (New York City time) on the date such payment is due, to Bank, in
each case in lawful money of the United States of America and in immediately
available funds. The failure of Borrower to make any such payment by 3:00 p.m.
(New York City time) on such due date shall not constitute a Default or Event of
Default hereunder, provided that such payment is made on such due date, but any
such payment received by Bank on any Business Day after 3:00 p.m. (New York City
time) shall be deemed to have been received on the immediately succeeding
Business Day or Working Day, as applicable, for the purpose of calculating any
interest payable in respect thereof.
(D) Bank shall have the right in its discretion to charge any
principal and/or interest or other sum due by Borrower to Bank, to any checking,
other deposit or loan account of Borrower or with Bank or to apply any proceeds
received by it against payment of same. In the event that the amount so charged
shall create an overdraft, Borrower hereby agrees to pay to Bank the fees
associated with overdraft until the overdraft is satisfied in full. During any
time in which an overdraft is created and outstanding, the Facilities shall be
deemed to be in default (and shall bear interest at the default rate set forth
in Section 9.7) and Bank shall not be required to honor any checks drawn on or
transfers from such deposit account nor shall it be required to notify Borrower
of the existence of any overdraft before dishonoring any such checks or
transfers, and to the extent permitted by law, Borrower waives any rights and
claims they may have against Bank for wrongful dishonor, interference with
contract, wrongful interruption of the Borrower's
15
businesses or similar claim, counterclaim or causes of action arising due to
Bank's failure to honor such checks. The creation of any overdrafts shall not be
deemed to be a payment hereunder or under any note evidencing the Obligations or
a waiver by Bank of any Event of Default hereunder and nothing herein shall
obligate Bank to create any such overdraft.
(E) All outstanding Advances, together with all accrued and unpaid
interest thereon, and all unpaid fees shall be due and payable in full on the
Maturity Date.
2.4 FEES If from time to time Bank, in accordance with its rights
hereunder, examines or inspects the books and records of Borrower, Borrower
shall upon the demand of Bank pay to Bank any reasonable out-of-pocket expenses
incurred by Bank in connection with such field examination, including but not
limited to travel expenses incurred by Bank in connection therewith.
2.5 PREPAYMENT If on any day the sum of the aggregate outstanding
principal balance of the Advances under Section 2.1 plus the Letter of Credit
Obligations and Bankers Acceptance Obligations hereof shall exceed the Maximum
Amount on such day or the other limitations set forth in Section 2.1, Borrower
shall, on such day, prepay such Advances by an amount equal to such excess
together with the Repayment Indemnity, if any. In the event that the aggregate
amount of Advances (together with accrued and unpaid interest thereon) shall
exceed the Direct Advance Sublimit, Borrower shall repay the amount of such
excess to Bank, together with any Repayment Indemnity payable in connection with
the repayment of any Advances other then at the end of the Applicable Interest
Period. The failure to make any such payment shall be an Event of Default.
2.6 PROCEDURES FOR ADVANCES Borrower shall provide Bank with at
least three (3) Working Day's oral notice of any requested Adjusted LIBO Rate
Advance, specifying the Borrowing Date and amount, which oral notice shall be
promptly confirmed in writing by Borrower (provided, however, Bank may rely and
act upon telephonic notice whether or not such written confirmation is
ultimately received). Bank shall, on or after 1:00 P.M. (New Jersey time) of the
Borrowing Date, make the amount of the requested Advance available to Borrower,
provided all conditions precedent to such Advance have been met or satisfied.
Each requested Adjusted LIBO Rate Advance hereunder for less than the full
amount available under the Direct Advance Sublimit shall be in the minimum
amount of [$50,000.00] or any multiple thereof. In the event that any requested
Direct Advance is, itself or in the aggregate with all then outstanding Direct
Advances, in excess of the Direct Advance Sublimit, the Borrower shall, at the
time that it requests such Direct Advance, deliver to the Bank such Cash
Collateral as is necessary in the Bank's discretion to ensure that the amount of
any Overage Obligations or Cash Secured Advances, including without limitation
the execution, of such pledge or similar agreements as are necessary and the
delivery of any documents of assignment and/or transfer as are necessary to
properly perfect the Bank's security interests in such Cash Collateral.
2.7 PROCEDURES FOR LETTERS OF CREDIT
16
(A) Issuance of Letters of Credit. Within the Maximum Amount, until
the Maturity Date, and provided that no Default or Event of Default shall have
occurred and be continuing or would result from the issuance of a Letter of
Credit and subject to the limitations of Section 2.1, Bank may issue Letters of
Credit for the account of Borrower on the terms hereinafter set forth. No Letter
of Credit shall have a term beyond 120 days and in any event no Letter of Credit
shall extend beyond the Maturity Date. Each of the Letters of Credit shall be
issued in a form satisfactory to Bank and pursuant to a Letter of Credit
Agreement duly executed by Borrower. The terms and conditions of the Letter of
Credit Agreement(s) are hereby incorporated herein by reference as if fully set
forth at length. Borrower shall pay to Bank any and all fees imposed by Bank in
connection with the issuance of Letters of Credit. Bank's current fee schedule
for Letters of Credit is attached hereto as Schedule 2.7(a); such Schedule is
subject to change without notice.
(B) Payments under Letters of Credit and Reimbursement by Borrower.
In the event of a drawing under any Letter of Credit and payment by Bank,
Borrower shall immediately either (i) reimburse Bank therefor, together with any
fees in connection therewith, which may be made by a charge against any of the
Obligors' accounts with the Bank or (ii) request the creation of a Banker's
Acceptance. If Borrower shall not so reimburse Bank as provided above, such
failure shall be an Event of Default and Borrower shall pay to Bank interest on
the amount of such payment from the date of such payment by Bank or the failure
of Borrower to so reimburse Bank, as applicable, through and including the date
of such reimbursement by Borrower at the Default Rate computed on the basis of
the actual number of days elapsed over a year of 360 days.
(C) Letter of Credit Obligations Absolute. Borrower's obligations to
make payments to Bank in order to reimburse payments by Bank on Letters of
Credit as provided in Subsection 2.7(B) above shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and the Letter of Credit Agreement(s), under any and all
circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter
of Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to
departure from all or any of the provisions of any Letter of Credit
or any Loan Document to which Bank is not a party;
(iii) the existence of any claim, setoff, defense or
other right that Borrower, any other party guaranteeing, or
otherwise obligated with, Borrower, any Subsidiary or other
Affiliate thereof or any other person may at any time have against
the beneficiary under any Letter of Credit, Bank or any other
Person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
17
(iv) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) payment by Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with
the terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any
kind of Bank, or any other person or any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this section, constitute a legal or
equitable discharge of Borrower's obligations hereunder.
It is understood that Bank may accept documents that appear on
their face to be in order, without responsibility for further
investigation, regardless of any notices or information to the
contrary and, in making any payment under any Letter of Credit (i)
Bank's exclusive reliance on the documents presented to it under
such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any drafts presented under such
Letter of Credit, whether or not the amount due to the beneficiary
thereunder equals (but does not exceed) the amount of such draft and
whether or not any document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein
proves to be inaccurate or untrue in any respect whatsoever and (ii)
any noncompliance in any immaterial respect of the documents
presented under such Letter of Credit with the terms thereof shall,
in each case, be deemed not to constitute wilful misconduct or gross
negligence of Bank.
(D) Outstanding Letter of Credit Obligations. In addition to the
provisions of Section 2.7(B), upon an Event of Default, the full amount of all
Letter of Credit Obligations shall be deemed to increase the principal amount
deemed outstanding under the Facilities (and any unpaid interest thereon and on
unpaid letter of credit fees shall be deemed principal on the Facilities,
provide that no interest shall be charged on the amount of the Letters of Credit
unless and until such Letters of Credit are drawn upon) for purposes of (x)
distribution of payments hereunder and (y) application of proceeds; provided,
however, if any such Letter of Credit thereafter expires without being drawn
upon, the amount thereof shall reduce the principal amount deemed outstanding
under the Facilities (as previously increased pursuant to this subsection (D))
and the distributions of payments and proceeds to Bank shall be adjusted
accordingly.
2.8 BANKERS' ACCEPTANCES. Until the Maturity Date, and provided that
no Event of Default or an event which with the giving of notice or lapse of
time, or both, would constitute an Event of Default, shall have occurred and be
continuing or would result from the creation of any Bankers' Acceptance and
subject to the limitations of Section 2.1 (a), if requested by Borrower, Bank
shall issue Bankers' Acceptances drawn under sight Letters of Credit as
18
provided in Section 2.7(B) hereof. The Bankers' Acceptances shall be discounted
by Bank at the applicable BADR. The Bankers' Acceptances shall have maturities
of thirty (30), sixty (60), ninety (90) or one hundred twenty (120) days. Each
Bankers' Acceptance shall be created in accordance with and governed by the
Bankers' Acceptance Agreement entered into simultaneously herewith between Bank
and Borrower. The terms and conditions of such Bankers' Acceptance Agreement are
hereby incorporated herein by reference as if fully set forth at length.
Borrower shall pay to Bank any and all fees imposed by Bank in connection with
Bank's creation of Bankers' Acceptances. The commission fee for each Bankers'
Acceptance shall be in accordance with the fee schedule attached hereto as
Schedule 2.8, subject to increases in proportion to any and all increases in
Bank's standard commission fees for bankers' acceptances.
2.9 PAYMENTS UNDER BANKERS' ACCEPTANCES AND REIMBURSEMENT BY
BORROWER. In connection with Bankers' Acceptances, Borrower shall pay (and
hereby unconditionally promises to pay) to Bank on the maturity date of the
draft (including renewals), the original principal amount prior to discount and
any commission fees of the Bankers' Acceptances. Such payments may be
effectuated by a Direct Advance under the Revolving Facility. In the event that
there shall not be sufficient availability under the Revolving Facility to
effect such payment, Borrower shall reimburse Bank in cash or via charge to any
of the Obligors' accounts with the Bank for such Bankers' Acceptances. In the
event that the Borrower shall not so reimburse the Bank, such failure to pay
shall constitute an Event of Default and Borrower shall pay to Bank interest on
the amount of such payment from the date of such payment by Bank through and
including the date of such reimbursement by Borrower at the Default Rate
computed on the basis of the actual number of days elapsed over a year of 360
days.
2.10 OUTSTANDING BANKERS' ACCEPTANCE OBLIGATIONS. Upon the
occurrence and during the continuance of an Event of Default, the full amount of
all Bankers' Acceptance Obligations shall be deemed to increase the principal
amount of the Facilities (and, to the extent permitted by law, any unpaid
commission fee(s) with respect to any Bankers' Acceptances shall be deemed to be
principal on the Facilities) for purposes of application of proceeds pursuant to
Section 9.3 hereof.
2.11 BANKERS' ACCEPTANCE REGULATION CHANGES. Without limitation of
any other provision hereof, if for any reason beyond the control of Bank, Bank
is required to maintain reserves against Bankers' Acceptance liabilities under
Regulation D of the Board of Governors (or any other regulation) of the Federal
Reserve System in effect from time to time, Borrower shall, upon demand by Bank,
pay to Bank additional amounts sufficient to indemnify and reimburse Bank
against any such reasonable additional costs incurred by Bank (including, but
not limited to, costs resulting from such reserve requirements) in connection
with such Bankers' Acceptance liabilities.
2.12 BANKER'S ACCEPTANCE DECLARED INELIGIBLE. In the event that any
Bankers' Acceptance is declared ineligible for discount by the Federal Reserve,
Borrower, at Bank's request, shall (x) repay to Bank the original amount of such
Bankers' Acceptance at maturity or sooner as required by law and (y) pay to Bank
any additional amounts
19
sufficient to reimburse Bank for reasonable additional costs incurred by it in
connection with such Bankers' Acceptance.
2.13 FOREIGN EXCHANGE CONTRACTS. Until the Maturity Date, and
provided that no Event of Default or an event which with the giving of notice or
the passage of time, both, would constitute an Event of Default, shall have
occurred and be continuing or would result from the purchase of any Foreign
Exchange Contract, Bank, at the request of Borrower, may enter into, for the
account of the Borrower, Foreign Exchange Contracts in an aggregate amount at
any one time not to exceed the U.S. dollar equivalent of $250,000; provided
further that Bank's purchase of Foreign Exchange Contracts shall be: (x) subject
to the limitations of Section 2.1(a) and the Foreign Exchange Contract Facility;
(y) subject to a maximum daily settlement limit of ten percent (10%) of the
maximum amount permitted for Foreign Exchange Contracts for the applicable loan
year (i.e., $25,000 daily settlement limit); and (z) created for the purpose of
purchasing Inventory and not for currency speculation purposes. Upon the
maturity of any Foreign Exchange Contract, Borrower shall immediately reimburse
Bank for any and all amounts payable by Bank under such Foreign Exchange
Contract.
2.14 USE OF PROCEEDS The proceeds of the Revolving Facility shall be
used by Borrower: (i) for short term working capital; and (ii) for Letters of
Credit and Bankers' Acceptances, subject to the terms and conditions hereof. The
proceeds of the Foreign Exchange Facility shall be used by Borrower for Foreign
Exchange Contracts, subject to the terms and conditions hereof.
2.15 CONDITIONS TO INITIAL ADVANCE The obligation of Bank to execute
this Agreement and to make the initial Advance or other financial accommodations
hereunder is subject to the satisfaction of the following conditions precedent:
(A) Documents. Bank shall have received the duly executed Revolving
Note, not less than four (4) copies of this Agreement and the duly executed
Guaranty and all other Loan Documents, each executed on behalf of the applicable
Obligors and/or by its duly authorized officers.
(B) Deliveries by Borrower. Obligors shall have delivered or caused
to be delivered to Bank or Bank shall have received, the following items, which
shall be in form and substance reasonably satisfactory to Bank and its counsel:
(i) Legal Opinion of Counsel to Borrower. Opinion of
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to Obligors, dated the date hereof and
addressed to Bank, substantially in the form of Exhibit D hereto.
(ii) Corporate Proceedings. Resolutions of the Boards of
Directors of Obligors and the respective Shareholders of the
Guarantors certified on the date hereof by the Secretary or an
Assistant Secretary of Borrower and Guarantor authorizing: (a) the
execution, delivery and performance of this
20
Agreement, and all of the other Loan Documents to which it is a
party; (b) the consummation of the transactions contemplated hereby
and thereby; and (c) the borrowings and other matters contemplated
in the Loan Documents. Such certificate shall state that the
resolutions set forth therein have not been amended, modified,
revoked or rescinded as of the date of such certificate and are in
full force and effect as of the Closing Date.
(iii) Incumbency Certificate. A certificate of the
Secretary or an Assistant Secretary of Borrower and Guarantors,
dated the date hereof, as to the incumbency and signature of the
officers executing each of the Loan Documents and any other document
to be delivered pursuant to any of such documents, together with
evidence of the incumbency of such Secretary or Assistant Secretary.
(iv) Officer's Certificate. A certificate of each of
Borrower and Guarantors signed by its president or chief financial
officer stating that to the best of his knowledge after diligent
investigation: (a) as of the date hereof and giving effect to such
Advance, Letter of Credit, Bankers' Acceptance or Foreign Exchange
Contract hereunder no Default or Event of Default exists hereunder;
and (b) all of Obligors' representations and warranties contained in
this Agreement and the other Loan Documents are presently true and
correct in all material respects.
(v) Consents, Licenses, Approvals, etc. Copies of all
consents, licenses and approvals required in connection with the
execution, delivery, performance, validity and enforceability of
this Agreement, the Revolving Note and the other Loan Documents, and
such consents, licenses and approvals shall be in full force and
effect and be reasonably satisfactory in form and substance to Bank
and its counsel.
(vi) Searches. Copies, in form and substance reasonably
satisfactory to Bank, of written or other advice relating to such
corporate status, financing statement, tax lien and judgment
searches as Bank may reasonably require.
(vii) Absence of Liens. Proof satisfactory to Bank in
its discretion that there are no liens, charges, pledges, mortgages
or security interests encumbering the assets of the Obligors.
(viii) Landlords' Waivers. Landlords' waivers in the
form of Exhibit E annexed hereto, for each location where any of
the Collateral is located.
(ix) Other Documents. All other documents provided for
herein or which Bank may request or require.
21
(x) Additional Information. Such additional information
and materials which Bank shall have reasonably requested.
(xi) Supporting Documents. On or before the date hereof,
(a) a copy of the Certificates of Incorporation of Borrower and
Guarantors, certified by the Secretary of State of Delaware; (b) a
certificate of such Secretary of State, dated as of a recent date,
as to the good standing of each of Borrower and Guarantors and
attaching the charter documents of Borrower and Guarantors on file
in the office of such Secretary of State; and (c) a certificate of
the Secretary or an Assistant Secretary of each of Borrower and
Guarantors dated the Closing Date and certifying with respect to
each Obligor (i) that attached thereto is a true and complete copy
of the By-laws of such Obligor as in effect on the date of such
certification, and (ii) that the Certificate of Incorporation of
each of Borrower and Guarantors has not been amended since the date
of the last amendment thereto indicated on the certificate of the
Secretary of State furnished pursuant to clause (A) above.
(xii) Fees/Costs/Taxes. Obligors shall have paid (i) all
of the reasonable fees and expenses of Bank's counsel which are
occasioned in connection with the preparation of this Agreement and
all other Loan Documents and the closing of the transactions
contemplated hereby and thereby and (ii) the Facility Fee of $12,500
and all filing and recording fees and taxes.
(xiii) Insurance. Evidence of the insurance required to
be in effect as set forth in this Agreement.
2.16 CONDITIONS TO ALL ADVANCES The obligation of Bank to make any
Advance, issue any Letter of Credit or Banker's Acceptance or enter into any
Foreign Exchange Contract is subject to fulfillment of the following additional
conditions precedent, to the reasonable satisfaction of Bank and counsel to
Bank:
(A) Representations and Warranties. The representations and
warranties made by Obligors herein or in any other of the Loan Documents or
which are contained in any certificate, document or financial or other statement
furnished at any time under or in connection herewith shall be correct in all
material respects on and as of the date of each Advance, issuance of each Letter
of Credit or Bankers' Acceptance, entering into each Foreign Exchange Contract,
after giving effect to such Advance or issuance of Letters of Credit, or
Bankers' Acceptance or Foreign Exchange Contract, as if made on and as of such
date.
(B) No Default. No Event of Default has occurred, and no Default has
arisen and is continuing on the date the Advance is to be made, Letter of Credit
or Banker's Acceptance or Foreign Exchange Contract is to be entered is to be
issued, after giving effect to such Advance, Letter of Credit, Bankers'
Acceptance or Foreign Exchange Contract.
22
(C) Litigation. No suit, action, investigation, inquiry or other
proceeding by any governmental authority or other Person or any other legal or
administrative proceeding shall be pending or threatened which (i) questions the
validity or legality of the transactions contemplated by this Agreement, or (ii)
seeks damages in connection therewith and which, in the reasonable judgment of
Bank, (x) involves a significant risk of a preliminary or permanent injunction
or other order by a state or federal court which would prevent, or require
rescission of, the transactions contemplated by this Agreement, or (y) in the
case of any action or proceeding which seeks monetary damages involves a
significant risk of resulting in substantial financial liability to Borrower or
Guarantor and/or Bank.
(D) Material Adverse Change. No event shall have occurred since the
date of the most recent consolidated financial statements of Borrower furnished
to Bank which resulted in a Material Adverse Change of Borrower or Guarantor or
had a Material Adverse Effect on Borrower or Guarantor.
(E) Legal Matters. All legal matters incident to the making of the
Facilities available to Borrower shall be satisfactory to counsel to Bank, in
the reasonable exercise of its judgment.
2.17 REGULATORY CAPITAL REQUIREMENTS If any existing or future law
or regulation or the interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof, or compliance by
Bank with any request or directive (whether or not having the force of law) of
any such authority, results in any increases after the date hereof in any
capital maintenance, capital ratio or similar requirement against credit
commitments made by Bank hereunder and the result thereof is to impose upon Bank
or increase any capital requirement applicable to Bank as a result of the making
or maintenance of making credit available hereunder (which imposition of or
increase in capital requirement may be determined by Bank's reasonable
allocation of the aggregate of such capital impositions or increases) then, upon
demand by Bank, Obligors shall immediately pay to Bank from time to time as
specified by Bank a fee which shall be sufficient to compensate Bank for such
imposition of or increase in capital requirements together with interest on each
such amount from the date demanded until payment in full thereof at the rate
provided in this Agreement with respect to fees and charges not paid when due. A
certificate setting forth in reasonable detail the amount necessary to
compensate Bank as a result of an imposition of or increase in capital
requirements submitted by Bank to Borrower shall be conclusive, absent manifest
error or bad faith, as to the amount thereof. For purposes of this Section 2.17
in calculating the amount necessary to compensate for any imposition of or
increase in capital requirements, Bank shall be deemed to be entitled to a rate
of return on capital (after federal, state and local taxes) of fifteen percent
(15%) per annum.
2.18 EXCESS ADVANCES In the event Bank shall extend credit hereunder
in an amount in excess of the Maximum Amount and/or the limits of the Foreign
Exchange Facility or if Borrower should directly or indirectly become indebted
to Bank in an amount which, together with all Obligations extended pursuant to
this Agreement, is in excess of the
23
Maximum Amount and/or the limits of the Foreign Exchange Facility, such Advances
or such Indebtedness (including, without limitation, any Letter of Credit
Obligations, Bankers' Acceptance Obligations and Foreign Exchange Contract
Obligations) shall nevertheless be covered by the terms of this Agreement and
the other Loan Documents.
2.19 REQUIREMENTS OF LAW If, after the date hereof, the adoption of
any law, regulation, treaty, or directive or any change therein or in the
interpretation or application thereof or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority, agency or instrumentality:
(A) does or shall subject Bank to any tax of any kind whatsoever
with respect to this Agreement, any Advances or the Facilities, or change the
basis of taxation of payments to Bank of principal, commitment fee, interest or
any other amount payable hereunder (except for changes in the rate of any tax
presently imposed on Bank);
(B) does or shall impose, modify, or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
or deposits or other liabilities in or for the account of, advances or loans by,
or other credit extended by, or any other acquisition of funds by, any office of
Bank which are not otherwise included in the determination of the Adjusted LIBO
Rate;
(C) has or would have the effect of reducing the rate of return on
Bank's capital as a consequence of its obligations hereunder to a level below
that which Bank could have achieved but for such adoption, change or compliance
(taking into consideration Bank's policies with respect to capital adequacy); or
(D) does or shall impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining advances or extensions of credit to Borrower or
to reduce any amount receivable from Borrower thereunder or to reduce the rate
of return on Bank's capital, then, in any such case, Borrower shall promptly pay
to Bank, upon its demand, any additional amounts necessary to compensate Bank
for such additional cost or reduced amount receivable or reduced rate of return
which Bank deems to be material, as determined by Bank, with respect to this
Agreement, any Advances or the other Facilities. If Bank becomes entitled to
claim any additional amounts pursuant to this Section 2.19, it shall promptly
notify Borrower of the event by reason of which it has become so entitled. A
certificate setting forth calculations as to any additional amounts payable
pursuant to the foregoing sentence submitted by Bank to Borrower shall be
conclusive in the absence of manifest error.
2.20 SALE, ASSIGNMENT OR PARTICIPATIONS Bank may from time to time
sell or assign, in whole or in part, or grant participations in some or all of
the Loan Documents and/or the obligations evidenced thereby. The holder of any
such sale, assignment
24
or participation, if the applicable agreement between Bank and such holder so
provides, (i) shall be entitled to all of the rights, obligations and benefits
of Bank, and (ii) shall be deemed to hold and may exercise the rights of setoff
or banker's lien with respect to any and all obligations of such holder to
Borrower, in each case as fully as though Borrower were directly indebted to
such holder. Bank may, in its discretion, give notice to Borrower of such sale,
assignment or participation; however, the failure to give such notice shall not
affect any of Bank's or such holder's rights hereunder. Borrower does hereby
authorize Bank to provide information concerning the Borrower to any prospective
purchaser, assignee or participant. The information provided may include, but is
not limited to, amounts, terms, balances, payment history, return item history
and any financial or other information about Borrower. Obligors, jointly and
severally, agree to indemnify, defend, release Bank, and hold Bank harmless, at
Borrower's cost and expense, from and against any and all lawsuits, claims,
actions, proceedings, or suits against Bank or against Borrower, Guarantors and
Bank, arising out of or relating to Bank's reporting or disclosure of such
information.
25
III
COLLATERAL
3.1 CROSS COLLATERAL All of the Collateral heretofore, herein or
hereafter given or assigned to Bank hereunder or in any other Loan Document
shall secure payment of all Obligations of Borrower and Guarantor to Bank.
3.2 ACCOUNTS RECEIVABLE Each of the Obligors hereby creates in favor
of Bank and hereby grants to Bank a security interest in all Accounts, as
defined herein, presently owned by Borrower or Guarantors or hereafter acquired.
3.3 INVENTORY Each of the Obligors hereby creates in favor of Bank
and hereby grants to Bank a security interest in all of its Inventory, as
defined herein, whether presently owned by Obligors or hereafter acquired and
wherever located.
3.4 GENERAL INTANGIBLES Each of the Obligors hereby creates in favor
of Bank and hereby grants to Bank a security interest in all of its General
Intangibles, whether presently owned by the Obligors or hereafter acquired.
3.5 DEPOSIT ACCOUNTS Each of the Obligors hereby creates in favor of
Bank, hereby assigns to Bank and hereby grants to Bank a security interest in
the balance of every deposit account, now or hereafter existing, of the Obligors
with Bank or any other institution, and all money, Instruments, securities,
documents, Chattel Paper, credits, claims, and other property of the Obligors
now or hereafter in the possession or custody of Bank or any of its agents or
any other institution.
3.6 CHATTEL PAPER Each of the Obligors hereby creates in favor of
Bank and hereby grants to Bank a security interest in all of its Chattel Paper,
whether presently owned by the Obligors or hereafter acquired, including but not
limited to all such Chattel Paper now or hereafter left in the possession of
Bank for any purpose, further including but not limited to for collection.
3.7 INSTRUMENTS Each of the Obligors hereby creates in favor of Bank
and hereby grants to Bank a security interest in all of its Instruments, whether
presently owned by the Obligors or hereafter acquired, including but not limited
to all such Instruments now or hereafter left in the possession of Bank for any
purpose, including but not limited to for collection.
3.8 DOCUMENTS Each of the Obligors hereby creates in favor of Bank
and hereby grants to Bank a security interest in all of its Documents, whether
presently owned by its or hereafter acquired, including but not limited to all
such Documents now or hereafter left in the possession of Bank for any purpose.
26
3.9 EQUIPMENT. Each of the Obligors hereby grants to Bank a security
interest in all of its Equipment, whether now owned or hereafter acquired, and
whenever located.
3.10 PROCEEDS AND RECORDS Each of the Obligors hereby creates in
favor of Bank and hereby grants to Bank a security interest in (A) all books and
records, including, without limitation, customer lists, credit files, computer
programs, print-outs and other computer materials and records of each of the
Obligors pertaining to all of the Collateral; and (B) all of the products and
proceeds of all of the foregoing Collateral (including all proceeds of insurance
policies covering the Collateral); as well as all accessions, additions,
substitutions, replacements and increments as to the assets in (A) and (B).
3.11 CONTINUING PERFECTION Each of the Obligors will perform any and
all steps requested by Bank to create and maintain in Bank's favor a first and
exclusive and valid lien on or security interest in the Collateral or pledges of
Collateral, including, without limitation, the execution, delivery, filing and
recording of financing statements and continuation statements, supplemental
security agreements, notes and any other documents necessary, in the opinion of
Bank, to protect its interest in the Collateral. Bank and its designated officer
are hereby irrevocably appointed each Obligor's (as applicable) attorney-in-fact
to do all acts and things which Bank may deem necessary to perfect and continue
perfected the security interests and Liens provided for in this Agreement and
the other Loan Documents, including, but not limited to, executing financing
statements on behalf of Borrower or Guarantors (as applicable).
3.12. OBLIGORS' GRANTS. Notwithstanding anything to the contrary
herein, it is the expressed intention of the Obligors and the Bank that the
grants of security interests and liens by the Obligors to the Bank is intended
to cover and encumber all of the assets of the Obligors, whether the same are
owned jointly among one or more Obligors or all are owned severally, whether
same are now owned or hereafter acquired, and wherever same may be located and
each Obligor hereby creates in favor of Bank and hereby grants a security
interest in all of their respective assets now owned or hereafter acquired
including, without limitation, all assets specifically described in this Article
III.
27
IV
[RESERVED]
28
V
REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement and to make Advances and
other financial accommodations hereunder, each of the Obligors represents and
warrants to Bank that:
5.1 GOOD STANDING Schedule 5.1 sets forth:
(A) the jurisdiction of each Obligor's incorporation and in which it
is in good standing;
(B) all other jurisdictions in which each Obligor is authorized to
transact business and all of which it is in good standing;
(C) any prior changes in the structure of each Obligor, such as
mergers, consolidations and the like;
(D) any prior name changes of each Obligor;
(E) all trade names or trade styles under which each Obligor
conducts business or issue invoices; and
(F) all Subsidiaries and Affiliates of each Obligor and the
percentage of stock or other ownership interest thereof owned by Borrower.
5.2 CORPORATE AUTHORITY Each Obligor has the requisite power and
authority to own its property and to carry on its businesses as now conducted,
and is in good standing and authorized to do business in each jurisdiction in
which the failure so to do would have a Material Adverse Effect on such Obligor.
Each Obligor has the corporate power to execute, deliver and carry out this
Agreement and all other Loan Documents to which it is a party, its Board of
Directors has duly authorized and approved the terms of the Loan described
herein and the taking of any and all action contemplated herein and therein, and
this Agreement and all other Loan Documents to which such Obligor is a party
constitutes the valid and binding obligations of such Obligor, enforceable
against it in accordance with their terms. No consent or approval of, or
exemption by, shareholders, any Governmental Body or any other Person is
required to authorize, or is otherwise required in connection with the
execution, delivery and performance of, the Loan Documents to which such Obligor
is a party, or is required as a condition to the validity or enforceability of
the Loan Documents to which such Obligor is a party.
5.3 COMPLIANCE WITH LAW (A) Each Obligor is in compliance with all
laws, rules and regulations to which it is subject and has all licenses,
certificates, permits and
29
franchises and other governmental authorization necessary to own its properties
and to conduct its businesses.
(B) The execution of this Agreement and each other Loan
Document, and the performance by each of the Obligors of its obligations
hereunder and thereunder, do not violate any existing law or regulation or any
writ or decree of any court or Governmental Body or the charter or by-laws of
Borrower or Guarantors or any agreement or undertaking to which such Obligor is
a party or by which it is bound.
5.4 NO LITIGATION There are no judgments against the Obligors and no
litigation or administrative proceeding before any Governmental Body is
presently pending, or to the knowledge of any Obligor, threatened, against any
Obligor or any of their respective property.
5.5 NO FINANCIAL CHANGE There has been no Material Adverse Change in
the condition of the Obligors since their last consolidated financial statements
and reports furnished to Bank and the information contained in said statements
and reports is true and correctly reflects the financial condition of the
Obligors as of the dates of the statements and reports, and such statements and
reports have been prepared in accordance with GAAP and do not contain any
material misstatement of fact or omit to state any facts necessary to make the
statements contained therein not misleading.
5.6 TAX COMPLIANCE Each of the Obligors has filed, or caused to be
filed, all tax returns required to be filed and has paid all taxes shown to be
due and payable on said return or on any assessment made against it.
5.7 GOOD TITLE AND ABSENCE OF LIENS Each of the Obligors has good
and marketable title to all of its properties and assets, real, personal and
mixed, and none of said properties or assets is subject to any Lien, except for
Permitted Encumbrances.
5.8 PLACE OF RECORDS, CHIEF EXECUTIVE OFFICE, INVENTORY AND OTHER
COLLATERAL (A) Each of the Obligors' chief executive offices, and the offices
where it keeps its records concerning any Accounts, and all locations of their
Inventory, and all other business locations of the Obligors are presently at the
locations set forth on Schedule 5.8.
(B) Except as set forth on Schedule 5.8, within four (4) months of
the date of this Agreement, none of Obligors' assets have been moved from any
jurisdiction or other locations than the present locations of assets set forth
on Schedule 5.8 under item (A)(V) except for Inventory purchased by an Obligor
(as applicable) in the ordinary course of business from persons or entities
customarily selling such Inventory.
(C) As of the date hereof no Inventory is now, except as set forth
on Schedule 5.8, stored with a bailee, warehouseman or similar party.
30
(D) As of the date of this Agreement, Obligors do not hold any Goods
belonging to third parties or in which other parties have an interest, including
any Goods sold on a ▇▇▇▇ and hold basis, except as set forth on Schedule 5.8.
(E) None of the Obligors presently purchases or otherwise holds
Goods on a consignment basis except as set forth on Schedule 5.8.
(F) Except as set forth on Schedule 5.8 none of the Obligors'
Inventory is of a nature that contains any labels, trademarks, trade names, or
other identifying characteristics which are the properties of third parties, and
the use of which by such Obligor is in violation of the rights of such third
parties or under license, royalty or similar agreements with any third parties.
(G) Except as set forth on Schedule 5.8 no persons hold any Goods of
any Obligor.
(H) Except as set forth on Schedule 5.8, none of the Obligors has
purchased any Inventory except in the ordinary course of business for value and
from persons customarily in the business of selling such Inventory.
(I) Except as set forth on Schedule 5.8, none of the Obligors holds
any Instrument or Chattel Paper connected with any Account.
(J) Except as set forth on Schedule 5.8, none of the Obligors owns
any trademarks, trade names, patents or copyrights.
(K) No surety bonds have been issued on behalf of any Obligor with
respect to any contracts or purchase orders out of which Accounts Receivable
have arisen or are expected to arise.
5.9 WARRANTIES AS TO ACCOUNTS Each of the Obligors warrants that as
to all Accounts reported to Bank: (A) each Account is a valid subsisting Account
as defined herein; (B) each Account represents a bona fide performed
transaction; (C) the amount shown on such Obligor's books and on any invoice or
statement delivered to Bank is owing to such Obligor; (D) no partial payment has
been made; (E) no set-off or counterclaim exists as to any such Account and no
agreement has been made under which any deductions or discount may be claimed
except regular discounts in the usual course of business, but only if disclosed
on the face of the invoice; (F) the Account Debtor has not disputed the Account
or otherwise asserted any defense, set-off or counterclaim; (G) that to the
extent required by law such Obligor is authorized to do business and in good
standing in any state in which any such Account must be enforced; (H) all agings
of Accounts submitted to Bank are true and accurate; and (I) no surety bond was
required or given on behalf of such Obligor in connection with any contracts or
purchase orders under which the Account arose.
31
5.10 ERISA (A) No Reportable Event or unfunded deficiencies or
failure of compliance with ERISA or the Internal Revenue Code of 1986, as
amended, has occurred and is continuing with respect to any Plan; and (B) the
Obligors have complied with the provisions of ERISA and the Internal Revenue
Code of 1986, as amended, with respect to each Plan.
5.11 LICENSES, PERMITS AND LAWS Each of the Obligors holds all
necessary licenses and permits for the operation of its businesses, including
all permits required under Environmental Laws and each such Obligor has complied
with all laws, rules and regulations applicable to its businesses, including but
not limited to the Fair Labor Standards Act, 29 U.S.C. ss. 215(a)(1). All such
licenses and permits are in good standing and are not under any outstanding
citation issued by any governmental authority, and no litigation has been
instituted nor (to the best knowledge of Borrower) have any claims been made by
any third parties relating to the licenses and permits issued by any
Governmental Body for the operation of their businesses, and no such citation,
litigation or claim, to the best knowledge of the Obligors is contemplated by
any Governmental Body or any third persons nor, to the best knowledge of
Borrower or Guarantor, does there exist any basis for any such citation,
litigation or claim by any of the authorities or any Person.
5.12 ENVIRONMENTAL STATUS As to all properties owned, leased or
operated by any Obligor and to all operations of its businesses:
(A) there is no pending or threatened proceeding affecting such
Obligor with respect to any Environmental Law;
(B) such Obligor has not been identified as a responsible or
potentially responsible party under CERCLA or any other Environmental Laws nor
received notification that any hazardous substance or contaminant has been found
at any site;
(C) none of such properties are listed or proposed for listing on
the National Properties List under CERCLA;
(D) no Hazardous Substance or Hazardous Waste (as such term is
defined in any Environmental Laws) have been disposed of or otherwise released
or discharged on such properties;
(E) no underground storage tanks exist on the properties and any
removal of any such tanks from the properties was undertaken in compliance with
the Underground Storage Tank Act; and
(F) no friable asbestos, or any substance containing asbestos or
PCB's have been installed in or exists on such properties.
5.13 REAFFIRMATION Each and every request for an Advance and other
extensions of credit hereunder shall be deemed as an affirmation by each of the
Obligors that no
32
Default nor Event of Default exists hereunder and that the representations and
warranties contained in this Article V are true and accurate as of the date of
each such request (notwithstanding that some of the terms hereof speak as of the
date of this Agreement) is in compliance with all applicable laws, rules and
regulations.
5.14 PROCEEDS OF FACILITIES None of the Obligors is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended. No part of the proceeds of the Facilities will be used, directly or
indirectly, for a purpose which violates any law, rule or regulation of any
Governmental Body, including without limitation the provisions of Regulations G,
T, U or X of the Board of Governors of the Federal Reserve System, as amended.
None of the Obligors represents that the proceeds of the Facilities provided for
herein shall be used in manner set forth in Section 2.14 hereof. No proceeds of
any loan or other financial accommodations hereunder shall be used to purchase
or carry any margin stock (within the meaning of Regulation U issued by the
Board of Governors of the Federal Reserve System) or to extend credit to others
for the purpose of purchasing or carrying any margin stock.
5.15 NO SUBSIDIARIES. Borrower has no Affiliates or Subsidiaries as
of the date hereof other than Guarantors, and Guarantors have no Subsidiaries or
Affiliates other than Borrower.
5.16 SOLVENCY The fair value of the business and assets of Borrower
and Guarantors will be in excess of the amount that will be required to pay its
liabilities (including, without limitation, contingent, subordinated, unmatured
and unliquidated liabilities on existing debts, as such liabilities may become
absolute and matured), in each case after giving effect to the transactions
contemplated by this Agreement and the use of proceeds therefrom. Borrower and
Guarantors, after giving effect to the transactions contemplated by this
Agreement and the use of proceeds therefrom, will not be engaged in any business
or transaction, or about to engage in any business or transaction, for which
such Person has an unreasonably small capital (within the meaning of the Uniform
Fraudulent Transfer Act, as adopted in the State of New Jersey and Section 548
of the Federal Bankruptcy Code), and none of the Borrower and Guarantors has any
intent to (A) hinder, delay or defraud any entity to which it is, or will
become, on or after the date hereof, indebted, or (B) to incur debts that would
be beyond its ability to pay as they mature.
5.17 NO DEFAULT None of the Obligors is in default under or with
respect to any of its Contractual Obligations in any respect which could have a
Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
5.18 FULL DISCLOSURE Neither this Agreement nor any other Loan
Document or certificate, written statement or other document furnished to Bank,
or to any appraiser or engineer employed or engaged by Bank, by or, to the
knowledge of any Obligor, on behalf of any Obligor in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
contains any untrue statement of a material fact or omits to state a
33
[MISSING FOLIO 34]
VI
AFFIRMATIVE COVENANTS
6.1 AUDIT AND OTHER REPORTS (A) The Obligors agree that within ninety (90)
days of the close of each fiscal year, they will furnish Bank with a detailed
report of audit, including a balance sheet, statements of financial condition,
profit and loss statement, income and cash flow statement, reconciliation of net
worth, notes to financial statements, all calculated on a consolidated basis and
certified on an unqualified basis, by an independent certified public accountant
satisfactory to Bank; (B) the Obligors will also furnish within sixty (60) days
of the close of each fiscal quarter, quarterly financial statements internally
prepared by management of the Borrower, all calculated on a consolidated basis
and prepared in a format acceptable to Bank; (C) Simultaneously with the
submission of the statements required under subsections (A) and (B) above, the
Obligors shall cause to be submitted to Bank a certificate of the Obligor's
accountants (as to its year-end statements) and Obligors' respective chief
financial officers in the form of Exhibit E annexed hereto (i) certifying the
financial information as true, correct and complete, (ii) certifying that all
representations and warranties set forth in the Loan Documents are true and
correct, (iii) setting forth the calculations of the financial tests described
in Section 7.2 hereof and attesting that none of the covenants set forth in this
Agreement have been breached and (iv) certifying that no event has occurred
which, with the passage of time and/or giving of notice, would constitute a
Default or Event of Default; (D) the Obligors shall notify Bank promptly, but no
later than five (5) days after a responsible officer of each Obligor shall
become aware of the following events (i) a Reportable Event or "prohibited
transaction" as such term is defined in ERISA, (ii) the occurrence of an event
which, with the passage of time and/or giving of notice, would constitute a
Default or Event of Default, (iii) the commencement of any proceeding or
litigation or other event which, if adversely determined, would adversely affect
any Obligor's financial condition or its ability to conduct business, (iv)
changes in the executive management of the Obligors, and (v) the termination or
threatened termination of or claim of breach by any Obligor of any material
contract, agreement or obligation, or of any claim of patent infringement, a
written notice specifying the existence thereof and the action Borrower is
taking or proposes to take with respect thereto; (E) the Obligors will furnish
to Bank prompt written notice if (i) any Indebtedness of any Obligors is
declared or shall become due and payable prior to its stated maturity, or called
and not paid when due or (ii) a default shall have occurred under any note or
the holder of any such note, or other evidence of Indebtedness, certificate of
security evidencing any such Indebtedness or any obligee with respect to any
other Indebtedness of any Obligor has the right to declare any such Indebtedness
due and payable prior to its stated maturity as a result of such default; (F)
Obligors agree to furnish to Bank with reasonable promptness such other data and
information concerning the Obligors as from time to time may be reasonably
requested by Bank; (G) Obligors agree to furnish Bank within ninety (90) days
after the close of each fiscal year, an unqualified management letter by an
independent accounting firm acceptable to Bank; (H) submission to the Bank, as
and when filed with the SEC, copies of Borrower's form ▇▇-▇, ▇▇-▇, ▇-▇, as well
as any registration statements and/or proxy statements filed with the SEC or any
other state securities bureau or authority or any foreign securities authority;
and (I) immediately upon receipt of same, furnish to the Bank prompt notice of
any stop order or suspension of trading or any delisting (voluntary or
involuntary) of Borrower's
35
securities traded on the NASDAQ. All financial statements shall be prepared in
accordance with GAAP.
6.2 INSURANCE Obligors agree to keep all of the tangible Collateral
assigned hereunder insured and obtain business interruption insurance, at their
own cost and expense, for the benefit of Bank, and in such amounts, in such
companies, and against such risks as may be acceptable to Bank, and deliver the
policies evidencing such insurance to Bank. If any of the Obligors fail to take
the action called for herein, Bank may, in its discretion obtain insurance
covering Bank's interest in the Collateral and the amount of the premium for
said insurance shall be added to the Obligations of the Obligors to Bank. All
policies of insurance on the Collateral shall be in form and with insurers
recognized as adequate by prudent business persons and all such policies shall
be in such amounts as may be satisfactory to Bank. Each of the Obligors shall
deliver to Bank the original (or certified copy) of each policy of insurance and
evidence of payment of all premiums therefor. Such policies of insurance shall
contain an endorsement, in form and substance satisfactory to Bank showing loss
payable to Bank. Such endorsement or an independent instrument furnished to
Bank, shall provide that the insurance companies will give Bank at least thirty
(30) days prior written notice before any such policy or policies of insurance
shall be altered or canceled and that no act or default of any Obligor or any
other Person shall affect the right of Bank to recover under such policy or
policies of insurance in case of loss or damage. The Obligors each hereby direct
all insurers under such policies of insurance to pay all proceeds payable
thereunder directly to Bank. Each of the Obligors irrevocably makes, constitutes
and appoints Bank (and all officers, employees or agents designated by Bank) as
its true and lawful attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of insurance (provided that
until an Event of Default exists, Bank shall consult with the applicable
Obligors prior to finally making, settling or adjusting claims under such
policies of insurance), endorsing the name of Borrower or Guarantors (as
applicable); on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. In the event any Obligor
at any time or times hereafter, shall fail to obtain or maintain any of the
policies of insurance required above or to pay any premium in whole or in part
relating thereto, then Bank, without waiving or releasing any obligation or
default by Borrower or Guarantors (as applicable) hereunder, may (but shall be
under no obligation to do so) at any time or times thereafter obtain and
maintain such policies of insurance and pay such premium and take any other
action with respect thereto which Bank deems advisable. All sums so disbursed by
Bank, including reasonable attorneys' fees, court costs, expenses and other
charges related thereto, shall be payable, on demand, by the Obligors to Bank
and shall be additional Obligations hereunder secured by the Collateral. The
Obligors also agree to at all times maintain insurance, both hazard and
liability, against such risks and in such amounts as reasonably prudent to
companies similarly situated as any applicable Obligors would maintain and to
furnish to each Bank from time to time evidence that such insurance is in full
force and effect.
6.3 PAYMENT OF EXPENSES The Obligors will pay any and all expenses,
including reasonable counsel fees and disbursements, filing and recording fees
and taxes, and all
36
other charges and expenses incurred or to be incurred by Bank in connection with
the preparation and execution and recording of this Agreement and all other Loan
Documents, and the Facilities made under this Agreement and all amendments and
modifications hereto and in defending or prosecuting any actions or proceedings
or otherwise enforcing any rights arising out of or relating to Bank's
transactions with Borrower and Guarantors.
6.4 [INTENTIONALLY OMITTED]
6.5 LANDLORD'S WAIVER Borrower and Guarantors shall cause the
landlord of all premises where any of the Collateral provided for herein may be
located (including without limitation, any premises now or hereafter leased by
Borrower or Guarantors) to execute and deliver to Bank a landlord's waiver in
the form set forth on Exhibit F.
6.6 GOOD WORKING CONDITION Each of Borrower and Guarantors shall
maintain all of its property in good working condition, ordinary wear and tear
excepted.
6.7 REPORTS OF COLLATERAL Each of Borrower and Guarantors shall, on
or before January 15, and July 15 of each year deliver to Bank an aging of its
Accounts and report of its Inventory, and an aging of its accounts payable in
such form as may be acceptable to Bank as to the preceding six (6) month period
and, within twenty (20) days of the close of each month, deliver to Bank a duly
completed accounts receivable reconciliation report in the form of Exhibit H
annexed hereto.
6.8 OBSERVANCE OF LEGAL REQUIREMENTS, LICENSES AND PERMITS AND
PROTECTION OF COLLATERAL
(A) Each Obligor shall comply with any and all laws, legislation,
rules and regulations in effect as of the date hereof and subsequent hereto,
including but not limited to all state, local and federal laws, legislation,
rules and regulations relating to employee pension and benefit funds, the
payment of taxes, assessments, and other governmental charges, zoning, and the
use, occupancy, transfer or encumbering of the Collateral and all Environmental
Laws, except with respect to the payment of taxes, assessments and other
governmental charges, as such payments thereof shall be contested in good faith
and by appropriate proceedings diligently conducted by Obligors, provided that
adequate reserves shall have been maintained therefor. Each of the Obligors
agrees to comply with all reasonable conditions required by Bank designed to
protect Bank and the Collateral from the effect of all Environmental Laws, ERISA
and such other laws, legislation, rules and regulations as are in, or may come
into, effect and apply to a Borrower, Bank, the transactions contemplated hereby
or the Collateral or any occupants or users thereof, whether as lessees,
tenants, licensees or otherwise. Each of the Obligors agrees to pay any costs
required to comply with any of the above conditions.
(B) Each of the Obligors (as applicable) shall observe and comply in
all material respects with all laws (including ERISA), ordinances, orders,
judgments, rules, regulations, certifications, franchises, permits, licenses,
directions and requirements of all
37
Governmental Bodies, which now or at any time hereafter may be applicable to
each of the Obligors and the operation of its business.
(C) Each of the Obligors will continue to hold all necessary
licenses and permits for the operations of its business.
(D) Each of the Obligors shall, in the event that any Lien shall be
filed against its Collateral by any Governmental Body in connection with the
discharge of hazardous substances or waste, either (i) pay such amounts
necessary to discharge the Lien or (ii) furnish to such Governmental Body a
bond, cash deposit or security necessary to discharge such Lien.
(E) Each of the Obligors shall promptly clean up any hazardous
substances or waste discharged without a proper permit therefor in accordance
with Environmental Laws.
(F) Each of the Obligors shall comply in all respects with the
Securities Acts.
6.9 INSPECTION Bank (by any of its officers, employees and agents)
shall have the right, at any time or times during Obligors' usual business
hours, to inspect the Collateral, all records related thereto, all financial
records, and the premises upon which any of the Collateral is located, to make
extracts from and/or audit such records, to discuss Obligors' affairs and
finances with any Person (including without limitation, Obligors' officers and
outside accountants) and to verify the amount, quality, quantity, value and
condition of, or any other matter relating to, the Collateral or Obligors.
6.10 COLLATERAL REQUIREMENTS Each Obligor will (A) furnish to Bank
all original and other documents evidencing right to payment including but not
limited to invoices, original orders, shipping and delivery receipts; (B) give
Bank such financial statements, reports, lists of Account Debtors and other data
concerning its Accounts, contracts and collections and the other Collateral, or
any other matters which Bank may, from time to time specify; (C) permit Bank or
its nominee to examine each Obligor's records at any time and to make extracts
therefrom; (D) notify Bank immediately in writing if any of its Accounts arise
out of contracts between any Obligor and the United States or any department,
agency or instrumentality thereof, or any other governmental body and take all
steps necessary to protect Bank under the Federal Assignment of Claims Act or
other applicable state or local statutes or ordinances; (E) deliver to Bank,
appropriately endorsed, any Instrument or Chattel Paper connected with any
Account; (F) collect its Accounts in the ordinary course of business and prior
to a Default sell its Inventory only in the ordinary course of business for
value to buyers in the ordinary course of business; (G) not sell or transfer
after a Default any of its Inventory; (H) keep accurate and complete records of
its Account Equipment and Inventory; (I) promptly notify Bank in writing of any
trademarks, trade names, patents or copyrights which it may hereafter own or
obtain a license to use or under which it may issue invoices; and (J) maintain
its Equipment in good working order and in accordance with the manufacturers'
manuals therefor.
38
6.11 CONTROL OF ACCOUNTS
(A) Bank shall have the right at any time after an Event of Default
to notify Account Debtors to make payments to Bank, to endorse all items of
payment which may come into its hands payable to Borrower or Guarantors, to take
control of any cash or non-cash proceeds of Accounts and of any returned or
repossessed goods; to compromise, extend or renew any Account or deal with it as
it may deem advisable, and to make exchanges, substitutions or surrenders of
Collateral, to notify the postal authorities, to deliver all mail,
correspondence or parcels addressed to Borrower or Guarantors to Bank at such
address as Bank may choose.
(B) Each of Borrower and Guarantor herewith appoints Bank or its
designee as attorney-in-fact to endorse Borrower's or Guarantors' names (as
applicable) on any checks, notes, acceptances, drafts or any other Instrument or
document requiring said endorsement and to sign Borrower's names on any invoice
or bills of lading relating to any Account, or drafts against its customers, or
schedules or confirmatory assignment on Accounts, or notices of assignment,
financing statements under the Uniform Commercial Code, and other public
records, and in verification of Accounts and in notices to Account Debtors.
(C) Bank shall have no obligation to preserve any rights against any
Person obligated on any Account, Chattel Paper, Instrument or other item of
Collateral.
6.12 CHANGE OF LOCATIONS Each of Borrower and Guarantors will
furnish Bank with at least ten (10) days prior written notice of any change in
location of or addition to its chief executive office, the office where it keeps
its records concerning its accounts, its location of Inventory, Equipment and
other assets, and other business locations.
6.13 DEPOSITORY RELATIONSHIPS Each of Borrower and Guarantors agrees
to maintain at Bank its primary depository relationship, as well as all of its
cash management accounts.
39
VII
NEGATIVE COVENANTS
7.1 LOANS, ADVANCES AND INVESTMENTS Each of Borrower and Guarantors
will not, without prior written consent of Bank, make any loans or advances to
or investment in any Person except for Investment Obligations and Permitted
Advances not to exceed in the aggregate during any fiscal year $10,000 to any
Person and $20,000 in the aggregate.
7.2 FINANCIAL COVENANTS
(A) Total Liabilities to Tangible Net Worth. Borrower and Guarantors
will not allow their ratio of Total Liabilities to Tangible Net Worth (on a
consolidated basis) to exceed:
from the Closing Date to March 31, 1998 - 1:00 to 1:00;
from April 1, 1998 through the Maturity Date - 1.25:1.00.
(B) Tangible Net Worth. Borrower and Guarantors shall not permit
their Tangible Net Worth (on a consolidated basis) to be less than the following
amounts at the following times:
from the Closing Date to March 31, 1998 - $8,500,000; and
from April 1, 1998 through March 31, 1999 $9,500,000; and
from April 1, 1999 through the Maturity Date - $10,500,000.
(C) Quick Ratio. Borrower and Guarantors shall not permit their
Quick Ratio (on a consolidated basis) at any time to be less than 2.00 to 1.00.
7.3 LIENS Neither Borrower nor Guarantors will allow or suffer any
Lien to exist on any of its assets except for Permitted Encumbrances.
7.4 LIMITATION ON INDEBTEDNESS Neither Borrower nor Guarantors will
create, incur, assume or suffer to exist any Indebtedness, whether by direct
borrowing or credit or by guaranty or surety agreement, except Permitted
Indebtedness.
7.5 CERTIFICATE OF INCORPORATION AND BY-LAWS Neither Borrower nor
any of the Guarantors will amend or otherwise modify its Certificate of
Incorporation, By-Laws or other organizational documents.
40
7.6 TRANSACTIONS AMONG AFFILIATES Neither Borrower nor Guarantors
will become a party to any transaction with an Affiliate or Subsidiary of
Borrower (other than the Guarantors) unless the terms and conditions relating to
such transaction are as favorable to Borrower or Guarantor (as applicable) as
would be obtainable at the time in a comparable arms-length transaction with a
Person other than an Affiliate or Subsidiary or pay or incur any obligation to
pay any management, service, consulting or similar fees to any Affiliate or
Subsidiary (other than the Guarantors).
7.7 SPECIAL COVENANTS AS TO ASSETS Each of Borrower and Guarantors
covenants that until satisfaction in full of all Obligations to Bank and until
termination of this Agreement:
(A) no Inventory shall be stored with a bailee, warehouseman or
similar party without Bank's prior written consent and, if Bank gives such
consent, the Borrower and Guarantors (as applicable) will concurrently therewith
cause any such bailee, warehouseman or similar party to issue and deliver to
Bank, in form and substance acceptable to Bank, warehouse receipts therefor in
Bank's name;
(B) neither Borrower nor Guarantors will hold any Goods belonging to
third parties or in which other parties have an interest, including any Goods
sold on a ▇▇▇▇ and hold basis, except as set forth on Schedule 5.8;
(C) neither Borrower nor Guarantors will purchase or otherwise hold
Goods on a consignment basis except as set forth on Schedule 5.8;
(D) except as set forth on Schedule 5.8 none of the Borrowers' nor
Guarantors' Inventory will be of a nature that contains any labels, trademarks,
trade names, or other identifying characteristics which are the property of
third parties, and the use of which by Borrower or Guarantor is in violation of
the rights of such third parties or a violation of any license, royalty or
similar agreements with any third parties;
(E) except as set forth on Schedule 5.8, Borrower nor Guarantors
will allow any Goods of Borrower or any further (as applicable) to be held by
any Person in the future.
(F) except upon prior written notice to Bank, neither Borrower nor
Guarantors will in the future purchase any Inventory except in the ordinary
course of business from Persons customarily in the business of selling such
Inventory.
(G) neither Borrower nor Guarantors will, without prior written
consent of Bank, remove the Collateral from its present location, except for the
removal of Inventory upon its sale in the ordinary course of business or
transfers of Inventory to any other facility of the Obligors as to which
facility appropriate UCC-1 financing statements shall have been filed.
41
(H) neither Borrower nor Guarantors will sell or transfer any
Inventory to any Affiliate or Subsidiary (other than the Guarantors);
(I) neither Borrower nor Guarantors will sell, lease or transfer any
of its Inventory or other assets except for sales of Inventory in the ordinary
course of business to good faith purchasers for value; and
(J) neither Borrower nor Guarantors will not cause any surety bonds
to be issued on its behalf in connection with any contracts or purchase orders
except upon not less than ten (10) days prior written notice to Bank.
7.8 PREPAYMENTS OF INDEBTEDNESS neither Borrower nor Guarantors will
prepay or obligate itself to prepay in whole or in part, any Indebtedness (other
than any Indebtedness due hereunder).
7.9 FISCAL YEAR neither Borrower nor Guarantors will change its
fiscal years from a March 31 fiscal year end without the prior written consent
of Bank.
7.10 CHANGE IN CONTROL neither Borrower nor Guarantors will make or
suffer a change in management of Borrower or Guarantor (as applicable) which
might (in Bank's determination) effectively cause undesirable results in
Borrower's or Guarantor's (as applicable) operations and financial performance.
Borrower shall not sell or transfer any stock or other equity interest or issue
any additional stock or other equity interest in Borrower or options or warrants
for the issuance of stock or other equity interest in Borrower other than the
issuance of common stock to Borrower's existing stockholders and the issuance of
options and shares of common stock into which such options are exercisable under
the two (2) stock option plans adopted by the Borrower entitled the "1996
Incentive Stock Option Plan" and the "1997 Associate Stock Option Plan."
Notwithstanding anything else to the contrary, no such options shall be granted
nor shall any common stock be issued upon the exercise of any such option if
there shall then be existing any Event of Default or any Event of Default shall
arise from such exercise or issuance.
7.11 CHANGE IN ACCOUNTING PRINCIPLES Neither Borrower nor Guarantors
will change or permit any change in accounting principles applied to Borrower
nor Guarantors, except as required by GAAP.
7.12 SALE AND LEASEBACK Neither Borrower nor Guarantors will enter
into any arrangement with any Person providing for the leasing by Borrower or
Guarantors (as applicable) of property which has been or is to be sold or
transferred by Borrower or Guarantors (as applicable) to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of Borrower.
42
7.13 MAINTAIN CORPORATE EXISTENCE AND NATURE OF BUSINESS
(A) Neither Borrower nor Guarantors will allow its corporate
existence to be other than in good standing and will not dissolve or liquidate
(or discontinue their normal operations with the intent to liquidate), or merge
or consolidate with or acquire or affiliate with any other business entity or
form any Subsidiary or Affiliate or sell all or substantially all of its Assets.
(B) Neither Borrower nor Guarantors will change its corporate or
trade names without furnishing to Bank at least ten (10) days prior written
notice thereof.
(C) Neither Borrower nor Guarantors will utilize any trade name not
set forth on Schedule 5.8 without furnishing to Bank at least ten (10) days
prior written notice thereof.
(D) Neither Borrower nor Guarantors will change the nature of its
businesses.
7.14 DIVIDENDS, REDEMPTIONS Neither Borrower nor Guarantors will pay
or declare any cash or property dividends, nor otherwise make a withdrawal or
distribution of capital or income, nor redeem, retire, repurchase or otherwise
acquire or set aside reserves to acquire any stock, partnership or other
ownership interest of Borrower or Guarantor of any Subsidiary or Affiliate if a
Default or Event of Default exists hereunder or any such action would cause a
Default or Event of Default to occur hereunder.
7.15 DISCHARGE OF HAZARDOUS WASTE Neither Borrower nor Guarantors
shall cause or permit to exist a discharge of hazardous substances or waste
resulting in damage to natural resources, unless such discharge is in compliance
with the conditions of a valid permit issued by the appropriate Governmental
Body.
7.16 LEASES Neither Borrower nor Guarantors shall enter into any
leases of real property, other than Permitted Leases.
43
VIII
EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an Event of
Default:
8.1 NON-PAYMENT Failure on the part of Borrower or Guarantors to pay
any Obligation to Bank when due.
8.2 NON-PERFORMANCE (a) Failure on the part of any Obligor to
perform its Obligations when due under Article VIII hereof or under Section 6.1,
6.2, 6.3, 6.9, 6. 10 and 6.12 hereto; or (b) other than as provided in Section
8.2(a), failure on the part of any Obligor to perform when such performance is
due any term, covenant or condition contained in any Loan Document or any other
agreement now existing or hereafter entered into with Bank, or in any document
executed in connection with any such agreements within thirty (30) days after
the Bank shall have notified such Obligor in writing of such failure.
8.3 MISREPRESENTATION Any representation, covenant or warranty made
by any Obligor in this Agreement, or any Loan Document, or in connection with
any instrument of guaranty or security furnished to Bank shall have proved to
have been inaccurate in any substantial or material respect as of the date or
dates with respect to which it is made or deemed to have been made.
8.4 OTHER LIEN Any Obligor shall have caused or permitted a security
interest or Lien, perfected or otherwise, other than the security interest and
Liens specifically provided for or permitted hereunder, to be created in any of
its assets, or shall have failed to take any action requested by Bank to perfect
or protect the security interests and Liens provided for herein.
8.5 INSOLVENCY Any Obligor shall have applied for or consented to
the appointment of a custodian, receiver, trustee or liquidator of all or a
substantial part of its assets; a custodian shall have been appointed with or
without consent of such Obligor; any Obligor is generally not paying its debts
as they become due, has made a general assignment for the benefit of creditors;
has been adjudicated insolvent, or has filed a voluntary petition in bankruptcy,
or a petition or an answer seeking reorganization or an arrangement with
creditors or to take advantage of any insolvency law, or an answer admitting the
material allegations of a petition in any bankruptcy, reorganization or
insolvency proceeding; or taken corporate action for the purpose of effecting
any, of the foregoing; or an order, judgment or decree shall have been entered,
without the application, approval or consent of any Obligor by any court of
competent jurisdiction approving a petition seeking reorganization of Borrower,
or appointing a receiver, trustee, custodian or liquidator of such Obligor, or a
substantial part of its assets and such order, judgment or decree shall have
continued unstayed and in effect for any period of forty-five (45) consecutive
days; or a petition in bankruptcy shall have been filed against any Obligor and
shall not have been dismissed for a period of thirty (30) consecutive days, or
if an Order for Relief
44
has been entered under the Bankruptcy Code, or if any Obligor shall have
suspended the transaction of its usual business.
8.6 JUDGMENT OR LIEN Entry of a judgment, issuance of any
garnishment, attachment or distraint, the filing of any lien or of any
governmental attachment against any property of any Obligor in an amount (in the
aggregate or alone) of $10,000 which entry, issuance, attachment or filing shall
have continued unstayed and in effect for a period of thirty (30) consecutive
days.
8.7 NONCOMPLIANCE WITH LEASES OR LAWS Failure of any Obligor to
comply with the material terms and conditions of any lease covering the premises
where any of its assets are located, including the Collateral and any orders,
ordinances, laws or statutes of any city, state or other governmental department
having jurisdiction with respect to such premises or the conduct of business
thereon.
8.8 ORGANIZATIONAL CHANGE Any change in the existing corporate
organization of any Obligor, including but not limited to a change to a
partnership (general or limited), limited liability company or the dissolution
of any Obligor.
8.9 INSECURITY If Bank shall deem itself insecure.
8. 10 IMPAIRMENT OF RESPONSIBILITY Occurrence of any event which, in
the opinion of Bank, impairs the financial responsibility of any Obligor.
8.11 ADVERSE CHANGE The determination by Bank that a Material
Adverse Change has occurred of any Obligor.
8.12 MISREPRESENTATION OF FACT The determination by Bank that a
material misrepresentation of fact has been made by any Obligor in any writing
supplementary or ancillary hereto.
8.13 ERISA If (A) any Reportable Event occurs and shall be
continuing for thirty (30) days after notice from Bank to any Obligor, or (B)
any Plan shall be terminated, or (C) the Plan administrator of any Plan shall
file with the PBGC a notice of intention to terminate such Plan, or (D) the PBGC
shall institute proceedings to terminate any Plan or appoint a trustee to
administer any Plan, and, if in any of the cases set forth in (A) through (D)
above, Bank reasonably determines in good faith that any Plan will be terminated
and that the amount of the unfunded guaranteed benefits (within the meaning of
Title IV of ERISA) resulting upon termination of such Plan would have a material
adverse effect on the financial condition and properties or operation of any
Obligor if a lien against the assets of Borrower were to result under ERISA.
8.14 DEFAULT IN OBLIGATIONS TO THIRD PARTIES Any Obligor is in
default beyond any applicable grace or cure period of any obligation for in
excess of $10,000
45
(in the aggregate), unless such Obligor is contesting such default in good faith
and shall have set aside on its books adequate reserves to satisfy any claims
arising therefrom.
8.15A. DEFAULT IN OBLIGATIONS TO BANK OR ITS AFFILIATES Any Obligor
or any Affiliate of any Obligor in default beyond any applicable grace or cure
period of any obligation of any Obligor, or any affiliate of any Obligor to Bank
or any affiliate or Bank other than those existing under the Loan Documents.
8.15B. TERMINATION OF DISTRIBUTION AGREEMENT. The Distribution
Agreement between the Borrower and Rich City International Packaging Limited
shall for any reason terminate or otherwise cease to be in full force and
effect.
8.15 LICENSES If any license or permit necessary for the continued
operation of Borrower's or any of the Obligor's customary business is revoked,
suspended, terminated or not renewed.
46
IX
CONSEQUENCE OF EVENT OF DEFAULT
In case any Event of Default shall have occurred, then and in every
such Event of Default, Bank may take any or all of the following actions, at the
same time or at different times, provided that upon the occurrence of an Event
of Default under Section 8.5 hereof the Facilities shall automatically terminate
and all Obligations shall automatically be immediately due and payable;
9.1 ACCELERATION Declare the Facilities, sums and Obligations owing
Bank from Borrower and any other Obligors under this Agreement or any other
agreement or loan between Bank and Borrower and such other Obligors to be
forthwith due and payable, whereupon all such sums shall forthwith become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by Borrower and any other Obligor and
the Commitment shall be terminated.
9.2 POSSESSION Proceed with or without judicial process to take
possession of all or any part of the Collateral provided for herein not already
in the possession of Bank and Borrower and each other Obligor agrees that upon
receipt of notice of Bank's intention to take possession of all or any part of
said Collateral, Borrower and such other Obligors will do everything reasonably
necessary to assemble the Collateral and make same available to Bank at a place
to be designated by Bank. Each of Borrower and any other Obligor hereby waives
any and all rights it may have, by statute, constitution or otherwise to notice
or a hearing to determine the probable cause of Bank to obtain possession, by
Court proceedings or otherwise, of the Collateral provided for in this or in any
other agreement with Bank.
9.3 METHODS OF SALE So long as Bank acts in a commercially
reasonable manner, assign, transfer and deliver at any time or from time to time
the whole or any portion of the Collateral or any rights or interest therein in
accordance with the Uniform Commercial Code, and without limiting the scope of
Bank's rights thereunder, Bank may sell the Collateral at public or private
sale, or in any other manner, at such price or prices as Bank may deem best, and
either for cash or credit, or for future delivery, at the option of Bank, in
bulk or in parcels and with or without having the Collateral at the sale or
other disposition. Bank shall have the right to be the purchaser at any public
sale. Bank shall have the right to conduct such sales on Borrower's and any
other Obligor'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 license or other right to use, without charge,
Borrower's and each other Obligor'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 franchise agreements shall inure to Bank's benefit. Each of
Borrower and each other Obligor hereby agrees that a reasonable means of
disposition of Accounts shall be for Bank to hold and liquidate any and all
Accounts. In the event of a sale of the Collateral, or any other
47
disposition thereof, Bank shall apply all proceeds first to all costs and
expenses of disposition, including attorneys' fees, and then to the Obligations
of Borrower to Bank.
9.4 RETENTION OF COLLATERAL Elect to retain the Collateral or any
part thereof in satisfaction of all Obligations due from Borrower and any other
Obligors to Bank upon notice of such proposed election to Borrower or any other
Obligors and any other party as may be required by the Uniform Commercial Code.
9.5 SET-OFF Bank shall have the right immediately, and without
notice or other action to set-off against any of the Obligations to Bank any sum
owed by Bank in any capacity to Borrower or any other Obligor whether due or
not, and Bank shall be deemed to have exercised such right of set-off and to
have made a charge against any such sum immediately upon the occurrence of such
Event of Default, even though the actual book entries may be made at some time
subsequent thereto.
9.6 ATTORNEYS' FEES AND EXPENSES Add to the Obligations of Borrower
and the other Obligors, Bank's reasonable expenses to obtain or enforce payment
of any Obligations hereunder and the enforcement or liquidation of any debt
hereunder shall include reasonable attorneys' fees plus other legal expenses
incurred by Bank.
9.7 INCREASE IN INTEREST/LATE CHARGE Increase the rate of interest
under any Obligations to the Default Rate. Unless otherwise agreed by Bank, this
increase in interest rate shall be retroactive to the date of the first
occurrence of an Event of Default. Add a late charge of five percent (5%) of any
payment of principal or interest required to be made by Borrower to Bank for
each month or portion thereof such payment remains unpaid, such period to begin
ten (10) days after such payment is required to be made.
9.8 BANK'S PERFORMANCE OF OBLIGATIONS If Borrower fails to comply
with any of the covenants or perform any of its obligations set forth herein or
in any other Loan Document, Bank may, but shall have no obligation to, perform
any such obligations or undertake any act to cause such covenant to be complied
with, including, but not limited to, discharging any Lien on any asset other
than Permitted Encumbrances. Any and all sums, and all costs and expenses
incurred by Bank in so performing or causing compliance, shall be payable on
demand together with interest at the default rate provided for in Section 9.7
hereof from the date of any such payment by Bank until the date paid by Borrower
or any other Obligor. Any such performance by Bank shall not cure any Default or
Event of Default by Borrower or such other Obligor.
9.9 OTHER REMEDIES Exercise any other remedies under the Uniform
Commercial Code or other applicable law, or any other Loan Document, including
but not limited to proceeding to enforce its right by suit in equity, action at
law or other appropriate proceeding, whether for payment or the specific
performance of the covenants or agreements contained in this Agreement or any
other Loan Document.
48
X
MISCELLANEOUS
10.1 NO WAIVER Each Obligor agrees that no delay on the part of Bank
in exercising any power or right hereunder or any other Loan Document shall
operate as a waiver of any such power or right, nor act as a consent to any
departure by any Obligor from any of the terms or conditions hereof or thereof,
preclude other or further exercise thereof, or the exercise of any other power
or right. No waiver whatsoever shall be valid unless in writing signed by Bank
and then only to the extent set forth therein.
10.2 MODIFICATION OR AMENDMENT This Agreement and every other Loan
Document cannot be changed orally and cannot be changed by an executory
agreement unless such agreement is in writing and signed by all parties hereto
by their duly authorized officers.
10.3 WAIVER OF NOTICE Each Obligor waives presentment, dishonor and
notice of dishonor, protest and notice of protest of all commercial papers at
any time held by Bank on which any Obligor is in any way liable.
10.4 ONE INSTRUMENT The provisions of this Agreement shall be in
addition to those of any notes or other evidence of the Obligations held by Bank
relating to this particular transaction, all of which shall be construed as one
instrument.
10.5 LAW OF NEW JERSEY This Agreement and all other Loan Documents
and the rights of the parties hereto and thereto shall be governed by the
internal laws of the State of New Jersey without regard to conflict of laws.
10.6 JURISDICTION Each Obligor hereby irrevocably consents to the
jurisdiction of the Courts of the State of New Jersey or any Federal Court in
such State in connection with any action or proceeding arising out of or related
to this Agreement or any other Loan Document. In any such litigation, each
Obligor waives personal service of any summons, complaint or other process and
agree that service may be made by certified or registered mail to them, at the
address provided herein.
10.7 SUCCESSORS OR ASSIGNS This Agreement and all other Loan
Documents shall be binding upon and shall inure to the benefit of the parties
hereto, their respective successors and assigns, provided, however, that the
Obligors shall not have any right to assign any of their rights hereunder.
10.8 RIGHTS CUMULATIVE The rights and remedies herein expressed or
in any other Loan Document to be vested in or conferred upon Bank shall be
cumulative and
49
shall be in addition to and not in substitution for or in derogation of the
rights and remedies conferred upon secured creditors by the Uniform Commercial
Code or any other applicable law.
10.9 LIMITATION OF LIABILITY No claim may be made by Borrower or any
other Obligor or other Person against Bank or, as the case may be, directors,
officers, employees, attorneys or agents of Bank for any special, punitive,
indirect or consequential damages in respect of any claim for breach of contract
arising out of or related to the transactions contemplated by this Agreement, or
any act, omission or event occurring in connection therewith; and Borrower and
the other Obligors hereby waive, release and agree not to ▇▇▇ upon any claim for
any such damages, whether or not accrued and whether or not known or suspected
to exist in its favor.
10.10 NOTIFICATION OF DISPOSITION OF COLLATERAL Any notification of
a sale or other disposition of the Collateral will be sufficient if given in the
manner set forth in Section 10.11 hereof not less than five (5) days prior to
the day on which such sales or other disposition will be made, and such
notification shall be deemed reasonable notice.
10.11 ADDRESSES OF NOTICES Any written notice required or permitted
to be given by this Agreement and the other Loan Documents shall be given or
made in writing, including telecopy, and shall be, as elected by the party
giving such notice, served personally by messenger or courier service,
telecopied (followed up by a mailing), or mailed in the United States by
prepaid, registered or certified mail, return receipt requested, to the
following:
If to any Obligor:
Leading Edge Packaging, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Building 409, Raritan Center
Edison, New Jersey 08837
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer
Fax #: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (except
for routine notices with
respect to borrowings
hereunder and
the like) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax #: (▇▇▇)▇▇▇-▇▇▇▇
50
If to Bank:
FIRST UNION NATIONAL BANK
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, Vice President
Fax #: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (except
for routine notices
with respect to borrowings
hereunder and the like) to:
▇▇▇▇▇, DANZIG, SCHERER, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Headquarters Plaza
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax #: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice given in accordance with the provisions of this section shall be
deemed effective, if hand delivered, on the date of such delivery, or on the
date telecommunicated if telecopied, or if mailed, on the date upon which the
return receipt is signed or delivery refused or the notice is designated by the
postal authorities as not deliverable, as the case may be. Each party may give
notice to each of the other parties of a change of its address for the purpose
of giving notice under this section which, thereafter until changed by like
notice, shall be the address of such party for purposes of this Agreement. Any
failure to provide notice to the parties' attorneys shall not affect the
validity of any otherwise proper notice.
10.12 TITLES The titles and headings indicated herein and any table
of contents are inserted for convenience only and shall not be considered a part
of this Agreement or in any way limit the construction or interpretation of this
Agreement.
10.13 DISCLOSURE Bank is hereby authorized to disclose any financial
or other information it may have about the Obligors or any affiliate of any
Obligor to any present or future participant or prospective participant, any
regulatory body or agency having jurisdiction over Bank, or to any Person which
succeeds to all or any part of Bank's interest herein.
10.14 TERM This Agreement shall with respect to Section 2.1 hereof
have a term through the Maturity Date or such later date as Bank may agree to in
writing in its sole discretion. The Advances provided for in Section 2.1 hereof
shall be due and payable in full upon expiration of the term as set forth herein
or as otherwise set forth in this Agreement. Notwithstanding the expiration of
the term, the rights of Bank hereunder and the obligations of
51
Borrower hereunder, including but not limited to the grant of security interests
in and Liens on the Collateral as set forth in Article III hereof, shall remain
in full force and effect until all of the Obligations are paid in full.
10.15 INTEREST LIMITATION It is the intention of Bank and the
Obligors to conform strictly to the laws of the State of New Jersey or the laws
of such other jurisdiction which may be found to apply to the subject
transaction relating to the maximum rate of interest which may be lawfully
contracted for or charged. Nothing contained in this Agreement or any other Loan
Document shall be construed to mean that Borrower has contracted to pay or is
obligated to pay any sum or sums to Bank in excess of those which may lawfully
be charged or contracted for under applicable law of the State of New Jersey or
other applicable law. If any provision of this Agreement or any of the other
Loan Documents shall require payment of any sum or sums of interest in excess of
the maximum permitted rate which may be lawfully contracted for or charged, then
Borrower and Bank agree that such result is as a consequence of their
inadvertence and/or mistake, and the interest charge for which Borrower is
liable under this instrument shall be recomputed for the sole and limited
purpose of determining the extent of the obligations and liabilities of any of
the Obligors to Bank so that the interest charges for which Borrower is liable
shall not exceed the maximum permitted rate which is determined to be
applicable. Additionally, any sums of interest which are collected by Bank from
any such Obligors or other source in connection with the Facilities evidenced
hereby which are in excess of the maximum permitted rate shall, for the sole and
limited purpose of determining the extent of the obligations and liabilities of
Borrower to Bank, be credited against the amount of principal for which any such
Obligors is liable to Bank after giving effect to any recomputation and
adjustment required pursuant to the foregoing provisions of this section, or if
such outstanding principal balance and interest are paid in full, any such
excess shall be remitted by Bank to any such Obligors.
10.16 INDEMNIFICATION Each Obligor hereby agrees to and do hereby
jointly and severally indemnify, protect, defend and save harmless Bank and any
member, officer, director, official, agent, employee and attorney of Bank, and
its respective heirs, successors and assigns (collectively, the "Indemnified
Parties"), from and against any and all losses, damages, expenses or liabilities
of any kind or nature and from any suits, claims or demands, including
reasonable counsel fees incurred in investigating or defending such claim,
suffered by any of them and caused by, relating to, arising out of, resulting
from, or in any way connected with the Loan Documents and the transactions
contemplated therein or the Collateral (unless caused by the gross negligence or
willful misconduct of the Indemnified Parties) including, without limitation:
(i) losses, damages, expenses or liabilities sustained by Bank in connection
with any environmental cleanup or other remedy required or mandated by any
Environmental Laws; (ii) any untrue statement of a material fact contained in
information submitted to Bank by Borrower or the omission of any material fact
necessary to be stated therein in order to make such statement not misleading or
incomplete; (iii) the failure of Borrower or any other Obligor to perform any
obligations herein required to be performed by Borrower or such Obligor; and
(iv) the ownership, construction, occupancy, operations, use and maintenance of
any of Borrower's
52
or any such Obligor's properties. The provisions of this Section 10.16 shall
survive termination of this Agreement and the other Loan Documents.
10.17 WAIVER OF TRIAL BY JURY EACH OF BORROWER AND THE OTHER
OBLIGORS HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
10.18 ARBITRATION
(A) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement and the other Loan
Documents ("Disputes") between or among parties to this Agreement shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, claims arising from Loan Documents executed in the
future, or claims arising out of or connected with the transaction reflected by
this Agreement
(B) Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of Bank
first stated above is located. The expedited procedures set forth in Rule 51 et
seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted or if such person is not
available to serve, the single arbitrator may be a licensed attorney.
Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements.
10.19 PRESERVATION AND LIMITATION OF REMEDIES
(A) Notwithstanding the preceding binding arbitration provisions,
Bank and Obligors agree to preserve, without diminution, certain remedies that
any party hereto may employ or exercise freely; independently or in connection
with an arbitration proceeding or after an arbitration action is brought. Bank
and Obligors shall have the right to proceed in any court of proper jurisdiction
or by self-help to exercise or prosecute the following remedies, as applicable:
(i) all rights to foreclose against any real or personal property or other
security by exercising a power of sale granted under the Loan Documents or under
applicable law or by judicial foreclosure and sale, including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, set-off, and peaceful
53
possession of personal property; (iii) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and filing an involuntary bankruptcy proceeding; and
(iv) when applicable, a judgment by confession of judgment. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
(B) Bank and Obligors agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
10.20 OBLIGATIONS OF OBLIGORS. Notwithstanding anything else
contained herein, it is the intention of the Bank and each of the Obligors that
the Obligors' obligations hereunder, whether for payment or performance of any
covenant or warranty hereunder or under any other Loan Document, are to be the
joint and several obligations of the Obligors.
54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
FIRST UNION NATIONAL BANK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
WITNESS LEADING EDGE PACKAGING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Sales Asst./ Asst Cashier Title: CFO
WITNESS LEP PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ----------------------------------
Name: Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Title: CFO
WITNESS LEP MARKETING & SALES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ----------------------------------
Name: Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Title: CFO
WITNESS LEP DISTRIBUTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ----------------------------------
Name: Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Title: CFO
55
LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A - Form Continuing Bankers' Acceptance Agreement
Exhibit B - Guaranty
Exhibit C - Form Irrevocable Letter of Credit
Exhibit D - Opinion of Counsel
Exhibit E - Certificate of Accountants and Certificate of Chief
Financial Officer
Exhibit F - Landlord's Waiver
Exhibit H - Form Accounts Receivable Reconciliation Report
Schedules
Schedule 1.72 - Other Indebtedness
Schedule 2.7(a) - Letter of Credits Fee Schedule
Schedule 2.8 - Bankers' Acceptances Commission Fee Schedule
Schedule 5.1 - Representations and Warranties
Schedule 5.8 - Locations of Chief Executive Office; Locations of Books
and Records; Locations of Collateral
EXHIBIT A
Continuing Bankers' Acceptance Agreement
See Tab No. 3
EXHIBIT B
Guaranty
See Tab No. 5
EXHIBIT C
Irrevocable Letter of Credit
See Tab No. 4
EXHIBIT D
Opinion of Counsel
See Tab No. 18
EXHIBIT E
Certificate of Accountants and Certificate of Chief Financial Officer
See Tab Nos, 19 and 20
EXHIBIT F
Landlord's Waiver
None
EXHIBIT H
Form of Accounts Receivable Reconciliation Report
The form of Accounts Receivable Reconciliation Report shall be in such form as
hereafter agreed to by the Obligors and the Bank.
SCHEDULE 1.72
Other Indebtedness
None
SCHEDULE 2.7(a) & 2.8
================================================================================
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Import Letters of Credit
Issuance
Mail/Fax $0
Cable Charge $25 per page
Pre-advice $40
Amendments (limit of 5 per L/C) $60
Cable Charge $25 per page
Document Examination/Payment 1/4%, min. $75
Discrepancy $60
Cancellation, Unutilized $70
Steamship Guarantee/Air Release $125 per quarter
Bankers Acceptances
Acceptance Commission
for amounts under $250,000 1.25% p.a., min. $150
for amounts $250,000 to $499,999 1.125% pa., min. $150
for amounts $500,000 & over 1.0% p.a., min. $150
Discount Rate As arranged, min. $100
Funds Transfer
Outgoing wire from an account $30
Other Activity Charges
Courier
domestic $20
foreign based on country and
service used
SCHEDULE 5.1
(A) Jurisdiction of incorporation of Obligors and in which they are in good
standing:
All Obligors are incorporated in the State of Delaware and are in good
standing in that state.
(B) Jurisdiction(s) Obligors are authorized to transact business and are in
good standing:
Leading Edge Packaging, Inc. is qualified to do business in the states of
New York and New Jersey and is in good standing in those states. LEP
Products, Inc. is qualified to do business in New Jersey and is in good
standing in that state.
(C) Prior changes in structure (mergers, consolidations, etc.):
None.
(D) Prior changes in name of Obligors:
LEP Products, Inc. was incorporated under the name LEP-Sun's Products,
Inc.
LEP Marketing and Sales was incorporated under the name LEP Sales and
Marketing, Inc.
(E) Trade names used by Obligors or under which invoices are issued:
LEP
Also, Leading Edge Packaging, Inc. issues joint invoices under its name
and that of Hang Ten for sales of watches of the Hang Ten brand.
(F) Subsidiaries and Affiliates
Name % of Outstanding Stock Owned
---- ----------------------------
Leading Edge Packaging, Inc. owns 100% of the stock of each of the
Guarantors.
Rich City International Packaging Limited owns approximately 57%
[ILLEGIBLE] of the stock of Leading Edge Packaging, Inc.
▇▇▇▇▇ ▇▇▇ Development Holdings Limited owns 100% of the stock of Rich City
as well as several other operating subsidiaries.
SCHEDULE 5.8
(A) (i) Obligors' chief executive office:
Leading Edge Packaging, Inc. has its chief executive office at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
Each of the Guarantors has its chief executive office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(ii) Change in location of foregoing within past four (4) months:
None.
(iii) Location of Books and Records:
Obligors maintain books and records in both offices listed under Item
(A)(i) above. In addition, certain records are kept at the offices of
▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
(iv) Change in location of foregoing within past four (4) months:
None.
(v) Present location(s) of Inventory and other assets:
Obligors keep all of their inventory and other assets at the locations
listed under Item (A)(i) above.
(B) Location from which assets have been moved or other location of assets
within past four (4) months:
None.
i
Schedule 5.8 continued
(C) (i) Name and address of warehouses, bailees or similar parties where any
Inventory of Obligors is located:
None, other than samples of de minimus value in the hands of distributors
from time to time.
(ii) if any: warehouse receipts are/are not issued:
None.
(iii) if warehouse receipts issued: they are negotiable/non negotiable:
N/A
(D) Goods held by Obligors in which other parties have any interests,
including Goods sold on a ▇▇▇▇ and hold basis:
Watches supplied by Hang Ten under its brand name.
(E) Goods held by Obligors on a consignment basis:
None.
(F) Inventory with trademarks, trade names, and the like which are the
property of others.
Watches carrying the Hang Ten brand name.
ii
Schedule 5.8 continued
(G) Names and addresses of persons holding Goods belonging to Obligors and
location of Goods:
None. (See response to Item (C)(i) above.)
(H) Purchases of Inventory or other assets not in the ordinary course of
business or from persons not customarily in the business of selling such
Goods:
None.
(I) Instruments or Chattel Paper held by Obligors relating to Accounts:
Letters of Credit for larger Accounts
(J) Trademark, trade names, patents or copyrights.
The Borrower has a trademark covering the name Leading Edge Packaging for
jewelry cases (app. Serial No. 75/128,302), which was assigned to Borrower
by Rocket Jewelry Box, Inc. The Assignment has been recorded at Reel
1602/Frame 0408.
iii