Exhibit 10.1
CREDIT AND SECURITY AGREEMENT
Dated as of September 7, 2004
by and among
U.S. PLASTIC LUMBER LTD.,
as Debtor and Debtor in Possession,
as the Borrower,
CERTAIN AFFILIATES OF U.S. PLASTIC LUMBER LTD.,
as Debtors and Debtors in Possession,
as the Guarantors,
and
AMPAC CAPITAL SOLUTIONS, LLC,
as the Lender
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS...................................................................................... 1
Section 1.1 Definitions....................................................................... 1
Section 1.2 Other Definitional Terms; Rules of Interpretation................................. 14
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY.......................................................... 14
Section 2.1 Advances.......................................................................... 14
Section 2.2 Procedures for Requesting Advances................................................ 14
Section 2.3 Sale Milestones................................................................... 15
Section 2.4 INTENTIONALLY OMITTED............................................................. 16
Section 2.5 Letters of Credit................................................................. 16
Section 2.6 Special Account................................................................... 17
Section 2.7 Payment of Amounts Drawn Under Letters of Credit; Obligation of Reimbursement..... 17
Section 2.8 Obligations Absolute.............................................................. 18
Section 2.9 Inventory Appraisals.............................................................. 18
Section 2.10 Interest; Minimum Interest Charge; Default Interest; Participations; Usury........ 18
Section 2.11 Fees.............................................................................. 19
Section 2.12 Time for Interest Payments; Payment on Non-Banking Days; Computation of Interest
and Fees......................................................................... 20
Section 2.13 Lockbox; Cash Collateral Account; Application of Payments......................... 21
Section 2.14 Voluntary Prepayment; Termination of the Credit Facility by the Borrower.......... 22
Section 2.15 Mandatory Prepayment.............................................................. 22
Section 2.16 Advances to Pay Obligations....................................................... 22
Section 2.17 Use of Proceeds................................................................... 22
Section 2.18 Liability Records................................................................. 22
ARTICLE III
SECURITY INTEREST; PRIORITY OCCUPANCY; SETOFF AND LIENS.......................................... 23
Section 3.1 Grant of Security Interest........................................................ 23
Section 3.2 Notification of Account Debtors and Other Obligors................................ 23
Section 3.3 Assignment of Insurance........................................................... 23
Section 3.4 Occupancy......................................................................... 23
Section 3.5 License........................................................................... 24
Section 3.6 Financing Statement............................................................... 24
Section 3.7 Setoff............................................................................ 25
Section 3.8 Collateral........................................................................ 26
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Section 3.9 Priority and Liens................................................................ 26
ARTICLE IV
CONDITIONS OF LENDING............................................................................ 27
Section 4.1 Conditions Precedent to the Initial Advance and Letter of Credit.................. 27
Section 4.2 Conditions Precedent to All Advances and Letters of Credit........................ 29
ARTICLE V
REPRESENTATIONS AND WARRANTIES................................................................... 31
Section 5.1 Existence and Power: Name: Chief Executive Office: Inventory and
Equipment Locations: Federal Employer Identification Number....................... 31
Section 5.2 Capitalization.................................................................... 31
Section 5.3 Authorization of Borrowing........................................................ 31
Section 5.4 Legal Agreements.................................................................. 31
Section 5.5 Subsidiaries...................................................................... 32
Section 5.6 Financial Condition............................................................... 32
Section 5.7 INTENTIONALLY OMITTED............................................................. 32
Section 5.8 Regulation U...................................................................... 32
Section 5.9 INTENTIONALLY OMITTED............................................................. 32
Section 5.10 Titles and Liens.................................................................. 32
Section 5.11 Intellectual Property Rights...................................................... 32
Section 5.12 Plans............................................................................. 33
Section 5.13 Default........................................................................... 34
Section 5.14 Environmental Matters............................................................. 34
Section 5.15 Submissions to Lender............................................................. 35
Section 5.16 INTENTIONALLY OMITTED............................................................. 35
Section 5.17 Rights to Payment................................................................. 35
Section 5.18 Bank Accounts..................................................................... 35
Section 5.19 Product Warranty Claims........................................................... 35
ARTICLE VI
COVENANTS........................................................................................ 35
Section 6.1 Reporting Requirements............................................................ 36
Section 6.2 Variance from Budget.............................................................. 39
Section 6.3 Negative Pledge................................................................... 39
Section 6.4 Indebtedness...................................................................... 39
Section 6.5 Guaranties........................................................................ 39
Section 6.6 Investments and Subsidiaries...................................................... 40
Section 6.7 Dividends and Distributions....................................................... 40
Section 6.8 Salaries.......................................................................... 40
Section 6.9 INTENTIONALLY OMITTED............................................................. 40
Section 6.10 Books and Records: Inspection and Examination..................................... 40
Section 6.11 Account Verification.............................................................. 41
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Section 6.12 Compliance with Laws.............................................................. 41
Section 6.13 Payment of Taxes and Other Claims................................................. 41
Section 6.14 Maintenance of Properties......................................................... 41
Section 6.15 Insurance......................................................................... 42
Section 6.16 Preservation of Existence......................................................... 42
Section 6.17 Delivery of Instruments, etc...................................................... 42
Section 6.18 Sale or Transfer of Assets: Suspension of Business Operations..................... 42
Section 6.19 Consolidation and Merger: Asset Acquisitions...................................... 43
Section 6.20 Sale and Leaseback................................................................ 43
Section 6.21 Restrictions on Nature of Business................................................ 43
Section 6.22 Accounting........................................................................ 43
Section 6.23 Discounts. etc.................................................................... 43
Section 6.24 Benefit Plans..................................................................... 43
Section 6.25 Place of Business: Name........................................................... 43
Section 6.26 Constituent Documents............................................................. 44
Section 6.27 Performance by the Lender......................................................... 44
Section 6.28 Remedies of the Lender............................................................ 44
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES........................................................... 44
Section 7.1 Events of Default................................................................. 44
Section 7.2 Rights and Remedies............................................................... 47
Section 7.3 Certain Notices................................................................... 48
ARTICLE VIII
AFFILIATE GUARANTIES............................................................................. 48
Section 8.1 Affiliate Guaranties.............................................................. 48
Section 8.2 Obligations Absolute.............................................................. 48
Section 8.3 Waiver of Suretyship Defenses..................................................... 49
Section 8.4 Contribution and Indemnification.................................................. 49
Section 8.5 Subordination of Intercompany Debt................................................ 50
ARTICLE IX
MISCELLANEOUS.................................................................................... 50
Section 9.1 No Waiver: Cumulative Remedies: Compliance with Laws.............................. 50
Section 9.2 Amendments, Etc................................................................... 50
Section 9.3 Addresses for Notices: Requests for Accounting.................................... 51
Section 9.4 Intentionally Omitted............................................................. 51
Section 9.5 Further Documents................................................................. 51
Section 9.6 Costs and Expenses................................................................ 51
Section 9.7 Indemnity......................................................................... 52
Section 9.8 Participants...................................................................... 52
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Section 9.9 Execution in Counterparts: Telefacsimile Execution................................ 53
Section 9.10 Retention of Obligors' Records.................................................... 53
Section 9.11 Binding Effect: Assignment: Complete Agreement: Exchanging Information............ 53
Section 9.12 Severability of Provisions........................................................ 53
Section 9.13 Headings.......................................................................... 53
Section 9.14 Governing Law: Jurisdiction, Venue................................................ 53
Section 9.15 Jury Trial Waiver................................................................. 54
TABLE OF EXHIBITS AND SCHEDULES 57
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CREDIT AND SECURITY AGREEMENT
Dated as of September 7, ▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LTD., a Delaware corporation, as debtor and debtor in
possession (the "Borrower"), EACH OF ITS AFFILIATES WHO ARE GUARANTORS PARTY
HERETO, as debtors and debtors in possession, and AMPAC CAPITAL SOLUTIONS, LLC,
a Nevada limited liability company (the "Lender"), hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement, except
~s otherwise expressly provided, the following terms shall have the meanings
assigned to the n in this Section or in the Section referenced after such term:
"Accounts" means, with respect to any Obligor, all of such Obligor'
s accounts as such term is defined in the UCC, including each and every
right of such Obligor to the payment of money, whether such right to
payment now exists or hereafter arises, whether such right to payment
arises out of a sale, lease or other disposition of goods or other
property, out of a rendering of services, out of a loan, out of the
overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated
or earned by such Obligor or by some other person who subsequently
transfers such person's interest to such Obligor, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all Liens) which such Obligor may at any time have by
law or agreement against any account debtor or other obligor obligated to
make any such payment or against any property of such account debtor or
other obligor; all including but not limited to all present and future
accounts, contract rights, loans and obligations receivable, chattel
papers, bonds, notes and other debt instruments, tax refunds and rights to
payment in the nature of general intangibles.
"Accommodation Payment" has the meaning given to such term in
Section 8.4.
"Advance" has the meaning given in Section 2.1.
"Affiliate" or "Affiliates" means, with respect to any Obligor, each
other Obligor, and any other Person controlled by, controlling or under
common control with any
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Obligor, including any Subsidiary of any Obligor. For purposes of this
definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Allocable Amount" has the meaning given to such term in Section
8.4.
"Asset Purchase Agreement" has the meaning give to such term in
Section 2.3(a).
"Availability" means, as of any date, the difference between (i) the
Borrowing Base and (ii) the sum of (A) the outstanding principal balance
of the Note and (b) the L/C Amount.
"Banking Day" means a day on which the Federal Reserve Bank of New
York is open for business.
"Bankruptcy Cases" means, collectively, the cases commenced pursuant
to Chapter 11 of the Bankruptcy Code on July 23, 2004 by the Obligors in
the Bankruptcy Court pending under jointly administered case no.
04-33579-BKC-PGH and "Bankruptcy Case" means any such case.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. Section 101
"Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of Florida, West Palm Beach Division, or any other court
having jurisdiction of the Bankruptcy Cases from time to time.
"Bidding Procedures Motion" has the meaning given to such term in
Section 2.3(d).
"Blocked Account Agreement" means the Blocked Account Agreement by
and among the Borrower, the Parent, Wachovia Bank and the Lender of even
date herewith.
"Blocked Accounts" means each "Blocked Account" as defined in the
Blocked Account Agreement, and "Blocked Account" means any such account.
"Borrowing Base" means at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 80% of Eligible Accounts, plus
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(ii) the lesser of(A) $500,000 or (B) 40% of Eligible
Inventory, less
(iii) subject to Section 2.3, the Minimum Liquidity Reserve,
less
(iv) such reserves as the Lender shall establish from time to
time in its sole discretion.
"Budget" means the budget attached to the Interim Order or the Final
Order, as applicable, as amended and restated from time to time. If any
replacement to the Budget is not approved by the Lender, the term "Budget"
shall mean the last replacement to the Budget that was approved by the
Lender.
"Carve-Out" has the meaning ascribed to that term in Section 3.9(e).
"Cash Collateral Account" means the "Depository Account" as defined
in the Lockbox Agreement.
"Closing Date" means the date each of the conditions precedent to
making the initial Advance is satisfied (which shall not be later than
September 7, 2004).
"Collateral" means, as to each Obligor, all property of the estate
of such Obligor within the meaning of Section 541 of the Bankruptcy Code,
including, without limitation, all of the following property and assets of
such Obligor, whether now owned or existing or hereafter acquired or
arising, regardless of where located: (i) all Accounts, chattel paper,
deposit accounts (including the Cash Collateral Account, the Blocked
Account and the Special Account), documents, Equipment, General
Intangibles, goods, instruments, Inventory, Investment Property,
letter-of-credit rights, letters of credit, and any items in any Lockbox;
(ii) all real property and all other collateral subject to the Lien of any
Security Document, including without limitation the Mortgages but
excluding the Option; (iii) all substitutions and replacements for or
products of any of the foregoing; (iv) in the case of all goods, all
accessions; (v) all accessories, attachments, parts, equipment and repairs
now or hereafter attached or affixed to or used in connection with any
goods; (vi) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering any goods; (vii) any money or other assets
of such Obligor that now or hereafter come into the possession, custody,
or control of the Lender or any of its affiliates; (viii) all sums on
deposit in the Cash Collateral Account, the Blocked Accounts and the
Special Account; and (ix) all proceeds or recoveries of any and all of the
foregoing.
"Commitment" means the Lender's commitment to make Advances to, and
to cause the Issuer to issue Letters of Credit for the account of, the
Borrower pursuant to Article I.
"Constituent Documents" means with respect to any Person, as
applicable, such Person's certificate of incorporation, articles of
incorporation, by-laws, certificate of formation, articles of
organization, limited liability company agreement, management agreement,
operating agreement, shareholder agreement, partnership agreement or
similar
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document or agreement governing such Person's existence, organization or
management or concerning disposition of ownership interests of such Person
or voting rights among such Person's owners.
"Credit Facility" means the credit facility being made available to
the Borrower by the Lender under Article II.
"Debt" means, with respect to a Person as of a given date, all items
of indebtedness or liability which in accordance with GAAP would be
included in determining total liabilities as shown on the liabilities side
of a balance sheet for such Person and shall also include the aggregate
payments required to be made by such Person at any time under any lease
that is considered a capitalized lease under GAAP.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the day a
Default or Event of Default occurs and ending on the date the Lender
notifies the Borrower in writing that such Default or Event of Default has
been cured or waived.
"Default Rate" means the Minimum Interest Charge pi~,'~ an annual
interest rate equal to five percent (5%) on the outstanding principal
balance of the Note.
"Director" means, with respect to any Obligor, a member of the board
of directors of such Obligor.
"Eaglebrook Group" means The Eaglebrook Group, Inc., a Delaware
Corporation.
"Eligible Accounts" means all unpaid Accounts of the Borrower (but
not any other Obligor) arising from the sale or lease of goods or the
performance of services by the Borrower, net of any credits, but excluding
any such Accounts having any of the following characteristics:
(i) That portion of Accounts which does not arise in
connection with Borrower's Winter Dating Program and which is unpaid
90 days or more after the invoice date or three times the required
payment period pursuant to the terms of the Account;
(ii) Accounts (other than Accounts that arise in connection
with the Winter Dating Program which are addressed in clause (xvii)
below) with payment terms in excess of 60 days from the invoice
date;
(iii) That portion of Accounts that is disputed or subject to
a claim of offset or a contra account;
(iv) That portion of Accounts not yet earned by the final
delivery of
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goods or rendition of services, as applicable, by the Borrower to
the customer, including progress ▇▇▇▇▇▇▇▇, and that portion of
Accounts for which an invoice has not been sent to the applicable
account debtor;
(v) Accounts constituting (A) proceeds of copyrightable
material unless such copyrightable material shall have been
registered with the United States Copyright Office, or (B) proceeds
of patentable inventions unless such patentable inventions have been
registered with the United States Patent and Trademark Office;
(vi) Accounts owed by any unit of government, whether foreign
or domestic (provided, however, that there shall be included in
Eligible Accounts that portion of Accounts owed by such units of
government for which the Borrower has provided evidence satisfactory
to the Lender that (A) the Lender has a first-priority perfected
security interest and (B) such Accounts may be enforced by the
Lender directly against such unit of government under all applicable
laws);
(vii) Accounts owed by an account debtor located outside the
United States which are not (A) backed by a bank letter of credit
naming the Lender as beneficiary or assigned to the Lender, in the
Lender's possession or control, and with respect to which a control
agreement concerning the letter-of-credit rights is in effect, and
acceptable to the Lender in all respects, in its sole discretion, or
(B) covered by a foreign receivables insurance policy acceptable to
the Lender in its sole discretion;
(viii) Accounts owed by an account debtor that is insolvent,
the subject of bankruptcy proceedings or has gone out of business;
(ix) Accounts owed by an Owner, Subsidiary, Affiliate,
Officer, Director or employee of any Obligor;
(x) Accounts not subject to a duly perfected first-priority
security interest in the Lender's favor;
(xi) That portion of Accounts that has been restructured,
extended, amended or modified;
(xii) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xiii) Accounts owed by an account debtor, regardless of
whether otherwise eligible, to the extent that the balance of such
Accounts exceeds 20% of the aggregate amount of all Eligible
Accounts;
(xiv) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 25% or more of the total amount due
under Accounts from
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such account debtor is ineligible under clauses (i), (ii), (iii) or
(xi) above;
(xv) Accounts owing by any account debtor listed on Schedule
5.19 hereto (as updated from time to time pursuant to Section 6.1
(d)(iii) hereto);
(xvi) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion; or
(xvii) Accounts which arise in connection with the Borrower's
Winter Dating Program (and is readily identifiable as such) and
which has been outstanding more than 150 days after the date of such
invoice; provided that in no event shall the aggregate amount of all
Eligible Accounts arising in connection with the Winter Dating
Program exceed 25% of the face amount of all Eligible Accounts
during months one through three of the Winter Dating Program, 35% of
the face amount of all Eligible Accounts during months four and five
of the Winter Dating Program and 46% of the face amount of all
Eligible Accounts during month six of the Winter Dating Program.
"Eligible Inventory" means all Inventory of the Borrower (but not
any other Obligor), at the lower of cost or market value as determined in
accordance with GAAP; but excluding any Inventory having any of the
following characteristics:
(i) Inventory that is: in-transit; located at any warehouse,
job site or other premises other than Borrower's Premises in Ocala,
Florida or Chicago, Illinois; not subject to a perfected
first-priority security interest in favor of the Lender; covered by
any negotiable or non-negotiable warehouse receipt, ▇▇▇▇ of lading
or other document of title; on consignment from any Person; or on
consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender;
(ii) Inventory that is damaged, obsolete, slow moving or not
currently saleable in the normal course of the Borrower's
operations;
(iii) Inventory manufactured by the Borrower pursuant to a
license unless the applicable licensor has agreed in writing to
permit the Lender to exercise its rights and remedies against such
Inventory;
(iv) Inventory that is subject to a Lien in favor of any
Person other than the Lender; or
(v) Inventory otherwise deemed ineligible by the Lender in its
sole discretion.
"Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
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"Equipment" means, with respect to any Obligor, all of such
Obligor's equipment, as such term is defined in the UCC, whether now owned
or hereafter acquired, including but not limited to all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies, and
including specifically the goods described in any equipment schedule or
list herewith or hereafter furnished to the Lender by any Obligor.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group which includes any Obligor and
which is treated as a single employer under Section 414 of the IRC.
"Event of Default" has the meaning specified in Section 7.1.
"Final Order" means an order of the Bankruptcy Court entered in the
Bankruptcy Cases after a final hearing under Bankruptcy Rule 4001(c)(2),
in all respects satisfactory to the Lender in its sole discretion, signed
and certified by the Clerk of the Bankruptcy Court as having been duly
entered and in full force and effect no later than thirty (30) days after
entry by the Bankruptcy Court of the Interim Order (or any earlier date
upon which the making of any Advance or the issuance of any Letter of
Credit the aggregate amount of either of which, when added to the sum of
the principal amount of all Advances then outstanding and the Letters of
Credit outstanding would exceed the amount thereof which was authorized by
the Bankruptcy Court in the Interim Order).
"Funding Date" means the date all of the conditions set forth in
Section 4.1 are satisfied.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.6.
"General Intangibles" means, with respect to any Obligor, all of
such Obligor's general intangibles, as such term is defined in the UCC,
whether now owned or hereafter acquired, including all present and future
Intellectual Property Rights, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use
such Obligor's name, and the goodwill of such Obligor' s business.
"Guarantors" means Parent, U.S. Plastic Lumber Finance, U.S. Plastic
Lumber IP, and Eaglebrook Group, in each case as debtors and debtors in
possession, and any other Person now or hereafter guarantying the
Obligations, and "Guarantor" means any of them.
"Hazardous Substances" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and all
other chemicals, wastes, substances and materials listed in, regulated by
or identified in any Environmental Law.
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"Infringement" means when used with respect to Intellectual Property
Rights, any infringement or other violation of Intellectual Property
Rights.
"Intellectual Property Rights" means all actual or prospective
rights arising in connection with any intellectual property or other
proprietary rights, including all rights arising in connection with
copyrights, patents, service marks, trade dress, trade secrets,
trademarks, trade names or mask works.
"Interim Order" has the meaning given to such term in Section
4.1(u).
"Inventory" means, with respect to any Obligor, all of such
Obligor's inventory, as such term is defined in the UCC, whether now owned
or hereafter acquired, whether consisting of whole goods, spare parts or
components, supplies or materials, whether acquired, held or furnished for
sale, for lease or under service contracts or for manufacture or
processing, and wherever located.
"Investment Property" means, with respect to any Obligor, all of
such Obligor's investment property, as such term is defined in the UCC,
whether now owned or hereafter acquired, including but not limited to all
securities, security entitlements, securities accounts, commodity
contracts, commodity accounts, stocks, bonds, mutual fund shares, money
market shares and U.S. Government securities.
"IRC" means the Internal Revenue Code of 1986, as amended.
"Issuer" means the issuer of any Letter of Credit.
"L/C Amount" means the sum of (i) the aggregate face amount of any
issued and outstanding Letters of Credit and (ii) the unpaid amount of the
Obligation of Reimbursement.
"L/C Application" means an application and agreement for a letter of
credit in a form acceptable to the Issuer and the Lender.
"Lessor Estoppel and Agreement" means that certain Lessor Estoppel
and Agreement executed by 2600 Roosevelt Associates, L.L.C., an Illinois
limited liability company, in favor of the Lender.
"Letter of Credit" has the meaning give to such term in Section 2.5.
"Licensed Intellectual Property" has the meaning given to such term
in Section 5.11(c).
"Lien" means any security interest, mortgage, deed of trust, pledge,
lien, charge, encumbrance, title retention agreement or analogous
instrument or device, including the interest of each lessor under any
capitalized lease and the interest of any bondsman under
8
any payment or performance bond, in, of or on any assets or properties of
a Person, whether now owned or hereafter acquired and whether arising by
agreement or operation of law.
"Loan Documents" means this Agreement, the Note, the Security
Documents, any L/C Application and each agreement, document, instrument or
certificate to be executed and delivered by any Obligor as a condition to
closing pursuant to Section 4.j. or to be executed and delivered by an
Obligor subsequent to closing pursuant to the terms of any Loan Document
or any order of the Bankruptcy Court.
"Lockbox" has the meaning given to such term in the Lockbox
Agreement.
"Lockbox Agreement" means the Lockbox Agreement by and among the
Borrower, Wachovia Bank and the Lender, of even date herewith.
"Material Adverse Effect" means any of the following:
(i) a material adverse effect on the business, operations,
results of operations, prospects, assets, liabilities or financial
condition of the Obligors, taken as a whole;
(ii) a material adverse effect on the ability of the Obligors,
taken as a whole, to perform their obligations under the Loan
Documents; or
(iii) a material adverse effect on the ability of the Lender
to enforce the Obligations or to realize the intended benefits of
the Orders and the Security Documents, including a material adverse
effect on the validity or enforceability of the Lender's
Superpriority Claim, any Loan Document or of any rights against any
Guarantor, or on the status, existence, perfection, priority or
enforceability of the Lender's first-priority Security Interests and
Liens securing payment or performance of the Obligations.
"Maturity Date" means December 2, 2004.
"Maximum Line" means $3 million.
"Minimum Interest Charge" has the meaning given to such term in
Section 2.10(b).
"Minimum Liquidity Reserve" means $50,000.00.
"Mortgages" means (i) that certain Mortgage, Security Agreement,
Financing Statement and Absolute Assignment of Rents and Revenues of even
date herewith executed by the Borrower in favor of the Lender, to be
recorded in ▇▇▇▇▇▇ County, Florida; (ii) that certain Leasehold Mortgage,
Security Agreement, Financing Statement and Absolute Assignment of Rents
and Revenues of even date herewith executed by the
9
Borrower in favor of the Lender, to be recorded in ▇▇▇▇ County, Illinois;
and (iii) any other mortgage, deed of trust, deed to secure debt, or
similar instrument or agreement pursuant to which any Obligor grants in
favor of the Lender a security interest in and lien upon any fee or
leasehold interest in real property owned by such Obligor.
"Multiemployer Plan" means a multiemployer plan (as defined in
Section 400 1(a)(3) of ERISA) to which any Obligor or any ERISA Affiliate
contributes or is obligated to contribute.
"Note" means the Borrower's revolving promissory note, payable to
the order of the Lender, in substantially the form of Exhibit A hereto.
"Obligation of Reimbursement" has the meaning given in Section
2.7(a).
"Obligations" means the Note, the Obligation of Reimbursement and
each and every other debt, liability and obligation of every type and
description which any Obligor may now or at any time hereafter owe to the
Lender which arises under this Agreement, any other Loan Document, the
Orders or any other document or order now or hereafter made, issued,
delivered or given in connection herewith or therewith, and whether it is
direct or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or sole, joint, several or joint
and several.
"Obligors" means the Borrower and the Guarantors, and "Obligor"
means the Borrower or any Guarantor.
"Ocala Personal Property" means all personal property of Borrower
located at the Ocala Real Property including, but not limited to, all of
the furniture, equipment, leasehold improvements, inventory, accounts,
chattels, security deposits, utility deposits, credits and general
intangibles and other assets of all kinds, tangible and intangible, used
at or in connection with the business being operated at the Ocala Real
Property by Borrower.
"Ocala Real Property" means all of Borrower's land, buildings,
structural additions, fixtures, electrical, heating and plumbing
equipment, furnaces, air conditioners, lighting fixtures, carpeting, tile,
linoleum, drinking fountains, hot water heaters, and other improvements
located in the City of Ocala, County of ▇▇▇▇▇▇, State of Florida together
with all privileges, rights, title, interests, easements, hereditaments,
and appurtenances thereunto belonging to Borrower, and all right, title,
and interest of Borrower in and to all streets, alleys, railways,
passages, and other rights-of-way included therein or adjacent thereto
(before or after the vacation thereof).
"Off-the-Shelf Software" has the meaning given to such term in
Section 5.11(c).
"Officer" means, with respect to any Obligor, an officer of such
Obligor.
"Option" means that certain Option to Purchase between the Borrower
and 2600
10
Roosevelt Associates, L.L.C., an Illinois limited liability company, which
grants to the Borrower an option to purchase certain real property in ▇▇▇▇
County, Illinois, where the Borrower presently conducts business.
"Orders" means, collectively, the Interim Order and the Final Order.
"Owned Intellectual Property" has the meaning given in Section
5.11(a).
"Owner" means, with respect to any Obligor, each Person having legal
or beneficial title to an ownership interest in such Obligor or a right to
acquire such an interest.
"Parent" means U.S. Plastic Lumber Corp., a Nevada corporation.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement executed by the Obligors named therein in
favor of the Lender of even date herewith.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) maintained for employees of any Obligor or any ERISA Affiliate and
covered by Title IV of ERISA.
"Permitted Lien" means:
(a) Liens for taxes, assessments or other governmental charges
not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Obligors in accordance with GAAP;
(b) carriers', warehousemen' s, mechanics', materialmens',
repairmens' or other like Liens arising on or after the Petition
Date by operation of law in the ordinary course of business so long
as (A) the underlying obligations are not overdue for a period of
more than 60 days or (B) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with
respect thereto are maintained on the books of the Obligors in
accordance with GAAP; and
(c) other Liens or title defects (including matters which an
accurate survey might disclose and exceptions to title set forth in
title insurance with respect to the Mortgages) which (x) do not
secure Debt (other than the Obligations) and (y) do not materially
detract from the value of such property or materially impair the use
thereof by any Obligor in the operation of its business.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
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"Petition Date" means July 23, 2004.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) maintained for employees of any Obligor or any ERISA Affiliate.
"Plan of Reorganization" means any plan of reorganization filed or
to be filed with the Bankruptcy Court in any of the Bankruptcy Cases.
"Pre-Petition Indebtedness" has the meaning given to such term in
Section 6.4.
"Pre-Petition Purchase Money Liens" means the liens granted by the
Borrower in certain of its equipment to certain equipment lenders who
financed the purchase of said equipment, including General Electric
Capital Corporation, People's Capital and Leasing Corp., Siemens Financial
Services, Inc., HSBC Business Credit (USA), Inc. and CIT Group/Equipment
Financing, Inc. as further identified on Schedule 5.10.
"Premises" means all premises where any Obligor conducts its
business and has any rights of possession, including the premises legally
described in Exhibit B attached hereto.
"Product Warranty Claims" means any claim against any Obligor
regarding allegedly defective products or materials sold by an Obligor to
a customer or distributor, whether asserted or unasserted, liquidated or
unliquidated, fixed or contingent.
"Professional Expense Cap" has the meaning given to such term in
Section 3.9(e).
"Related Documents" has the meaning given to such term in Section
2.8(a).
"Reportable Event" means a reportable event (as defined in Section
4043 of ERISA), other than an event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the
Pension Benefit Guaranty Corporation.
"Sale" means the sale of the Ocala Real Property and the Ocala
Personal Property to the purchaser party to the Asset Purchase Agreement
(or to such higher and better bidder as the Bankruptcy Court shall
determine) pursuant to Section 3 63(f) of the Bankruptcy Code.
"Sale Milestones" has the meaning given to such term in Section 2.3.
"Sale Motion" has the meaning given to such term in Section 2.3(c).
"Security Documents" means this Agreement, the Lockbox Agreement,
the Blocked Account Agreement, the Mortgages, the Lessor Estoppel and
Agreement, the Patent and Trademark Security Agreement, and any other
document, agreement, certificate or financing statement delivered to the
Lender from time to time to secure the
12
Obligations or to protect the Lender or its Security Interest.
"Security Interest" has the meaning given to such term in Section
3.1.
"Special Account" means a specified cash collateral account
maintained by a financial institution acceptable to the Lender in
connection with Letters of Credit, as contemplated by Section 2.6.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of Directors of
such corporation, irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of
the happening of any contingency, is at the time directly or indirectly
owned by any Obligor, by any Obligor and one or more other Subsidiaries,
or by one or more other Subsidiaries of any Obligor.
"Superpriority Claim" shall mean a claim against the Borrower or any
other Obligor, as applicable, in the Bankruptcy Cases that constitutes an
allowed administrative expense claim in the Bankruptcy Cases with priority
under Section 364(c)(1) of the Bankruptcy Code over any and all other
administrative expenses of the kind specified or ordered pursuant to any
provision of the Bankruptcy Code, including, but not limited to, Sections
105, 326, 330, 331, 503(b), 506(c), 507(a), 507(b), and 726 of the
Bankruptcy Code; provided, that priority status of the Obligations and the
Liens securing the same shall be subject to the Carve-Out.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Credit Facility is deemed terminated pursuant to Section 2.14
by delivery by the Borrower of written notice of termination, , (iii) the
effective date of any confirmed Plan of Reorganization, (iv) the
appointment by the Bankruptcy Court of a trustee or examiner having
enlarged powers (powers beyond those set forth in Sections 1 106(a)(3) and
(4) of the Bankruptcy Code) relating to the operation of the business of
any Obligor, (v) the date any Bankruptcy Case is converted to a Chapter 7
proceeding or is dismissed, or (vi) the date the Lender demands payment of
the Obligations after an Event of Default pursuant to Section 7.2.
"UCC" means the Uniform Commercial Code as in effect in the State of
California, or in any other state whose laws are held to govern this
Agreement or any Loan Document or any portion hereof or thereof.
"U.S. Plastic Lumber Finance" means U.S. Plastic Lumber Finance
Corporation, a Delaware corporation.
"U.S. Plastic Lumber IP" means U.S. Plastic Lumber IP Corporation, a
Delaware corporation.
"Winter Dating Program" has the meaning set forth in the side
letter, dated the
13
date hereof, from Lender and acknowledged by the Obligors.
SECTION 1.2 OTHER DEFINITIONAL TERMS; RULES OF INTERPRETATION. The
words "hereof', "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP. All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections of,
or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". Unless the context in which used
herein otherwise clearly requires, "or" has the inclusive meaning represented by
the phrase "and/or". Defined terms include in the singular number the plural and
in the plural number the singular. Reference to any agreement (including this
Agreement or any other Loan Document), document or instrument means such
agreement, document or instrument as amended, modified, replaced or restated and
in effect from time to time in accordance with the terms thereof (and, if
applicable, in accordance with the terms hereof and the other Loan Documents),
except where otherwise explicitly provided, and reference to any promissory note
includes any promissory note which is an extension or renewal thereof or a
substitute or replacement therefor. Reference to any law, rule, regulation,
order, decree, requirement, policy, guideline, directive or interpretation means
as amended, modified, codified, replaced or reenacted, in whole or in part, and
in effect on the determination date, including rules and regulations promulgated
thereunder.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
SECTION 2.1 ADVANCES. The Lender agrees, on the terms and subject to
the conditions herein set forth, to make advances (each an "Advance") to the
Borrower from time to time from the Funding Date to the Termination Date. The
Lender shall have no obligation to make an Advance to the extent the amount of
the requested Advance exceeds the Availability. The Borrower's obligation to pay
the Advances shall be evidenced by the Note and shall be secured by the
Collateral. The Credit Facility is a revolving credit facility, and thus funds
may be requested, repaid, and reborrowed prior to the Termination Date as
provided in this Agreement.
SECTION 2.2 PROCEDURES FOR REQUESTING ADVANCES. The Borrower shall
comply with the following procedures in requesting Advances:
(a) Time for Requests. The Borrower shall request each Advance not
later than 12:00 p.m., Los Angeles, California time on the Banking Day
which is the date the Advance is to be made. Each such request shall be
effective upon receipt by the Lender,
14
shall be in writing or by telephone or telecopy transmission, to be
confirmed in writing by the Borrower if so requested by the Lender in the
form of Exhibit C, and shall be by (i) an Officer of the Borrower; or (ii)
a person designated as the Borrower's agent by an Officer of the Borrower
in a writing delivered to the Lender; or (iii) a person whom the Lender
reasonably believes to be an Officer of the Borrower or such a designated
agent. The Borrower shall repay all Advances even if the Lender does not
receive such confirmation and even if the person requesting an Advance was
not in fact authorized to do so. Any request for an Advance, whether
written or telephonic, shall be deemed to be a representation by the
Borrower that the conditions set forth in Section 4.2 have been satisfied
as of the time of the request.
(b) Disbursement. Upon fulfillment of the applicable conditions set
forth in Article IV, the Lender shall disburse the proceeds of the
requested Advance by crediting the same to the Borrower's demand deposit
account maintained with Wachovia Bank or other mutually agreed upon
banking institution unless the Lender and the Borrower shall agree in
writing to another manner of disbursement
SECTION 2.3 SALE MILESTONES. THE BORROWING Base shall include the
Minimum Liquidity Reserve until each of the following conditions is satisfied,
as determined by the Lender in its sole discretion (collectively, the "Sale
Milestones"):
(a) Asset Purchase Agreement. The Obligors shall have delivered to
the Lender an Asset Purchase Agreement (the "Asset Purchase Agreement")
executed by Borrower and the purchaser party thereto by September 15, 2004
for the sale of the Ocala Real Property and the Ocala Personal Property
for a cash purchase price of at least $3,000,000.00 in form and content
acceptable to the Lender and contingent upon, among other things, an order
of the Bankruptcy Court approving the consummation of the sale pursuant to
Section 363 of the Bankruptcy Code of the Ocala Real Property and the
Ocala Personal Property to such purchaser on the terms set forth in such
Asset Purchase Agreement. The closing of the purchase and sale of the
Ocala Real Property and Ocala Personal Property shall occur on or before
October 15, 2004.
(b) Purchaser's Financing. The Obligors shall have established that
the purchaser party to the Asset Purchase Agreement has the financial
ability to pay the stated purchase price for the Ocala Real Property and
the Ocala Personal Property by providing to the Lender financial
statements, loan commitments or such other documentation as the Lender
shall request.
(c) Sale Motion. The Obligors shall have filed in the Bankruptcy
Cases a motion (the "Sale Motion") to sell the Ocala Real Property and the
Ocala Personal Property to the purchaser party to the Asset Purchase
Agreement (or to such higher and better bidder as the Bankruptcy Court
shall determine) pursuant to Section 363(f) of the Bankruptcy Code and in
accordance with the Asset Purchase Agreement. The Sale Motion shall be in
form and substance satisfactory to the Lender. An order of the
15
Bankruptcy Court approving the consummation of the sale pursuant to
Section 363 of the Bankruptcy Code of the Ocala Real Property and the
Ocala Personal Property to such purchaser on the terms set forth in such
Asset Purchase Agreement shall have been entered on or before October 15,
2004.
(d) Bidding Procedures Motion. The Obligors shall have filed in the
Bankruptcy Cases, a motion (the "Bidding Procedures Motion") to establish
bidding procedures relating to the Sale described in the Sale Motion and
shall seek an expedited hearing on the Bidding Procedures Motion. The
Bidding Procedures Motion on same shall be in form and content
satisfactory to the Lender.
Notwithstanding anything to the contrary in this Agreement, the Lender
shall have no obligation to make Advances which cause the outstanding balance of
the Credit Facility to be more than $1 million unless all of the Sale Milestones
have been satisfied, as determined by the Lender in its sole discretion.
SECTION 2.4 INTENTIONALLY OMITTED.
SECTION 2.5 LETTERS OF CREDIT.
(a) The Lender agrees, on the terms and subject to the conditions
herein set forth, to cause an Issuer to issue, from the Funding Date to
the Termination Date, one or more irrevocable standby or documentary
letters of credit (each, a "Letter of Credit") for the Borrower's account
by guaranteeing payment of the Borrower's obligations or being a
co-applicant. The Lender shall have no obligation to cause an Issuer to
issue any Letter of Credit if the face amount of the Letter of Credit to
be issued would exceed the lesser of:
(i) $500,000.00 less the L/C Amount, or
(ii) Availability.
Each Letter of Credit, if any, shall be issued pursuant to a separate L/C
Application entered into between the Borrower and the Lender for the
benefit of the Issuer, completed in a manner satisfactory to the Lender
and the Issuer. The terms and conditions set forth in each such L/C
Application shall supplement the terms and conditions hereof, but if the
terms of any such L/C Application and the terms of this Agreement are
inconsistent, the terms hereof shall control.
(b) No Letter of Credit shall be issued with an expiry date later
than the Termination Date in effect as of the date of issuance.
(c) Any request to cause an Issuer to issue a Letter of Credit shall
be deemed to be a representation by the Borrower that the conditions set
forth in Section 4.2 have been satisfied as of the date of the request.
16
SECTION 2.6 SPECIAL ACCOUNT. If the Credit Facility is terminated
for any reason while any Letter of Credit is outstanding, the Borrower shall
thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount. The Special Account shall be
an interest bearing account maintained for the Lender by any financial
institution acceptable to the Lender. Any interest earned on amounts deposited
in the Special Account shall be credited to the Special Account. The Lender may
apply amounts on deposit in the Special Account at any time or from time to time
to the Obligations in the Lender's sole discretion. No Obligor may withdraw any
amounts on deposit in the Special Account as long as the Lender maintains a
security interest therein. The Lender agrees to transfer any balance in the
Special Account to the Borrower when the Lender is required to release its
security interest in the Special Account under applicable law.
SECTION 2.7 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT;
OBLIGATION OF REIMBURSEMENT. The Borrower acknowledges that the Lender, as co
applicant, will be liable to the Issuer for reimbursement of any and all draws
under Letters of Credit and for all other amounts required to be paid under the
applicable L/C Application. Accordingly, the Borrower shall pay to the Lender
any and all amounts required to be paid under the applicable L/C Application,
when and as required to be paid thereby, and the amounts designated below, when
and as designated:
(a) The Borrower shall pay to the Lender on the day a draft is
honored under any Letter of Credit a sum equal to all amounts drawn under
such Letter of Credit plus any and all reasonable charges and expenses
that the Issuer or the Lender may pay or incur relative to such draw and
the applicable L/C Application, plus interest on all such amounts, charges
and expenses as set forth below (the Borrower's obligation to pay all such
amounts is herein referred to as the "Obligation of Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit,
the Borrower authorizes the Lender to make an Advance in the amount of the
Obligation of Reimbursement and to apply the proceeds of such Advance
thereto. Such Advance shall be repayable in accordance with and be treated
in all other respects as an Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the
Borrower is unable, because a Default Period exists or for any other
reason, to obtain an Advance to pay the Obligation of Reimbursement, the
Borrower shall pay to the Lender on demand and in immediately available
funds, the amount of the Obligation of Reimbursement together with
interest, accrued from the date of the draft until payment in full at the
Default Rate. Notwithstanding the Borrower's inability to obtain an
Advance for any reason, the Lender is irrevocably authorized, in its sole
discretion, to make an Advance in an amount sufficient to discharge the
Obligation of Reimbursement and all accrued but unpaid interest thereon.
(d) The Borrower's obligation to pay any Advance made under
this
17
Sections, shall be evidenced by the Note and shall bear interest as
provided in Section 2.10.
SECTION 2.8 OBLIGATIONS ABSOLUTE. The Borrower's obligations arising
under Section 2.7 shall be absolute, unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of Section 2.7, under all
circumstances whatsoever, including (without limitation) the following
circumstances:
(a) any lack of validity or enforceability of any Letter of Credit
or any other agreement or instrument relating to any Letter of Credit
(collectively the "Related Documents")
(b) any amendment or waiver of or any consent to departure from all
or any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right which
any Obligor may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such beneficiary or any such transferee may be acting), or other
person or entity, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents or any
unrelated transactions;
(d) any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) payment by or on behalf of the Issuer under any Letter of Credit
against presentation of a draft or certificate which does not strictly
comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
SECTION 2.9 INVENTORY APPRAISALS. The Lender may obtain, and may
from time to time update, at the Borrower's expense, an appraisal of Inventory
by an appraiser acceptable to the Lender in its sole discretion.
SECTION 2.10 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST;
PARTICIPATIONS; USURY.
(a) Note. Except as set forth in Subsections (c) and (e), the
outstanding principal balance of the Note shall bear interest at 1.25% per
month
18
(b) Minimum Interest Charge. Notwithstanding the interest payable
pursuant to Subsection (a), but subject to Subsection (e), the Borrower
shall pay to the Lender interest of not less than $15,000 per month (the
"Minimum Interest Charge") during the term of this Agreement.
(c) Default Interest Rate. Upon notice to the Borrower from the
Lender from time to time of an Event of Default, the principal of the
Advances outstanding from time to time, but subject to Section 2.10(e),
shall bear interest at the Default Rate, effective as of the first day of
the Default Period through the last day of such Default Period. The
Lender's election to charge the Default Rate shall be in its sole
discretion and shall not be a waiver of any of its other rights and
remedies. The Lender's election to charge interest at the Default Rate for
less than the entire Default Period shall not be a waiver of its right to
later charge the Default Rate for the entire Default Period.
(d) Participations. If any Person shall acquire a participation in
the Advances or the Obligation of Reimbursement, the Borrower shall be
obligated to the Lender to pay the full amount of all interest calculated
under this Section 2.10, along with all other fees, charges and other
amounts due under this Agreement, regardless if such Person elects to
accept interest with respect to its participation at a lower rate than
that calculated under this Section 2.10, or otherwise elects to accept
less than its pro rata share of such fees, charges and other amounts due
under this Agreement.
(e) Usury. Notwithstanding anything to the contrary contained in any
Loan Document, all agreements which either now are or which shall become
agreements between one or more Obligors and the Lender are hereby limited
so that in no contingency or event whatsoever shall the total liability
for payments in the nature of interest, additional interest and other
charges exceed the applicable limits imposed by any applicable usury laws.
If any payments in the nature of interest, additional interest and other
charges made under any Loan Document are held to be in excess of the
limits imposed by any applicable usury laws, it is agreed that any such
amount held to be in excess shall be considered payment of principal
hereunder, and the indebtedness evidenced hereby shall be reduced by such
amount so that the total liability for payments in the nature of interest,
additional interest and other charges shall not exceed the applicable
limits imposed by any applicable usury laws, in compliance with the
desires of the Borrower and the Lender. This provision shall never be
superseded or waived and shall control every other provision of the Loan
Documents and all agreements between the Borrower and the Lender, or their
successors and assigns.
SECTION 2.11 FEES.
(a) Commitment Fee. The Borrower shall pay the Lender a fully earned
and non-refundable commitment fee of $50,000, payable at the entry of the
Final Order.
(b) Audit Fees. The Borrower shall pay the Lender, on demand, audit
fees in connection with any audits or inspections conducted by or on
behalf of the Lender of any Collateral or any Obligor's operations or
business at the rates established from time to time by the Lender as its
audit fees (which fees are currently $950 per day per auditor
19
plus out-of-pocket expenses).
(c) INTENTIONALLY OMITTED.
(d) Letter of Credit Fees. The Borrower shall pay to the Lender a
fee with respect to each Letter of Credit, if any, accruing on a daily
basis and computed at the annual rate of six percent (6%), of the
aggregate amount that may then be drawn under it assuming compliance with
all conditions for drawing (the "Aggregate Face Amount"), from and
including the date of issuance of such Letter of Credit until such date as
such Letter of Credit shall terminate by its terms or be returned to the
Lender, due and payable monthly in arrears on the first day of each month
and on the Termination Date; provided, however that during Default
Periods, in the Lender's sole discretion and without waiving any of its
other rights and remedies, such fee shall increase to twelve percent (12%)
of the Aggregate Face Amount. The foregoing fee shall be in addition to
any and all fees, commissions and charges of the Issuer with respect to or
in connection with such Letter of Credit.
(e) Letter of Credit Administrative Fees. The Borrower shall pay to
the Lender, on written demand, the administrative fees charged by the
Issuer in connection with the honoring of drafts under any Letter of
Credit, amendments thereto, transfers thereof and all other activity with
respect to the Letters of Credit at the then-current rates published by
the Issuer for such services rendered on behalf of customers of the Issuer
generally.
(f) Termination Fee. If the Credit Facility is terminated (i) by the
Lender during a Default Period that begins before the Maturity Date, or
(ii) by the Borrower as of a date other than the Maturity Date, the
Borrower shall pay to the Lender a fee in an amount equal to $50,000 less
the amount of interest paid to the Lender under this Agreement.
(g) Other Fees. The Lender may from time to time, upon five (5) days
prior notice to the Borrower during a Default Period, charge additional
fees for Advances made and Letters of Credit issued in excess of
Availability, for late delivery of reports, in lieu of imposing interest
at the Default Rate, and for other reasons. The Borrower's request for an
Advance or the issuance of a Letter of Credit at any time after such
notice is given and such five (5) day period has elapsed shall constitute
the Borrower's agreement to pay the fees described in such notice.
SECTION 2.12 TIME FOR INTEREST PAYMENTS; PAYMENT ON NON-BANKING
DAYS; COMPUTATION OF INTEREST AND FEES
(a) Time For Interest Payments. Interest shall be due and payable in
arrears on the last day of each month and on the Termination Date.
(b) Payment on Non-Banking Days. Whenever any payment to be made
20
hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of
interest on the Advances or the fees hereunder, as the case may be.
(c) Computation of Interest and Fees. Interest accruing on the
outstanding principal balance of the Advances and fees hereunder
outstanding from time to time shall be computed on the basis of actual
number of days elapsed in a year of 360 days.
SECTION 2.13 LOCKBOX; CASH COLLATERAL ACCOUNT; APPLICATION OF
PAYMENTS.
(a) Lockbox and Cash Collateral Account.
(i) The Obligors shall instruct all account debtors to pay all
Accounts directly to the Lockbox. If, notwithstanding such
instructions, any Obligor receives any payments on Accounts, such
Obligor shall deposit such payments into the Cash Collateral
Account. The Obligors shall also deposit all other cash proceeds of
Collateral directly to the Cash Collateral Account. Until so
deposited, such Obligor shall hold all such payments and cash
proceeds in trust for and as the property of the Lender and shall
not commingle such property with any of its other funds or property.
All deposits in the Cash Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations.
(ii) All items deposited in the Cash Collateral Account shall
be subject to final payment. If any such item is returned
uncollected, the Borrower will immediately pay the Lender, or, for
items deposited in the Cash Collateral Account, the bank maintaining
such account, the amount of that item, or such bank at its
discretion may charge any uncollected item to the Borrower's
commercial account or other account. The Borrower shall be liable as
an endorser on all items deposited in the Cash Collateral Account,
whether or not in fact endorsed by the Borrower.
(b) Application of Payments.
(i) Each Obligor acknowledges and agrees that, in accordance
with the Lockbox Agreement, all available funds in the Cash
Collateral Account shall be transferred to the Lender's general
account for payment of the Obligations. Except as provided in the
preceding sentence, amounts deposited in the Cash Collateral Account
shall not be subject to withdrawal by any Obligor, except after full
and indefeasible payment and discharge of all Obligations.
(ii) All payments to the Lender shall be made in immediately
available funds, and shall be applied to the Obligations upon
receipt of immediately available funds by the Lender. Funds received
from the Cash Collateral Account
21
shall be deemed to be immediately available. The Lender may hold all
payments not constituting immediately available funds for three (3)
additional days before applying them to the Obligations.
SECTION 2.14 VOLUNTARY PREPAYMENT; TERMINATION OF THE CREDIT
FACILITY BY THE BORROWER. Except as otherwise provided herein, the Borrower may
terminate the Credit Facility at any time if it (I) gives the Lender at least
three (3) Banking Days' prior written notice and (ii) pays the Lender the
termination fee in accordance with Section 2.11(f). If the Borrower terminates
the Credit Facility, all Obligations shall be immediately due and payable.
Subject to termination of the Credit Facility and indefeasible payment and
performance of all Obligations, the Lender shall, at the Obligor's expense,
release or terminate the Security Interest and the Security Documents to which
the Obligors are entitled bylaw.
SECTION 2.15 MANDATORY PREPAYMENT. Without notice or demand, if the
sum of the outstanding principal balance of the Advances plus the L/C Amount
shall at any time exceed the Borrowing Base, the Borrower shall (i) first,
immediately prepay the Advances to the extent necessary to eliminate such
excess; and (ii) if prepayment in full of the Advances is insufficient to
eliminate such excess, pay to the Lender in immediately available funds for
deposit in the Special Account an amount equal to the remaining excess. Any
payment received by the Lender under this Section 2.15 or under Section 2.14 may
be applied to the Obligations, in such order and in such amounts as the Lender,
in its discretion, may from time to time determine.
SECTION 2.16 ADVANCES TO PAY OBLIGATIONS. Notwithstanding anything
in Section 2.1, the Lender may, in its discretion at any time or from time to
time, without the Borrower's request and even if the conditions set forth in
Section 4.2 would not be satisfied, make an Advance in an amount equal to the
portion of the Obligations from time to time due and payable.
SECTION 2.17 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances and each Letter of Credit only to (a) pay fees due the United States
Trustee pursuant to 28 U.S.C. Section 1930; and (b) provide working capital for
the Obligors in accordance with the Budget and this Agreement.
SECTION 2.18 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, records as to the Obligations. All entries made on any
such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Obligors will admit and certify in
writing the exact principal balance of the Obligations that the Obligors then
assert to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Obligors unless the Obligors
give the Lender specific written notice of exception within ten (10) days of
receipt by the Borrower.
22
ARTICLE III
SECURITY INTEREST; PRIORITY OCCUPANCY; SETOFF AND LIENS
SECTION 3.1 GRANT OF SECURITY INTEREST. Each Obligor hereby pledges,
assigns and grants to the Lender a Lien and security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations. Upon request by the Lender, each
Obligor will grant the Lender a security interest in all commercial tort claims
it may have against any Person.
SECTION 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time (whether or not a Default Period then exists) notify any
account debtor of any Obligor or other person obligated to pay the amount due
that such right to payment has been assigned or transferred to the Lender for
security and shall be paid directly to the Lender. Each Obligor will join in
giving such notice if the Lender so requests. At any time after an Obligor or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in each Obligor's name, (a) demand,
▇▇▇ for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Obligor's agent and attorney-in-fact, notify the United States Postal Service to
change the address for delivery of each Obligor's mail to any address designated
by the Lender, otherwise intercept any Obligor's mail, and receive, open and
dispose of any Obligor's mail, applying all Collateral as permitted under this
Agreement and holding all other mail for the Obligor's account or forwarding
such mail to the Obligor's last known address.
SECTION 3.3 ASSIGNMENT OF INSURANCE. Subject to an order of the
Bankruptcy Court authorizing the financing of insurance premiums, as additional
security for the payment and performance of the Obligations, each Obligor hereby
assigns to the Lender any and all monies (including proceeds of insurance and
refunds of unearned premiums) due or to become due under, and all other rights
of such Obligor with respect to, any and all policies of insurance now or at any
time hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and each Obligor hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in any Obligor's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
SECTION 3.4 OCCUPANCY.
(a) Each Obligor hereby irrevocably grants to the Lender the right
to take exclusive possession of the Premises at any time during a Default
Period.
23
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good ▇▇▇▇▇ ▇▇▇▇ to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Credit Facility, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all such
goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for
any rent or other compensation for the possession, occupancy or use of any
of the Premises, the Borrower shall reimburse the Lender promptly for the
full amount thereof. In addition, the Borrower will pay, or reimburse the
Lender for, all taxes, fees, duties, imposts, charges and expenses at any
time incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.4.
SECTION 3.5 LICENSE. Without limiting the generality of any other
Security Document, each Obligor hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of such Obligor for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such
materials become saleable Inventory, all in accordance with the same quality
standards previously adopted by such Obligor for its own manufacturing and
subject to such Obligor's reasonable exercise of quality control; and (b)
selling, leasing or otherwise disposing of any or all Collateral during any
Default Period.
SECTION 3.6 FINANCING STATEMENT. Each Obligor acknowledges that
pursuant to the Orders, the Liens in favor of the Lender in all Collateral shall
be perfected without the taking of any further action, including recordation of
any instruments of mortgage or assignment, or the recording or filing of any
financing statements, notices of liens or other similar instruments.
Notwithstanding the foregoing, each Obligor authorizes the Lender to file from
time to time such financing statements against the Collateral described as "all
personal property" or describing specific items of Collateral including
commercial tort claims as the Lender deems necessary or useful to perfect the
Security Interest. A carbon, photographic or other reproduction of this
Agreement or of any financing statements signed by such Obligor (if required) is
sufficient as a financing statement and may be filed as a financing statement in
any state to perfect the security interests granted hereby. For this purpose,
the following information is set forth:
Legal name and address of Borrower:
24
U. S. Plastic Lumber, Ltd. d/b/a U.S. Plastic Lumber Inc.-Worldwide
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. _________________________________
Legal name and address of Parent:
U.S. Plastic Lumber Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. _______________
Legal name and address of U.S. Plastic Lumber IP:
U.S. Plastic Lumber IP Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. ______________
Legal name and address of U.S. Plastic Lumber Finance:
U.S. Plastic Lumber Finance Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇-▇▇▇▇
Organizational Identification No. ____________________
Legal name and address of Eaglebrook Group:
The Eaglebrook Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. ____________________
Name and address of Secured Party:
AMPAC Capital Solutions, LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECTION 3.7 SETOFF. Subject to the Orders, the Lender may at any
time or from
25
time to time, at its sole discretion and without demand and without notice to
anyone, setoff any liability owed to any Obligor by the Lender or any of its
affiliates, whether or not due, against any Obligation, whether or not due. In
addition, subject to the Orders, each other Person holding a participating
interest in any Obligations shall have the right to appropriate or setoff any
deposit or other liability then owed by such Person or any of its affiliates to
any Obligor, whether or not due, and apply the same to the payment of said
participating interest, as fully as if such Person had lent directly to such
Obligor the amount of such participating interest.
SECTION 3.8 COLLATERAL. This Agreement does not contemplate a sale
of accounts, contract rights or chattel paper, and, as provided by law, the
Obligors are entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Obligors may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. Each Obligor waives any right it may have to require the
Lender to pursue any third person for any of the Obligations.
SECTION 3.9 PRIORITY AND LIENS.
(a) Pursuant to section 364(c)(l) of the Bankruptcy Code, the
Obligations of the Obligors hereunder and under the other Loan Documents
shall at all times constitute allowed Superpriority Claims in the
Bankruptcy Cases and in any future Chapter 7 case.
(b) Pursuant to section 364(c)(2) of the Bankruptcy Code, the
Obligations of each Obligor hereunder and under the other Loan Documents
shall at all times be secured by a first-priority Lien senior to all other
Liens on all property of each such Obligor, real and personal, whether now
owned or hereafter acquired, in each case, to the extent that such
property is not subject to a valid, perfected, enforceable and
nonavoidable Lien in existence on the Petition Date.
(c) Pursuant to section 364(d)(l) of the Bankruptcy Code, the
Obligations of each Obligor hereunder and under the other Loan Documents
shall at all times be secured by a perfected senior priming Lien upon all
property of such Obligor, real and personal, whether now owned or
hereafter acquired, provided, that such senior priming Liens shall be
subject to the payment of the Carve-Out as described in clause (e) below
and the Pre-Petition Purchase Money Liens.
(d) As to all real property the title to which is held by any
Obligor, or the possession of which is held by any Obligor pursuant to a
leasehold interest, such Obligor hereby assigns and conveys as security,
grants a security interest in, hypothecates, mortgages, pledges and sets
over unto the Lender all of the right, title, and interest of such Obligor
in and to all of such owned real property and in all such leasehold
interests,
26
together in each case with all of the right, title and interest of such
Obligor in and to all buildings, improvements, and fixtures related
thereto, any lease or sublease thereof, all General Intangibles relating
thereto and all proceeds thereof.
(e) The Liens on the Collateral under Sections 364(c)(2) and (d)(1)
of the Bankruptcy Code, for the benefit of the Lender, and the
Superpriority Claim under Section 364(c)(1) of the Bankruptcy Code
afforded the Obligations, shall be subject to the following (collectively,
the "Carve-Out"): (i) the unpaid fees due and payable to the Clerk of the
Court and the U.S. Trustee pursuant to 28 U.S.C. Section 1930 and (ii)
allowed, unpaid claims for fees and expenses incurred by professionals
retained pursuant to an order of the Bankruptcy Court in an amount not to
exceed $300,000 in the aggregate (the "Professional Expense Cap") only in
the event that the Maximum Line has been fully utilized (in the event that
Lender makes Advances less than the Maximum Line, the Professional Expense
Cap shall be limited to ten (1 0)% of the outstanding Advances); provided
that (A) no Advance, including any Advance used to fund the Carve-Out,
shall apply to or be available for any fees or expenses incurred in
connection with the investigation, initiation or prosecution of any
claims, causes of action, adversary proceedings or other litigation
against the Lender, including, without limitation (x) challenging the
amount, validity, perfection, priority or enforceability of or asserting
any defense, counterclaim or offset to, the Obligations or the Liens of
the Lender in respect thereof or (y) preventing, hindering or otherwise
delaying, whether directly or indirectly, the exercise by the Lender of
any of its rights and remedies under this Agreement or the other Loan
Documents or the enforcement or realization upon any of the Lender's Liens
on or security interests in any applicable Collateral, and (B) in no event
shall any of the Carve-Out (x) be paid from amounts on deposit in the Cash
Collateral Account or (y) include any fees or expenses arising after the
conversion of a Bankruptcy Case under Chapter 11 of the Bankruptcy Code to
a case under Chapter 7 of the Bankruptcy Code (other than as permitted
under clause (i) above).
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND LETTER
OF CREDIT. The Lender's obligation to make the initial Advance hereunder or to
cause any Letters of Credit to be issued shall be subject to the condition
precedent that the Lender shall have received all of the following, each in form
and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Obligors.
(b) The Note, properly executed by the Borrower.
(c) INTENTIONALLY OMITTED.
(d) INTENTIONALLY OMITTED.
27
(e) A true and correct copy of any and all agreements pursuant to
which any Obligor' s property is in the possession of any Person other
than any Obligor.
(f) The Lockbox Agreement, properly executed by the Borrower,
Wachovia Bank and the Lender within ten days of Closing and evidence of
closing of all other bank accounts other than Wachovia within ten days of
Closing.
(g) The Blocked Account Agreement, properly executed by the
Borrower, the Parent, Wachovia Bank and the Lender within ten days of
Closing and evidence of closing of all other bank accounts other than
Wachovia within ten days of Closing.
(h) The Mortgages, properly executed by the Obligor named therein.
(i) INTENTIONALLY OMITTED.
(j) An Environmental Indemnity Agreement for each Premises, properly
executed by the Obligor named therein.
(k) INTENTIONALLY OMITTED.
(l) The Patent and Trademark Security Agreement, properly executed
by the Obligors.
(m) The Lessor Estoppel and Agreement, properly executed by 2600
Roosevelt Associates, L.L.C., an Illinois limited liability company.
(n) Within fifteen (15) days of Closing, current searches from the
Delaware, Nevada, Illinois, Florida, and California secretaries of state
showing that no Liens have been filed and remain in effect against any
Obligor except (i) the Liens listed on Schedule 5.10 and (ii) any
financing statements, fixture filings or Mortgages filed by the Lender.
(o) For each Obligor, a certificate of such Obligor's Secretary or
Assistant Secretary certifying that attached to such certificate are (i)
the resolutions of such Obligor's Directors and, if required, Owners,
authorizing the execution, delivery and performance of the Loan Documents,
(ii) true, correct and complete copies of such Obligor's Constituent
Documents, and (iii) examples of the signatures of the Obligor's Officers
or agents authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests, on
their behalf.
(p) For each Obligor, current certificate issued by the Secretary of
State of the state of its formation, certifying that such Obligor is in
compliance with all applicable organizational requirements of such State.
(q) For each Obligor, evidence that such Obligor is duly licensed or
qualified to transact business in all jurisdictions where the character of
the property owned or
28
leased or the nature of the business transacted by it makes such licensing
or qualification necessary.
(r) A certificate of an Officer of the Borrower confirming, in his
personal capacity, the representations and warranties set forth in Article
V.
(s) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(t) Payment of the fees and commissions due under Section 2.11
through the date of the initial Advance or Letter of Credit and expenses
incurred by the Lender through such date and required to be paid by the
Borrower under Section 9.6, including all legal expenses incurred through
the date of this Agreement within ten (10) days of the date hereof.
(u) Interim Order. The Lender shall have received a signed copy of
the interim order (the "Interim Order") of the Bankruptcy Court with the
Budget attached thereto (with such modifications as are approved by the
Lender in its sole discretion) authorizing and approving the making of
Advances and the issuance of Letters of Credit contemplated hereby and by
the other Loan Documents and the granting of the Superpriority Claim
status and Liens as described in Section 3.9 and the Interim Order. The
Interim Order (i) shall have been entered upon an application or motion of
the Obligors satisfactory in form and substance to the Lender in its sole
discretion, (ii) shall be certified by the Clerk of the Bankruptcy Court
as having been duly entered, (iii) shall have authorized extensions of
credit by the Lender in the amounts set forth in the Budget consisting of
Advances and Letters of Credit and include, without limitation, a finding
and ruling to the effect that the Advances and Letters of Credit made or
issued pursuant to the Interim Order are made in good faith within the
meaning of Section 364(e) of the Bankruptcy Code, (iv) shall approve the
payment by the Obligors of all of the fees and expenses set forth herein,
and (v) shall be in full force and effect and shall not have been vacated,
reversed, modified, amended or stayed or the subject of a stay pending
appeal.
(v) Additional Documents. The Obligors shall have executed and
delivered to the Lender such other documents which the Lender determines
are reasonably necessary to consummate the transactions contemplated
hereby.
(w) Budget. On or before the Closing Date, the Lender shall have
received the Budget, in form and substance satisfactory to the Lender in
its sole discretion.
(x) Financial Advisor. The Borrower shall have retained and
appointed Triax Capital Advisors, LLC as a financial advisor and the
Lender shall be satisfied with the terms of such retention and
appointment, all of which shall be approved by entry of an order from the
Bankruptcy Court.
SECTION 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF
CREDIT.
29
The Lender's obligation to make each Advance and to cause each Letter of Credit
to be issued shall be subject to the further conditions precedent that:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance or issuance of a Letter of
Credit as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date;
(b) no event has occurred and is continuing, or would result from
such Advance or issuance of a Letter of Credit which constitutes a Default
or an Event of Default;
(c) since the Petition Date, no event or series of events shall have
occurred, which the Lender determines to constitute a material adverse
change in (i) the assets, liabilities, business, operations, condition
(financial or otherwise), properties or prospects of the Borrower or any
other Obligor, (ii) the enforceability of the Liens, rights and remedies
of the Lender under the Loan Documents and the Orders, (iii) the ability
of the Borrower or the other Obligors to timely pay the Obligations in
full when due and to perform their covenants, agreements and obligations
under the Loan Documents and the Orders or (iv) the value of the assets of
the Borrower and the other Obligors;
(d) the Lender shall have received evidence satisfactory to it that
the Borrower is operating in compliance with the Budget;
(e) none of the Bankruptcy Cases shall have been dismissed or
converted to a case under Chapter 7 of the Bankruptcy Code, no Obligor
shall have filed an application for any order dismissing any Bankruptcy
Case or converting any Bankruptcy Case to a case under Chapter 7 or the
Bankruptcy Code, and no trustee under Chapter 7 or Chapter 11 of the
Bankruptcy Code and no examiner with powers beyond the duty to investigate
and report, as set forth in Sections 1 106(a)(3) and (4) of the Bankruptcy
Code, shall have been appointed in the Bankruptcy Cases. No application
shall have been filed by any Obligor for the approval of any other first
priority administrative claim in the Bankruptcy Cases which is pan passu
with or senior to the claims of the Lender against the Obligor (and, other
than the Carve-Out, no such claim or Lien has arisen) and no Obligor shall
have failed to oppose any such motion filed by any other Person;
(f) the Interim Order shall not have been appealed, stayed,
reversed, modified or amended in any respect and shall be in full force
and effect; and
(g) if such Advance or request for a Letter of Credit is requested
more than thirty (30) days after the Interim Order, the Final Order shall
have been entered and in full force and effect and shall not have been
appealed, stayed, reversed, modified or amended in any respect.
30
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each Obligor represents and warrants to the Lender on the date of
this Agreement and on each date an Advance is requested, as follows:
SECTION 5.1 EXISTENCE AND POWER: NAME: CHIEF EXECUTIVE OFFICE:
INVENTORY AND EQUIPMENT LOCATIONS: FEDERAL EMPLOYER IDENTIFICATION NUMBER. Each
Obligor is a corporation, duly organized, validly existing and in good standing
under the laws of the state of its formation set forth in Schedule 5.1 and is
duly licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary. Each Borrower
has all requisite power and authority to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. Each Obligor's name as set forth in its Constituent
Documents is correctly set forth on Schedule 5.1. During its existence, each
Obligor has done business solely under the names for such Obligor set forth in
Schedule 5.1. Each Obligor's chief executive office and principal place of
business is located at the address set forth in Schedule 5.1 and all of such
Obligor' s records relating to its business or the collateral are kept at such
location. All Inventory and Equipment of such Obligor is located at that
location or at one of the other locations listed in Schedule 5.1 for such
Obligor. Each Obligor's federal employer identification number is correctly set
forth in Section 3.6.
SECTION 5.2 CAPITALIZATION. Schedule 5.2 constitutes a correct and
complete list of all ownership interests of the Obligors, and an organizational
chart showing the ownership structure of all Obligors and their Subsidiaries.
SECTION 5.3 AUTHORIZATION OF BORROWING~ NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by each Obligor of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of such Obligor' s Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including Regulation X of the
Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to the Obligors or
of any Obligor's Constituent Documents; (iv) result in a breach of or constitute
a default under any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which any Obligor is a party or by which it or
its properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than the Security Interest) upon or
with respect to any of the properties now owned or hereafter acquired by such
Obligor.
SECTION 5.4 LEGAL AGREEMENTS. Subject to Bankruptcy Court approval,
this
31
Agreement constitutes and, upon due execution by the applicable Obligors, each
of the other Loan Documents will constitute, the legal, valid and binding
obligations of the Obligors party thereto, enforceable against the Obligors
party thereto in accordance with their respective terms.
SECTION 5.5 SUBSIDIARIES. Except as set forth in Schedule 5.5
hereto, the Obligors have no Subsidiaries.
SECTION 5.6 FINANCIAL CONDITION. The Obligors have furnished to the
Lender their consolidated audited financial statements for the fiscal year ended
December 31, 2002, consolidated unaudited financial statements for the fiscal
year ended December 31, 2003, and consolidated unaudited financial statements
for the fiscal year-to-date period ended June 30, 2004, and those statements
fairly present the Obligors' financial condition on the dates thereof and the
results of its operations and cash flows for the periods then ended and were
prepared in accordance with generally accepted accounting principles.
SECTION 5.7 INTENTIONALLY OMITTED.
SECTION 5.8 REGULATION U. No Obligor is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
SECTION 5.9 INTENTIONALLY OMITTED.
SECTION 5.10 TITLES AND LIENS. Each Obligor has good and absolute
title to all Collateral free and clear of all Liens, other than (i) Liens in
existence on the Petition Date held by the holders of the Pre-Petition Purchase
Money Liens, and (ii) other Liens, in each case as described on Schedule 5.10.
SECTION 5.11 INTELLECTUAL PROPERTY RIGHTS.
(a) OWNED INTELLECTUAL PROPERTY. SCHEDULE 5.11 is a complete list of all
patents, applications for patents, trademarks, applications for trademarks,
service marks, applications for service marks, mask works, trade dress and
copyrights for which any Obligor is the registered owner (the "Owned
Intellectual Property"). Except as disclosed on Schedule 5.11, (i) each Obligor
owns its Owned Intellectual Property free and clear of all restrictions
(including covenants not to ▇▇▇ a third party), court orders, injunctions,
decrees, writs or Liens, whether by written agreement or otherwise, (ii) no
Person other than the Obligor indicated in Schedule J owns or has been granted
any right in the Owned Intellectual Property, (iii) all Owned Intellectual
Property is valid, subsisting and enforceable and (iv) each Obligor has taken
all commercially reasonable action necessary to maintain and protect its Owned
Intellectual Property.
(b) AGREEMENTS WITH EMPLOYEES AND CONTRACTORS. Each Obligor has entered
into a
32
legally enforceable agreement with each of its employees and subcontractors
obligating each such Person to assign to such Obligor, without any additional
compensation, any Intellectual Property Rights created, discovered or invented
by such Person in the course of such Person's employment or engagement with such
Obligor (except to the extent prohibited by law), and further requiring such
Person to cooperate with such Borrower, without any additional compensation, in
connection with securing and enforcing any Intellectual Property Rights therein;
provided, however, that the foregoing shall not apply with respect to employees
and subcontractors whose job descriptions are of the type such that no such
assignments are reasonably foreseeable.
(c) INTELLECTUAL PROPERTY RIGHTS LICENSED FROM OTHERS. Schedule 5.11 is a
complete list of all agreements under which such Obligor has licensed
Intellectual Property Rights from another Person ("Licensed Intellectual
Property") other than readily available, non-negotiated licenses of computer
software and other intellectual property used solely for performing accounting,
word processing and similar administrative tasks ("Off-the-shelf Software") and
a summary of any ongoing payments such Obligor is obligated to make with respect
thereto. Except as disclosed on Schedule 5.11 and in written agreements, copies
of which have been given to the Lender, each Obligor's licenses to use the
Licensed Intellectual Property are free and clear of all restrictions, Liens,
court orders, injunctions, decrees, or writs, whether by written agreement or
otherwise. Except as disclosed on Schedule 5.11, no Obligor is obligated or
under any liability whatsoever to make any payments of a material nature by way
of royalties, fees or otherwise to any owner of, licensor of, or other claimant
to, any Intellectual Property Rights.
(d) OTHER INTELLECTUAL PROPERTY NEEDED FOR BUSINESS. Except for
Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned Intellectual
Property and the Licensed Intellectual Property constitute all Intellectual
Property Rights used or necessary to conduct the Obligor's businesses as they
are presently conducted or as the Obligor reasonably foresees conducting them.
(e) INFRINGEMENT. Except as disclosed on Schedule 5.11, no Obligor has
knowledge of, and has not received any written claim or notice alleging, any
Infringement of another Person's Intellectual Property Rights (including any
written claim that any Obligor must license or refrain from using the
Intellectual Property Rights of any third party) nor, to any Obligor's
knowledge, is there any threatened claim or any reasonable basis for any such
claim.
SECTION 5.12 PLANS. Except as disclosed to the Lender in writing
prior to the date hereof, no Obligor nor any ERISA Affiliate of any Obligor (i)
maintains or has maintained any Pension Plan, (ii) contributes or has
contributed to any Multiemployer Plan or (iii) provides or has provided
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required under Section 601 of ERISA,
Section 4980B of the IRC or applicable state law). No Obligor nor any ERISA
Affiliate of any Obligor has received any notice or has any knowledge to the
effect that it is not in full compliance with any of the requirements of ERISA,
the IRC or applicable state law with respect to any Plan. No Reportable Event
exists in connection with any Pension Plan. Each Plan which is intended to
qualify under the IRC is so qualified, and no fact or circumstance exists which
may have an adverse effect on the Plan's tax-qualified status. No Obligor nor
any ERISA Affiliate of any Obligor has (x) any accumulated funding deficiency
(as defined in Section 302 of ERISA and
33
Section 412 of the IRC) under any Plan, whether or not waived, (y) any liability
under Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (z) any liability
or knowledge of any facts or circumstances which could result in any liability
to the Pension Benefit Guaranty Corporation, the Internal Revenue Service, the
Department of Labor or any participant in connection with any Plan (other than
routine claims for benefits under the Plan).
SECTION 5.13 DEFAULT. Except as set forth on Schedule 5.13, each
Obligor is in compliance with all provisions of all agreements, instruments,
decrees and orders to which it is a party or by which it or its property is
bound or affected, the breach or default of which could have a Material Adverse
Effect.
SECTION 5.14 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 5.14, to each Obligor's best
knowledge, there are not present in, on or under the Premises any
Hazardous Substances in such form or quantity as to create any material
liability or obligation for either any Obligor or the Lender under common
law of any jurisdiction or under any Environmental Law, and no Hazardous
Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to
create any such material liability.
(b) To each Obligor's best knowledge, no Obligor has disposed of
Hazardous Substances in such a manner as to create any material liability
under any Environmental Law.
(c) Except as set forth on Schedule 5.14, to each Obligor's best
knowledge, there are not and there never have been any requests, claims,
notices, investigations, demands, administrative proceedings, hearings or
litigation, relating in any way to the Premises or any Obligor, alleging
material liability under, violation of, or noncompliance with any
Environmental Law or any license, permit or other authorization issued
pursuant thereto. To each Obligor's best knowledge, no such matter is
threatened or impending.
(d) Except as set forth on Schedule 5.14, to each Obligor's best
knowledge, each Obligor's businesses are and have in the past always been
conducted in accordance with all Environmental Laws and all licenses,
permits and other authorizations required pursuant to any Environmental
Law and necessary for the lawful and efficient operation of such
businesses are in the appropriate Obligor' s possession and are in full
force and effect. No permit required under any Environmental Law is
scheduled to expire within 12 months and there is no threat that any such
permit will be withdrawn, terminated, limited or materially changed.
(e) To each Obligor's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
34
(f) The Obligors have delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or any Obligor's
businesses.
SECTION 5.15 SUBMISSIONS TO LENDER. All financial and other
information provided to the Lender by or on behalf of any Obligor in connection
with the Obligors' request for the Credit Facility is (i) true and correct in
all material respects, (ii) does not omit any material fact necessary to make
such information not misleading and, (iii) as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
SECTION 5.16 INTENTIONALLY OMITTED.
SECTION 5.17 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the applicable Obligor's records pertaining thereto
as being obligated to pay such obligation except as set forth in Schedule 5.17.
SECTION 5.18 BANK ACCOUNTS. Except for the Cash Collateral Account,
any payroll account or the Blocked Accounts, no Obligor maintains or otherwise
has any (a) checking, savings or other accounts at any bank or other financial
institution or investment fund, (b) investment account, securities account,
commodity account or any similar account with any securities intermediary or
commodity intermediary or (c) other account where money is or may be deposited
or maintained with any Person except as set forth in Schedule 5.18.
SECTION 5.19 PRODUCT WARRANTY CLAIMS. To the knowledge of Obligors,
Schedule 5.19 sets forth the only account debtors with asserted or known
potential Product Warranty Claims against any Obligor.
ARTICLE VI
COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower and each other Obligor, as the
case may be, will comply with the following requirements, unless the Lender
shall otherwise consent in writing:
35
SECTION 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within 90 days after the end of each fiscal year of the Borrower,
the Borrower will deliver, or cause to be delivered, to the Lender, the
Borrower's unaudited financial statements, which annual financial
statements shall include the Borrower's balance sheet as at the end of
such fiscal year and the related statements of the Borrower's income,
retained earnings and cash flows for the fiscal year then ended, prepared,
if the Lender so requests, on a consolidating and consolidated basis to
include any Affiliates, all in reasonable detail and prepared in
accordance with GAAP and a certificate of the Borrower's chief financial
officer in the form of Exhibit D hereto stating that such financial
statements have been prepared in accordance with GAAP, fairly represent
the Borrower's financial position and the results of its operations, and
whether or not such officer has knowledge of the occurrence of any Default
or Event of Default and, if so, stating in reasonable detail the facts
with respect thereto.
(b) MONTHLY FINANCIAL STATEMENTS. As soon as available and in any
event within 20 days after the end of each month, the Borrower will
deliver to the Lender an unaudited/internal balance sheet and statements
of income and retained earnings of the Borrower as at the end of and for
such month and for the year to date period then ended, prepared, if the
Lender so requests, on a consolidating and consolidated basis to include
any Affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments;
and accompanied by a certificate of the Borrower's chief financial
Officer, substantially in the form of Exhibit D hereto stating (i) that
such financial statements have been prepared in accordance with GAAP,
subject to year-end audit adjustments and fairly represent the Borrower's
financial position and the results of its operations, (ii) whether or not
such officer has knowledge of the occurrence of any Default or Event of
Default not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all relevant
facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the Budget.
(c) WEEKLY FINANCIAL REPORTS. By the second Banking Day of each
week, the Borrower will deliver to the Lender (i) a weekly cash flow
statement as of the end of the previous week setting forth the actual
revenues and expenses of the Obligors for such week, and (ii) a weekly
reconciliation with respect to the Budget as of the end of the previous
week setting forth the actual revenues and expenses of the Obligors as
compared to the budgeted amounts for such categories.
(d) COLLATERAL REPORTS. By the second Banking Day of each week, or
more frequently if the Lender so requires, the Borrower will deliver to
the Lender (i) agings of the Borrower's Accounts receivable and its
accounts payable, (ii) an inventory
36
certification report, (iii) a calculation of the Borrower's Accounts,
Eligible Accounts, Inventory and Eligible Inventory, including an updated
Schedule 5.19 clearly identifying Product Warranty Claims that were not
previously listed on Schedule ~ and (iv) a listing and copies of all
credit memos relating to disputes or claims by the Borrower's customers,
in each case determined as at the end of the previous week. The Borrower
shall also provide such information to the Lender by the third Banking Day
of each month, prepared as of the end of the previous month.
(e) BANKRUPTCY SCHEDULES AND U.S. TRUSTEE REPORTS. The Obligors
shall deliver to the Lender a copy of all reports they submit to the
Bankruptcy Court, including, but not limited to, their schedules of assets
and liabilities, schedules of current income and expenditures, schedules
of executory contracts and unexpired leases, statements of financial
affairs and lists of equity security holders, all as required and in the
form prescribed by Bankruptcy Rule 1007, within the time period prescribed
by the Bankruptcy Court. The Obligors shall also deliver to the Lender a
copy of any and all interim, operating or other statements or reports
required to be filed by the Bankruptcy Code, the Bankruptcy Rules, the
local rules of the Bankruptcy Court or the rules or procedures of the
Office of the U.S. Trustee.
(f) DEFAULTS. As promptly as practicable (but in any event not later
than five (5) business days) after an Officer of any Obligor obtains
knowledge of the occurrence of any Default or Event of Default, the
Borrower or such other Obligor will deliver to the Lender notice of such
occurrence, together with a detailed statement by a responsible Officer of
the Borrower or such other Obligor of the steps being taken by the
Borrower or such other Obligor to cure the effect thereof.
(g) BENEFIT PLANS. As soon as possible, and in any event within 30
days after any Obligor knows or has reason to know that any Reportable
Event with respect to any Pension Plan has occurred, the Borrower will
deliver to the Lender a statement of the Borrower's chief financial
Officer setting forth details as to such Reportable Event and the action
which the Borrower proposes to take with respect thereto, together with a
copy of the notice of such Reportable Event to the Pension Benefit
Guaranty Corporation. As soon as possible, and in any event within 10 days
after any Obligor fails to make any quarterly contribution required with
respect to any Pension Plan under Section 4 12(m) of the IRC, the Borrower
will deliver to the Lender a statement of the Borrower's chief financial
Officer setting forth details as to such failure and the action which the
Borrower proposes to take with respect thereto, together with a copy of
any notice of such failure required to be provided to the Pension Benefit
Guaranty Corporation. As soon as possible, and in any event with 10 days
after any Obligor knows or has reason to know that it has or is reasonably
expected to have any liability under Section 4201 or 4243 of ERISA for any
withdrawal, partial withdrawal, reorganization or other event under any
Multiemployer Plan, the Borrower will deliver to the Lender a statement of
the Borrower's chief financial Officer setting forth details as to such
liability and the action which Borrower proposes to take with respect
thereto.
(h) INTENTIONALLY OMITTED
37
(i) OFFICERS AND DIRECTORS. Promptly upon knowledge thereof, the
Obligors will deliver to the Lender notice of any change in the persons
constituting the Officers and Directors of any Obligor.
(j) COLLATERAL. Promptly upon knowledge by any Obligor thereof, the
Borrower will deliver to the Lender notice of any loss of or material
damage to any Collateral or of any substantial adverse change in any
Collateral or the prospect of payment thereof.
(k) COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice of any commercial tort claims
any Obligor may bring against any person, including the name and address
of each defendant, a summary of the facts, an estimate of the Obligor's
damages, copies of any complaint or demand letter submitted by such
Obligor, and such other information as the Lender may request.
(l) INTELLECTUAL PROPERTY.
(i) INTENTIONALLY OMITTED
(ii) Promptly upon knowledge thereof, the Borrower will
deliver to the Lender notice of (A) any Infringement of its
Intellectual Property Rights by others, (B) claims that any Obligor
is Infringing another Person's Intellectual Property Rights and (C)
any threatened cancellation, termination or material limitation of
its Intellectual Property Rights.
(iii) Promptly upon receipt, the Borrower will give the Lender
copies of all registrations and filings with respect to the
Intellectual Property Rights of any Obligor.
(m) INTENTIONALLY OMITTED
(n) INTENTIONALLY OMITTED
(o) INTENTIONALLY OMITTED
(p) VIOLATIONS OF LAW. Promptly upon knowledge thereof, the Borrower
will deliver to the Lender notice of any Obligor's violation of any law,
rule or regulation, the non-compliance with which could have a Material
Adverse Effect.
(q) OTHER REPORTS. From time to time, with reasonable promptness,
the Borrower will deliver to the Lender any and all receivables schedules,
collection reports, deposit records, equipment schedules, copies of
invoices to account debtors, shipment documents and delivery receipts for
goods sold, and such other material, reports, records or information with
respect to any Obligor as the Lender may request.
38
SECTION 6.2 VARIANCE FROM BUDGET. The weekly net total of receipts
and disbursements for the Obligors, collectively, as reflected in the Weekly Net
Cash Inflows/Outflows line item in the Budget, shall not, for any week, have a
negative variance of more than fifteen percent (15%) unless otherwise agreed to
by the Lender in its sole discretion.
SECTION 6.3 NEGATIVE PLEDGE. No Obligor will create, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired by it (or
any income therefrom or any right to receive income therefrom), or apply to the
Bankruptcy Court for authority to do any of the foregoing, except:
(a) Liens existing as of the Petition Date which are set forth on
Schedule 5.10 hereto;
(b) Permitted Liens;
(c) the Security Interest and Liens of the Lender; and
(d) the adequate protection Lien provided to the holder of any Lien
set forth on Schedule 5.10 pursuant to the Orders and which is junior and
subordinate to the Security Interest and Liens described in clause (c)
above.
SECTION 6.4 INDEBTEDNESS. No Obligor will incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money or letters of credit issued on such
Obligor's behalf, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:
(a) the Obligations;
(b) indebtedness in existence on the Petition Date and listed on
Schedule 6.4 hereto (the "Pre-Petition Indebtedness") and
(c) indebtedness incurred consistent with Section 2.17.
SECTION 6.5 GUARANTIES. No Obligor will assume, guarantee, endorse
or otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
(a) the endorsement of negotiable instruments by such Obligor for
deposit or collection or similar transactions in the ordinary course of
its business;
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 6.4 hereto; and
(c) the guarantees hereunder.
39
SECTION 6.6 INVESTMENTS AND SUBSIDIARIES. No Obligor will purchase
or hold beneficially any stock or other securities or evidences of indebtedness
of, make or permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including any partnership
or joint venture, except:
(a) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued by
U.S. corporations rated "A-i" or "A-2" by Standard & Poors Corporation or
"P-l" or "P-2" by ▇▇▇▇▇'▇ Investors Service or certificates of deposit or
bankers' acceptances having a maturity of one year or less issued by
members of the Federal Reserve System having deposits in excess of
$100,000,000 (which certificates of deposit or bankers' acceptances are
fully insured by the Federal Deposit Insurance Corporation);
(b) expenses set forth as a line item in the Budget; and
(c) current investments in the Subsidiaries in existence on the date
hereof and listed in Schedule 5.5 hereto.
SECTION 6.7 DIVIDENDS AND DISTRIBUTIONS. No Obligor will declare or
pay any dividends on any class of its stock or make any payment on account of
the purchase, redemption or other retirement of any shares of such stock or make
any distribution in respect thereof, either directly or indirectly.
SECTION 6.8 SALARIES. No Obligor will pay excessive or unreasonable
salaries, bonuses, commissions, consultant fees or other compensation; or
increase the salary, bonus, commissions, consultant fees or other compensation
of any Director, Officer or consultant, or any member of their families, from
the rate of compensation in effect on the Petition Date.
SECTION 6.9 INTENTIONALLY OMITTED
SECTION 6.10 BOOKS AND RECORDS: INSPECTION AND EXAMINATION. Each
Obligor will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to its business and financial condition and such
other matters as the Lender may from time to time request in which true and
complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all company and
financial books and records of such Obligor at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to such Obligor, and to discuss such
Obligor's affairs with any of its Directors, Officers, employees or agents. Each
Obligor hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to Lender, at such Obligor's expense, all financial
information, books and records, work papers, management reports and other
information in their possession regarding such Obligor.
40
Each Obligor will permit the Lender, or its employees, accountants, attorneys or
agents, upon request, to examine and inspect any Collateral or any other
property of such Obligor at any time during ordinary business hours.
SECTION 6.11 ACCOUNT VERIFICATION. The Lender may at any time, and
from time to time, send or require the Borrower or any other Obligor to send
requests for verification of accounts or notices of assignment to account
debtors and other obligors with respect to Accounts. The Lender may also at any
time, and from time to time, telephone account debtors and other obligors with
respect to Accounts to verify Accounts.
SECTION 6.12 COMPLIANCE WITH LAWS.
(a) Each Obligor will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and
keep the Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or local
law, statute or ordinance.
(b) Without limiting the foregoing undertakings, each Obligor
specifically agrees that it will comply with all applicable Environmental
Laws and obtain and comply with all permits, licenses and similar
approvals required by any Environmental Laws, and will not generate, use,
transport, treat, store or dispose of any Hazardous Substances in such a
manner as to create any material liability or obligation under the common
law of any jurisdiction or any Environmental Law.
SECTION 6.13 PAYMENT OF TAXES AND OTHER CLAIMS. Each Obligor will
pay or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon any properties of such
Obligor; provided, that such Obligor shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which proper reserves
have been made.
SECTION 6.14 MAINTENANCE OF PROPERTIES.
(a) Each Obligor will keep and maintain the Collateral and all of
its other properties necessary or useful in its business in good
condition, repair and working order (normal wear and tear excepted) and
will from time to time replace or repair any worn, defective or broken
parts; provided, however, that nothing in this Section 6.14 shall prevent
such Obligor from discontinuing the operation and maintenance of any of
its properties if such discontinuance is, in such Obligor' s judgment,
desirable in the conduct of such Obligor's business and not
disadvantageous in any material respect to the Lender.
41
Each Obligor will take all commercially reasonable steps necessary to
protect and maintain its Intellectual Property Rights.
(b) Each Obligor will defend the Collateral against all Liens,
claims or demands of all Persons (other than the Lender) claiming the
Collateral or any interest therein. The Obligors will keep all Collateral
free and clear of all Liens except Permitted Liens. Each Obligor will take
all commercially reasonable steps necessary to prosecute any Person
Infringing its Intellectual Property Rights and to defend itself against
any Person accusing it of Infringing any Person's Intellectual Property
Rights.
SECTION 6.15 INSURANCE. The Obligors will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Obligors operate.
Without limiting the generality of the foregoing, the Obligors will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as the Lender may reasonably
request, with any loss payable to the Lender to the extent of its interest, and
all policies of such insurance shall contain a lender's loss payable endorsement
for the Lender's benefit. All policies of liability insurance required hereunder
shall name the Lender as an additional insured.
SECTION 6.16 PRESERVATION OF EXISTENCE. Each Obligor will preserve
and maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
SECTION 6.17 DELIVERY OF INSTRUMENTS, ETC. Upon request by the
Lender, each Obligor will promptly deliver to the Lender in pledge all
instruments, documents and chattel paper constituting Collateral, duly endorsed
or assigned by such Obligor.
SECTION 6.18 SALE OR TRANSFER OF ASSETS: SUSPENSION OF BUSINESS
OPERATIONS. Except as otherwise set forth herein, no Obligor will sell, lease,
assign, transfer or otherwise dispose of (i) the stock of any Subsidiary, (ii)
all or a substantial part of its assets, or (iii) any Collateral or any interest
therein (whether in one transaction or in a series of transactions) to any other
Person other than the sale of Inventory in the ordinary course of business and
the Sale, and will not liquidate, dissolve or suspend business operations. No
Obligor will transfer any part of its ownership interest in any Intellectual
Property Rights and will not permit any agreement under which it has licensed
Licensed Intellectual Property to lapse, except that any Obligor may transfer
such rights or permit such agreements to lapse if it shall have reasonably
determined that the applicable Intellectual Property Rights are no longer useful
in its business. If any Obligor transfers any Intellectual Property Rights for
value, such Obligor will pay over the proceeds to the Lender for application to
the Obligations. No Obligor will license any other Person to use
42
any of its Intellectual Property Rights, except that any Obligor may grant
licenses in the ordinary course of its business in connection with sales of
Inventory or provision of services to its customers.
SECTION 6.19 CONSOLIDATION AND MERGER: ASSET ACQUISITIONS. No
Obligor will consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
SECTION 6.20 SALE AND LEASEBACK. No Obligor will enter into any
arrangement, directly or indirectly, with any other Person whereby such Obligor
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which such Obligor intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
SECTION 6.21 RESTRICTIONS ON NATURE OF BUSINESS. No Obligor will
engage in any line of business materially different from that presently engaged
in by such Obligor and will not purchase, lease or otherwise acquire assets not
related to its business.
SECTION 6.22 ACCOUNTING. No Obligor will adopt any material change
in accounting principles other than as required by GAAP. No Obligor will adopt,
permit or consent to any change in its fiscal year.
SECTION 6.23 DISCOUNTS. ETC. After notice from the Lender, the
Obligors will not grant any discount, credit or allowance to any customer of
such Obligor or accept any return of goods sold. The Obligors will not at any
time modify, amend, subordinate, cancel or terminate the obligation of any
account debtor or other obligor with respect to my amount owing to any Obligor.
SECTION 6.24 BENEFIT PLANS. Neither any Obligor nor any ERISA
Affiliate will (i) adopt, create, assume or become a party to any Pension Plan,
(ii) incur any obligation to contribute to any Multiemployer Plan, (iii) incur
any obligation to provide post-retirement medical or insurance benefits with
respect to employees or former employees (other than benefits required by law)
or (iv) amend any Plan in a manner that would materially increase its funding
obligations.
SECTION 6.25 PLACE OF BUSINESS: NAME. No Obligor will transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business location except for the Ocala Real Property. The Obligors
will not permit any tangible Collateral or any records pertaining to the
Collateral to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be required to
be, but has not in fact been, filed in order to perfect the Security Interest.
No Obligor will change its name or jurisdiction of organization.
43
SECTION 6.26 CONSTITUENT DOCUMENTS. The Obligors will not amend
their Constituent Documents.
SECTION 6.27 PERFORMANCE BY THE LENDER. If any Obligor at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein or in any other Loan Document, and if such
failure shall continue for a period of three (3) Banking Days after the Lender
gives such Obligor written notice thereof (or in the case of the agreements
contained in Sections 6.13 and immediately upon the occurrence of such failure,
without notice or lapse of time), the Lender may, but need not, perform or
observe such covenant on behalf and in the name, place and stead of such Obligor
(or, at the Lender's option, in the Lender's name) and may, but need not, take
any and all other actions which the Lender may reasonably deem necessary to cure
or correct such failure (including the payment of taxes, the satisfaction of
Liens, the performance of obligations owed to account debtors or other obligors,
the procurement and maintenance of insurance, the execution of assignments,
security agreements and financing statements, and the endorsement of
instruments); and the Obligors shall thereupon pay to the Lender on demand the
amount of all monies expended and all costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Lender in connection with or
as a result of the performance or observance of such agreements or the taking of
such action by the Lender, together with interest thereon from the date expended
or incurred at the Default Rate. To facilitate the Lender's performance or
observance of such covenants of any Obligor, each Obligor hereby irrevocably
appoints the Lender, or the Lender's delegate, acting alone, as such Obligor' s
attorney in fact (which appointment is coupled with an interest) with the right
(but not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of such Obligor any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by such Obligor under this Section
6.27.
SECTION 6.28 REMEDIES OF THE LENDER. No Obligor shall seek to obtain
any stay in respect of the exercise of the remedies available to the Lender
under this Agreement.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of any Obligations when they become due
and payable;
(b) Default in the performance, or breach, of any covenant or
agreement of any Obligor contained in this Agreement or any other Loan
Document;
(c) INTENTIONALLY OMITTED;
44
(d) Non-payment when due of the premium on any insurance policy
required to be maintained hereunder, following expiration of all
applicable cure periods available to the Borrower;
(e) Suspension of the operation of the Borrower's present business
(including manufacturing operations) other than the Borrower's operation
in Ocala, Florida;
(f) The Obligors' shall fail to satisfy each of the Sale Milestones
as provided for by Section 2.3 hereof;
(g) Intentionally Omitted;
(h) Intentionally Omitted;
(i) Intentionally Omitted;
(j) Any representation or warranty made by any Obligor in this
Agreement or any other Loan Document or by the Borrower (or any of its
Officers) or any Guarantor in any agreement, certificate, instrument or
financial statement or other statement contemplated by or made or
delivered pursuant to or in connection with this Agreement shall prove to
have been incorrect in any material respect when deemed to be effective;
(k) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Pension Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Pension Plan, shall have occurred and be
continuing 30 days after written notice to such effect shall have been
given to the Borrower by the Lender; or a trustee shall have been
appointed by an appropriate United States District Court to administer any
Pension Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Pension Plan or to appoint a
trustee to administer any Pension Plan; or any Obligor or any ERISA
Affiliate shall have filed for a distress termination of any Pension Plan
under Title IV of ERISA; or any Obligor or any ERISA Affiliate shall have
failed to make any quarterly contribution required with respect to any
Pension Plan under Section 412(m) of the IRC, which the Lender determines
in good faith may by itself, or in combination with any such failures that
the Lender may determine are likely to occur in the future, result in the
imposition of a Lien on any Obligor's assets in favor of the Pension Plan;
or any withdrawal, partial withdrawal, reorganization or other event
occurs with respect to a Multiemployer Plan which results or could
reasonably be expected to result in a material liability of any Obligor to
the Multiemployer Plan under Title IV of ERISA;
(l) An event of default shall occur under any Security Document;
(m) Intentionally Omitted;
(n) any Bankruptcy Case shall be dismissed or converted to a case
under
45
Chapter 7 of the Bankruptcy Code, or any Obligor shall file an application
for an order dismissing its Bankruptcy Case or converting its Bankruptcy
Case to a case under Chapter 7 of the Bankruptcy Code;
(o) the Bankruptcy Court shall enter an order that is not stayed
pending appeal granting relief from the automatic stay applicable under
Section 362 of the Bankruptcy Code to the holder or holders of any
security interest to permit foreclosure (or the granting of a deed in lieu
of foreclosure or the like) in any assets of any Obligor with an orderly
liquidation value equal to or in excess of $100,000.00 in the aggregate;
or an order shall be entered by the Bankruptcy Court granting relief from
the automatic stay applicable under Section 362 of the Bankruptcy Code to
permit the creation, perfection or enforcement of any judgment, Lien, levy
or attachment based on any judgment, whether or not such judgment arises
from or gives rise to a prepetition or post-petition claim with a value
equal to or in excess of $100,000.00 in the aggregate; or an order shall
be entered by the Bankruptcy Court that is not stayed pending appeal
otherwise granting relief from the automatic stay to any creditor of any
Obligor with respect to any claim or claims with a value equal to or in
excess of $100,000.00 in the aggregate; or an order shall be entered by
the Bankruptcy Court that is not stayed pending appeal otherwise granting
relief from the automatic stay if such stay relief could reasonably be
expected to have a Material Adverse Effect; provided, however, that it
shall not be an Event of Default if relief from the automatic stay is
lifted solely for the purpose of (i) allowing such creditor to determine
the liquidated amount of its claim against any Obligor or (ii) seeking
payment from a source other than any Obligor or any of their assets;
(p) any Person shall propose a sale pursuant to Section 363 of the
Bankruptcy Code, or a Plan of Reorganization, or the Bankruptcy Court
shall approve any such sale or plan that does not require the payment in
full in cash of all Obligations of the Obligors hereunder and under the
other Loan Documents (including the cancellation and return of all Letters
of Credit or the delivery of cash collateral with respect to such Letters
of Credit in an amount equal to 110% of the aggregate undrawn amount of
such Letters of Credit) on or before the closing of such sale or the
effective date of such Plan of Reorganization;
(q) an order of the Bankruptcy Court shall be entered, or any
Obligor shall file an application for an order, dismissing any Bankruptcy
Case, which order does not require a provision for payment in full in cash
of all Obligations of the Obligors hereunder (including the cancellation
and return of all Letters of Credit or the delivery of cash collateral
with respect to such Letters of Credit in an amount equal to 110% of the
aggregate undrawn amount of such Letters of Credit) prior to any such
dismissal;
(r) either (i) an order of the Bankruptcy Court shall be entered in
or with respect to any Bankruptcy Case or any Obligor shall file an
application for an order with respect to any Bankruptcy Case (A) to
revoke, reverse, stay, rescind, modify, vacate, supplement or amend the
Interim Order or the Final Order without the Lender's written consent, (B)
to permit any administrative expense or any claim (now existing or
hereafter arising, of any kind or nature whatsoever) to have an
administrative priority as to any
46
Obligor equal or superior to the priority of the claims of the Lender in
respect of the Obligations (other than the Carve-Out), (C) to grant or
permit the grant of a Lien on the property of any Obligor without the
Lender's written consent, or (D) that shall impair the Lender's
Superpriority Claim in respect of the Obligations, or (ii) an application
for any of the orders described and proscribed in any or all of Sections
7.1(m), (n), (o), (p) or (q) shall be made by a Person other than any
Obligor and such application is not contested by the applicable Obligor in
good faith and the relief requested is granted in an order that is not
vacated, reversed, rescinded or stayed pending appeal;
(s) (i) the Interim Order shall cease to be in full force and effect
and the Final Order shall not have been entered prior to such cessation,
or (ii) the Final Order shall not have been entered by the Bankruptcy
Court on or before the date that is thirty (30) days after the Interim
Order, or (iii) from and after the date of entry thereof, the Final Order
shall cease to be in full force and effect, or (iv) any Obligor shall fail
to comply with the terms of the Interim Order or the Final Order in any
material respect; or
(t) the Bankruptcy Court shall enter an order appointing a trustee
in any Bankruptcy Case or appointing a responsible officer or an examiner
with powers beyond the duty to investigate and report, as set forth in
Sections 11 .06(a)(3) and (4) of the Bankruptcy Code, in any Bankruptcy
Case.
SECTION 7.2 Section 7.2 Rights and Remedies. Subject to the Orders,
during any Default Period, the Lender may exercise any or all of the following
rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Obligors, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment, notice
of dishonor, protest or further notice of any kind, all of which each
Obligor hereby expressly waives;
(c) the Lender may decrease the advance rates set forth in the
definition of "Borrowing Base" in Section 1.1
(d) the Lender may, without notice to the Obligors and without
further action, apply any and all money owing by the Lender or any of its
affiliates to any Obligor to the payment of the Obligations;
(e) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which each Guarantor hereby
expressly waives) and the right to sell, lease or otherwise dispose of any
or all of the Collateral (with or without giving any warranties as to the
Collateral, title to the Collateral or similar warranties), and, in
connection therewith, the Obligors will on
47
demand assemble the Collateral and make it available to the Lender at a
place to be designated by the Lender which is reasonably convenient to
both parties;
(f) [INTENTIONALLY OMITTED];
(g) the Lender may make demand upon the Borrower and, forthwith upon
such demand, the Borrower will pay to the Lender in immediately available
funds for deposit in the Special Account pursuant to Section 2.15 an
amount equal to the aggregate maximum amount available to be drawn under
all Letters of Credit then outstanding, assuming compliance with all
conditions for drawing thereunder;
(h) the Lender may exercise and enforce its rights and remedies
under the Loan Documents; and
(i) the Lender may exercise any other rights and remedies available
to it by law or agreement.
If the Lender sells any of the Collateral on credit, the Obligations will be
reduced only to the extent of payments actually received by the Lender. If the
purchaser fails to pay for the Collateral, the Lender may resell the Collateral
and shall apply any proceeds actually received by the Lender to the Obligations.
SECTION 7.3 CERTAIN NOTICES. If notice to any Obligor of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten
calendar days before the date of intended disposition or other action.
ARTICLE VIII
AFFILIATE GUARANTIES
SECTION 8.1 AFFILIATE GUARANTIES. Each of the Guarantors hereby
unconditionally and irrevocably, jointly and severally, guarantees the full
payment and performance by the Borrower of all of the Obligations, whether now
existing or hereafter arising. Each Guarantor hereby unconditionally and
irrevocably agrees that upon default in the payment when due (whether at stated
maturity, by acceleration or otherwise) of any principal of, or interest on, any
Advance or any other Obligation, it will forthwith pay the same, without notice
or demand.
SECTION 8.2 OBLIGATIONS ABSOLUTE. Each Guarantor agrees that the
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the Lender with
respect thereto. All Obligations shall be conclusively presumed to have been
created in reliance hereon. The Guarantors' obligations under this Agreement
shall be absolute and unconditional irrespective of: (a) any lack of validity or
enforceability of any Loan Document or any other agreement or instrument
relating thereto; (b) any change in the time,
48
manner or place of payments of, or in any other term of, all or any part of the
Obligations, or any other amendment or waiver thereof or any consent to
departure therefrom, including any increase in the Obligations resulting from
the extension of additional credit to the Borrower or otherwise; (c) any taking,
exchange, release or non-perfection of any Collateral, or any release or
amendment or waiver of or consent to departure from any guaranty for all or any
of the Obligations; (d) any change, restructuring or termination of the
corporate structure or existence of any Obligor; or (e) any other circumstance
which might otherwise constitute a defense available to, or a discharge of, any
Obligor. The Guarantors' obligations under this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned by the Lender
upon the insolvency, bankruptcy or reorganization of any Obligor or otherwise,
all as though such payment had not been made. The Guarantors' obligations under
this Agreement may be deemed by the Lender to be an agreement of guaranty or
surety.
SECTION 8.3 WAIVER OF SURETYSHIP DEFENSES. Each Guarantor agrees
that the joint and several liability of the Guarantors provided for in Section
8.1 shall not be impaired or affected by any modification, supplement, extension
or amendment of any contract or agreement to which any other Obligor may
hereafter agree (other than an agreement signed by the Lender specifically
releasing such liability), nor by any delay, extension of time, renewal,
compromise or other indulgence granted by the Lender with respect to any of the
Obligations, nor by any other agreements or arrangements whatever with the other
Obligors or with anyone else, each Guarantor hereby waiving all notice of such
delay, extension, release, substitution, renewal, compromise or other
indulgence, and hereby consenting to be bound thereby as fully and effectually
as if it had expressly agreed thereto in advance. The liability of each
Guarantor is direct and unconditional as to all of the Obligations, and may be
enforced without requiring the Lender first to resort to any other right, remedy
or security. Each Guarantor hereby expressly waives promptness, diligence,
notice of acceptance and any other notice (except to the extent expressly
provided for herein or in another Loan Document) with respect to any of the
Obligations, this Agreement or any other Loan Document and any requirement that
the Lender protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against any Obligor or any other
Person or any Collateral, including any rights any Guarantor may otherwise have
under law, including, but not limited to, any law in any jurisdiction under
which any Guarantor is incorporated or in which any Guarantor conducts business.
To the extent that, notwithstanding the foregoing waivers, any notice is
required to be delivered to a Guarantor under the provisions of any applicable
law, this Agreement or any other Loan Document, each Guarantor hereby appoints
the Borrower, and the Borrower shall act, as such Guarantor's agent for the
purpose of receiving such notice.
SECTION 8.4 CONTRIBUTION AND INDEMNIFICATION. To the extent that any
Guarantor shall repay any of the Obligations (an "Accommodation Payment"), then,
to the extent that such Guarantor has not received the benefit of such repaid
Obligations (whether through an inter-company loan or otherwise), the Guarantor
making such Accommodation Payment shall be entitled to contribution and
indemnification from, and be reimbursed by, each of the other Obligors in an
amount, for each of such other Obligors, equal to a fraction of such
Accommodation Payment, the numerator of which fraction is such other Obligor's
"Allocable Amount" (as defined below) and the denominator of which is the sum of
the Allocable Amounts
49
of all of the Obligors. As of any date of determination, the "Allocable Amount"
of each Obligor shall be equal to the greater of (a) the amount of such repaid
Obligations actually received by such Obligor (whether through inter-company
loan or otherwise), and (b) the maximum amount of liability for Accommodation
Payments which could be asserted against such Obligor hereunder without (i)
rendering such Obligor "insolvent" within the meaning of the Bankruptcy Code,
Section 2 of the Uniform Fraudulent Transfer Act (the "UFTA"), or Section 2 of
the Uniform Fraudulent Conveyance Act ("UFCA"), (ii) leaving such Obligor with
unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 4 of the UFCA, or (iii)
leaving such Obligor unable to pay its debts as they become due within the
meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section
5 of the UFCA. All rights and claims of contribution, indemnification and
reimbursement under this Section 8.4 shall be subordinate in right of payment to
the prior payment in full of the Obligations.
SECTION 8.5 SUBORDINATION OF INTERCOMPANY DEBT. Each of the Obligors
hereby agrees that (a) all Debt owing by any Obligor or any Affiliate of any
Obligor to any other Obligor or any Affiliate of any Obligor shall be subject
and subordinate in all respects to the Obligations, (b) it shall deliver, or
cause to be delivered, to the Lender the original of each promissory note
evidencing such Debt, properly endorsed over to the Lender, and (c) all such
promissory notes shall contain a legend in the form set forth below:
INDEBTEDNESS EVIDENCED BY THIS PROMISSORY NOTE IS SUBJECT AND
SUBORDINATE TO THE "OBLIGATIONS" AS DESCRIBED IN THAT CERTAIN CREDIT
AND SECURITY AGREEMENT, DATED AS OF SEPTEMBER 7, 2004, AMONG U.S.
PLASTIC LUMBER LTD., AND CERTAIN OF ITS AFFILIATES, AND AMPAC
CAPITAL SOLUTIONS, LLC, AS AMENDED, MODIFIED AND SUPPLEMENTED FROM
TIME TO TIME.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NO WAIVER: CUMULATIVE REMEDIES: COMPLIANCE WITH LAWS. No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereol~ nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.
SECTION 9.2 AMENDMENTS, ETC. No amendment, modification, termination
or waiver of any provision of any Loan Document or consent to any departure by
any Obligor
50
therefrom or any release of a Security Interest shall be effective unless the
same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
SECTION 9.3 ADDRESSES FOR NOTICES: REQUESTS FOR ACCOUNTING. Except
as otherwise expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below next to its
signature or, as to each party, at such other address or telecopier number as
may hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender. All requests under Section 9-210 of the
UCC (i) shall be made in a writing signed by a person authorized under Section
2.2(a), (ii) shall be personally delivered, sent by registered or certified
mail, return receipt requested, or by overnight courier of national reputation,
(iii) shall be deemed to be sent when received by the Lender and (iv) shall
otherwise comply with the requirements of Section 9-2 10 of the UCC. Each
Obligor requests that the Lender respond to all such requests which on their
face appear to come from an authorized individual and releases the Lender from
any liability for so responding. The Obligors shall pay Lender the maximum
amount allowed by law for responding to such requests.
SECTION 9.4 INTENTIONALLY OMITTED.
SECTION 9.5 FURTHER DOCUMENTS. Each Obligor will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements, control agreements and
other agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that any Obligor
executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).
SECTION 9.6 COSTS AND EXPENSES. Each Obligor, jointly and severally,
shall pay on demand all costs and expenses, including reasonable attorneys'
fees, incurred by the Lender in connection with the Obligations, this Agreement,
the Loan Documents, any Letter of Credit and any other document or agreement
related hereto or thereto, and the transactions contemplated hereby, including
all such costs, expenses and fees incurred in connection with the
51
negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interest.
SECTION 9.7 INDEMNITY. In addition to the payment of expenses
pursuant to Section 9.6, each Obligor, jointly and severally, shall indemnify,
defend and hold harmless the Lender, and any of its participants, parent
corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees,
attorneys and agents of the foregoing (the "Indemnitees") from and against any
of the following (collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the execution
and delivery of the Loan Documents or the making of the Advances;
(ii) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.14
proves to be incorrect in any respect or as a result of any violation of
the covenant contained in Section 6.12(b) and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or
nature whatsoever (including the reasonable fees and disbursements of
counsel) in connection th the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee
shall be designated a party thereto, which may be imposed on, incurred by
or asserted against any such Indemnitee, in any manner related to or
arising out of or in connection with the making of the Advances and the
Loan Documents or the use or intended use of the proceeds of the Advances
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Obligors, or counsel designated by the Obligors and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Obligor's sole cost and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, each Obligor shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Obligors' obligations
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Obligors' other obligations hereunder. The foregoing
undertaking to indemnify, defend and hold harmless by the Indemitees shall not
apply if the act or omission results from the Lender's own bad faith.
SECTION 9.8 PARTICIPANTS. The Lender and its participants, if any,
are not partners or joint venturers, and the Lender shall not have any liability
or responsibility for any
52
obligation, act or omission of any of its participants. All rights and powers
specifically conferred upon the Lender may be transferred or delegated to any of
the Lender's participants, successors or assigns.
SECTION 9.9 EXECUTION IN COUNTERPARTS: TELEFACSIMILE EXECUTION. This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
SECTION 9.10 RETENTION OF OBLIGORS' RECORDS. The Lender shall have
no obligation to maintain any electronic records or any documents, schedules,
invoices, agings, or other papers delivered to the Lender by any Obligor or in
connection with the Loan Documents for more than four months after receipt by
the Lender.
SECTION 9.11 BINDING EFFECT: ASSIGNMENT: COMPLETE AGREEMENT:
EXCHANGING INFORMATION. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that no Obligor shall have the right to assign its rights
thereunder or any interest therein. To the extent permitted by law, each Obligor
waives and will not assert against any assignee any claims, defenses or set-offs
which such Obligor could assert against the Lender. This Agreement shall also
bind all Persons who become a party to this Agreement as a borrower or
guarantor. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. Without limiting the Lender's right to share information regarding any
Obligor and its Affiliates with the Lender's participants, accountants, lawyers
and other advisors, the Lender, may exchange any and all information they may
have in their possession regarding any Obligor and its Affiliates, and each
Obligor waives any right of confidentiality it may have with respect to such
exchange of such information.
SECTION 9.12 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
SECTION 9.13 HEADINGS. Article, Section and Subsection headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
SECTION 9.14 GOVERNING LAW: JURISDICTION, VENUE. Except to the
extent otherwise provided in the Mortgages, this Agreement, the Loan Documents
and the rights of the parties shall be construed and interpreted, and the rights
of the parties shall be determined, in
53
accordance with the Bankruptcy Code and the substantive laws of the State of
Florida, without regard to choice or conflict of law principles of that or any
other jurisdiction. Without limiting any party's right to appeal any order of
the Bankruptcy Court, (a) the Bankruptcy Court shall retain exclusive
jurisdiction to enforce the terms of this Agreement and to decide any claims or
disputes which may arise or result from, or be connected with, this Agreement,
any breach or default hereunder, or the transactions contemplated hereby, and
(b) any and all claims, actions, causes of action, suits and proceedings related
to the foregoing shall be filed and maintained only in the Bankruptcy Court, and
the parties hereby consent to and submit to the jurisdiction and venue of the
Bankruptcy Court and shall receive notices at such locations as indicated in
Section 3.6 hereof. The parties hereby consent to the jurisdiction of the
Bankruptcy Court for any action or proceeding arising from or relating to this
Agreement.
SECTION 9.15 Jury Trial Waiver. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.
[Signatures on following page]
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IN WITNESS WIHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Notice Address for Obligors: Borrower:
____________________________ U.S. PLASTIC LUMBER LTD., a Delaware
Telecopier:_________________ corporation, as debtor and debtor in
Attention:__________________ possession
e-mail:_____________________
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------
Its:__________________
Notice Address for Lender: Guarantors:
AMPAC Capital Solutions, LLC U.S. PLASTIC LUMBER CORP., a Nevada
corporation, as debtor and debtor in
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇. ▇▇▇ possession
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager Its: Vice President
e-mail:____________________________
U.S. PLASTIC LUMBER FINANCE
CORPORATION, a Delaware corporation,
As debtor and debtor in possession
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
Its: Vice President
U.S. PLASTIC LUMBER IP CORPORATION,
a Delaware corporation, as debtor
and debtor in possession
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
Its: Vice President
THE EAGLEBROOK GROUP, INC., a
Delaware corporation, as debtor and
debtor in possession
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
Its: Vice President
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Lender:
AMPAC CAPITAL SOLUTIONS, LLC, a
Nevada limited liability company
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Its: Manager
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TABLE OF EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF PROMISSORY NOTE
EXHIBIT B PREMISES
EXHIBIT C FORM OF NOTICE OF BORROWING
EXHIBIT D FORM OF OFFICER CERTIFICATION REGARDING FINANCIAL STATEMENTS
SCHEDULE 5.1 LEGAL NAME, TRADE NAMES, CHIEF EXECUTIVE OFFICE, PRINCIPAL
PLACE OF BUSINESS, AND LOCATIONS OF COLLATERAL
SCHEDULE 5.2 CAPITALIZATION AND ORGANIZATIONAL CHART
SCHEDULE 5.5 SUBSIDIARIES
SCHEDULE 5.10 PRE-PETITION LIENS
SCHEDULE 5.11 INTELLECTUAL PROPERTY DISCLOSURES
SCHEDULE 5.13 DEFAULTS CREATING MATERIAL ADVERSE EFFECT
SCHEDULE 5.14 ENVIRONMENTAL MATTERS
SCHEDULE 5.17 RIGHTS TO PAYMENTS
SCHEDULE 5.18 BANK ACCOUNTS
SCHEDULE 5.19 PRODUCT WARRANTY CLAIMS
SCHEDULE 6.4 PRE-PETITION INDEBTEDNESS AND GUARANTIES
57