UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-K/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended April 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ________ to ________
Commission File Number 0-3255
JAYARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1863419
(State or jurisdiction of incorporation or organization) (IRS Employer ID No.)
PO Box 741528, Houston, Texas 77274
(Address of principal executive office) (Zip Code)
Telephone number, including area code: (713) 783-9184
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.30 per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is $2,799,594 as of June 30, 1996.
The number of shares outstanding of Registrant's Common Stock is 7,978,799 as of
June 30, 1996.
EXHIBIT 10(21)
STATE STREET BANK AND TRUST COMPANY
LOAN AND SECURITY AGREEMENT
(ALL ASSETS)
April 29, 1996
1. SECURITY INTEREST. Rosalco, Inc., a Delaware corporation (hereinafter
called BORROWER), for valuable consideration, receipt whereof is hereby
acknowledged, grants to State Street Bank and Trust Company, a Massachusetts
trust company, the secured party hereunder (hereinafter called the BANK), a
continuing security interest in, and a lien on, the following property of the
Borrower, wherever located and whether now owned or hereafter acquired:
(a) all inventory, including all goods, merchandise, raw materials,
goods and work in process, finished goods, and other tangible
personal property now owned or hereafter acquired and held for
sale or lease or furnished or to be furnished under contracts of
service or used or consumed in Borrower's business (all
hereinafter called the INVENTORY);
(b) all accounts (as defined in the Uniform Commercial Code,
hereinafter ACCOUNTS), contracts, contract rights, notes, bills,
drafts, acceptances, general intangibles (including without
limitation trade names, customer lists, goodwill, computer
programs, computer records, computer software, computer data,
trade secrets, trademarks, patents, ledger sheets, files, records,
data processing records relating to any Accounts and all tax
refunds of every kind and nature to which Borrower is now or
hereafter may become entitled to, no matter how arising),
instruments, documents, chattel paper, choses in action, and all
other debts, obligations and liabilities in whatever form, owing
to Borrower from any person, firm or corporation or any other
legal entity, whether now existing or hereafter arising, now or
hereafter received by or belonging or owing to Borrower, for goods
sold by it or for services rendered by it, or however otherwise
sane may have been established or created, all guarantees and
securities therefor, all right, title and interest of Borrower in
the merchandise or services which gave rise thereto, including the
rights of reclamation and stoppage in transit, all rights to
replevy goods, and all rights of an unpaid seller of merchandise
or services (all hereinafter called the RECEIVABLES);
(c) all machinery, equipment, fixtures and other goods (as defined in
Article 9 of the Uniform commercial Code) whether now owned or
hereafter acquired by the Borrower and wherever located, all
replacements and substitutions therefor or accessions thereto and
all proceeds thereof (all hereinafter called the EQUIPMENT); and
(d) all proceeds and products of all of the foregoing in any form,
including, without limitation, all proceeds of credit, fire or
other insurance, and also including, without limitation, rents
and profits resulting from the temporary use of any of the
foregoing (which, with Inventory, Receivables and Equipment are
all hereinafter called COLLATERAL)
2. OBLIGATIONS SECURED. The security interest granted hereby is to secure
payment and performance of all debts, liabilities and obligations of Borrower
to the Bank hereunder and also any and all other debts, liabilities and
obligations ofBorrower to Bank of every kind and description, direct or
indirect, absolute or contingent,. primary or secondary, due or to become due,
now existing or hereafter arising, whether or not such obligations are related
to the transactions described in this Agreement, by class, or kind, or whether
or not contemplated by the parties at the tire of the granting of this security
interest, regardless of how they arise or by what agreement or Instrument they
may be evidenced or whether evidenced by any agreement or instrument, and
includes obligations to perform acts and refrain from taking action as well as
obligations to pay money including, without limitation, all interest,, fees,
charges, expenses and overdrafts, and also including, without limitation, all
obligations and liabilities which the Bank may incur or become liable for, on
account of, or as a result of, any transactions between Bank and Borrower
including any which may arise out of any letter of credit, acceptance or similar
instrument or obligation incurred by Bank for the account of Borrower (all
hereinafter called OBLIGATIONS).
3. BORROWER' PLACES OF BUSINESS, INVENTORY LOCATIONS AND RETURNS POLICY.
Borrower warrants that Borrower has no places of business other than that shown
at the end of Agreement, unless other places of business are listed on Schedule
A, annexed hereto, in which event Borrower represents that it has additional
places of business at those locations set forth on Schedule A.
Borrower's principal executive office and the office where Borrower keeps its
records concerning its accounts, contract rights and other property, is that
shown at the end of this Agreement. All Inventory presently owned by borrower
is stored at the locations set forth on Schedule A.
Borrower will promptly notify Bank in writing of any change in the location of
any place of business or the location of any Inventory or the establishment of
any new place of business or location of Inventory or office where its records
are kept which would be shown in this Agreement if it were executed after such
change.
Borrower represents and warrants that it has described its returns policy in
writing to Bank and that it does now, and will continue to, apply such policy
consistently in the conduct of its business and agrees that it shall notify Bank
in writing before changing its policy or the application thereof.
4. BORROWER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants (and at the time of each loan hereunder shall be deemed
to represent and warrant) that:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and shall
hereafter remain in good standing as a corporation in that state, and
is duly qualified and in good standing in every other state in which
it is doing business, and shall hereafter remain duly qualified and
in good standing in every other state in which by reason of the
nature or location of the Borrower's assets or operations, such
qualification may be necessary.
(b) Borrower's exact legal name is as set forth in this Agreement and
Borrower will not undertake or commit to undertake any act which will
result in a change of Borrower's legal name, without giving Bank at
least thirty (30) days prior written notice of the same.
(c) The execution, delivery and performance of this Agreement, and any
other document executed in connection herewith, are within the
Borrower's corporate powers, have been duly authorized, are not in
contravention of law or the terms of the Borrower's charter, by-laws
or other incorporation papers, or of any indenture, agreement or
undertaking to which the Borrower is a party or by which it or any of
its properties may be bound.
(d) All Articles of organization and all amendments thereto of Borrower
have been duly filed and are in proper order. All capital stock
issued by Borrower and outstanding was and is properly issued and all
books and records of Borrower, including but not limited to its
minute books, by-laws and books of account, are accurate and up to
date and will be so maintained.
(e) Borrower owns all of the assets reflected in the most recent of
Borrower's financial statements provided to Bank, except assets sold
or otherwise disposed of in the ordinary course of business since the
date thereof, and such assets together with any assets acquired since
such date, including without limitation the collateral, are free and
clear of any lien, pledge, security interest, charge, mortgage or
encumbrance of any nature whatsoever, except (i) the security
interests and other encumbrances (if any) listed on Schedule B
annexed hereto, (ii) those leases set forth on schedule C annexed
hereto, or (iii) liens and security interests in favor of Bank.
(f) Borrower has made or filed all tax returns, reports and declarations
relating to any material tax liability required by any jurisdiction
to which it is subject (any tax liability which may result in a lien
on any Collateral being hereby deemed material); has paid all taxes
shown or determined to be due thereon except those being contested in
good faith and which Borrower has, prior to the date of such contest,
identified in writing to Bank as being contested; and has made
adequate provision for the payment of all taxes so contested, so that
no lien will encumber any Collateral, and in respect of subsequent
periods.
(g) Borrower (i) is subject to no charter, corporate or other legal
restriction, or any judgment, award, decree, order, governmental rule
or regulation or contractual restriction which could have a material
adverse effect on its financial condition, business or prospects,
and (ii) is in compliance with its charter documents and by-laws, all
contractual requirements by which it or any of its properties may be
bound and all applicable laws, rules and regulations (including
without limitation those relating to environmental protection) other
than laws, rules or regulations the validity or applicability of
which it is contesting in good faith or provisions of any of the
foregoing the failure to comply with which cannot reasonably be
expected to materially adversely affect its financial condition,
business or prospects or the value of any Collateral.
(h) There is no action, suit, proceeding or investigation pending or, to
Borrower's knowledge, threatens against or affecting it or any of its
assets before or by any court or other governmental authority which,
if determined adversely to it, would have a material adverse effect
on its financial condition, business or prospects or the value of any
Collateral.
(i) Borrower is in compliance with ERISA; no Reportable Event has
occurred and is continuing with respect to any Plan; and it has no
unfunded vested liability under any Plan. The word PLAN as used in
this Agreement means any employee plan subject to Title IV of the
Employee Retirement Income Security Act of 1974 (ERISA) maintained
for employees of Borrower, any subsidiary of Borrower or any other
trade or business under common control with Borrower within the
meaning of Section 414(c) of the Internal Revenue Code of 1986 or any
regulations thereunder.
5. LOANS.
(a) Subject to the terms and Provisions of this agreement, the Bank
hereby establishes a revolving line of credit in Borrower's favor in
the amount set forth below, as determined by Bank from time to time
hereafter. From time to time upon Borrower's request, so long as the
sum of the aggregate principal amount of all loans outstanding and
the requested loan does not exceed the lesser of (i) the Borrowing
Base (as defined below) or (ii) the Credit Limit (as defined below),
Bank shall make such loan, absent demand or the occurrence of an
Event of Default or an event, which, with notice or the lapse of time
or both, would constitute an Event of Default. Without limiting the
demand feature of any loans that Bank does make hereunder, Borrower
agrees that the aggregate unpaid principal of all loans outstanding
at any one time shall not exceed the Borrowing Base. The term,
BORROWING BASE as used herein shall mean the sum of the following:
(1) ninety (90%) percent of the unpaid face Amount of all Qualified
Accounts (as defined below) which are rated one or two by Dunn and
Bradstreet; PLUS
(2) eighty (80%) percent of the unpaid face amount of all Qualified
Accounts which are not rated one or two by Dunn and Bradstreet; PLUS
(3) ninety (90%) percent of the unpaid face amount of all Accounts which
have not yet been earned by performance but which not yet been earned
by performance but which are supported by letters of credit; PLUS
(4) the lesser of (i) Five Million ($5,000,000.00) Dollars from the date
hereof through and including April 30, 1996, Four Million Five
Hundred Thousand ($4,500,000.00) Dollars from May 1, 1996 through and
including November 30, 1996 and Four Million ($4,000,000.00) Dollars
thereafter or (ii) forty (40%) percent of all Eligible Inventory (as
defined below) consisting of finished goods located in warehouses, in
transit or which have been ordered pursuant to a purchase order
backed by a letter of credit issued by Bank, but which has not yet
been negotiated (exclusive of Inventory in Transit covered by
subsection (3) above); MINUS
(5) one hundred (100%) percent of (i) the aggregate amount then undrawn
on all outstanding letters of credit issued by Bank for the account
of Borrower; and (ii) all outstanding Banker's acceptances issued by
Bank for the account of Borrower;
but in no event shall the sum of all loans plus the sum of the aggregate amount
undrawn on all letters of credit and acceptances be in excess of the Credit
Limit (as defined below), or such other sum as may from time to time be fixed
by the Bank upon notice to Borrower. All such loans shall bear interest and
at the option of Bank shall be evidenced by demand notes in form satisfactory
to Bank, but in the absence of notes shall be conclusively evidenced by the
Bank's record of disbursements and repayments and shall be payable ON DEMAND.
Interest will be charged to Borrower at a fluctuating rate which is the daily
equivalent to the Prime Rate in effect from time to time, plus one and
three-quarters (1.75%) percent per annum or at such other rate agreed on from
time to time by the parties, upon any balance owing to Bank at the close of each
day "and shall be payable monthly in arrears, on the first day of each month,
until the Bank makes demand. The rate of interest pavable by Borrower shall be
changed effective as of that date in which a change in the Prime Rate becomes
effective. Interest sha11 be computed on the basis of the actual number of days
elapsed over a year of three hundred sixty (360) days. The term PRIME RATE as
used herein and in any supplement and amendment hereto shall mean the rate of
interest announced by Bank in Boston as its Prime Rate.
(b) The term CREDIT LIMIT as used herein shall mean an amount equal to
Ten Million ($10,000,000.00) Dollars.
(c) The Borrowing Base formula set forth above is intended solely for
monitoring purposes. The making of loans, advances, and credits by the
Bank to the in excess of the above described Borrowing Base formula is
for the benefit of the Borrower and does not affect the obligations of
borrower hereunder; all such loans constitute Obligations and must be
repaid by Borrower in accordance with the terms of this Agreement.
(d) Borrower hereby authorizes and directs Bank, in Bank's sole discretion
(provided, however, Bank shall have no obligation to do so), (i) to pay
accrued interest as the same becomes due and payable pursuant to this
Agreement or Pursuant to any note or other agreement between Borrower
and Bank, and to treat the same as a loan to Borrower which shall be
added to Borrower's loan balance pursuant to this Agreement; or (ii)
to apply the proceeds of Collateral, including without limitation,
payments on Accounts, and other payments from sales or lease of
Inventory and any other funds to the payment of such items or the
payment of any other amounts then due to Bank from Borrower.
6. DEFINITION OF QUALIFIED ACCOUNT. The term QUALIFIED ACCOUNT, as used
herein, means an Account owing to Borrower which met the following
specifications at the time it came into existence and continues to meet the same
until it is collected in full:
(a) The Account is not more than ninety (90) days from the date of the
invoice thereof.
(b) The Account arose from the performance of services or an outright sale
of goods by Borrower, such goods have been shipped to the account
debtor, and Borrower has possession of, or has delivered to Bank,
shipping and delivery receipts evidencing such shipment.
(c) The Account is not subject to any prior assignment, claim, lien, or
security interest, and Borrower will not make any further assignment
thereof or create any further security interest therein, nor permit
Borrower's rights therein to be reached by attachment, levy,
garnishment or other judicial process.
(d) The Account is not subject to set-off, credit, allowance or
adjustment by the account debtor, except discount allowed for prompt
payment and the account debtor has not complained as to his liability
thereon and has not returned any of the goods from the sale of which
the Account arose.
(e) The Account arose in the ordinary course of Borrower's business and
did not arise from the performance of services or a sale of goods to
a supplier or employee of the Borrower.
(f) No notice of bankruptcy or insolvency of the account debtor has been
received by or is known to the Borrower.
(g) The Account is not owed by an account debtor whose principal place of
business is outside the United States of America.
(h) The Account is not owed by an entity which is a parent,
brother/sister, subsidiary or affiliate of Borrower.
(i) The account debtor is not located in the State of New Jersey or in
the State of Minnesota, unless Borrower has filed and shall file all
legally required Notice of Business Activities Reports with the New
Jersey Division of Taxation or the Minnesota Department of Revenue,
as the case may be.
(j) The Account when aggregated with all of the Accounts of that account
debtor does not exceed twenty-five (25%) percent of the then
aggregate of Qualified Accounts.
(k) The Account is not evidenced by a promissory note.
(l) The Account did not arise out of any sale made on a bill and hold,
dating or delayed shipment basis.
(m) The Bank in its sole discretion does not deem the Account to be
unacceptable for any reason.
7. DEFINITION OF ELIGIBLE INVENTORY. The term ELIGIBLE INVEETORY as used
herein, means Borrower's raw materials, work in process and finished goods
which are initially and at all times until sold: new and unused (except, with
Bank's written approval, used equipment held for sale or lease), in first-class
condition, merchantable and saleable through normal trade channels; at a
location which has been identified in writing to Bank; subject to a perfected
security interest in favor of Bank; owned by Borrower free and clear of any lien
except in favor of Bank; not obsolete; not scrap, waste, defective goods and the
like; have been produced by Borrower in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
promulgated thereunder; not stored with a bailee, warehouseman or similar party
unless Bank has given its prior written consent thereto and Borrower has caused
each such bailee, warehouseman or similar party to issue and deliver toBank
warehouse receipts in Bank's name for such Inventory; and have not been
designated by Bank in its sole discretion as unacceptable for any reason by
notice to Borrower.
8. BANK'S REPORTS. After the end of each month, Bank will render to Borrower a
statement of Borrower's loan account with Bank hereunder, showing all applicable
credits and debits. Each statement shall be considered correct and to have been
accepted by Borrower and shall be conclusively binding upon Borrower in respect
of all charges, debits and credits of whatsoever nature contained therein under
or pursuant to this Agreement, and the closing balance shown therein, unless
Borrower notifies Bank in writing of any discrepancy within twenty (20) days
from the mailing by Bank to Borrower of any such monthly statement.
9. CAPITAL ADEQUACY. If the Bank shall deem applicable to this Agreement
(including, in each case, the borrowed and unused portion hereof) , any
requirement of any law of the United States of America, any regulation, order,
interpretation, ruling, official directive or guideline (whether or not having
the force of law) of the Board of Governors of the Federal Reserve System, the
Comptroller of the Currency, the Federal Deposit Insurance Corporation or any
other board or governmental or administrative agency of the United states of
America shall impose, increase, modify or make applicable thereto or cause to
be included in, any reserve, special deposit, calculation used in the
computation of regulatory capital standards, assessment or other requirement
which imposes on the Bank any cost that is attributable to the maintenance
thereof, then, and in each such event, the Borrower shall promptly pay the Bank,
upon its demand, such amount as will compensate the Bank for any such cost,
which determination may be based upon the Bank's reasonable allocation of the
aggregate of such costs resulting from- such events. In the event any such
cost is a continuing cost, a fee payable to the Bank may be imposed upon the
Borrower periodically for so long as any such cost is deemed applicable to the
Bank, in an amount determined by the Bank to be necessary to compensate the Bank
for any such cost. The determination by the Bank of the existence and amount of
any such cost shall, in the absence of manifest error, be conclusive.
10. COLLECTIONS; SET OFF; NOTICE OF ASSIGNMENT; EXPENSES; POWER OF ATTORNEY.
(a) Immediately after written notification to Borrower by Bank (the
NOTICE), which may be given at any time whether or not demand has been
made or an Event of Default has occurred hereunder and continuing for
as long as any obligation remains outstanding, Borrower will
immediately upon receipt of all checks, drafts, cash and other
remittances in payment of any Inventory sold or in payment or on
account of Borrower's accounts, contracts, contract rights, notes,
bills, drafts, acceptances, general intangibles, choses in action and
all other forms of obligations, deliver the same to the Bank
accompanied by a remittance report in form specified by Bank. Said
proceeds shall be delivered to Bank in the same form received except
for the endorsement of Borrower where necessary to permit collection
of items, which endorsement Borrower agrees to make. The Bank will
credit (conditional upon final collection) all such payments against
the principal or interest of any loans secured hereby; provided,
however, for the purpose of computing interest, any items requiring
clearance or payment shall not be considered to have been credited
against any loans secured hereby until three (3) business days after
receipt by Bank of any such items. The order and method of such
application shall be in the sole discretion of Bank and any portion
of such funds which the Bank elects not to so apply shall be paid over
from time to time by Bank to Borrower.
Prior to receipt of the Notice, Borrower may, upon receipt of all
remittances and payments of any Inventory sold or in payment or on
account of Borrower's Accounts, use such proceeds to pay its ordinary
and necessary business expenses in the ordinary course of Borrower's
business and the requirement that Borrower furnish remittance reports
to Bank shall be suspended.
(b) Any and al1 deposits (whether demand or time deposits) or other sums
at any time credited by or due from Bank to Borrower shall at all
times constitute additional security for the Obligations and may be
set-off against any Obligations at any time whether or not they are
then due or other security held by Bank is considered by Bank to be
adequate. Any and all instruments, documents, policies and
certificates of insurance, securities, goods, accounts, choses in
action, general intangibles, chattel papers, cash, property and the
proceeds thereof (whether or not the same are Collateral or proceeds
thereof hereunder) owned by Borrower or in which Borrower has an
interest, which now or hereafter are at any time in possession or
control of Bank or in transit by mail or carrier to or from Bank or in
the possession of any third party acting in Bank's behalf, without
regard to whether Bank received the same in pledge, for safekeeping,
as agent for collection or transmission or otherwise or whether Bank
had conditionally released the same, shall constitute additional
security for the Obligations and may be applied at any time to any
obligations which are then owing, whether due or not due. Bank shall
be entitled to presume, in the absence of clear and specific written
notice to the contrary hereinafter provided by Borrower to Bank, that
any and all deposits maintained by Borrower with Bank are general
accounts as to which no person or entity other than Borrower has any
legal or equitable interest Whatsoever.
(c) The Bank may at any time notify account debtors that Collateral has
been assigned to Bank and that payments shall be made directly to
Bank. Upon request of Bank at any time, Borrower will so notify such
account debtors and will indicate on all billings to such account
debtors that their accounts must be paid to Bank. The Bank shall have
full power to collect, compromise, endorse, sell or otherwise deal
with the Collateral or proceeds thereof in its own name or in the name
of Borrower.
(d) Borrower shall pay to Bank on demand any and all reasonable counsel
fees and other expenses incurred by the Bank in connection with the
preparation, interpretation, enforcement, administration or amendment
of this Agreement, or of any documents relating thereto, and any and
all expenses, including, but not limited to, a collection charge on
all accounts collected, all attorneys, fees and expenses, and all
other expenses of like or unlike nature which may be expended by the
Bank to obtain or enforce payment of any Account either as against the
account debtor, Borrower, or any guarantor or surety of Borrower or in
the prosecution or defense of any action or concerning any matter
growing out of or connected with the subject matter of this Agreement,
the obligations or the Collateral or any of Bank's rights or interests
therein or thereto, including, without limiting the generality of the
foregoing, any counsel fees or expenses incurred in any bankruptcy, or
insolvency proceedings and costs and expenses incurred or paid by Bank
in connection with the administration, supervision, protection or
realization on any security held by Bank for the debt secured hereby,
whether such security was granted by Borrower or by any other person
primarily or secondarily liable (with or without recourse) with
respect to such debt, and all costs and expenses incurred by Bank in
connection with the defense, settlement or satisfaction of any action,
claim or demand asserted against Bank in connection with the debt
secured hereby, all of which amounts shall be considered advances to
protect Bank's security, and shall be secured hereby. At Its option,
and without limiting any other rights or remedies, Bank may at any
time pay or discharge any taxes, liens, security interests or other
encumbrances at any tine levied against or placed on any of the
collateral, and may procure and pay any premiums on any insurance
required to be carried by Borrower, and provide for the maintenance
and preservation of any of the Collateral, and otherwise take any
action reasonably deemed necessary to Bank to protect its security,
and all amounts expended by Bank in connection with any of the
foregoing matters, including reasonable attorneys' fees, shall be
considered obligations of Borrower and shall be secured hereby.
(e) Borrower does hereby make, constitute and appoint any officer or agent
of Bank as Borrower's true and lawful attorney-in-fact, with power to
endorse the name of Borrower or any of Borrower's officers or agents
upon any notes, checks, drafts, money orders, or other instruments of
payment (including payments payable under any policy of insurance on
the collateral) or Collateral that may come into possession of the
Bank in full or part payment of any amounts owing to Bank; to sign and
endorse the name of Borrower or any of Borrower's officers or agents
upon any invoice, freight or express bill, bill of lading, storage or
warehouse receipts, drafts against debtors,. assignments,
verifications and notices in connection with Accounts, and any
instrument or documents relating thereto or to Borrower's rights
therein; to give written notice to such office and officials of the
United States Post Office to effect such change or changes of address
so that all mail addressed to Borrower may be delivered directly to
Bank; granting upon Borrower's said attorney full power to do any and
all things necessary to be done in and about the premises as fully and
effectually as Borrower might or could do, and hereby ratifying all
that said attorney shall lawfully do or cause to be done by virtue
hereof. Neither the Bank nor the attorney shall be liable for any acts
or omissions nor for any error of judgment or mistake, except for
their gross negligence or willful misconduct. This power of attorney
shall be irrevocable for the term of this Agreement and all
transactions hereunder and thereafter as long as Borrower may be
indebted to Bank.
11. FINANCING STATEMENTS. At the request of Bank, Borrower will join with Bank
in executing one or more Financing Statements pursuant to the Uniform Commercial
Code or other notices appropriate under applicable law in form satisfactory to
Bank and will pay the cost of filing the same in all public offices wherever
filing is deemed by Bank to be necessary or desirable. A legible carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement.
12. BORROWER'S REPORTS.
(a) At the time of each borrowing hereunder, Borrower will execute and
deliver to Bank a Loan Confirmation Report, in the form supplied by
Bank, reflecting the status of the loan and Collateral securing same.
(b) Borrower shall, from time to time, deliver to Sank a Supplemental
Assignment of Accounts on a form supplied by Bank containing a summary
of accounts created since the last Supplemental Assignment and a
certificate concerning Borrower's inventory values, with copies of
invoices relating to said accounts attached thereto.
(c) Borrower shall cause all of its invoices, including the copies
thereof, to be printed and to bear consecutive numbers and shall
prepare and issue its invoices in such consecutive numerical order.
If requested by Bank, all copies of invoices not previously delivered
to Bank shall be delivered to Bank with each schedule of Accounts.
Copies of all invoices which are voided or cancelled or which for any
other reason do not evidence an Account shall be included in such
delivery. If any invoice or copy thereof is lost, destroyed or
otherwise unavailable, Borrower shall account in writing, in form
satisfactory to Bank, for such missing invoice.
(d) Within twenty (20) calendar days after the end of each month or on
such other more frequent basis as may be required by Bank from time
to time, Borrower shall submit to Bank an aging report in form
satisfactory to Bank showing the amounts due and owing on all Accounts
according to Borrower's records as of the close of such Accounting
Period or such shorter period as may be required by Bank from time to
time, together with such other information as Bank may require. If
Borrower's monthly aging reports are prepared by an accounting service
or other agent, Borrower hereby authorizes and directs such service or
agent to deliver such aging reports and any other related documents to
Bank upon any request therefor by Bank.
(e) Within twenty (20) calendar days after the end of each month or on
such other more frequent basis as may be required by Bank from time to
time, Borrower shall furnish to Bank a certificate describing all of
Borrower's Inventory by value based on the lower of cost or market
value, listing all Inventory by nature, quantity and location,
together with such other information as Bank may require.
(f) Within twenty (20) calendar days after the end or each month or on
such other more frequent basis as may be required by Bank from time to
time, Borrower shall submit to Bank an aging of Borrower's accounts
payable setting forth all accounts payable as of the close of such
Accounting Period, showing the total amount due to each account
creditor, the month in which such account payable was created, and
such other information as Bank shall request.
(g) Borrower shall deliver to Bank all documents, as frequently as
indicated below, or at such other times as Bank may request, and all
other documents and information requested by Bank:
Document Frequency Due
(i) Borrowing Certificate, in- Monthly or daily following
cluding cash receipts, credit receipt of the Notice
memos, sales, debit memos,
unpaid loan balance, new
borrowing requests and the
adjusted loan balance and a
borrowing base certificate
substantially in the form
attached hereto as Exhibit A
(ii) List of names and addresses of Annually, within 60 days
account debtors to whom Borrower after the end of each
has made sales during the pre- fiscal year of Borrower
vious fiscal year
(iii) Reconciliation report, in form Weekly or daily following
satisfactory to Bank, showing receipt of the Notice
all Accounts, collections,
payments, credits, and extensions
since the preceding report
(iv) Notice of noncompliance with the Immediately upon learning
provisions of this Agreement of such noncompliance, or
if any representation or
warranty contained herein
is no longer true or
accurate
(h) Within forty-five (45) days after the close of each monthly fiscal
period of Borrower, a consolidating statement of financial position and
a consolidating statement of profit and losses reflecting the financial
condition of Jayark Corporation (JAYARK) and its consolidated
subsidiaries, including Borrower, at the end of such period and the
results of operations during such period, such consolidating statement
of financial position and consolidating statement of profit and loss
to be certified by Jayark's President, Vice President, Treasurer or
Secretary to fairly present the financial position of Jayark and its
consolidated subsidiaries at the end of such period and the results of
operations during such period in accordance with generally accepted
accounting principles consistently, applied, subject to normal year-end
audit adjustments;
(i) Within forty-five (45) days after the close of each quarterly fiscal
period of Borrower, a covenant compliance certificate, executed by
Jayark's President, Vice President, Treasurer or secretary, on a form
supplied by Bank;
(j) Annually as soon as available but within ninety (90) days after the
close of each fiscal year of Borrower, a full and complete signed copy
of a report or reports by certified public accountants reasonably
satisfactory to Bank which shall include a consolidated statement of
financial condition of Jayark and its consolidated subsidiaries,
including Borrower, at the end of such year and a consolidated
statement of profit and loss of Jayark and its consolidated
subsidiaries reflecting the results of operations during such year,
together with the report of such certified public accountants as to
the scope of the audit.
(k) in addition to the foregoing, the Borrower promptly shall provide the
Bank with such other and additional information concerning the
Borrower, the Collateral, the operation of the Borrower's business,
and the Borrower's financial condition, including financial reports
and statements, as the Bank may from time to time request from the
Borrower. All financial information provided the Bank by the Borrower
shall be prepared in accordance with generally accepted accounting or
auditing principles (as applicable) applied consistently in the
preparation thereof and with prior periods to fairly reflect the
financial conditions of the Borrower at the close of, and its results
of operations for, the periods in question.
13. GENERAL AGREEMENTS OF BORROWER.
(a) Borrower agrees to keep all the Collateral insured with coverage and
in amounts not less than that usually carried by one engaged in a like
business and in any event not less than that required by Bank with
loss payable to the Bank and Borrower, as their interests may appear,
hereby appointing Bank as attorney for Borrower in obtaining,
adjusting, settling and cancelling such insurance and endorsing any
drafts. As further assurance for the payment and performance of the
Obligations, Borrower hereby assigns to Bank all sums, including
returns of unearned premiums, which may become payable under any
policy of insurance on the collateral and Borrower hereby directs
each insurance company issuing any such policy to make payment of
such sums directly to Bank.
(b) The Bank or its agents have the right to inspect the Collateral and
all records pertaining thereto at intervals to be determined by Bank
and without hindrance or delay.
(c) Although, as above set forth, Bank has a continuing security interest
in all of Borrower's Collateral and in the Proceeds thereof, Borrower
will at all times maintain as the minimum security hereunder a
Borrowing Base not less than the aggregate unpaid principal of all
loans made hereunder; and if Borrower fails to do so, Borrower will
immediately make the necessary reduction in the unpaid principal
amount of said loans.
(d) Borrower will at all times keep accurate and complete records of
Borrower's Inventory, Accounts and other Collateral, and Bank, or any
of its agents, shall have the right to call at Borrower's place or
places of business at intervals to be determined by Bank, and without
hindrance or delay, to inspect, audit, check, and make extracts from
any copies of the books, records, journals, orders, receipts,
correspondence which relate to Borrower's Accounts, and other
Collateral or other transactions, between the parties thereto and the
general financial condition of Borrower and Bank may remove any of
such records temporarily for the purpose of having copies made
thereof.
(e) Borrower will maintain its corporate existence in good standing and
comply with all laws and regulations of the United States or of any
state or states thereof or of any political subdivision thereof, or
of any governmental authority which may be applicable to it or to its
business.
(f) Borrower will pay all real and personal property taxes, assessments
and charges and all franchises, income, unemployment, old age benefits,
withholding, sales and other taxes assessed against it, or payable by
it at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to its property.
(g) The Bank may in its own name or in the name of others communicate with
account debtors in order to verify with them to Bank's satisfaction the
existence, amount and terms of any Accounts.
(h) This Agreement may but need not be supplemented by separate assignments
of Accounts and if such assignments are given the rights and security
interests given thereby shall be in addition to and not in limitation
of the rights and security interests given by this Agreement.
(i) If any of Borrower's Accounts arise out of contracts with the United
States or any department, agency, or instrumentality thereof, Borrower
will immediately notify Bank thereof in writing and execute any
instruments and take any steps required by Bank in order that all
monies due and to become due under such contracts shall be assigned to
Bank and notice thereof given to the Government under the Federal
Assignment of Claims Act.
(j) If any of Borrower's Accounts should be evidenced by promissory notes,
trade acceptances, or other instruments for the payment of money,
Borrower will immediately deliver same to Bank, appropriately endorsed
to Bank's order and, regardless of the form of such endorsement,
Borrower hereby waives presentment, demand, notice of dishonor, protest
and notice of protest and all other notices with respect thereto.
(k) Borrower will promptly pay when due all taxes and assessments upon the
Collateral or for its use or operation or upon this Security Agreement,
or upon any note or notes evidencing the Obligations, and will, at the
request of Bank, promptly furnish Bank the receipted bills therefor.
At its option, Bank may discharge taxes, liens or security interests or
other encumbrances at any time levied or placed on the Collateral, may
pay for insurance on the Collateral and may pay for the maintenance and
preservation of the collateral. Borrower agrees to reimburse Bank on
demand for any payments made, or any expenses incurred by Bank pursuant
to the foregoing authorization, and upon failure of the Borrower so to
reimburse Bank, any such sums paid or advanced by Bank shall be deemed
secured by the Collateral and constitute part of the obligations.
(l) Borrower will immediately notify Bank upon receipt of notification of
any potential or known release or threat of release of hazardous
materials, hazardous waste, hazardous or toxic substance or oil from
any site operated by Borrower or of the incurrence of any expense or
loss in connection therewith or with the Borrower's obtaining knowledge
of any investigation, action or the incurrence of any expense or loss
by any governmental authority in connection with the assessment,
containment or removal of any hazardous material or oil for which
expense or loss the Borrower may be liable. As used herein, the terms
HAZARDOUS WASTE, HAZARDOUS OR TOXIC SUBSTANCE, HAZARDOUS MATERIAL; or
OIL shall have the same meanings as defined and used in any of the
following (the ACTS): the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq.; the Federal Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801 et seq.; the Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq.; M.G.L.A. c. 21E (Massachusetts
Oil and Hazardous Material Release Prevention Act); M.G.L.A. c. 21C
(Massachusetts Hazardous Waste Management Act); and/or the regulations
adopted and publications promulgated pursuant to any of the Acts, as
the same may be amended from time to time.
(m) Except for the Bank's gross negligence or willful misconduct, Borrower
will indemnify and save Bank harmless from all loss, costs, damage,
liability or expenses (including, without limitation, court costs and
reasonable attorneys' fees) that Bank 'may sustain or incur by reason
of defending or protecting this security interest or the priority
thereof or enforcing the Obligations, or in the prosecution or defense
of any action or proceeding concerning any matter growing out of or in
connection with this Agreement and/or any other documents now or
hereafter executed in connection with this Agreement and/or the
Obligations and/or the Collateral. This indemnity shall survive the
repayment of the obligations and the termination of Bank's agreement
to make loans available to Borrower and the termination of this
Agreement.
(n) At the option of the Bank, Borrower will furnish to Bank, from time to
time, within five (5) days after the accrual in accordance with
applicable law of Borrower's obligation to make deposits for F.I.C.A.
and withholding taxes and/or sales taxes, proof satisfactory to Bank
that such deposits have been made as required.
(o) Should Borrower fail to make any of such deposits or furnish such
proof then Bank may, in its sole and absolute discretion, (a) make any
of such deposits or any part thereof, (b) pay such taxes, or any part
thereof, or (c) set-up such reserves as Bank, in its judgment, shall
deem necessary to satisfy the liability for such taxes. Each amount
so deposited or paid shall constitute an advance under the terms
hereof, repayable on demand with interest, as provided herein, and
secured by all collateral and any other property at any time pledged
by Borrower with Bank. Nothing herein shall be deemed to obligate
Bank to make any such deposit or payment or set-up such reserve and
the making of one or more of such deposits or payments or the
setting-up of such reserve shall not constitute (i) an agreement on
Bank's part to take any further or similar action, or (ii) a waiver
of any default by Borrower under the terms hereof.
(p) All advances by Bank to Borrower under this Agreement and under any
other agreement constitute one general revolving fluctuating loan, and
all indebtedness of Borrower to Bank under this and under any other
agreement constitute one general Obligation. Each advance to Borrower
hereunder or otherwise shall be made upon the security of all of the
Collateral held and to be held by Bank. It is distinctlv understood
and agreed that all of the rights of Bank contained in this Agreement
shall likewise apply, insofar as applicable, to any modification of or
supplement to this Agreement and to any other agreements between Bank
and Borrower. Any default of this Agreement by Borrower shall
constitute, likewise, a default by Borrower of any other existing
agreement with Bank, and any default by Borrower of any other
agreement with Bank shall constitute a default of this Agreement.
The entire Obligation of Borrower to Bank shall become due and payable
when payments become due and payable hereunder upon termination of
this Agreement.
(q) Borrower hereby grants to Bank for a term to commence on the date of
this Agreement and continuing thereafter until all debts and
Obligations of any kind or character owing from Borrower to Bank are
fully paid and discharged, the right to use all premises or places of
business which Borrower presently has or may hereafter have and where
any of the Collateral may be located, at a total rental for the entire
period of $1.00. Bank agrees not to exercise the rights granted in
this paragraph unless and until Bank determines to exercise its rights
against the Collateral.
(r) Borrower will, at its expense, upon request of Bank promptly and duly
execute and deliver such documents and assurances and take such
actions as may be necessary or desirable or as Bank may request in
order to correct any defect, error or omission which may at any time
be discovered or to more effectively carry out the intent and purpose
of this Agreement and to establish, perfect and protect Bank's
security interest, rights and remedies created or intended to be
created hereunder. Without limiting the generality of the the above,
Borrower will join with Bank in executing financing and continuation
statements pursuant to the Uniform Commercial Code or other notices
appropriate under applicable Federal or state law in form satisfactory
to Bank and filing the same in all public offices and jurisdictions
wherever and whenever requested by Bank.
(s) Borrower shall perform any and all further steps requested by Bank to
perfect Bank's security interest in Inventory, such as leasing
warehouses to Bank or its designee, placing and maintaining signs,
appointing custodians, maintaining stock records and transferring
Inventory to warehouses. A physical listing of all Inventory,
wherever located, shall be taken by Borrower at least annually and
whenever requested by Bank if one or more of the Events of Default
exist.
(t) Borrower hereby grants to Bank for a term to commence on the date of
this Agreement and continuing thereafter until all debts and
obligations of any kind or character owed to Bank are fully paid and
discharged, a non-exclusive irrevocable royalty-free license in
connection with the Bank's exercise of its rights hereunder, to use,
apply or affix any trademark, trade name logo or the like and to use
any patents, in which the Borrower now or hereafter has rights, which
license may be used by Bank upon and after the occurrence of any one
or more of the events of Default, provided, however, that such use by
Bank shall be suspended if such Events of Default are cured. This
license shall be in addition to, and not in lieu of, the inclusion of
all of Borrower's trademarks, servicemarks, trade names, logos,
goodwill, patents, franchises and licenses in the Collateral; in
addition to the right to use said Collateral as provided in this
paragraph, Bank shall have full right to exercise any and all of its
other rights regarding Collateral with respect to such trademarks,
servicemarks, trade names, logos, goodwill patents, franchises and
licenses.
(u) In consideration of the Bank establishing a revolving line of credit
with the Borrower, the Borrower (or AVES Audio Visual Systems, Inc.
(AVES)), but not both, shall pay to the Bank a facility fee equal to
$25,000.00 at closing and $7,500.00 per month, or any portion
thereof, commencing May 1, 1996 and on the first day of each month
thereafter.
14. BORROWER'S NEGATIVE COVENANTS. Borrower will not at any time:
(a) (Fixed Assets) during any fiscal year of Borrower, make, directly or
indirectly, capital expenditures for the purchase, fabrication,
creation or lease of fixed assets, including rentals for leased
items, in an aggregate amount greater than $300,000.00;
(b) (Debt to Capital Base) permit the aggregate amount of its senior
indebtedness to be more than 2.0 times the amount of its tangible
capital base through April 30, 1997 and 1.75 times thereafter;
(c) (Current Ratio) permit its ratio of current assets to current
liabilities to be less than 1.5 to 1;
(d) (Minimum Net Earnings) permit a loss in excess of $100,000.00 as at
the end of the fiscal period ending on July 31 in any fiscal year of
Borrower, commencing with the fiscal period ending July 31, 1996, or
permit its net after-tax cumulative earnings to be less than the
following amounts for the following time periods:
Minimum Cumulative Net
After Tax Earnings Time Period
$300,000.00 As at the end of the fiscal period
ending on October 31 in any fiscal
year of Borrower, commencing with the
fiscal period ending October 31, 1996
$500,000.00 As at the end of the fiscal period
ending on January 31 in any fiscal
year of Borrower, commencing with the
fiscal period ending January 31, 1997
$600,000.00 As at the end of the fiscal period
ending on April 30 in any fiscal
year of Borrower, commencing with the
fiscal period ending April 30, 1997
The covenants set forth in (a) and (d) shall be calculated on a combined
basis with AVES. The covenants set forth in (b) and (c) shall be
calculated on a consolidated basis for Jayark corporation and its
subsidiaries.
(e) (Subchapter S Corporation) if Borrower is a Subchapter S corporation,
make distributions to its shareholders during any fiscal year of
Borrower in an aggregate amount greater than the amount necessary to
pay federal and state income taxes upon Borrower's undistributed income
for such year;
(f) (Disposition of Collateral) sell, assign, exchange or otherwise dispose
of any of the Collateral (other than Inventory consisting of (i) scrap,
waste, defective goods and the like; (ii) obsolete goods; (iii)
finished goods sold in the ordinary course of business) or any interest
therein to any individual, partnership, trust or other corporation; and
(iv) Equipment which is no longer required or deemed necessary for the
conduct of Borrower's business, so long as Borrower receives therefor a
sum substantially equal to such Equipment's fair value, remits such sum
to Bank in accordance with the terms of this Agreement or replaces such
Equipment with other equipment of similar value which is subject to a
first security interest in Bank's favor;
(g) (Liens) create, permit to be created or suffer to exist any lien,
encumbrance or security interest of any kind (LIEN) upon any of the
Collateral or any other property of Borrower, now owned or hereafter
acquired, except: (i) landlords', carriers', warehousemen's, mechanics'
and other similar liens arising by operation of law in the ordinary
course of Borrower's business; (ii) arising out of pledge or deposits
under worker's compensation, unemployment insurance, old age pension,
social security, retirement benefits or other similar legislation;
(iii) purchase money Liens arising in the ordinary course of business
(so long as the indebtedness secured thereby does not exceed the lesser
of the cost or fair market value of the property subject thereto, and
such Lien extends to no other property); (iv) those liens and
encumbrances set forth on Schedule B annexed hereto; and (v) in favor
of Bank;
(h) (Dividends) pay any dividends on or make any distribution on account of
(except, if Borrower is a Subchapter S corporation, consistent with
paragraph (e) above) any class of Borrower's capital stock in cash or
in property (other than additional shares of such stock), or redeem,
purchase or otherwise acquire, directly or indirectly, any of such
stock;
(i) (Loans) make any loans or advances to any individual, partnership,
trust or other corporation, including without limitation Borrower's
directors, officers and employees, except advances to officers or
employees with respect to expenses incurred by them in the ordinary
course of their duties which are properly reimbursable by Borrower;
(j) (Guarantees) assume, guaranty, endorse or otherwise become directly or
contingently liable in respect of including without limitation by way
of agreement, contingent, or otherwise, to purchase, provide funds to
or otherwise invest in a debtor or otherwise to assure a creditor
against loss), any indebtedness (except guarantees by endorsement of
instruments for deposit or collection in the ordinary course of
business and guarantees in favor of Bank) of any individual,
partnership, trust or other corporation;
(k) (Investments) (i) use any loan proceeds to purchase or carry any MARGIN
STOCK (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) or (ii) invest in or purchase any stock or
securities of any individual, partnership, trust or other corporation
except (x) readily marketable direct obligations of, or obligations
guaranteed by, the United States of America or any agency thereof or
(y) time deposits with or certificates of deposit issued by the Bank;
(l) (Transactions with Affiliates) enter into any lease or other
transaction with any shareholder, officer or affiliate on terms any
less favorable than those which might be obtained at the time from
persons who (or entities which) are not such a shareholder, officer or
affiliate;
(m) (Subsidiaries) sell, transfer or otherwise dispose of any stock of any
subsidiary of Borrower; or
(n) (Mergers, consolidations or sales) (a) merge or consolidate with or
into any corporation; (b) enter into any joint venture or partnership
with any person, firm or corporation; (c) convey, lease or sell all or
any material portion of its property or assets or business to any other
person, firm or corporation, except for the sale of Inventory in the
ordinary course of its business; or (d) convey, lease or sell any of
its assets to any person, firm or corporation for less than the fair
market value thereof.
For purposes of this section: TANGIBLE CAPITAL BASE shall mean Borrower's
tangible net worth plus subordinated debt; SUBORDINATED DEBT shall mean debt
which is specifically subordinated to all Obligations of the Borrower to the
Bank including, without limitation, $500,000.00 of commercial paper, upon terms
and conditions satisfactory to the Bank; TANGIBLE NET WORTH shall mean
Borrower's stockholders' equity determined in accordance with generally accepted
accounting principles, consistently applied, subtracting therefrom (i)
intangibles (as determined in accordance with such principles so applied) and
(ii) accounts and indebtedness owing to Borrower from any employee or parent,
subsidiary or other affiliate of Borrower; CAPITAL EXPENDITURES shall not be
limited to amounts paid during such fiscal year and shall include, in the case
of a purchase, the entire purchase price and, in the case of a capital lease
(but not an operating lease), the entire rental for the term; DISTRIBUTIONS
shall mean all payment or distributions to shareholders in cash or in property
other than reasonable salaries, bonuses and expense reimbursements; CURRENT
ASSETS and CURRENT LIABILITIES shall be determined in accordance with generally
accepted accounting principles consistently applied; INDEBTEDNESS shall mean
(i) all liabilities for borrowed money, for the deferred purchase price of
property or services, and under leases which are or should be, under generally
accepted accounting principles, recorded as capital leases, in respect of which
a person or entity is directly or indirectly, absolutely or contingently liable
as obligor, guarantor, endorser or otherwise, or in respect of which such person
or entity otherwise assures a creditor against loss, (ii) all liabilities of the
type described in (i) above which are secured by (or for which the holder has
an existing right, contingent or otherwise, to be secured by) any lien upon
property owned by such person or entity, whether or not such person or entity
has assumed or become liable for the payment thereof, and (iii) all other
liabilities or obligations which would, in accordance with generally accepted
accounting principles, be classified as liabilities of such person or entity;
AFFILIATE shall mean any person or entity (i) which directly or indirectly
controls, or is controlled by or is under common control with the Borrower or
a subsidiary, (ii) which directly or indirectly beneficially holds or owns five
(5%) percent or more of any class of voting stock of the Borrower or any
subsidiary, or (iii) five (5%) percent or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Borrower or a
subsidiary; CONTROL shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of any
person or entity, whether through the ownership of voting securities, by
contract or otherwise; and SENIOR INDEBTEDNESS shall mean indebtedness minus
subordinated debt.
15. DEFAULT. Nothing contained in this section, or elsewhere in this Agreement,
shall affect the demand nature of such of the obligations as are by their terms,
demand obligations, including, without limitation, loans and advances under this
Agreement. The occurrence of an Event of Default shall not be a prerequisite
for the Bank's making demand or requiring payment of such Obligations.
Upon the occurrence of any one or more of the following events (herein, EVENTS
OF DEFAULT), any and all Obligations of the Borrower to the Bank shall become
immediately due and payable, at the option of the Bank and without notice or
demand. The occurrence of any such Event of Default shall also constitute,
without notice or demand, a default under all other agreements between the bank
and the Borrower and instruments and papers given the Bank by the Borrower,
whether such agreements, instruments, or papers now exist or hereafter arise,
namely:
(a) The failure by the Borrower to pay upon demand any amount due under
this Agreement.
(b) The failure by the Borrower to pay upon demand (or when due, if not
payable on demand) any other Obligations.
(c) The failure by the
Borrower to promptly, punctually and faithfully perform, or observe
any term, covenant or agreement on its part to be performed or
observed pursuant to any of the provisions of this Agreement.
(d) The determination by Bank that any representation or warranty
heretofore, now or hereafter made by the Borrower to Bank, in any
documents, instrument, agreement, or paper was not true or accurate
when given.
(e) The occurrence of any event such that any indebtedness of the Borrower
from any lender other than Bank could be accelerated, notwithstanding
that such acceleration has not taken place.
(f) The Occurrence of any event which would cause a lien creditor, as
that term is defined in Section 9-301 of the Code, to take priority
over advances made by Bank.
(g) A filing against or relating to the Borrower of (i) a federal tax lien
in favor of the United states of America or any political subdivision
of the United States of America, or (ii) a state tax lien in favor of
any state of United States of America or any political subdivision of
any such state.
(h) The occurrence of any event of default under Any agreement between
Bank and the Borrower or instrument or paper given Bank by the
Borrower, whether such agreement, instrument, or paper now exists or
hereafter arises (notwithstanding that Bank may not have exercised its
rights upon default under any such other agreement, instrument or
paper).
(i) Any act by, against, or relating to the Borrower, or its property or
assets, which act constitutes the application for, consent to, or
sufferance of the appointment of a receiver, trustee or other person,
pursuant to court action or otherwise, over all, or any part of the
Borrower's property.
(j) The granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower, or the occurrence of any
other voluntary or involuntary liquidation or extension of debt
agreement for the Borrower; the failure by the Borrower to generally
pay the debts of the Borrower as they mature; adjudication of
bankruptcy or insolvency relative to the Borrower; the entry of an
order for relief or similar order with respect to the Borrower in any
proceeding pursuant to Title 11 of the United States Code entitled
BANKRUPTCY (the BANKRUPTCY CODE) or any other federal bankruptcy law;
the filing of any complaint, application, or petition by or against
the Borrower initiating any matter in which the Borrower is or may be
granted any relief from the debts of the Borrower pursuant to the
Bankruptcy Code or any other insolvency statute or procedure; the
calling or sufferance of a meeting of creditors of the Borrower; the
meeting by the Borrower of a formal or informal creditor's committee;
the offering by or entering into by the Borrower of any composition,
extension or any other arrangement seeking relief or extension for the
debts of the Borrower, or the initiation of any other judicial or
non-judicial proceeding or agreement by, against or including the
Borrower which seeks or intends to accomplish a reorganization or
arrangement with creditors.
(k) The entry of any judgment against Borrower in excess of $50,000.00,
which judgment is not satisfied or appealed from (with execution or
similar process stayed) within fifteen (15) days of its entry.
(l) The occurrence of any event or circumstance with respect to the
Borrower such that Bank shall believe in good faith that the prospect
of payment of all or any part of the Obligations or the Performance by
the Borrower under this Agreement or' any other agreement between the
Bank and the Borrower is impaired or there shall occur any material
adverse change in the business or financial condition of the Borrower
which differs from that which has been represented by the Bank in
conjunction with the financing arrangements evidenced by this
Agreement.
(m) The entry of any court order which enjoins, restrains or in any way
prevents the Borrower from conducting all or any part of its business
affairs in the ordinary course of business.
(n) The service of any process upon Bank seeking to attach by trustee
process any funds of the Borrower on deposit with Bank.
(o) Any change in the identity, authority or responsibilities of any
person having management or policy authority with respect to the
Borrower and/or any direct or indirect change in the ownership of the
capital stock of the Borrower from that existing at the execution of
this Agreement.
(p) The occurrence of any uninsured loss, theft, damage or destruction to
any material asset(s) of the Borrower.
(q) Any act by or against, or relating to the Borrower or its assets
pursuant to which any creditor of the Borrower seeks to reclaim or
repossess or reclaims or repossesses all or a portion of the
Borrower's assets.
(r) The death, termination of existence, dissolution, or liquidation of
the Borrower or the ceasing to carry on actively any substantial part
of the Borrower's current business.
(s) This Agreement shall, at any time after its execution and delivery and
for any reason, cease (i) to create a valid and perfected first
priority security interest in and to the property purported to be
subject to this Agreement; or (ii) to be in full force and effect or
shall be declared null and void, or the validity or enforceability
hereof shall be contested by the Borrower or any guarantor of the
Borrower denies it has any further liability or obligation hereunder.
(t) Any of the following events occur or exist with respect to the
Borrower or any ERISA affiliate: (i) any PROHIBITED TRANSACTION (as
defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code) involving any Plan; (ii) any REPORTABLE EVENT (as
defined in Section 4043 of ERISA and the regulations issued under such
Section) shall occur with respect to any Plan, which give rise to a
potential claim by PBGC; (iii) The filing under Section 4041 of ERISA
of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance exists which might constitute
grounds entitling the Pension Benefit Guaranty Corporation (PBGC) to
institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or
the institution by the PBGC of any such proceedings; (v) or partial
withdrawal under section 4201 or 4204 of ERISA from a Multiemployer
Plan or the reorganization, insolvency, or termination of any
Multiemployer Plan; and in each case above, such event or condition,
together with all other events or conditions, if any, could in the
opinion of the Bank subject the 3orrower to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise.
(u) The occurrence of any of the foregoing Events of Default with respect
to any guarantor, endorser, or surety to Bank of the obligations, as
if such guarantor, endorser or surety, were the BORROWER described
therein.
(v) The termination of any guaranty by any guarantor of the Obligations.
(w) The attachment of any security interest, lien or mortgage upon
property of the Borrower not in favor of the Bank, without the Bank's
prior written consent.
(x) The occurrence of an Event of Default under or termination for any
reason of that certain Loan and Security Agreement (All Assets)
between AVES and the Bank of even date.
Upon the occurrence of an Event of Default, Bank may declare any obligation
Bank may have hereunder to be cancelled, declare all Obligations of
Borrower to be due and payable and proceed to enforce payment of the
Obligations and to exercise any and. all of the rights and remedies
afforded to Bank by the Uniform Commercial Code or under the terms of this
Agreement or otherwise. In addition, upon the occurrence of an Event Of
Default, it Bank proceeds to enforce payment of the obligations, Borrower
shall be obligated to deliver to Bank cash collateral in an amount equal to
the aggregate amounts then undrawn on all outstanding letters of credit or
acceptances issued or guaranteed by Bank for the account of Borrower, and
Bank may proceed to enforce payment of the same and to exercise all rights
and remedies afforded to Bank by the Uniform Commercial Code or under the
terms of this Agreement or otherwise. Upon the occurrence of, and during
the continuance of, an Event of Default, the Borrower, as additional
compensation to the Bank for its increased credit risk, promises to pay
interest on all Obligations (including, without limitation, principal,
whether or not past due, past due interest and any other amounts past due
under this Agreement) at a per annum rate of three (3%) percent greater
than the rate of interest then specified in Section 5 of this Agreement.
16. PROCESSING AND SALES OF INVENTORY. So long as Borrower is not in default
hereunder, Borrower shall have the right, in the regular course of business,
to process and sell Borrower's Inventory. A sale in the ordinary course of
business shall not include a transfer in total or partial satisfaction of
a debt.
17. CONSENT TO JURISDICTION. Borrower and Bank agree that any action or
proceeding to enforce or arising out of this Agreement may be commenced in any
court of the Commonwealth of Massachusetts sitting in the counties of Suffolk or
Middlesex, or in the District Court of the United States for the District of
Massachusetts, and Borrower waives personal service of process and agrees that
a summons and complaint commencing an action or proceeding in any such court
shall be properly served and confer personal jurisdiction if served by
registered or certified mail to Borrower, or as otherwise provided by the laws
of the commonwealth of Massachusetts or the United States of America.
18. TERMINATION. This Agreement may be terminated at any time by either party
giving written notice of termination to the other party; provided, however, that
unless and until all loans made by the Bank to the Borrower hereunder and all
other obligations or commitments of the Bank under which an Obligation could
arise, outstanding as of the time of giving or receipt as the case may be, of
such notice by the Bank have been paid in full, such termination shall in no way
affect the security interest or other rights and powers herein granted to the
Bank, and until such payment in full the security interest of the Bank in all
Inventory, Accounts and other Collateral of the Borrower, whether existing as of
the time of such termination or thereafter arising, and al1 rights and powers
herein granted to the Bank in respect thereof shall remain in full force and
effect. Until all of the Obligations of Borrower to Bank have been fully paid
and satisfied and all commitments of the Bank under which an obligation could
arise have expired, Borrower shall continue to assign Accounts to Bank, turn
over all collections to the Bank in kind and otherwise fully comply with the
terms and conditions of this Agreement as herein provided. Prior to such
payment in full of all of the Obligations of Borrower to Bank, this Agreement
shall be a continuing agreement in every respect.
19. MISCELLANEOUS.
(a) No delay or omission on the part of Bank in exercising any rights
shall operate as a waiver of such right or any other right. Waiver on
any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. All Bank's rights and
remedies, whether evidenced hereby or by any other agreement,
instrument or paper, shall be cumulative and may be exercised
singularly or concurrently.
(b) Bank is authorized to make loans under the terms of this Agreement
upon the request, either written or oral, in the name of Borrower or
any authorized person whose name appears at the end of this Agreement
or of any of the following named person, or persons, from time to
time, holding the following offices of Borrower, President, Treasurer
and such other officers and authorized signatories as may from time to
time be set forth in separate banking and borrowing resolutions.
(c) If at any time or times by assignment or otherwise, the Bank assigns
this Agreement, such assignment shall carry with it the Bank's powers
and rights under this Agreement, and the transferee shall become
vested with said powers and rights whether or not they are
specifically referred to in the transfer. Bank shall notify Borrower
of any assignment, partial assignment or transfer by the Bank of this
Agreement or of the Obligations of Borrower.
(d) Borrower agrees that any and all loans made by Bank to Borrower or for
its account under this Agreement shall be conclusively deemed to have
been authorized by Borrower and to have been made pursuant to duly
authorized requests therefor on its behalf.
(e) Unless otherwise defined in this Agreement, capitalized words shall
have the meanings set forth in the Uniform Commercial Code as in
effect in the Commonwealth of Massachusetts as of the date of this
Agreement.
(f) Paragraph and section headings used In this Agreement are for
convenience only, and shall not effect the construction of this
Agreement. If one or more provisions of this Agreement (or the
application thereof) shall be invalid, illegal or unenforceable in any
respect in any jurisdiction, the same shall not, invalidate or render
illegal or unenforceable such provision (or its application) in any
other jurisdiction or any other provision of this Agreement (or its
application). This Agreement is the entire agreement of the parties
with respect to the subject matter hereof and supersedes any prior
written or verbal communications or instruments relating thereto.
(g) All notices and other communications hereunder shall be made by
telegram, telex, electronic transmitter, overnight air courier, or
certified or registered mail, return receipt requested, and shall be
deemed to be received by the party to whom sent one business day after
sending, if sent by telegram, telex, electronic transmitter, or
overnight air courier, and three business days after mailing if sent
by certified or registered mail. All such notices and other
communications to a party hereto shall be addressed to such party at
the address set forth at the end of this Agreement or to such other
address as such party may designate for itself in a notice to the
other party given in accordance with this section.
(h) The laws of Massachusetts shall govern the construction of this
Agreement and the rights and duties of the parties hereto. This
Agreement shall take effect as a sealed instrument.
Witnessed by: ROSALCO, INC.
John H. Hartman By: David L. Koffman, Vice President
Address: P.O. Box 741528
Houston, TX 77274
STATE STREET BANK AND TRUST COMPANY
By: John D. Gaziano, Jr., Vice President
Address: 225 Franklin Street
Boston, MA 02110
SCHEDULES
The following Schedules to the within Inventory and Accounts Receivable Security
Agreement are respectively described in the section indicated. Those Schedules
in which no information has been inserted shall be deemed to read NONE.
SCHEDULE A
Borrower's Places of Business (S3)
Property Located
Address At Such Address
------- ----------------
SCHEDULE B
Other Encumbrances and Liens (S4(e)(i)
Secured Party Description Payment Terms and
or Mortgagee of Collateral Dates of Maturity
------------- ------------- -----------------
SCHEDULE C
Leases (S4(e)(ii)
Description Date of Lease Rental
Lessor of Property and Term Payable
------ ----------- ------------- -------
EXHIBIT A
CERTIFICATE AS TO
COLLATERAL AND BORROWING BASE
Pursuant to a Loan and Security Agreement (All Assets) dated as of _________,
1996 (the AGREEMENT) between the undersigned (the BORROWER) and State Street
Bank and Trust Company (the BANK), the undersigned has the following loans and
letters of credit outstanding:
Loans: $____________
Letters of Credit including
Standby Letters of Credit: $____________
Total: $____________
and hereby confirms to Bank its security interest pursuant to the Agreement in
all of Borrower's Inventory, including that recently acquired, Accounts,
including those newly created, and all other Collateral, regardless of when
such Collateral arose or was acquired by Borrower, and further certifies to
Bank as follows:
1. Total value of Eligible Inventory on _________, 199__:
A. Value of Eligible Inventory located at specific warehouse location
approved by Bank:
Location Book Value
-------- ----------
Jeffersonville, IN $_________
Dominguez, CA $_________
Other $_________
Total: $_________
B. 40% of Item 1A, not to exceed $5,000,000.00 through and including
April 30, 1996, $4,500,000.00 from May 1, 1996 through and including
November 30, 1996 or $4,000,000.00 thereafter
$________
2. Total Value of Qualified Accounts Receivable on _________, 199__:
A. All Accounts, which are rated one or two by Dunn and
Bradstreet: $_________
B. Non-Qualified Accounts, which are rated one or two by
Dunn and Bradstreet: $_________
C. Item 2A minus Item 2B: $_________
D. 90% of Item 2C: $_________
E. All Accounts, which are not rated one or two by Dunn
and Bradstreet: $_________
F. Non-Qualified Accounts, which are rated one or two by
Dunn and Bradstreet $_________
G. Item 2E minus Item 2F: $_________
H. 80% of Item 2G: $_________
I. All Accounts, as to which rights have not been earned
by performance but which are supported by letters of
credit acceptable to Bank: $_________
J. 90% of Item 2I: $_________
3. Borrowing Base:
A. Item 1B plus Item 2D plus Item 2H plus Item 2J: $_________
B. $10,000,000.00 $_________
C. Amount Available to Borrower (the lesser of Item 3A
or Item 3B): $_________
D. Less Total Outstanding Obligations (including Letters
of Credit): $_________
E. Available Funds to Borrower (Item 3C minus Item 3D): $_________
Executed and sealed this _____ day of _________, 199__.
ROSALCO, INC.
By:________________
EXHIBIT 10(22)
STATE STREET BANK AND TRUST COMPANY
LOAN AND SECURITY AGREEMENT
(ALL ASSETS)
April 29, 1996
1. SECURITY INTEREST. AVES Audio Visual Systems, Inc., a Texas corporation
(hereinafter called BORROWER), for valuable consideration, receipt whereof is
hereby acknowledged, grants to State Street Bank and Trust Company, a
Massachusetts trust company, the secured party hereunder (hereinafter called the
BANK), acontinuing security interest in, and a lien on, the following property
of the Borrower, wherever located and whether now owned or hereafter acquired:
(a) all inventory, including all goods, merchandise, raw materials,
goods and work in process, finished goods, and other tangible
personal property now owned or hereafter acquired and held for
sale or lease or furnished or to be furnished under contracts of
service or used or consumed in Borrower's business (all
hereinafter called the INVENTORY);
(b) all accounts (as defined in the Uniform Commercial Code,
hereinafter ACCOUNTS), contracts, contract rights, notes, bills,
drafts, acceptances, general intangibles (including without
limitation trade names, customer lists, goodwill, computer
programs, computer records, computer software, computer data,
trade secrets, trademarks, patents, ledger sheets, files, records,
data processing records relating to any Accounts and all tax
refunds of every kind and nature to which Borrower is now or
hereafter may become entitled to, no matter how arising),
instruments, documents, chattel paper, choses in action, and all
other debts, obligations and liabilities in whatever form, owing
to Borrower from any person, firm or corporation or any other
legal entity, whether now existing or hereafter arising, now or
hereafter received by or belonging or owing to Borrower, for goods
sold by it or for services rendered by it, or however otherwise
sane may have been established or created, all guarantees and
securities therefor, all right, title and interest of Borrower in
the merchandise or services which gave rise thereto, including the
rights of reclamation and stoppage in transit, all rights to
replevy goods, and all rights of an unpaid seller of merchandise
or services (all hereinafter called the RECEIVABLES);
(c) all machinery, equipment, fixtures and other goods (as defined in
Article 9 of the Uniform commercial Code) whether now owned or
hereafter acquired by the Borrower and wherever located, all
replacements and substitutions therefor or accessions thereto and
all proceeds thereof (all hereinafter called the EQUIPMENT); and
(d) all proceeds and products of all of the foregoing in any form,
including, without limitation, all proceeds of credit, fire or
other insurance, and also including, without limitation, rents
and profits resulting from the temporary use of any of the
foregoing (which, with Inventory, Receivables and Equipment are
all hereinafter called COLLATERAL)
2. OBLIGATIONS SECURED. The security interest granted hereby is to secure
payment and performance of all debts, liabilities and obligations of Borrower
to the Bank hereunder and also any and all other debts, liabilities and
obligations ofBorrower to Bank of every kind and description, direct or
indirect, absolute or contingent,. primary or secondary, due or to become due,
now existing or hereafter arising, whether or not such obligations are related
to the transactions described in this Agreement, by class, or kind, or whether
or not contemplated by the parties at the tire of the granting of this security
interest, regardless of how they arise or by what agreement or Instrument they
may be evidenced or whether evidenced by any agreement or instrument, and
includes obligations to perform acts and refrain from taking action as well as
obligations to pay money including, without limitation, all interest,, fees,
charges, expenses and overdrafts, and also including, without limitation, all
obligations and liabilities which the Bank may incur or become liable for, on
account of, or as a result of, any transactions between Bank and Borrower
including any which may arise out of any letter of credit, acceptance or similar
instrument or obligation incurred by Bank for the account of Borrower (all
hereinafter called OBLIGATIONS).
3. BORROWER' PLACES OF BUSINESS, INVENTORY LOCATIONS AND RETURNS POLICY.
Borrower warrants that Borrower has no places of business other than that shown
at the end of Agreement, unless other places of business are listed on Schedule
A, annexed hereto, in which event Borrower represents that it has additional
places of business at those locations set forth on Schedule A.
Borrower's principal executive office and the office where Borrower keeps its
records concerning its accounts, contract rights and other property, is that
shown at the end of this Agreement. All Inventory presently owned by borrower
is stored at the locations set forth on Schedule A.
Borrower will promptly notify Bank in writing of any change in the location of
any place of business or the location of any Inventory or the establishment of
any new place of business or location of Inventory or office where its records
are kept which would be shown in this Agreement if it were executed after such
change.
Borrower represents and warrants that it has described its returns policy in
writing to Bank and that it does now, and will continue to, apply such policy
consistently in the conduct of its business and agrees that it shall notify
Bank in writing before changing its policy or the application thereof.
4. BORROWER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower represents
and warrants (and at the time of each loan hereunder shall be deemed to
represent and warrant) that:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and shall
hereafter remain in good standing as a corporation in that state, and
is duly qualified and in good standing in every other state in which
it is doing business, and shall hereafter remain duly qualified and
in good standing in every other state in which by reason of the
nature or location of the Borrower's assets or operations, such
qualification may be necessary.
(b) Borrower's exact legal name is as set forth in this Agreement and
Borrower will not undertake or commit to undertake any act which will
result in a change of Borrower's legal name, without giving Bank at
least thirty (30) days prior written notice of the same.
(c) The execution, delivery and performance of this Agreement, and any
other document executed in connection herewith, are within the
Borrower's corporate powers, have been duly authorized, are not in
contravention of law or the terms of the Borrower's charter, by-laws
or other incorporation papers, or of any indenture, agreement or
undertaking to which the Borrower is a party or by which it or any of
its properties may be bound.
(d) All Articles of organization and all amendments thereto of Borrower
have been duly filed and are in proper order. All capital stock
issued by Borrower and outstanding was and is properly issued and all
books and records of Borrower, including but not limited to its
minute books, by-laws and books of account, are accurate and up to
date and will be so maintained.
(e) Borrower owns all of the assets reflected in the most recent of
Borrower's financial statements provided to Bank, except assets sold
or otherwise disposed of in the ordinary course of business since the
date thereof, and such assets together with any assets acquired since
such date, including without limitation the collateral, are free and
clear of any lien, pledge, security interest, charge, mortgage or
encumbrance of any nature whatsoever, except (i) the security
interests and other encumbrances (if any) listed on Schedule B
annexed hereto, (ii) those leases set forth on schedule C annexed
hereto, or (iii) liens and security interests in favor of Bank.
(f) Borrower has made or filed all tax returns, reports and declarations
relating to any material tax liability required by any jurisdiction
to which it is subject (any tax liability which may result in a lien
on any Collateral being hereby deemed material); has paid all taxes
shown or determined to be due thereon except those being contested in
good faith and which Borrower has, prior to the date of such contest,
identified in writing to Bank as being contested; and has made
adequate provision for the payment of all taxes so contested, so that
no lien will encumber any Collateral, and in respect of subsequent
periods.
(g) Borrower (i) is subject to no charter, corporate or other legal
restriction, or any judgment, award, decree, order, governmental rule
or regulation or contractual restriction which could have a material
adverse effect on its financial condition, business or prospects,
and (ii) is in compliance with its charter documents and by-laws, all
contractual requirements by which it or any of its properties may be
bound and all applicable laws, rules and regulations (including
without limitation those relating to environmental protection) other
than laws, rules or regulations the validity or applicability of
which it is contesting in good faith or provisions of any of the
foregoing the failure to comply with which cannot reasonably be
expected to materially adversely affect its financial condition,
business or prospects or the value of any Collateral.
(h) There is no action, suit, proceeding or investigation pending or, to
Borrower's knowledge, threatens against or affecting it or any of its
assets before or by any court or other governmental authority which,
if determined adversely to it, would have a material adverse effect
on its financial condition, business or prospects or the value of any
Collateral.
(i) Borrower is in compliance with ERISA; no Reportable Event has
occurred and is continuing with respect to any Plan; and it has no
unfunded vested liability under any Plan. The word PLAN as used in
this Agreement means any employee plan subject to Title IV of the
Employee Retirement Income Security Act of 1974 (ERISA) maintained
for employees of Borrower, any subsidiary of Borrower or any other
trade or business under common control with Borrower within the
meaning of Section 414(c) of the Internal Revenue Code of 1986 or any
regulations thereunder.
5. LOANS.
(a) Subject to the terms and Provisions of this agreement, the Bank
hereby establishes a revolving line of credit in Borrower's favor in
the amount set forth below, as determined by Bank from time to time
hereafter. From time to time upon Borrower's request, so long as the
sum of the aggregate principal amount of all loans outstanding and
the requested loan does not exceed the lesser of (i) the Borrowing
Base (as defined below) or (ii) the Credit Limit (as defined below),
Bank shall make such loan, absent demand or the occurrence of an
Event of Default or an event, which, with notice or the lapse of time
or both, would constitute an Event of Default. Without limiting the
demand feature of any loans that Bank does make hereunder, Borrower
agrees that the aggregate unpaid principal of all loans outstanding
at any one time shall not exceed the Borrowing Base. The term,
BORROWING BASE as used herein shall mean the sum of the following:
(1) eighty (80%) percent of the unpaid face Amount of all Qualified
Accounts (as defined below)MINUS
(2) one hundred (100%) percent of (i) the aggregate amount then undrawn
on all outstanding letters of credit issued by Bank for the account
of Borrower; and (ii) all outstanding Banker's acceptances issued by
Bank for the account of Borrower;
but in no event shall the sum of all loans plus the sum of the aggregate amount
undrawn on all letters of credit and acceptances be in excess of the Credit
Limit (as defined below), or such other sum as may from time to time be fixed
by the Bank upon notice to Borrower. All such loans shall bear interest and
at the option of Bank shall be evidenced by demand notes in form satisfactory
to Bank, but in the absence of notes shall be conclusively evidenced by the
Bank's record of disbursements and repayments and shall be payable ON DEMAND.
Interest will be charged to Borrower at a fluctuating rate which is the daily
equivalent to the Prime Rate in effect from time to time, plus one (1%) percent
per annum or at such other rate agreed on from time to time by the parties, upon
any balance owing to Bank at the close of each day "and shall be payable monthly
in arrears, on the first day of each month, until the Bank makes demand. The
rate of interest pavable by Borrower shall be changed effective as of that date
in which a change in the Prime Rate becomes effective. Interest sha11 be
computed on the basis of the actual number of days elapsed over a year of three
hundred sixty (360) days. The term PRIME RATE as used herein and in any
supplement and amendment hereto shall mean the rate of interest announced by
Bank in Boston as its Prime Rate.
(b) The term CREDIT LIMIT as used herein shall mean an amount equal to
One Million Five Hundred Thousand ($1,500,000.00) Dollars.
(c) The Borrowing Base formula set forth above is intended solely for
monitoring purposes. The making of loans, advances, and credits by the
Bank to the in excess of the above described Borrowing Base formula is
for the benefit of the Borrower and does not affect the obligations of
borrower hereunder; all such loans constitute Obligations and must be
repaid by Borrower in accordance with the terms of this Agreement.
(d) Borrower hereby authorizes and directs Bank, in Bank's sole discretion
(provided, however, Bank shall have no obligation to do so), (i) to pay
accrued interest as the same becomes due and payable pursuant to this
Agreement or Pursuant to any note or other agreement between Borrower
and Bank, and to treat the same as a loan to Borrower which shall be
added to Borrower's loan balance pursuant to this Agreement; or (ii)
to apply the proceeds of Collateral, including without limitation,
payments on Accounts, and other payments from sales or lease of
Inventory and any other funds to the payment of such items or the
payment of any other amounts then due to Bank from Borrower.
6. DEFINITION OF QUALIFIED ACCOUNT. The term QUALIFIED ACCOUNT, as used
herein, means an Account owing to Borrower which met the following
specifications at the time it came into existence and continues to meet the same
until it is collected in full:
(a) The Account is not more than ninety (90) days from the date of the
invoice thereof.
(b) The Account arose from the performance of services or an outright sale
of goods by Borrower, such goods have been shipped to the account
debtor, and Borrower has possession of, or has delivered to Bank,
shipping and delivery receipts evidencing such shipment.
(c) The Account is not subject to any prior assignment, claim, lien, or
security interest, and Borrower will not make any further assignment
thereof or create any further security interest therein, nor permit
Borrower's rights therein to be reached by attachment, levy,
garnishment or other judicial process.
(d) The Account is not subject to set-off, credit, allowance or
adjustment by the account debtor, except discount allowed for prompt
payment and the account debtor has not complained as to his liability
thereon and has not returned any of the goods from the sale of which
the Account arose.
(e) The Account arose in the ordinary course of Borrower's business and
did not arise from the performance of services or a sale of goods to
a supplier or employee of the Borrower.
(f) No notice of bankruptcy or insolvency of the account debtor has been
received by or is known to the Borrower.
(g) The Account is not owed by an account debtor whose principal place of
business is outside the United States of America.
(h) The Account is not owed by an entity which is a parent,
brother/sister, subsidiary or affiliate of Borrower.
(i) The account debtor is not located in the State of New Jersey or in
the State of Minnesota, unless Borrower has filed and shall file all
legally required Notice of Business Activities Reports with the New
Jersey Division of Taxation or the Minnesota Department of Revenue,
as the case may be.
(j) The Account when aggregated with all of the Accounts of that account
debtor does not exceed twenty-five (25%) percent of the then
aggregate of Qualified Accounts.
(k) The Account is not evidenced by a promissory note.
(l) The Account did not arise out of any sale made on a bill and hold,
dating or delayed shipment basis.
(m) The Bank in its sole discretion does not deem the Account to be
unacceptable for any reason.
7. DEFINITION OF ELIGIBLE INVENTORY. The term ELIGIBLE INVEETORY as used
herein, means Borrower's raw materials, work in process and finished goods
which are initially and at all times until sold: new and unused (except, with
Bank's written approval, used equipment held for sale or lease), in first-class
condition, merchantable and saleable through normal trade channels; at a
location which has been identified in writing to Bank; subject to a perfected
security interest in favor of Bank; owned by Borrower free and clear of any lien
except in favor of Bank; not obsolete; not scrap, waste, defective goods and the
like; have been produced by Borrower in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
promulgated thereunder; not stored with a bailee, warehouseman or similar party
unless Bank has given its prior written consent thereto and Borrower has caused
each such bailee, warehouseman or similar party to issue and deliver toBank
warehouse receipts in Bank's name for such Inventory; and have not been
designated by Bank in its sole discretion as unacceptable for any reason by
notice to Borrower.
8. BANK'S REPORTS. After the end of each month, Bank will render to Borrower a
statement of Borrower's loan account with Bank hereunder, showing all applicable
credits and debits. Each statement shall be considered correct and to have been
accepted by Borrower and shall be conclusively binding upon Borrower in respect
of all charges, debits and credits of whatsoever nature contained therein under
or pursuant to this Agreement, and the closing balance shown therein, unless
Borrower notifies Bank in writing of any discrepancy within twenty (20) days
from the mailing by Bank to Borrower of any such monthly statement.
9. CAPITAL ADEQUACY. If the Bank shall deem applicable to this Agreement
(including, in each case, the borrowed and unused portion hereof) , any
requirement of any law of the United States of America, any regulation, order,
interpretation, ruling, official directive or guideline (whether or not having
the force of law) of the Board of Governors of the Federal Reserve System, the
Comptroller of the Currency, the Federal Deposit Insurance Corporation or any
other board or governmental or administrative agency of the United states of
America shall impose, increase, modify or make applicable thereto or cause to
be included in, any reserve, special deposit, calculation used in the
computation of regulatory capital standards, assessment or other requirement
which imposes on the Bank any cost that is attributable to the maintenance
thereof, then, and in each such event, the Borrower shall promptly pay the Bank,
upon its demand, such amount as will compensate the Bank for any such cost,
which determination may be based upon the Bank's reasonable allocation of the
aggregate of such costs resulting from- such events. In the event any such
cost is a continuing cost, a fee payable to the Bank may be imposed upon the
Borrower periodically for so long as any such cost is deemed applicable to the
Bank, in an amount determined by the Bank to be necessary to compensate the Bank
for any such cost. The determination by the Bank of the existence and amount of
any such cost shall, in the absence of manifest error, be conclusive.
10. COLLECTIONS; SET OFF; NOTICE OF ASSIGNMENT; EXPENSES; POWER OF ATTORNEY.
(a) Immediately after written notification to Borrower by Bank (the
NOTICE), which may be given at any time whether or not demand has been
made or an Event of Default has occurred hereunder and continuing for
as long as any obligation remains outstanding, Borrower will
immediately upon receipt of all checks, drafts, cash and other
remittances in payment of any Inventory sold or in payment or on
account of Borrower's accounts, contracts, contract rights, notes,
bills, drafts, acceptances, general intangibles, choses in action and
all other forms of obligations, deliver the same to the Bank
accompanied by a remittance report in form specified by Bank. Said
proceeds shall be delivered to Bank in the same form received except
for the endorsement of Borrower where necessary to permit collection
of items, which endorsement Borrower agrees to make. The Bank will
credit (conditional upon final collection) all such payments against
the principal or interest of any loans secured hereby; provided,
however, for the purpose of computing interest, any items requiring
clearance or payment shall not be considered to have been credited
against any loans secured hereby until three (3) business days after
receipt by Bank of any such items. The order and method of such
application shall be in the sole discretion of Bank and any portion
of such funds which the Bank elects not to so apply shall be paid over
from time to time by Bank to Borrower.
Prior to receipt of the Notice, Borrower may, upon receipt of all
remittances and payments of any Inventory sold or in payment or on
account of Borrower's Accounts, use such proceeds to pay its ordinary
and necessary business expenses in the ordinary course of Borrower's
business and the requirement that Borrower furnish remittance reports
to Bank shall be suspended.
(b) Any and al1 deposits (whether demand or time deposits) or other sums
at any time credited by or due from Bank to Borrower shall at all
times constitute additional security for the Obligations and may be
set-off against any Obligations at any time whether or not they are
then due or other security held by Bank is considered by Bank to be
adequate. Any and all instruments, documents, policies and
certificates of insurance, securities, goods, accounts, choses in
action, general intangibles, chattel papers, cash, property and the
proceeds thereof (whether or not the same are Collateral or proceeds
thereof hereunder) owned by Borrower or in which Borrower has an
interest, which now or hereafter are at any time in possession or
control of Bank or in transit by mail or carrier to or from Bank or in
the possession of any third party acting in Bank's behalf, without
regard to whether Bank received the same in pledge, for safekeeping,
as agent for collection or transmission or otherwise or whether Bank
had conditionally released the same, shall constitute additional
security for the Obligations and may be applied at any time to any
obligations which are then owing, whether due or not due. Bank shall
be entitled to presume, in the absence of clear and specific written
notice to the contrary hereinafter provided by Borrower to Bank, that
any and all deposits maintained by Borrower with Bank are general
accounts as to which no person or entity other than Borrower has any
legal or equitable interest Whatsoever.
(c) The Bank may at any time notify account debtors that Collateral has
been assigned to Bank and that payments shall be made directly to
Bank. Upon request of Bank at any time, Borrower will so notify such
account debtors and will indicate on all billings to such account
debtors that their accounts must be paid to Bank. The Bank shall have
full power to collect, compromise, endorse, sell or otherwise deal
with the Collateral or proceeds thereof in its own name or in the name
of Borrower.
(d) Borrower shall pay to Bank on demand any and all reasonable counsel
fees and other expenses incurred by the Bank in connection with the
preparation, interpretation, enforcement, administration or amendment
of this Agreement, or of any documents relating thereto, and any and
all expenses, including, but not limited to, a collection charge on
all accounts collected, all attorneys, fees and expenses, and all
other expenses of like or unlike nature which may be expended by the
Bank to obtain or enforce payment of any Account either as against the
account debtor, Borrower, or any guarantor or surety of Borrower or in
the prosecution or defense of any action or concerning any matter
growing out of or connected with the subject matter of this Agreement,
the obligations or the Collateral or any of Bank's rights or interests
therein or thereto, including, without limiting the generality of the
foregoing, any counsel fees or expenses incurred in any bankruptcy, or
insolvency proceedings and costs and expenses incurred or paid by Bank
in connection with the administration, supervision, protection or
realization on any security held by Bank for the debt secured hereby,
whether such security was granted by Borrower or by any other person
primarily or secondarily liable (with or without recourse) with
respect to such debt, and all costs and expenses incurred by Bank in
connection with the defense, settlement or satisfaction of any action,
claim or demand asserted against Bank in connection with the debt
secured hereby, all of which amounts shall be considered advances to
protect Bank's security, and shall be secured hereby. At Its option,
and without limiting any other rights or remedies, Bank may at any
time pay or discharge any taxes, liens, security interests or other
encumbrances at any tine levied against or placed on any of the
collateral, and may procure and pay any premiums on any insurance
required to be carried by Borrower, and provide for the maintenance
and preservation of any of the Collateral, and otherwise take any
action reasonably deemed necessary to Bank to protect its security,
and all amounts expended by Bank in connection with any of the
foregoing matters, including reasonable attorneys' fees, shall be
considered obligations of Borrower and shall be secured hereby.
(e) Borrower does hereby make, constitute and appoint any officer or agent
of Bank as Borrower's true and lawful attorney-in-fact, with power to
endorse the name of Borrower or any of Borrower's officers or agents
upon any notes, checks, drafts, money orders, or other instruments of
payment (including payments payable under any policy of insurance on
the collateral) or Collateral that may come into possession of the
Bank in full or part payment of any amounts owing to Bank; to sign and
endorse the name of Borrower or any of Borrower's officers or agents
upon any invoice, freight or express bill, bill of lading, storage or
warehouse receipts, drafts against debtors,. assignments,
verifications and notices in connection with Accounts, and any
instrument or documents relating thereto or to Borrower's rights
therein; to give written notice to such office and officials of the
United States Post Office to effect such change or changes of address
so that all mail addressed to Borrower may be delivered directly to
Bank; granting upon Borrower's said attorney full power to do any and
all things necessary to be done in and about the premises as fully and
effectually as Borrower might or could do, and hereby ratifying all
that said attorney shall lawfully do or cause to be done by virtue
hereof. Neither the Bank nor the attorney shall be liable for any acts
or omissions nor for any error of judgment or mistake, except for
their gross negligence or willful misconduct. This power of attorney
shall be irrevocable for the term of this Agreement and all
transactions hereunder and thereafter as long as Borrower may be
indebted to Bank.
11. FINANCING STATEMENTS. At the request of Bank, Borrower will join with Bank
in executing one or more Financing Statements pursuant to the Uniform Commercial
Code or other notices appropriate under applicable law in form satisfactory to
Bank and will pay the cost of filing the same in all public offices wherever
filing is deemed by Bank to be necessary or desirable. A legible carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement.
12. BORROWER'S REPORTS.
(a) At the time of each borrowing hereunder, Borrower will execute and
deliver to Bank a Loan Confirmation Report, in the form supplied by
Bank, reflecting the status of the loan and Collateral securing same.
(b) Borrower shall, from time to time, deliver to Sank a Supplemental
Assignment of Accounts on a form supplied by Bank containing a summary
of accounts created since the last Supplemental Assignment and a
certificate concerning Borrower's inventory values, with copies of
invoices relating to said accounts attached thereto.
(c) Borrower shall cause all of its invoices, including the copies
thereof, to be printed and to bear consecutive numbers and shall
prepare and issue its invoices in such consecutive numerical order.
If requested by Bank, all copies of invoices not previously delivered
to Bank shall be delivered to Bank with each schedule of Accounts.
Copies of all invoices which are voided or cancelled or which for any
other reason do not evidence an Account shall be included in such
delivery. If any invoice or copy thereof is lost, destroyed or
otherwise unavailable, Borrower shall account in writing, in form
satisfactory to Bank, for such missing invoice.
(d) Within twenty (20) calendar days after the end of each month or on
such other more frequent basis as may be required by Bank from time
to time, Borrower shall submit to Bank an aging report in form
satisfactory to Bank showing the amounts due and owing on all Accounts
according to Borrower's records as of the close of such Accounting
Period or such shorter period as may be required by Bank from time to
time, together with such other information as Bank may require. If
Borrower's monthly aging reports are prepared by an accounting service
or other agent, Borrower hereby authorizes and directs such service or
agent to deliver such aging reports and any other related documents to
Bank upon any request therefor by Bank.
(e) Within twenty (20) calendar days after the end of each month or on
such other more frequent basis as may be required by Bank from time to
time, Borrower shall furnish to Bank a certificate describing all of
Borrower's Inventory by value based on the lower of cost or market
value, listing all Inventory by nature, quantity and location,
together with such other information as Bank may require.
(f) Within twenty (20) calendar days after the end or each month or on
such other more frequent basis as may be required by Bank from time to
time, Borrower shall submit to Bank an aging of Borrower's accounts
payable setting forth all accounts payable as of the close of such
Accounting Period, showing the total amount due to each account
creditor, the month in which such account payable was created, and
such other information as Bank shall request.
(g) Borrower shall deliver to Bank all documents, as frequently as
indicated below, or at such other times as Bank may request, and all
other documents and information requested by Bank:
Document Frequency Due
(i) Borrowing Certificate, in- Monthly or daily following
cluding cash receipts, credit receipt of the Notice
memos, sales, debit memos,
unpaid loan balance, new
borrowing requests and the
adjusted loan balance and a
borrowing base certificate
substantially in the form
attached hereto as Exhibit A
(ii) List of names and addresses of Annually, within 60 days
account debtors to whom Borrower after the end of each
has made sales during the pre- fiscal year of Borrower
vious fiscal year
(iii) Reconciliation report, in form Weekly or daily following
satisfactory to Bank, showing receipt of the Notice
all Accounts, collections,
payments, credits, and extensions
since the preceding report
(iv) Notice of noncompliance with the Immediately upon learning
provisions of this Agreement of such noncompliance, or
if any representation or
warranty contained herein
is no longer true or
accurate
(h) Within forty-five (45) days after the close of each monthly fiscal
period of Borrower, a consolidating statement of financial position and
a consolidating statement of profit and losses reflecting the financial
condition of Jayark Corporation (JAYARK) and its consolidated
subsidiaries, including Borrower, at the end of such period and the
results of operations during such period, such consolidating statement
of financial position and consolidating statement of profit and loss
to be certified by Jayark's President, Vice President, Treasurer or
Secretary to fairly present the financial position of Jayark and its
consolidated subsidiaries at the end of such period and the results of
operations during such period in accordance with generally accepted
accounting principles consistently, applied, subject to normal year-end
audit adjustments;
(i) Within forty-five (45) days after the close of each quarterly fiscal
period of Borrower, a covenant compliance certificate, executed by
Jayark's President, Vice President, Treasurer or secretary, on a form
supplied by Bank;
(j) Annually as soon as available but within ninety (90) days after the
close of each fiscal year of Borrower, a full and complete signed copy
of a report or reports by certified public accountants reasonably
satisfactory to Bank which shall include a consolidated statement of
financial condition of Jayark and its consolidated subsidiaries,
including Borrower, at the end of such year and a consolidated
statement of profit and loss of Jayark and its consolidated
subsidiaries reflecting the results of operations during such year,
together with the report of such certified public accountants as to
the scope of the audit.
(k) in addition to the foregoing, the Borrower promptly shall provide the
Bank with such other and additional information concerning the
Borrower, the Collateral, the operation of the Borrower's business,
and the Borrower's financial condition, including financial reports
and statements, as the Bank may from time to time request from the
Borrower. All financial information provided the Bank by the Borrower
shall be prepared in accordance with generally accepted accounting or
auditing principles (as applicable) applied consistently in the
preparation thereof and with prior periods to fairly reflect the
financial conditions of the Borrower at the close of, and its results
of operations for, the periods in question.
13. GENERAL AGREEMENTS OF BORROWER.
(a) Borrower agrees to keep all the Collateral insured with coverage and
in amounts not less than that usually carried by one engaged in a like
business and in any event not less than that required by Bank with
loss payable to the Bank and Borrower, as their interests may appear,
hereby appointing Bank as attorney for Borrower in obtaining,
adjusting, settling and cancelling such insurance and endorsing any
drafts. As further assurance for the payment and performance of the
Obligations, Borrower hereby assigns to Bank all sums, including
returns of unearned premiums, which may become payable under any
policy of insurance on the collateral and Borrower hereby directs
each insurance company issuing any such policy to make payment of
such sums directly to Bank.
(b) The Bank or its agents have the right to inspect the Collateral and
all records pertaining thereto at intervals to be determined by Bank
and without hindrance or delay.
(c) Although, as above set forth, Bank has a continuing security interest
in all of Borrower's Collateral and in the Proceeds thereof, Borrower
will at all times maintain as the minimum security hereunder a
Borrowing Base not less than the aggregate unpaid principal of all
loans made hereunder; and if Borrower fails to do so, Borrower will
immediately make the necessary reduction in the unpaid principal
amount of said loans.
(d) Borrower will at all times keep accurate and complete records of
Borrower's Inventory, Accounts and other Collateral, and Bank, or any
of its agents, shall have the right to call at Borrower's place or
places of business at intervals to be determined by Bank, and without
hindrance or delay, to inspect, audit, check, and make extracts from
any copies of the books, records, journals, orders, receipts,
correspondence which relate to Borrower's Accounts, and other
Collateral or other transactions, between the parties thereto and the
general financial condition of Borrower and Bank may remove any of
such records temporarily for the purpose of having copies made
thereof.
(e) Borrower will maintain its corporate existence in good standing and
comply with all laws and regulations of the United States or of any
state or states thereof or of any political subdivision thereof, or
of any governmental authority which may be applicable to it or to its
business.
(f) Borrower will pay all real and personal property taxes, assessments
and charges and all franchises, income, unemployment, old age benefits,
withholding, sales and other taxes assessed against it, or payable by
it at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to its property.
(g) The Bank may in its own name or in the name of others communicate with
account debtors in order to verify with them to Bank's satisfaction the
existence, amount and terms of any Accounts.
(h) This Agreement may but need not be supplemented by separate assignments
of Accounts and if such assignments are given the rights and security
interests given thereby shall be in addition to and not in limitation
of the rights and security interests given by this Agreement.
(i) If any of Borrower's Accounts arise out of contracts with the United
States or any department, agency, or instrumentality thereof, Borrower
will immediately notify Bank thereof in writing and execute any
instruments and take any steps required by Bank in order that all
monies due and to become due under such contracts shall be assigned to
Bank and notice thereof given to the Government under the Federal
Assignment of Claims Act.
(j) If any of Borrower's Accounts should be evidenced by promissory notes,
trade acceptances, or other instruments for the payment of money,
Borrower will immediately deliver same to Bank, appropriately endorsed
to Bank's order and, regardless of the form of such endorsement,
Borrower hereby waives presentment, demand, notice of dishonor, protest
and notice of protest and all other notices with respect thereto.
(k) Borrower will promptly pay when due all taxes and assessments upon the
Collateral or for its use or operation or upon this Security Agreement,
or upon any note or notes evidencing the Obligations, and will, at the
request of Bank, promptly furnish Bank the receipted bills therefor.
At its option, Bank may discharge taxes, liens or security interests or
other encumbrances at any time levied or placed on the Collateral, may
pay for insurance on the Collateral and may pay for the maintenance and
preservation of the collateral. Borrower agrees to reimburse Bank on
demand for any payments made, or any expenses incurred by Bank pursuant
to the foregoing authorization, and upon failure of the Borrower so to
reimburse Bank, any such sums paid or advanced by Bank shall be deemed
secured by the Collateral and constitute part of the obligations.
(l) Borrower will immediately notify Bank upon receipt of notification of
any potential or known release or threat of release of hazardous
materials, hazardous waste, hazardous or toxic substance or oil from
any site operated by Borrower or of the incurrence of any expense or
loss in connection therewith or with the Borrower's obtaining knowledge
of any investigation, action or the incurrence of any expense or loss
by any governmental authority in connection with the assessment,
containment or removal of any hazardous material or oil for which
expense or loss the Borrower may be liable. As used herein, the terms
HAZARDOUS WASTE, HAZARDOUS OR TOXIC SUBSTANCE, HAZARDOUS MATERIAL; or
OIL shall have the same meanings as defined and used in any of the
following (the ACTS): the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq.; the Federal Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801 et seq.; the Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq.; M.G.L.A. c. 21E (Massachusetts
Oil and Hazardous Material Release Prevention Act); M.G.L.A. c. 21C
(Massachusetts Hazardous Waste Management Act); and/or the regulations
adopted and publications promulgated pursuant to any of the Acts, as
the same may be amended from time to time.
(m) Except for the Bank's gross negligence or willful misconduct, Borrower
will indemnify and save Bank harmless from all loss, costs, damage,
liability or expenses (including, without limitation, court costs and
reasonable attorneys' fees) that Bank 'may sustain or incur by reason
of defending or protecting this security interest or the priority
thereof or enforcing the Obligations, or in the prosecution or defense
of any action or proceeding concerning any matter growing out of or in
connection with this Agreement and/or any other documents now or
hereafter executed in connection with this Agreement and/or the
Obligations and/or the Collateral. This indemnity shall survive the
repayment of the obligations and the termination of Bank's agreement
to make loans available to Borrower and the termination of this
Agreement.
(n) At the option of the Bank, Borrower will furnish to Bank, from time to
time, within five (5) days after the accrual in accordance with
applicable law of Borrower's obligation to make deposits for F.I.C.A.
and withholding taxes and/or sales taxes, proof satisfactory to Bank
that such deposits have been made as required.
(o) Should Borrower fail to make any of such deposits or furnish such
proof then Bank may, in its sole and absolute discretion, (a) make any
of such deposits or any part thereof, (b) pay such taxes, or any part
thereof, or (c) set-up such reserves as Bank, in its judgment, shall
deem necessary to satisfy the liability for such taxes. Each amount
so deposited or paid shall constitute an advance under the terms
hereof, repayable on demand with interest, as provided herein, and
secured by all collateral and any other property at any time pledged
by Borrower with Bank. Nothing herein shall be deemed to obligate
Bank to make any such deposit or payment or set-up such reserve and
the making of one or more of such deposits or payments or the
setting-up of such reserve shall not constitute (i) an agreement on
Bank's part to take any further or similar action, or (ii) a waiver
of any default by Borrower under the terms hereof.
(p) All advances by Bank to Borrower under this Agreement and under any
other agreement constitute one general revolving fluctuating loan, and
all indebtedness of Borrower to Bank under this and under any other
agreement constitute one general Obligation. Each advance to Borrower
hereunder or otherwise shall be made upon the security of all of the
Collateral held and to be held by Bank. It is distinctlv understood
and agreed that all of the rights of Bank contained in this Agreement
shall likewise apply, insofar as applicable, to any modification of or
supplement to this Agreement and to any other agreements between Bank
and Borrower. Any default of this Agreement by Borrower shall
constitute, likewise, a default by Borrower of any other existing
agreement with Bank, and any default by Borrower of any other
agreement with Bank shall constitute a default of this Agreement.
The entire Obligation of Borrower to Bank shall become due and payable
when payments become due and payable hereunder upon termination of
this Agreement.
(q) Borrower hereby grants to Bank for a term to commence on the date of
this Agreement and continuing thereafter until all debts and
Obligations of any kind or character owing from Borrower to Bank are
fully paid and discharged, the right to use all premises or places of
business which Borrower presently has or may hereafter have and where
any of the Collateral may be located, at a total rental for the entire
period of $1.00. Bank agrees not to exercise the rights granted in
this paragraph unless and until Bank determines to exercise its rights
against the Collateral.
(r) Borrower will, at its expense, upon request of Bank promptly and duly
execute and deliver such documents and assurances and take such
actions as may be necessary or desirable or as Bank may request in
order to correct any defect, error or omission which may at any time
be discovered or to more effectively carry out the intent and purpose
of this Agreement and to establish, perfect and protect Bank's
security interest, rights and remedies created or intended to be
created hereunder. Without limiting the generality of the the above,
Borrower will join with Bank in executing financing and continuation
statements pursuant to the Uniform Commercial Code or other notices
appropriate under applicable Federal or state law in form satisfactory
to Bank and filing the same in all public offices and jurisdictions
wherever and whenever requested by Bank.
(s) Borrower shall perform any and all further steps requested by Bank to
perfect Bank's security interest in Inventory, such as leasing
warehouses to Bank or its designee, placing and maintaining signs,
appointing custodians, maintaining stock records and transferring
Inventory to warehouses. A physical listing of all Inventory,
wherever located, shall be taken by Borrower at least annually and
whenever requested by Bank if one or more of the Events of Default
exist.
(t) Borrower hereby grants to Bank for a term to commence on the date of
this Agreement and continuing thereafter until all debts and
obligations of any kind or character owed to Bank are fully paid and
discharged, a non-exclusive irrevocable royalty-free license in
connection with the Bank's exercise of its rights hereunder, to use,
apply or affix any trademark, trade name logo or the like and to use
any patents, in which the Borrower now or hereafter has rights, which
license may be used by Bank upon and after the occurrence of any one
or more of the events of Default, provided, however, that such use by
Bank shall be suspended if such Events of Default are cured. This
license shall be in addition to, and not in lieu of, the inclusion of
all of Borrower's trademarks, servicemarks, trade names, logos,
goodwill, patents, franchises and licenses in the Collateral; in
addition to the right to use said Collateral as provided in this
paragraph, Bank shall have full right to exercise any and all of its
other rights regarding Collateral with respect to such trademarks,
servicemarks, trade names, logos, goodwill patents, franchises and
licenses.
(u) In consideration of the Bank establishing a revolving line of credit
with the Borrower, the Borrower (or Rosalco, Inc. (ROSALCO)), but
not both, shall pay to the Bank a facility fee equal to $25,000.00 at
closing and $7,500.00 per month, or any portion thereof, commencing
May 1, 1996 and on the first day of each month thereafter.
14. BORROWER'S NEGATIVE COVENANTS. Borrower will not at any time:
(a) (Fixed Assets) during any fiscal year of Borrower, make, directly or
indirectly, capital expenditures for the purchase, fabrication,
creation or lease of fixed assets, including rentals for leased
items, in an aggregate amount greater than $300,000.00;
(b) (Debt to Capital Base) permit the aggregate amount of its senior
indebtedness to be more than 2.0 times the amount of its tangible
capital base through April 30, 1997 and 1.75 times thereafter;
(c) (Current Ratio) permit its ratio of current assets to current
liabilities to be less than 1.5 to 1;
(d) (Minimum Net Earnings) permit a loss in excess of $100,000.00 as at
the end of the fiscal period ending on July 31 in any fiscal year of
Borrower, commencing with the fiscal period ending July 31, 1996, or
permit its net after-tax cumulative earnings to be less than the
following amounts for the following time periods:
Minimum Cumulative Net
After Tax Earnings Time Period
$300,000.00 As at the end of the fiscal period
ending on October 31 in any fiscal
year of Borrower, commencing with the
fiscal period ending October 31, 1996
$500,000.00 As at the end of the fiscal period
ending on January 31 in any fiscal
year of Borrower, commencing with the
fiscal period ending January 31, 1997
$600,000.00 As at the end of the fiscal period
ending on April 30 in any fiscal
year of Borrower, commencing with the
fiscal period ending April 30, 1997
The covenants set forth in (a) and (d) shall be calculated on a combined
basis with Rosalco. The covenants set forth in (b) and (c) shall be
calculated on a consolidated basis for Jayark corporation and its
subsidiaries.
(e) (Subchapter S Corporation) if Borrower is a Subchapter S corporation,
make distributions to its shareholders during any fiscal year of
Borrower in an aggregate amount greater than the amount necessary to
pay federal and state income taxes upon Borrower's undistributed income
for such year;
(f) (Disposition of Collateral) sell, assign, exchange or otherwise dispose
of any of the Collateral (other than Inventory consisting of (i) scrap,
waste, defective goods and the like; (ii) obsolete goods; (iii)
finished goods sold in the ordinary course of business) or any interest
therein to any individual, partnership, trust or other corporation; and
(iv) Equipment which is no longer required or deemed necessary for the
conduct of Borrower's business, so long as Borrower receives therefor a
sum substantially equal to such Equipment's fair value, remits such sum
to Bank in accordance with the terms of this Agreement or replaces such
Equipment with other equipment of similar value which is subject to a
first security interest in Bank's favor;
(g) (Liens) create, permit to be created or suffer to exist any lien,
encumbrance or security interest of any kind (LIEN) upon any of the
Collateral or any other property of Borrower, now owned or hereafter
acquired, except: (i) landlords', carriers', warehousemen's, mechanics'
and other similar liens arising by operation of law in the ordinary
course of Borrower's business; (ii) arising out of pledge or deposits
under worker's compensation, unemployment insurance, old age pension,
social security, retirement benefits or other similar legislation;
(iii) purchase money Liens arising in the ordinary course of business
(so long as the indebtedness secured thereby does not exceed the lesser
of the cost or fair market value of the property subject thereto, and
such Lien extends to no other property); (iv) those liens and
encumbrances set forth on Schedule B annexed hereto; and (v) in favor
of Bank;
(h) (Dividends) pay any dividends on or make any distribution on account of
(except, if Borrower is a Subchapter S corporation, consistent with
paragraph (e) above) any class of Borrower's capital stock in cash or
in property (other than additional shares of such stock), or redeem,
purchase or otherwise acquire, directly or indirectly, any of such
stock;
(i) (Loans) make any loans or advances to any individual, partnership,
trust or other corporation, including without limitation Borrower's
directors, officers and employees, except advances to officers or
employees with respect to expenses incurred by them in the ordinary
course of their duties which are properly reimbursable by Borrower;
(j) (Guarantees) assume, guaranty, endorse or otherwise become directly or
contingently liable in respect of including without limitation by way
of agreement, contingent, or otherwise, to purchase, provide funds to
or otherwise invest in a debtor or otherwise to assure a creditor
against loss), any indebtedness (except guarantees by endorsement of
instruments for deposit or collection in the ordinary course of
business and guarantees in favor of Bank) of any individual,
partnership, trust or other corporation;
(k) (Investments) (i) use any loan proceeds to purchase or carry any MARGIN
STOCK (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) or (ii) invest in or purchase any stock or
securities of any individual, partnership, trust or other corporation
except (x) readily marketable direct obligations of, or obligations
guaranteed by, the United States of America or any agency thereof or
(y) time deposits with or certificates of deposit issued by the Bank;
(l) (Transactions with Affiliates) enter into any lease or other
transaction with any shareholder, officer or affiliate on terms any
less favorable than those which might be obtained at the time from
persons who (or entities which) are not such a shareholder, officer or
affiliate;
(m) (Subsidiaries) sell, transfer or otherwise dispose of any stock of any
subsidiary of Borrower; or
(n) (Mergers, consolidations or sales) (a) merge or consolidate with or
into any corporation; (b) enter into any joint venture or partnership
with any person, firm or corporation; (c) convey, lease or sell all or
any material portion of its property or assets or business to any other
person, firm or corporation, except for the sale of Inventory in the
ordinary course of its business; or (d) convey, lease or sell any of
its assets to any person, firm or corporation for less than the fair
market value thereof.
For purposes of this section: TANGIBLE CAPITAL BASE shall mean Borrower's
tangible net worth plus subordinated debt; SUBORDINATED DEBT shall mean debt
which is specifically subordinated to all Obligations of the Borrower to the
Bank including, without limitation, $500,000.00 of commercial paper, upon terms
and conditions satisfactory to the Bank; TANGIBLE NET WORTH shall mean
Borrower's stockholders' equity determined in accordance with generally accepted
accounting principles, consistently applied, subtracting therefrom (i)
intangibles (as determined in accordance with such principles so applied) and
(ii) accounts and indebtedness owing to Borrower from any employee or parent,
subsidiary or other affiliate of Borrower; CAPITAL EXPENDITURES shall not be
limited to amounts paid during such fiscal year and shall include, in the case
of a purchase, the entire purchase price and, in the case of a capital lease
(but not an operating lease), the entire rental for the term; DISTRIBUTIONS
shall mean all payment or distributions to shareholders in cash or in property
other than reasonable salaries, bonuses and expense reimbursements; CURRENT
ASSETS and CURRENT LIABILITIES shall be determined in accordance with generally
accepted accounting principles consistently applied; INDEBTEDNESS shall mean
(i) all liabilities for borrowed money, for the deferred purchase price of
property or services, and under leases which are or should be, under generally
accepted accounting principles, recorded as capital leases, in respect of which
a person or entity is directly or indirectly, absolutely or contingently liable
as obligor, guarantor, endorser or otherwise, or in respect of which such person
or entity otherwise assures a creditor against loss, (ii) all liabilities of the
type described in (i) above which are secured by (or for which the holder has
an existing right, contingent or otherwise, to be secured by) any lien upon
property owned by such person or entity, whether or not such person or entity
has assumed or become liable for the payment thereof, and (iii) all other
liabilities or obligations which would, in accordance with generally accepted
accounting principles, be classified as liabilities of such person or entity;
AFFILIATE shall mean any person or entity (i) which directly or indirectly
controls, or is controlled by or is under common control with the Borrower or
a subsidiary, (ii) which directly or indirectly beneficially holds or owns five
(5%) percent or more of any class of voting stock of the Borrower or any
subsidiary, or (iii) five (5%) percent or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Borrower or a
subsidiary; CONTROL shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of any
person or entity, whether through the ownership of voting securities, by
contract or otherwise; and SENIOR INDEBTEDNESS shall mean indebtedness minus
subordinated debt.
15. DEFAULT. Nothing contained in this section, or elsewhere in this Agreement,
shall affect the demand nature of such of the obligations as are by their terms,
demand obligations, including, without limitation, loans and advances under this
Agreement. The occurrence of an Event of Default shall not be a prerequisite
for the Bank's making demand or requiring payment of such Obligations.
Upon the occurrence of any one or more of the following events (herein, EVENTS
OF DEFAULT), any and all Obligations of the Borrower to the Bank shall become
immediately due and payable, at the option of the Bank and without notice or
demand. The occurrence of any such Event of Default shall also constitute,
without notice or demand, a default under all other agreements between the bank
and the Borrower and instruments and papers given the Bank by the Borrower,
whether such agreements, instruments, or papers now exist or hereafter arise,
namely:
(a) The failure by the Borrower to pay upon demand any amount due under
this Agreement.
(b) The failure by the Borrower to pay upon demand (or when due, if not
payable on demand) any other Obligations.
(c) The failure by the
Borrower to promptly, punctually and faithfully perform, or observe
any term, covenant or agreement on its part to be performed or
observed pursuant to any of the provisions of this Agreement.
(d) The determination by Bank that any representation or warranty
heretofore, now or hereafter made by the Borrower to Bank, in any
documents, instrument, agreement, or paper was not true or accurate
when given.
(e) The occurrence of any event such that any indebtedness of the Borrower
from any lender other than Bank could be accelerated, notwithstanding
that such acceleration has not taken place.
(f) The Occurrence of any event which would cause a lien creditor, as
that term is defined in Section 9-301 of the Code, to take priority
over advances made by Bank.
(g) A filing against or relating to the Borrower of (i) a federal tax lien
in favor of the United states of America or any political subdivision
of the United States of America, or (ii) a state tax lien in favor of
any state of United States of America or any political subdivision of
any such state.
(h) The occurrence of any event of default under Any agreement between
Bank and the Borrower or instrument or paper given Bank by the
Borrower, whether such agreement, instrument, or paper now exists or
hereafter arises (notwithstanding that Bank may not have exercised its
rights upon default under any such other agreement, instrument or
paper).
(i) Any act by, against, or relating to the Borrower, or its property or
assets, which act constitutes the application for, consent to, or
sufferance of the appointment of a receiver, trustee or other person,
pursuant to court action or otherwise, over all, or any part of the
Borrower's property.
(j) The granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower, or the occurrence of any
other voluntary or involuntary liquidation or extension of debt
agreement for the Borrower; the failure by the Borrower to generally
pay the debts of the Borrower as they mature; adjudication of
bankruptcy or insolvency relative to the Borrower; the entry of an
order for relief or similar order with respect to the Borrower in any
proceeding pursuant to Title 11 of the United States Code entitled
BANKRUPTCY (the BANKRUPTCY CODE) or any other federal bankruptcy law;
the filing of any complaint, application, or petition by or against
the Borrower initiating any matter in which the Borrower is or may be
granted any relief from the debts of the Borrower pursuant to the
Bankruptcy Code or any other insolvency statute or procedure; the
calling or sufferance of a meeting of creditors of the Borrower; the
meeting by the Borrower of a formal or informal creditor's committee;
the offering by or entering into by the Borrower of any composition,
extension or any other arrangement seeking relief or extension for the
debts of the Borrower, or the initiation of any other judicial or
non-judicial proceeding or agreement by, against or including the
Borrower which seeks or intends to accomplish a reorganization or
arrangement with creditors.
(k) The entry of any judgment against Borrower in excess of $50,000.00,
which judgment is not satisfied or appealed from (with execution or
similar process stayed) within fifteen (15) days of its entry.
(l) The occurrence of any event or circumstance with respect to the
Borrower such that Bank shall believe in good faith that the prospect
of payment of all or any part of the Obligations or the Performance by
the Borrower under this Agreement or' any other agreement between the
Bank and the Borrower is impaired or there shall occur any material
adverse change in the business or financial condition of the Borrower
which differs from that which has been represented by the Bank in
conjunction with the financing arrangements evidenced by this
Agreement.
(m) The entry of any court order which enjoins, restrains or in any way
prevents the Borrower from conducting all or any part of its business
affairs in the ordinary course of business.
(n) The service of any process upon Bank seeking to attach by trustee
process any funds of the Borrower on deposit with Bank.
(o) Any change in the identity, authority or responsibilities of any
person having management or policy authority with respect to the
Borrower and/or any direct or indirect change in the ownership of the
capital stock of the Borrower from that existing at the execution of
this Agreement.
(p) The occurrence of any uninsured loss, theft, damage or destruction to
any material asset(s) of the Borrower.
(q) Any act by or against, or relating to the Borrower or its assets
pursuant to which any creditor of the Borrower seeks to reclaim or
repossess or reclaims or repossesses all or a portion of the
Borrower's assets.
(r) The death, termination of existence, dissolution, or liquidation of
the Borrower or the ceasing to carry on actively any substantial part
of the Borrower's current business.
(s) This Agreement shall, at any time after its execution and delivery and
for any reason, cease (i) to create a valid and perfected first
priority security interest in and to the property purported to be
subject to this Agreement; or (ii) to be in full force and effect or
shall be declared null and void, or the validity or enforceability
hereof shall be contested by the Borrower or any guarantor of the
Borrower denies it has any further liability or obligation hereunder.
(t) Any of the following events occur or exist with respect to the
Borrower or any ERISA affiliate: (i) any PROHIBITED TRANSACTION (as
defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code) involving any Plan; (ii) any REPORTABLE EVENT (as
defined in Section 4043 of ERISA and the regulations issued under such
Section) shall occur with respect to any Plan, which give rise to a
potential claim by PBGC; (iii) The filing under Section 4041 of ERISA
of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance exists which might constitute
grounds entitling the Pension Benefit Guaranty Corporation (PBGC) to
institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or
the institution by the PBGC of any such proceedings; (v) or partial
withdrawal under section 4201 or 4204 of ERISA from a Multiemployer
Plan or the reorganization, insolvency, or termination of any
Multiemployer Plan; and in each case above, such event or condition,
together with all other events or conditions, if any, could in the
opinion of the Bank subject the 3orrower to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise.
(u) The occurrence of any of the foregoing Events of Default with respect
to any guarantor, endorser, or surety to Bank of the obligations, as
if such guarantor, endorser or surety, were the BORROWER described
therein.
(v) The termination of any guaranty by any guarantor of the Obligations.
(w) The attachment of any security interest, lien or mortgage upon
property of the Borrower not in favor of the Bank, without the Bank's
prior written consent.
(x) The occurrence of an Event of Default under or termination for any
reason of that certain Loan and Security Agreement (All Assets)
between Rosalco and the Bank of even date.
Upon the occurrence of an Event of Default, Bank may declare any obligation
Bank may have hereunder to be cancelled, declare all Obligations of
Borrower to be due and payable and proceed to enforce payment of the
Obligations and to exercise any and. all of the rights and remedies
afforded to Bank by the Uniform Commercial Code or under the terms of this
Agreement or otherwise.
In addition, upon the occurrence of an Event Of Default, it Bank proceeds
to enforce payment of the obligations, Borrower shall be obligated to
deliver to Bank cash collateral in an amount equal to the aggregate amounts
then undrawn on all outstanding letters of credit or acceptances issued or
guaranteed by Bank for the account of Borrower, and Bank may proceed to
enforce payment of the same and to exercise all rights and remedies
afforded to Bank by the Uniform Commercial Code or under the terms of this
Agreement or otherwise. Upon the occurrence of, and during the continuance
of, an Event of Default, the Borrower, as additional compensation to the
Bank for its increased credit risk, promises to pay interest on all
Obligations (including, without limitation, principal, whether or not past
due, past due interest and any other amounts past due under this Agreement)
at a per annum rate of three (3%) percent greater than the rate of interest
then specified in Section 5 of this Agreement.
16. PROCESSING AND SALES OF INVENTORY. So long as Borrower is not in default
hereunder, Borrower shall have the right, in the regular course of business,
to process and sell Borrower's Inventory. A sale in the ordinary course of
business shall not include a transfer in total or partial satisfaction of
a debt.
17. CONSENT TO JURISDICTION. Borrower and Bank agree that any action or
proceeding to enforce or arising out of this Agreement may be commenced in any
court of the Commonwealth of Massachusetts sitting in the counties of Suffolk or
Middlesex, or in the District Court of the United States for the District of
Massachusetts, and Borrower waives personal service of process and agrees that
a summons and complaint commencing an action or proceeding in any such court
shall be properly served and confer personal jurisdiction if served by
registered or certified mail to Borrower, or as otherwise provided by the laws
of the commonwealth of Massachusetts or the United States of America.
18. TERMINATION. This Agreement may be terminated at any time by either party
giving written notice of termination to the other party; provided, however, that
unless and until all loans made by the Bank to the Borrower hereunder and all
other obligations or commitments of the Bank under which an Obligation could
arise, outstanding as of the time of giving or receipt as the case may be, of
such notice by the Bank have been paid in full, such termination shall in no way
affect the security interest or other rights and powers herein granted to the
Bank, and until such payment in full the security interest of the Bank in all
Inventory, Accounts and other Collateral of the Borrower, whether existing as of
the time of such termination or thereafter arising, and al1 rights and powers
herein granted to the Bank in respect thereof shall remain in full force and
effect. Until all of the Obligations of Borrower to Bank have been fully paid
and satisfied and all commitments of the Bank under which an obligation could
arise have expired, Borrower shall continue to assign Accounts to Bank, turn
over all collections to the Bank in kind and otherwise fully comply with the
terms and conditions of this Agreement as herein provided. Prior to such
payment in full of all of the Obligations of Borrower to Bank, this Agreement
shall be a continuing agreement in every respect.
19. MISCELLANEOUS.
(a) No delay or omission on the part of Bank in exercising any rights
shall operate as a waiver of such right or any other right. Waiver on
any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. All Bank's rights and
remedies, whether evidenced hereby or by any other agreement,
instrument or paper, shall be cumulative and may be exercised
singularly or concurrently.
(b) Bank is authorized to make loans under the terms of this Agreement
upon the request, either written or oral, in the name of Borrower or
any authorized person whose name appears at the end of this Agreement
or of any of the following named person, or persons, from time to
time, holding the following offices of Borrower, President, Treasurer
and such other officers and authorized signatories as may from time to
time be set forth in separate banking and borrowing resolutions.
(c) If at any time or times by assignment or otherwise, the Bank assigns
this Agreement, such assignment shall carry with it the Bank's powers
and rights under this Agreement, and the transferee shall become
vested with said powers and rights whether or not they are
specifically referred to in the transfer. Bank shall notify Borrower
of any assignment, partial assignment or transfer by the Bank of this
Agreement or of the Obligations of Borrower.
(d) Borrower agrees that any and all loans made by Bank to Borrower or for
its account under this Agreement shall be conclusively deemed to have
been authorized by Borrower and to have been made pursuant to duly
authorized requests therefor on its behalf.
(e) Unless otherwise defined in this Agreement, capitalized words shall
have the meanings set forth in the Uniform Commercial Code as in
effect in the Commonwealth of Massachusetts as of the date of this
Agreement.
(f) Paragraph and section headings used In this Agreement are for
convenience only, and shall not effect the construction of this
Agreement. If one or more provisions of this Agreement (or the
application thereof) shall be invalid, illegal or unenforceable in any
respect in any jurisdiction, the same shall not, invalidate or render
illegal or unenforceable such provision (or its application) in any
other jurisdiction or any other provision of this Agreement (or its
application). This Agreement is the entire agreement of the parties
with respect to the subject matter hereof and supersedes any prior
written or verbal communications or instruments relating thereto.
(g) All notices and other communications hereunder shall be made by
telegram, telex, electronic transmitter, overnight air courier, or
certified or registered mail, return receipt requested, and shall be
deemed to be received by the party to whom sent one business day after
sending, if sent by telegram, telex, electronic transmitter, or
overnight air courier, and three business days after mailing if sent
by certified or registered mail. All such notices and other
communications to a party hereto shall be addressed to such party at
the address set forth at the end of this Agreement or to such other
address as such party may designate for itself in a notice to the
other party given in accordance with this section.
(h) The laws of Massachusetts shall govern the construction of this
Agreement and the rights and duties of the parties hereto. This
Agreement shall take effect as a sealed instrument.
Witnessed by: AVES AUDIO VISUAL SYSTEMS, INC.
John H. Hartman By: David L. Koffman, Vice President
Address: P.O. Box 741528
Houston, TX 77274
STATE STREET BANK AND TRUST COMPANY
By: John D. Gaziano, Jr., Vice President
Address: 225 Franklin Street
Boston, MA 02110
SCHEDULES
The following Schedules to the within Inventory and Accounts Receivable Security
Agreement are respectively described in the section indicated. Those Schedules
in which no information has been inserted shall be deemed to read NONE.
SCHEDULE A
Borrower's Places of Business (S3)
Property Located
Address At Such Address
------- ----------------
SCHEDULE B
Other Encumbrances and Liens (S4(e)(i)
Secured Party Description Payment Terms and
or Mortgagee of Collateral Dates of Maturity
------------- ------------- -----------------
SCHEDULE C
Leases (S4(e)(ii)
Description Date of Lease Rental
Lessor of Property and Term Payable
------ ----------- ------------- -------
EXHIBIT A
CERTIFICATE AS TO
COLLATERAL AND BORROWING BASE
Pursuant to a Loan and Security Agreement (All Assets) dated as of _________,
1996 (the AGREEMENT) between the undersigned (the BORROWER) and State Street
Bank and Trust Company (the BANK), the undersigned has the following loans and
letters of credit outstanding:
Loans: $____________
Letters of Credit including
Standby Letters of Credit: $____________
Total: $____________
and hereby confirms to Bank its security interest pursuant to the Agreement in
all of Borrower's Inventory, including that recently acquired, Accounts,
including those newly created, and all other Collateral, regardless of when
such Collateral arose or was acquired by Borrower, and further certifies to
Bank as follows:
1. Total value of Qualified Accounts Receivable on _________, 199__:
A. All Accounts: $_________
B. Non-Qualified Accounts: $_________
C. Item 1A minus Item 1B: $_________
D. 80% of Item 1C: $_________
2. Borrowing Base:
A. Item 1D: $_________
B. $1,500,000.00 $_________
C. Amount Available to Borrower (the lesser of Item 2A
or Item 2B): $_________
D. Less Total Outstanding Obligations (including Letters
of Credit): $_________
E. Available Funds to Borrower (Item 2C minus Item 2D): $_________
Executed and sealed this _____ day of _________, 199__.
AVES AUDIO VISUAL SYSTEMS, INC.
By:________________
EXHIBIT 10(23)
September 20, 1996
Rosalco, Inc.
257 America Place
Jeffersonville, IN 47130
Attn: Mr. David L. Koffman, President
Re: First Amendment of Loan and Security Agreement (All Assets) dated April 29,
1996
Gentlemen:
Reference is made to that certain Loan and Security Agreement (All Assets) dated
April 29, 1996 (the AGREEMENT) by and between Rosalco, Inc. (the BORROWER) and
State Street Bank and Trust Company (the BANK).
Notwithstanding the provisions of the Agreement to the contrary, the Agreement
is hereby amended, effective immediately, as follows:
1. All capitalized terms used herein, unless otherwise defined, shall have
the meanings ascribed to them in the Agreement.
2. Paragraphs 5(a) and 5(b) of the Agreement are hereby deleted in their
entirety and the following new Paragraphs 5(a) and 5(b) substituted
therefor:
" 5. LOANS.
(a) Subject to the terms and provisions of this Agreement, the Bank
hereby establishes a revolving line of credit in Borrower's favor in
the amount set forth below, as determined by Bank from time to time
hereafter. From time to time upon Borrower's request, so long as
the sum of the aggregate principal amount of all loans outstanding
and the requested loan does not exceed the lesser of (i) the
Borrowing Base (as defined below) or (ii) the Credit Limit (as
defined below) , Bank shall make such loan, absent demand or the
occurrence of an Event of Default or an event, which, with notice or
the lapse of time or both, would constitute an Event of Default.
Without limiting the demand feature of any loans that Bank does make
hereunder, Borrower agrees that the aggregate unpaid principal of
all loans outstanding at any one time shall not exceed the Borrowing
Base. The term BORROWING BASE as used herein shall mean the sum of
the following:
(1) ninety (90%) percent of the unpaid face amount of all Qualified
Accounts (as defined below) which are rated one or two by Dunn
and Bradstreet; PLUS
(2) eighty (80%) percent of the unpaid face amount of all Qualified
Accounts which are not rated one or two by Dunn and Bradstreet;
PLUS
(3) ninety (90%) percent of the unpaid face amount of all Accounts
which have not yet been earned by performance but which are
supported by letters of credit; PLUS
(4) the lesser of (i) Five Million ($5,000,000.00) Dollars from the
date hereof through and including April 30, 1996, Four Million
Five Hundred Thousand ($4,500,000.00) Dollars from May 1, 1996
through and including November 30, 1996 and Four Million
($4,000,000.00) Dollars thereafter or (ii) forty-five (45%)
percent of all Eligible inventory (as defined below) through and
including October 31, 1996 and forty (40%) percent of all
Eligible Inventory thereafter consisting of finished goods
located in warehouses, in transit or which have been ordered
pursuant to a purchase order backed by a letter of credit issued
by Bank, but which has not yet been negotiated (exclusive of
Inventory in Transit covered by subsection (3) above); MINUS
(5) one hundred (100%) percent of (i) the aggregate amount then
undrawn on all outstanding letters of credit issued by Bank for
the account of Borrower; and (ii). all outstanding Banker's
acceptances issued by Bank for the account of Borrower;
but in no event shall the sum of all loans plus the sum of the
aggregate amount undrawn on all letters of credit and
acceptances be in excess of the Credit Limit (as defined below),
or such other sum as may from time to time be fixed by the Bank
upon notice to Borrower. All such loans shall bear interest and
at the option of Bank shall be evidenced by demand notes in form
satisfactory to Bank, but in the absence of notes shall be
conclusively evidenced by the Bank's record of disbursements and
repayments and shall be payable ON DEMAND. Interest will be
charged to Borrower at a fluctuating rate which is the daily
equivalent to the Prime Rate in effect from time to time, plus
one and three-quarters (1.75%) percent per annum or at such
other rate agreed on from time to time by the parties, upon any
balance owing to Bank at the close of each day and shall be
payable monthly in arrears, on the first day of each month,
until the Bank makes demand. The rate of interest payable by
Borrower shall be changed effective as of that date in which a
change in the Prime Rate becomes effective. Interest shall be
computed on the basis of the actual number of days elapsed over
a year of three hundred sixty (360) days. The term PRIME RATE
as used herein and in any supplement and amendment hereto shall
mean the rate of interest announced by Bank in Boston as its
Prime Rate.
(b) The term CREIDT LIMIT as used herein shall mean an amount equal to
Eleven Million ($11,000,000.00) Dollars through and including
October 31, 1996 and Ten Million ($10,000,000.00) Dollars
thereafter. "
3. Paragraphs 14(b), 14(c) and 14(d) of the Agreement are hereby deleted
in their entirety and the following new Paragraphs 14(b), 14(c) and
14(d) substituted therefor:
" (b) (Debt to Capital Base) permit the aggregate amount of its senior
indebtedness to be more than 2.0 times the amount of its
tangible capital base through April 30, 1997 and 1.75 times
thereafter;
(c) (Current Ratio) permit its ratio of current assets to current
liabilities to be less than 1.5 to 1;
(d) permit a loss in
excess of $100,000 00 as at the end of the fiscal period ending
on July 31 in any fiscal year of Borrower, commencing with the
fiscal period ending July 31, l996, or permit its net after tax
cumulative earnings to be less than the following amounts for
the following time periods:
Minimum Cumulative Net
After Tax Earninqs Time Period
$300,000.00 As at the end of the fiscal period
ending an October 31 in any fiscal
year of Borrower, commencing with
the fiscal period ending October
31, 1996
$500,000.00 As at the end of the fiscal period
ending on January 31 in any fiscal
year of Borrower, commencing with
the fiscal period ending January
31, 1997
$600,000.00 As at the end of the fiscal period
ending on April 30 in any fiscal
year of Borrower, commencing with
the fiscal period ending April 30,
1997
The covenants set forth in (a) and (d) shall be calculated an a combined
basis with AVES. The covenants set forth in (b) and (c) shall be
calculated on a consolidated basis for Jayark Corporation and its
subsidiaries. "
4. The defined term INDEBTEDNESS appearing at the end of Paragraph 14 of
the Agreement on Page 20 thereof, is hereby amended to indicate that
the Borrower's indebtedness to________ in the original principal amount
of $1,700,000.00 shall be excluded from that definition (and the
financial covenants calculated pursuant thereto) through and includinq
April 30, 1997. Thereafter, if that debt remains outstanding, it should
be included within the term INDEBTEDNESS.
5. The address for the Borrower set forth on the signature page (Page 26)
of the Agreement is hereby revised to reflect the Borrower's principal
place of business at 257 American Place, Jeffersonville, Indiana 47130.
6. Schedule A, Schedule B, and Schedule C appearing on page 27 of the
Agreement are hereby deleted in their entirety and the Schedule A,
Schedule B, and Schedule C attached hereto are substituted therefor.
Except as specifically amended hereby, the Agreement remains in full
force and effect and the Borrower hereby reaffirms all representations
and warranties therein, as of the date hereof.
Please acknowledge your assent and agreement to the matters contained
herein by signing this letter in the space provided and returning it to
the undersigned, whereupon it shall take effect as an instrument under
seal.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By: John D. Gaziano, Jr., Vice President
ACCEPTED AND AGREED TO:
ROSALCO, INC.
By: David L. Koffman, President
SCHEDULES
The following Schedules to the within Inventory and Accounts Receivable Security
Agreement are respectively described in the section indicated. Those Schedules
in which no information has been inserted shall be deemed to read NONE.
SCHEDULE A
Borrower's Places of Business (S3)
Property Located
Address At Such Address
------- ----------------
SCHEDULE B
Other Encumbrances and Liens (S4(e)(i)
Secured Party Description Payment Terms and
or Mortgagee of Collateral Dates of Maturity
------------- ------------- -----------------
SCHEDULE C
Leases (S4(e)(ii)
Description Date of Lease Rental
Lessor of Property and Term Payable
------ ----------- ------------- -------
EXHIBIT 10(24)
EXTENSION OF MATURITY OF
JAYARK CORPORATION 12% CONVERTIBLE SUBORDINATED
DEBENTURES DATED APRIL 30,1990
Each of the undersigned, who together are the holders of all of the outstanding
12% convertible subordinated debentures (the "Debentures') of Jayark
Corporation, a Delaware corporation, originally due to mature on December 31,
1994, and extended to mature on December 31, 1995 by extension agreement dated
April 30, 1994, hereby agrees to further extend the maturity of all Debentures
held by such undersigned party for a penod of three additional years or December
31, 1999. In all other respects the provisions, terms and conditions of the
Debentures remain unchanged and in full force and effect.
Executed as of December 31, 1995.
David L. Koffman
Frank Rabinovitz
CCB Associates, L.P.
By: CLR Operating Corp. General Partner
By:
Sonny Samuels