Exhibit 10.3
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this "Agreement")
is entered into on November 21, 1997, between NATIONSCREDT COMMERICAL
CORPORATION, THROUGH ITS NATIONSCREDTT COMMERCIAL FUNDING DIVISION ("Lender"),
having an address at 1177 Avenue of the Americas, 36th Floor, New York, New York
10036 and COFFEE HOLDING CO., INC. ("Borrower"), whose chief executive office is
located at 4401 First Avenue, Brooklyn, New York 11232-0005 ("Borrower's
Address"). The Schedules to this Agreement are an integral part of this
Agreement and are incorporated herein by reference. Terms used, but not defined
elsewhere, in this Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 Amount. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) Revolving Loans and Credit Accommodations. From time to time
during the Term at Borrower's request, make revolving loans to Borrower
("Revolving Loans"), and make letters of credit, bankers acceptances and other
credit accommodations ("Credit Accommodations") available to Borrower in each
case to the extent that there is sufficient Availability at the time of such
request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation; provided, that after giving effect to such Revolving Loan or
Credit Accommodation, (x) the outstanding balance of all monetary Obligations
(including the principal balance of any Term Loan and, solely for the purpose of
determining compliance with this provision, the Credit Accommodation Balance)
will not exceed the Maximum Facility Amount set forth in Section I (a) of
Schedule A and (y) none of the other Loan Limits set forth in Section I of
Schedule A will be exceeded. For this purpose, "Availability" means:
(i) the aggregate amount of Eligible Accounts (less maximum
existing or asserted taxes, discounts, credits and allowances) multiplied by the
Accounts Advance Rate set forth in Section 1(b)(i) of Schedule A but not to
exceed the Accounts Sublimit set forth in Section 1(c) of Schedule A,
plus
(ii) the lower of cost or market value of Eligible Inventory
multiplied by the Inventory Advance Rates) set forth in Section 1(b)(ii) of
Schedule A, but not to exceed the Inventory Sublimit(s) set forth in Section
1(d) of Schedule A;
minus
(iii) all Reserves which Lender has established pursuant to
Section 1.2 (including those to be established in connection with the requested
Revolving Loan or Credit Accommodation);
minus
(iv) the outstanding balance of all of the monetary
Obligations (excluding the Credit Accommodation Balance and the principal
balance of the Term Loan); and
plus
(v) the Overadvance Amount, if any, set forth .n Section 1(g)
of Schedule A.
(b) Term Loan. On the date of this Agreement, make (i) an advance to
Borrower computed with respect to the value of Borrower's Eligible Equipment
(the ("Equipment Advance") in the principal amount, if any, set forth in Section
2(a)(i) of Schedule A, and (ii) an advance to Borrower computed with respect to
the value of Borrower's Eligible Real Property (the "Real Property Advance') in
the principal amount, if any, set forth in Section 2(a)(ii) of Schedule A. The
Equipment Advance and the Real Property Advance are collectively referred to as
the "Term Loan. "
1.2 Reserves. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("Reserves") to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests and other
rights of Lender in the Collateral or (B) the assets, business or prospects of
Borrower or any Obligor, (ii) Lender's good faith concern that any Collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, (iii) any fact or circumstance which Lender determines in
good faith constitutes, or could constitute, a Default or Event of Default or
(iv) any other events or circumstances which Lender determines in good faith
make the establishment or revision of a Reserve prudent. Without limiting the
foregoing, Lender shall (x) in the case of each Credit Accommodation issued for
the purchase of Inventory (a) which meets the criteria for Eligible Inventory
set forth in clauses (i), (ii), (iii), (v) and (vi) of the definition of
Eligible Inventory, (b) which is or will be in transit to one of the locations
set forth in Section 9(d) of Schedule A, (c) which is fully insured in a manner
satisfactory to Lender and (d) with respect to which Lender is in possession of
all bills of lading and all other documentation which Lender has requested, all
in form and substance satisfactory to Lender in its sole discretion, establish a
Reserve equal to the cost of such Inventory (plus all duties, freight, taxes,
insurance, costs and other charges and expenses relating to such Credit
Accommodation or such Eligible Inventory) multiplied by a percentage equal to
100% minus the Inventory Advance Rate applicable to Eligible Inventory and (y)
in the case of any other Credit Accommodation issued for any purpose, establish
a Reserve equal to the full amount of such Credit Accommodation plus all costs
and other charges and expenses relating to such Credit Accommodation. In
addition, (x) Lender shall establish a permanent Reserve in the amount set forth
in Section 1(f) of Schedule A, and (y) if the outstanding principal balance of
the Term Loan advance with respect to Eligible Equipment exceeds the percentage
set forth in Section 2(a)(i) of Schedule A of the appraised value of such
Eligible Equipment, Lender may establish an additional Reserve in the amount of
such excess (and, for this purpose, if payments of principal on the Term Loan
advances against Eligible Equipment and Real Property are not calculated
separately, payments of principal of the Term Loan made by Borrower shall be
deemed to apply to the Term Loan advance with respect to Eligible Equipment and
Real Property, respectively, in proportion to the original principal amounts of
such advances). Lender may, in its discretion, establish and revise Reserves by
deducting them in determining Availability or by reclassifying Eligible Accounts
or Eligible Inventory as ineligible. In no event shall the establishment of a
Reserve in respect of a particular actual or contingent liability obligate
Lender to make advances hereunder to pay such liability or otherwise obligate
Lender with respect thereto.
1.3 Other Provisions Applicable to Credit Accommodations. Lender may, in
its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lenders guaranty
or indemnification; provided, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
1.4 Repayment. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately pay to Lender such amounts
(or provide cash collateral to Lender with respect to the Credit Accommodation
Balance in the manner set forth in Section 7.3), as shall cause Borrower to be
in full compliance with all of the Loan Limits. Notwithstanding the foregoing
Lender may, in its sole discretion, make or permit Revolving Loans, the Tern
Loan, any Credit Accommodations or any other monetary Obligations to be in
excess of any of the Loan Limits; provided, that Borrower shall, upon Lender's
demand, pay to Lender such amounts as shall cause Borrower to be in full
compliance with all of the Loan Limits. All unpaid monetary Obligations shall be
payable in full on the Maturity Date (as defined in Section 7.1) or, if earlier,
the date of any early termination pursuant to Section 7.2.
1.5 Minimum Borrowing. Subject to the terns and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so. However, Lender shall not be obligated to loan Borrower the Minimum Loan
Amount other than in accordance with all of the terms and conditions of this
Agreement.
2. INTEREST AND FEES.
2.1 Interest. All Loans and other monetary Obligations shall bear interest
at the Interest Rate(s) set forth in Section 3 of Schedule A, except where
expressly set forth to the contrary in this Agreement or another Loan Document;
provided, that after the occurrence of an Event of Default, all Loans and other
monetary Obligations shall, at Lender's option, bear interest at a rate per
annum equal to two percent (2 %) in excess of the rate otherwise applicable
thereto (the "Default Rate") until paid in full (notwithstanding the entry of
any judgment against Borrower or the exercise of any other right or remedy by
Lender), and all such interest shall be payable on demand. Changes in the
Interest Rate shall be effective as of the date of any change in the Prime Rate.
Notwithstanding anything to the contrary contained in this Agreement, the
aggregate of all amounts deemed to be interest hereunder and charged or
collected by Lender is not intended to exceed the highest rate permissible under
any applicable law, but if it should, such interest shall automatically be
reduced to the extent necessary to comply with applicable law and Lender will
refund to Borrower any such excess interest received by Lender.
2.2 Fees and Warrants. Borrower shall pay Lender the following fees, and
issue Lender the following warrants, which are in addition to all interest and
other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(a) Closing Fee. A closing fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully earned as of, and payable
on, the date hereof.
(b) Facility Fees. A facility fee for the Initial Term in the amount
set forth in Section 6(b)(i) of Schedule A (which shall be fully earned as of
the date of this Agreement and shall be payable in equal installments due,
respectively, on the date of this Agreement and on each anniversary thereof
during the Initial Term), and a facility fee for each Renewal Term in the amount
set forth in Section 6(b)(ii) of Schedule A (which shall be fully earned as of
the first day of such Renewal Term and shall be payable in equal installments
due, respectively, on the first day of such Renewal Term and on each anniversary
thereof during such Renewal Term).
(c) Servicing Fee. A monthly servicing fee in the amount set forth
in Section 6(c) of Schedule A, in consideration of Lender's administration and
other services for each month (or part thereof),
which shall be fully earned as of, and payable in advance on, the date of this
Agreement and on the first date of each month thereafter so long as any of the
Obligations are outstanding.
(d) Unused Line Fee. An unused line fee at a rate equal to the
percentage per annum set forth in Section 6(d) of Schedule A of the amount by
which the Maximum Facility Amount exceeds the average dally outstanding
principal balance of the Loans and the Credit Accommodation Balance during the
immediately preceding month (or part thereof), which fee shall be payable, in
arrears, on the first day of each month so long as any of the Obligations are
outstanding and on the Maturity Date.
(e) Minimum Borrowing Fee. A minimum borrowing fee equal to the
excess, if any, of (i) interest which would have been payable in respect of each
period set forth in Section 6(e)(i) of Schedule A if, at all times during such
period, the principal balance of the Loans was equal to the Minimum Loan Amount
over (ii) the actual interest payable in respect of such period, which fee shall
be fully earned as of the last day of such period and payable on the date set
forth in Section 6(e)(ii) of Schedule A and on the Maturity Date, commencing
with the immediately following period.
(f) Success Fee. A success fee in the amount set forth in Section
6(f) of Schedule A, which shall be fully earned as of the date of this Agreement
and payable as set forth in Section 6(f) of Schedule A.
(g) Warrants. Warrants to acquire the capital stock of Borrower, as
summarized in Section 6(g) of Schedule A and as more fully set forth in a
separate warrant agreement executed by Borrower contemporaneously with this
Agreement.
(h) Credit Accommodation Fees. All of the fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A.
2.3 Computation of Interest and Fees. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 Loan Account; Monthly Accountings. Lender shall maintain a loan
account for Borrower reflecting all advances, charges, expenses and payments
made pursuant to this Agreement (the "Loan Account"), and shall provide Borrower
with a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty days after such account is rendered,
describing the nature of any alleged errors or admissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of the Obligations. Interest, fees and
other monetary Obligations due and owing under this Agreement (including fees
and other amounts paid by Lender to issuers of Credit Accommodations) may, in
Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the Obligations,
Borrower hereby grants to Lender a continuing security interest in all of
Borrower's property and interests in property, whether tangible or intangible,
now owned or in existence or hereafter acquired or arising, wherever located,
including Borrower's interest in all of the following, whether or not eligible
for lending purposes: (i) all Accounts, Chattel Paper, Instruments, Documents,
Goods (including Inventory, Equipment, farm products and consumer goods),
Investment Property, General Intangibles, Deposit Accounts and money, (ii) all
proceeds and products of all of the foregoing (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties for
loss or my destruction of my of the foregoing) and (iii) all books and records
relating to my of the foregoing.
4. ADMINISTRATION.
4.1 Lock Boxes and Blocked Accounts. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("Account Proceeds"),
which my include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "Lock Box") or (ii) depositing all Account Proceeds
received by Borrower into one or more bank accounts maintained in Borrowers name
(each, a "Blocked Account"), under an arrangement acceptable to Lender with a
depository bank acceptable to Lender, pursuant to which all funds deposited into
each Blocked Account are to be transferred to Lender in such manner, and with
such frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
require from time to time in connection with the foregoing. On the date of this
Agreement, Borrower will execute and deliver to Lender a Blocked Account
agreement, in form and substance satisfactory to Lender.
4.2 Remittance of Proceeds. Except as provided in Section 4.1, all
proceeds arising from the sale or other disposition of my Collateral shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrowers other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 Application of Payments. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining Availability, such amounts will be credited to the Loan Account
and the Collateral balances to which they relate upon Lender's receipt of advice
from Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's account at Lender's Bank (or upon Lender's deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case subject to final payment and collection. However, for purposes of
computing interest on the Obligations, such items shall be deemed applied by
Lender three Business Days after Lender's receipt of advice of deposit thereof
at Lender's Bank.
4.4 Notification; Verification. Lender or its designee may, from time to
time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; and (ii) notify Account Debtors that Lender has a security interest
in the Accounts and that payment thereof is to be made directly to Lender. Upon
the occurrence of a Default or Event of Default, Lender or its designee may,
from time to time, demand, collect or enforce payment of any Accounts and
Chattel Paper (but without any duty to do so).
4.5 Power of Attorney. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing,
except as expressly provided below), at Lender's option, but without obligation,
with or without notice to Borrower, and at Borrowers expense, to do any or all
of the following, in Borrowers name or otherwise: (i) execute on behalf of
Borrower any documents that Lender may, in its sole discretion, deem advisable
in order to perfect and maintain Lenders security interests in the Collateral,
to exercise a right of Borrower or Lender, or to fully consummate all the
transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or lease (as lessor or lessee) any real or personal property which is part of
the Collateral or in which Lender has an interest; (iii) execute on behalf of
Borrower any invoices relating to any Accounts, any draft against any Account
Debtor, any proof of claim in bankruptcy, any notice of Lien or claim, and any
assignment or satisfaction of mechanic's, materialman's or other Lien; (iv)
execute on behalf of Borrower any notice to any Account Debtor, (v) receive and
otherwise take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; (vi) endorse Borrower's name on all checks and other
forms of remittances received by Lender; (vii) pay contest or settle any Lien,
charge, encumbrance, security interest and adverse claim in or to any of the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (viii) after the occurrence of a Default or
Event of Default, grant extensions of time to pay, compromise claims relating
to, and settle Accounts, Chattel Paper and General Intangibles for less than
face value and execute all releases and other documents in connection therewith;
(ix) pay any sums required on account of Borrowers taxes or to secure the
release of any Liens therefor; (x) pay any amounts necessary to obtain, or
maintain in effect, any of the insurance described in Section 5.12; (xi) settle
and adjust, and give releases of, any insurance claim that relates to any of the
Collateral and obtain payment therefor; (xii) instruct any third party having
custody or control of any Collateral or books or records belonging to, or
relating to, Borrower to give Lender the same rights of access and other rights
with respect thereto as Lender has under this Agreement; and (xiii) after the
occurrence of a Default or Event of Default, change the address for delivery of
Borrower's mail and receive and open all mail addressed to Borrower. Any and all
sums paid, and any and all costs, expenses, liabilities, obligations and
reasonable attorneys' fees incurred, by Lender with respect to the foregoing
shall be added to and become part of the Obligations, shall be payable on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. Borrower agrees that Lender's rights under
the foregoing power of attorney or any of Lender's other rights under this
Agreement or the other Loan Documents shall not be construed to indicate that
Lender is in control of the business, management or properties of Borrower.
4.6 Disputes. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper. Borrower will not, without
Lender's prior written consent, compromise or settle any Account or Chattel
Paper for less than the full amount thereof, grant any extension of time of
payment of any Account or Chattel Paper, release (in whole or in part) any
Account Debtor or other person liable for the payment of any Account or Chattel
Paper or grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Account or Chattel Paper; except
that prior to the occurrence of an Event of Default, Borrower may take any of
such actions in the ordinary course of its business, provided that Borrower
promptly reports the same to Lender.
4.7 Invoices. At Lender's request, Borrower will cause all invoices and
statements which it sends to Account Debtors or other third parties to be
marked, in a manner satisfactory, to Lender, to reflect Lenders security
interest therein.
4.8 Inventory.
(a) Returns. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will
promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount (sending a copy to
Lender). After the occurrence of an Event of Default, Borrower will (i) hold the
returned Inventory in trust for Lender, (ii) segregate all returned Inventory
from all of Borrower's other property; (iii) conspicuously label the returned
Inventory as Lenders property; and (iv) immediately notify Lender of the return
of such Inventory, specifying the reason for such return, the location and
condition of the returned Inventory and, at Lender's request, deliver such
returned Inventory to Lender at an address specified by Lender.
(b) Other Covenants. Borrower will not, without Lender's prior
written consent, (i) store any Inventory with any warehouseman or other third
party other than as set forth in Section 9(d) of Schedule A and on Schedule 4.8
hereto; provided, that the Inventory stored at the locations listed on Schedule
4.8 hereto must not exceed, in the aggregate, 20% of Borrower's total Inventory
at any one time, or (ii) sell any Inventory on a sale-or-return, guaranteed
sale, consignment, or other contingent basis. All of the Inventory has been
produced only in accordance with the Fair Labor Standards Act of 1938 and all
rules, regulations and orders promulgated thereunder, if applicable.
4.9 Access to Collateral, Books and Records. At reasonable times, and on
one Business Day's notice, prior to the occurrence of a Default or an Event of
Default, and at any time and with or without notice after the occurrence of a
Default or an Event of Default, Lender or its agents shall have the right to
inspect the Collateral, and the right to examine and copy Borrower's books and
records. Lender shall take reasonable steps to keep confidential all information
obtained in any such inspection or examination, but Lender shall have the right
to disclose any such information to its auditors, regulatory agencies, attorneys
and participants, and pursuant to any subpoena or other legal process. Borrower
agrees to give Lender access to any or all of Borrower's premises to enable
Lender to conduct such inspections and examinations. Such inspections and
examinations shall be at Borrower's expense and the charge therefor shall be
$750 per person per day (or such higher amount as shall represent Lender's then
current standard charge), plus reasonable out-of-pocket expenses. Lender may, at
Borrower's expense, use Borrower's personnel, computer and other equipment,
programs, printed output and computer readable media, supplies and premises for
the collection, sale or other disposition of Collateral to the extent Lender, in
its sole discretion, deems appropriate. Borrower hereby irrevocably authorizes
all accountants and third parties to disclose and deliver to Lender, at
Borrower's expense, all financial information, books and records, work papers,
management reports and other information in their possession regarding Borrower.
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location other
than Borrowers Address without first obtaining Lender's written consent (which
consent may be conditioned upon such accounting firm, service bureau or other
third party agreeing to give Lender the same rights with respect to access to
books and records and related rights as Lender has under this Agreement).
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation by, Lender, and (ii) the accuracy of
each such representation, warranty and covenant will be a condition to each Loan
and Credit Accommodation).
5.1 Existence and Authority. Borrower is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation. Borrower is qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or
other organizational documents, or any law or any agreement or instrument or any
court order which is binding upon Borrower or its property, do not constitute
grounds for acceleration of any indebtedness or obligation under any agreement
or instrument which is binding upon Borrower or its property, and, except as set
forth on Schedule 5.1 hereto, do not require the consent of any Person. This
Agreement and such other Loan Documents have been duly executed and delivered
by, and are enforceable against, Borrower, and all other Obligors who have
signed them, in accordance with their respective terms (except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or limiting creditors' rights or by equitable principles
generally (regardless of whether enforcement is sought in equity or at law)).
Sections 9(g) and 9(h) of Schedule A set forth the ownership of Borrower and the
names and ownership of Borrower's Subsidiaries as of the date of this Agreement.
5.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least thirty days' prior written notice before changing its name
or doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to another
corporation or other legal entity; (ii) all Accounts invoiced under any such
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement; and (iii) all
schedules of Accounts, including any sales made or services rendered using any
trade name shall show Borrower's name as assignor.
5.3 Title to Collateral; Permitted Liens. Borrower has good and marketable
title to, or a valid leasehold interest in, the Collateral. All Equipment leased
by Borrower is listed on Schedule 5.3 hereto, which Schedule 5.3 sets forth a
complete description of such leased Equipment. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Lender now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Lender and the Collateral against all claims
of others. None of the Collateral which is Equipment is or will be affixed to
any real property in such a manner, or with such intent, as to become a fixture.
Except for leases or subleases as to which Borrower has delivered to Lender a
landlord's waiver in form and substance satisfactory to Lender, Borrower is not
a lessee or sublessee under any real property, lease or sublease pursuant to
which the lessor or sublessor may obtain any rights in any of the Collateral,
and no such lease or sublease now prohibits, restrains, impairs or conditions,
or will prohibit, restrain, impair or condition, Borrower's right to remove any
Collateral from the premises. Whenever any Collateral is located upon premises
in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Lender, cause each such third party to execute and deliver to
Lender, in form and substance acceptable to Lender, such waivers and
subordinations as Lender shall specify, so as to ensure that Lender's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party. Borrower will keep in full force and effect, and will comply with
all the terms of, any lease of real property where any of the Collateral now or
in the future may be located.
5.4 Accounts and Chattel Paper. As of each date reported by Borrower, all
Accounts which Borrower has reported to Lender as being Eligible Accounts comply
in all respects with the criteria for eligibility established by Lender and in
effect at such time. All Accounts and Chattel Paper are genuine and in all
respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower in the ordinary course of its business and in accordance
with the terms and conditions of all purchase orders, contracts or other
documents relating thereto, each Account Debtor thereunder had the capacity to
contract at the time any contract or other document giving
rise to such Accounts and Chattel Paper were executed, and the transactions
giving rise to such Accounts and Chattel Paper comply with all applicable laws
and governmental rules and regulations.
5.5 Investment Property. Borrower will take any and all actions required
or requested by Lender, from time to time, to (i) cause Lender to obtain
exclusive control of any Investment Property in a manner acceptable to Lender
and (ii) obtain from any issuers of Investment Property and such other Persons
as Lender shall specify, for the benefit of Lender, written confirmation of
Lenders exclusive control over such Investment Property and take such other
actions as Lender may request to perfect Lender's security interest in such
Investment Property. For purposes of this Section 5.5, Lender shall have
exclusive control of Investment Property if (A) such Investment Property
consists of certificated securities and Borrower delivers such certificated
securities to Lender (with appropriate endorsements if such certificated
securities are in registered form); (B) such Investment Property consists of
uncertificated securities and either (x) Borrower delivers such uncerticated
securities to Lender or (y) the issuer thereof agrees, pursuant to documentation
in form and substance satisfactory to Lender, that it will comply with
instructions originated by Lender without further consent by Borrower; and (C)
such Investment Property consists of security entitlements and either (x) Lender
becomes the entitlement holder thereof or the appropriate securities
intermediary agrees, pursuant to documentation in form and substance
satisfactory to Lender, that it will comply with entitlement orders originated
by Lender without further consent by Borrower.
5.6 Place of Business; Location or Collateral. Borrowers Address is
Borrower's chief executive office and the location of its books and records. In
addition, except as provided in the immediately following sentence, Borrower has
places of business and Collateral located only at the locations set forth on
Sections 9(d) and 9(e) of Schedule A. Borrower will give Lender at least thirty
days' prior written notice before opening any additional place of business,
changing its chief executive office or the location of its books and records, or
moving any of the Collateral to a location other than Borrower's Address or one
of the locations set forth in Sections 9(d) and 9(e) of Schedule A, and will
execute and deliver all financing statements and other agreements, instruments
and documents which Lender shall require as a result thereof.
5.7 Financial Condition, Statements and Reports. All financial statements
delivered to Lender by or on behalf of Borrower have been prepared in conformity
with GAAP and completely and fairly reflect the financial condition of Borrower,
at the times and for the periods therein stated. Between the last date covered
by any such financial statement provided to Lender and the date hereof (or, with
respect to the remaking of this representation in connection with the making of
any Loan or the providing of any Credit Accommodation, the date such Loan is
made or such Credit Accommodation is provided), there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
solvent and able to pay its debts as they come due, and has sufficient capital
to carry on its business as now conducted and as proposed to be conducted. All
schedules, reports and other information and documentation delivered by Borrower
to Lender with respect to the Collateral are, or will be, when delivered, true,
correct and complete as of the date delivered or the date specked therein.
5.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed all tax returns and reports required by applicable law, has timely paid
all applicable taxes, assessments, deposits and contributions owing by Borrower
and will timely pay all such items in the future as they became due and payable.
Borrower may, however, defer payment of any contested taxes; provided, that
Borrower (i) in good faith contests Borrower's obligation to such taxes by
appropriate proceedings promptly and diligently instituted and conducted; (ii)
notifies Lender in writing of the commencement of, and any material development
in, the proceedings; (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a Lien upon any of the Collateral and (iv)
maintains adequate reserves therefor in conformity with GAAP. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay
all amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, permitted partial or complete termination of,
or permitted the occurrence of any other event with respect to, any such plan
which could result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or any other governmental agency.
5.9 Compliance with Laws. Borrower has complied in all material respects
with all provisions of all applicable laws and regulations, including those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrowers business, the payment and withholding of taxes, ERISA and
other employee matters, safety and environmental matters.
5.10 Litigation. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrowers
knowledge) threatened against Borrower. There is no claim, suit, litigation,
proceeding or investigation pending or (to the best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which may result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Borrower, or in any material impairment in
the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Lender in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower.
5.11 Use of Proceeds. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 Insurance. Borrower will at all times carry property, liability and
other insurance, with insurers acceptable to Lender, in such form and amounts,
and with such deductibles and other provisions, as Lender shall require, and
Borrower will provide evidence of such insurance to Lender, so that Lender is
satisfied that such insurance is, at all times, in full force and effect. Each
property insurance policy shall name Lender as loss payee and shall contain a
lender's loss payable endorsement in form acceptable to Lender, each liability
insurance policy shall name Lender as an additional insured, and each business
interruption insurance policy shall be collaterally assigned to Lender, all in
form and substance satisfactory to Lender. All policies of insurance shall
provide that they may not be cancelled or changed without at least thirty days'
prior written notice to Lender, shall contain breach of warranty coverage, and
shall otherwise be in form and substance satisfactory to Lender. Upon receipt of
the proceeds of any such insurance, Lender shall apply such proceeds in
reduction of the Obligations as Lender shall determine in its sole discretion.
Borrower will promptly deliver to Lender copies of all reports made to insurance
companies.
5.13 Financial and Collateral Reports. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrowers certified public accountants concur in any change therein and
such change is disclosed to Lender):
(a) Collateral Reports. On or before the fifteenth day of each
month, an aging of Borrower's Accounts, Chattel Paper and notes receivable, and
monthly Inventory reports, all in such form, and together with such additional
certificates, schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; provided, that
Borrower's failure to execute and deliver the same shall not affect or limit
Lender's security interests and other rights in any of the Accounts, nor shall
Lender's failure to advance or lend against a specific Account affect or limit
Lender's security interest and other rights therein. Together with each such
schedule, Borrower shall furnish Lender with copies (or, at Lender's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping
instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing. In
addition, Borrower shall deliver to Lender the originals of all Instruments,
Chattel Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts, immediately upon receipt thereof and in the
same form as received, with all necessary endorsements. Lender may destroy or
otherwise dispose of all documents, schedules and other papers delivered to
Lender pursuant to this Agreement (other than originals of Instruments, Chattel
Paper, security agreements, guaranties and other documents and property,
evidencing or securing any Accounts) six months after Lender receives them,
unless Borrower requests their return in writing in advance and arranges for
their return to Borrower at Borrower's expense.
(b) Annual Statements. Not later than ninety days after the close of
each fiscal year of Borrower, unqualified (except for a qualification for a
change in accounting principles with which the accountant concurs) audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a consolidated and consolidating basis, certified by a firm of
independent certified public accountants of recognized standing selected by
Borrower but acceptable to Lender, together with a copy of any management letter
issued in connection therewith and a letter from such accountants acknowledging
that Lender is relying on such financial statements;
(c) Interim Statements. Not later than twenty days after the end of
each month hereafter, and sixty days after the last month of Borrower's fiscal
year, unaudited interim financial statements of Borrower and its Subsidiaries as
of the end of such month and of the portion of Borrower's fiscal year then
elapsed, on a consolidated and consolidating basis, certified by the principal
financial officer of Borrower as prepared in accordance with GAAP and fairly
presenting the consolidated financial position and results of operations of
Borrower and its Subsidiaries for such month and period subject only to changes
from audit and year-end adjustments and except that such statements need not
contain notes;
(d) Projections, Etc. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time;
(e) Shareholder Reports, Etc. Promptly after the sending or filing
thereof, as the case may be, copies of any proxy, statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(f) ERISA Reports. Upon request by Lender, copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto, and
(g) Other Information. Such other data and information (financial
and otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrowers and each of its Subsidiary's
financial condition or results of operations.
5.14 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Lender with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Lender, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.15 Maintenance of Collateral, Etc. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose.
Borrower will immediately advise Lender in writing of any material loss or
damage to the Collateral and of any investigation, action, suit, proceeding or
claim relating to the Collateral or which may result in an adverse impact upon
Borrower's business, assets or financial condition.
5.16 Notification of Changes. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 Further Assurances. Borrower agrees at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 Negative Covenants. Except as set forth in Section 13 of Schedule A,
Borrower will not, without Lender's prior written consent, (i) merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents; (iii)
enter into any transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral or other assets, except that Borrower may sell finished
goods Inventory in the ordinary course of its business; (v) make any loans to,
or investments in, any Affiliate or other Person in the form of money or other
assets; (vi) incur any debt outside the ordinary course of business; (vii)
guaranty or otherwise become liable with respect to the obligations of another
party or entity; (viii) pay or declare any dividends or other distributions on
Borrower's stock, if Borrower is a corporation (except for dividends payable
solely in capital stock of Borrower) or with respect to any equity interests, if
Borrower is not a corporation; (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's capital stock or other equity
interests; (x) make any change in Borrower's capital structure; (xi) dissolve or
elect to dissolve; (xii) pay any principal or interest on any indebtedness owing
to an Affiliate; (xiii) enter into any transaction with an Affiliate other than
on arms-length terms; or (xiv) agree to do any of the foregoing.
5.19 Financial Covenants.
(a) Capital Expenditures. Borrower will not expend or commit to
expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.
(b) Net Worth. Borrower will at all times maintain a net worth of at
least the amount set forth in Section 8(b) of Schedule A.
(c) Tangible Net Worth. Borrower will at all times maintain a
minimum tangible net worth of at least the amount set forth in Section 8(c) of
Schedule A.
(d) Working Capital. Borrower will at all times maintain working
capital of at least the amount set forth in Section 8(d) of Schedule A.
(e) Net Losses. Borrower will not permit its cumulative net loss to
exceed the amount set forth in Section 8(e) of Schedule A.
(f) Net Income. Borrower will not permit its cumulative net income
to be less than the amount set forth in Section 8(f) of Schedule A.
(g) Leverage. Borrower will not permit the ratio of its total
liabilities to its net worth to exceed, at any time, the ratio set forth in
Section 8(g) of Schedule A.
(h) Other Financial Covenants. Borrower will comply with any
additional financial covenants set forth in Section 8(j) of Schedule A.
6. RELEASE AND INDEMNITY.
6.1 Release. Borrower hereby releases Lender and its Affiliates and their
respective directors, officers, employees, attorneys and agents and any other
Person affiliated with or representing Lender (the "Released Parties") from any
and all liability arising from acts or omissions under or pursuant to this
Agreement, whether based on errors of judgment or mistake of law or fact, except
for those arising from willful misconduct. However, in no circumstance will any
of the Released Parties be liable for lost profits or other special or
consequential damages. Such release is made on the date hereof and remade upon
each request for a Loan or Credit Accommodation by Borrower. Without limiting
the foregoing:
(a) Lender shall not be liable for (i) any shortage or discrepancy
in, damage to, or loss or destruction of, any goods, the sale or other
disposition of which gave rise to an Account: (ii) any error, act, omission, or
delay of any kind occurring in the settlement, failure to settle, collection or
failure to collect any Account; (iii) settling any Account in good faith for
less than the full amount thereof; or (iv) any of Borrower's obligations under
any contract or agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any instructions as to acceptance or rejection of any documents or
goods, to execute for Borrower's account any and all applications for steamship
or airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
6.2 Indemnity. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys fees), of every nature, character and description, which
the Released Parties may sustain or incur based upon or arising out of any of
the transactions contemplated by this Agreement or the other Loan Documents or
any of the Obligations, including any transactions or occurrences relating to
the issuance of any Credit Accommodation, the Collateral relating thereto, any
drafts thereunder and any errors or omissions relating thereto (including any
loss or claim due to any action or inaction taken by the issuer of any Credit
Accommodation) (and for this purpose any charges to Lender by any issuer of
Credit Accommodations shall be conclusive as to their appropriateness and may be
charged to the Loan Account), or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the willful
misconduct of the Released Parties). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement.
7. TERM.
7.1 Maturity Date. Lender's obligation to make Loans and to provide Credit
Accommodations under this Agreement shall initially continue in effect until the
Initial Maturity Date set forth in Section 7 of Schedule A (the "Initial Term")
provided, that such date shall automatically be extended (the Initial Maturity
Date, as it may be so extended, being referred to as the "Maturity Date") for
successive additional terms of three years each (each a "Renewal Term"), unless
one party gives written notice to the other, not less than sixty days prior to
the Maturity Date, that such party elects not to extend the Maturity Date. This
Agreement and the other Loan Documents and Lender's security interests in and
Liens upon the Collateral, and all representations, warranties and covenants of
Borrower contained herein and therein, shall remain in full force and effect
after the Maturity Date until all of the monetary Obligations are indefeasibly
paid in full.
7.2 Early Termination. Lenders obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty business days after
written notice of termination is given to Lender or (ii) by Lender at any time
after the occurrence of an Event of Default, without notice, effective
immediately; provided, that if any Affiliate of Borrower is also a party to a
financing arrangement with Lender, no such early termination under clause (i)
above shall be effective unless such Affiliate simultaneously terminates its
financing arrangement with Lender. If so terminated under this Section 7.2,
Borrower shall pay to Lender (i) an early termination fee (the "Early
Termination Fee") in the amount set forth in Section 6(h) of Schedule A plus
(ii) any earned but unpaid Facility Fee. Such fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations. In addition, if
Borrower so terminates and repays the Obligations without having provided Lender
with at least thirty days' prior written notice thereof, an additional amount
equal to thirty days of interest al the applicable Interest Rate(s), based on
the average outstanding amount of the Obligations for the six month period
immediately preceding the date of termination.
7.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if, on the Maturity
Date or on any earlier effective date of termination, there are any outstanding
Credit Accommodations, then on such date Borrower shall provide to Lender cash
collateral in an amount equal to 110% of the Credit Accommodation Balance to
secure all of the Obligations (including estimated attorneys' fees and other
expenses) relating to said Credit Accommodations or such greater percentage or
amount as Lender reasonably deems appropriate, pursuant to a cash pledge
agreement in form and substance satisfactory to Lender.
7.4 Effect of Termination. No termination shall affect or impair any right
or remedy of Lender or relieve Borrower of any of the Obligations until all of
the monetary Obligations have been indefeasibly and irrevocably paid in full.
Upon indefeasible and irrevocable payment and performance in full of all of the
monetary Obligations (and the provision of cash collateral with respect to any
Credit Accommodation Balance as required by Section 7.3) and termination of this
Agreement, Lender shall promptly deliver to Borrower termination statements,
requests for reconveyances and such other documents as may be reasonably
required to terminate Lender's security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Lender immediate written notice thereof: (i) if any
warranty, representation, statement, report or certificate made or delivered to
Lender by Borrower or any of Borrower's officers, employees or agents is untrue
or misleading; (ii) if Borrower fails to pay when due any principal or interest
on any Loan or any other monetary Obligation; (iii) if Borrower breaches any
covenant or obligation contained in (a) any of the first sentence of Section
5.1, Section 5.5, Section 5.8, clauses (b), (c), (d) or (f) of Section 5.13 or
Section 5.14 of this Agreement and such breach has not been cured to Lender's
satisfaction within 10 days' of the occurrence thereof or (b) any Section of
this Agreement, other than those listed in clause (a), or any other Loan
Document or fails to perform any other non-monetary Obligation; (iv) if any
levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made or permitted to exist on all or any part of the
Collateral; (v) if one or more judgments aggregating in excess of $25,000, or
any injunction or attachment, is obtained against Borrower or any Obligor which
remains unstayed for more than ten days or is enforced; (vi) the occurrence of
any default under any financing agreement, security agreement or other
agreement, instrument or document executed and delivered by (A) Borrower with,
or in favor of, any Person other than Lender or (B) Borrower or any Affiliate of
Borrower with, or in favor of, Lender or any Affiliate of Lender; (vii) the
dissolution, death, termination of existence in good standing, insolvency or
business failure or suspension or cessation of business as usual of Borrower or
any Obligor (or of any general partner of Borrower or any Obligor if it is a
partnership) or the appointment of a receiver, trustee or custodian for all or
any part of the property of, or an assignment for the benefit of creditors by
Borrower or any Obligor, or the commencement of any proceeding by Borrower or
any Obligor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, or if Borrower makes or sends a
notice of a bulk transfer or calls a meeting of its creditors; provided that in
the event of the death or bankruptcy of any Obligor, Borrower shall have thirty
days from the date of such occurrence to replace such Obligor with a Person
acceptable to Lender; (viii) the commencement of any proceeding against Borrower
or any Obligor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; (ix) the actual or attempted
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations, or any security document securing the Obligations,
by any Obligor; (x) if Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations attempts to limit or terminate its
subordination agreement; (xi) if there is any actual or threatened indictment of
Borrower or any Obligor under any criminal statute or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any Obligor,
pursuant to which the potential penalties or remedies sought or available
include forfeiture of any property of Borrower or such Obligor; (xii) if there
is a change in the record or beneficial ownership of an aggregate of more than
49 % of the outstanding shares of stock of Borrower (or partnership or
membership interests if it is a partnership or limited liability company), in
one or more transactions, compared to the ownership of outstanding shares of
stock (or partnership or membership interests) of Borrower as of the date
hereof, without the prior written consent of Lender, which consent shall not be
unreasonably withheld; (xiii) if there is any change in the chief executive
officer, chief operating officer or chief financial officer of Borrower; (xiv)
if an Event of Default occurs under any Loan and Security Agreement between
Lender and an Affiliate of Borrower; or (xv) if Lender determines in good faith
that the Collateral is insufficient to fully secure the Obligations or that the
prospect of payment of performance of the Obligations is impaired.
8.2 Remedies. Upon the occurrence of any Default, and at any time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be
immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any of
the Obligations; (iii) take possession of any or all of the Collateral wherever
it may be found, and for that purpose Borrower hereby authorizes Lender, without
judicial process, to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain (or cause a custodian to remain) on the premises in exclusive control
thereof, without charge for so long as Lender deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, that if Lender seeks to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives (A) any bond and
any surety, or security relating thereto required by law as an incident to such
possession, (B) any demand for possession prior to the commencement of any suit
or action to recover possession thereof and (C) any requirement that Lender
retain possession of, and not dispose of any such Collateral until after trial
or final judgment; (iv) require Borrower to assemble any or all of the
Collateral and make it available to Lender at one or more places designated by
Lender which are reasonably convenient to Lender and Borrower, and to remove the
Collateral to such locations as Lender may deem advisable; (v) complete the
processing, manufacturing or repair of any Collateral prior to a disposition
thereof and, for such purpose and for the purpose of removal, Lender shall have
the right to use Borrower's premises, vehicles and other Equipment and all other
property without charge; (vi) sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time Lender obtains possession of it or
after further manufacturing, processing or repair, at one or more public or
private sales, in lots or in bulk, for cash, exchange or other property, or on
credit (a "Sale"), and to adjourn any such Sale from time to time without notice
other than oral announcement at the time scheduled for Sale (and, in connection
therewith, (A) Lender shall have the right to conduct such Sale on Borrower's
premises without charge, for such times as Lender deems reasonable, on Lender's
premises. or elsewhere, and the Collateral need not be located at the place of
Sale; (B) Lender may directly or through any of its Affiliates purchase or lease
any of the Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition and (C) any Sale of Collateral shall
not relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title, physical condition or otherwise at the time of sale);
(vii) demand payment of and collect any Accounts, Chattel Paper, Instruments and
General Intangibles included in the Collateral and, in connection therewith,
Borrower irrevocably authorizes Lender to endorse or sign Borrower's name on all
collections, receipts, Instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of Collateral or proceeds thereof and, in Lender's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Accounts, General Intangibles and the like for less than face value; and (viii)
demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
relating thereto. In addition to the foregoing remedies, upon the occurrence of
any Event of Default resulting from a breach of any of the financial covenants
set forth in Section 5.19, Lender may, at its option, upon not less than ten
days' prior notice to Borrower, reduce any or all of the Advance Rates set forth
in Section 1(b) of Schedule A to the extent Lender, in its sole discretion,
deems appropriate. In addition to the rights and remedies set forth above,
Lender shall have all the other rights and remedies accorded a secured party
after default under the UCC and under all other applicable laws, and under any
other Loan Document, and all of such rights and remedies are cumulative and
non-exclusive. Exercise or partial exercise by Lender of one or more of its
rights or remedies shall not be deemed an election or bar Lender from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Lender to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and effect
until all of the Obligations have been fully paid and performed. If notice of
any sale or other disposition of Collateral is required by law, notice at least
seven days prior to the sale designating the time and place of sale in the case
of a public sale or the time after which any private sale or other disposition
is to be made shall be deemed to be reasonable notice, and Borrower waives any
other notice. If any Collateral is sold or leased by Lender on credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment is collected by Lender.
8.3 Application of Proceeds. Subject to any application required by law,
all proceeds realized as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally, entitled
thereto; but Borrower shall remain liable to Lender for any deficiency. If
Lender, in its sole discretion, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any Sale, Lender shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Lender of
the cash therefor.
9. GENERAL PROVISIONS.
9.1 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in the heading to this
Agreement, or by facsimile to the facsimile number shown in Section 9(i) of
Schedule A, or at any other address (or to any other facsimile number)
designated in writing by one party to the other party in the manner prescribed
in this Section 9.1. All notices shall be deemed to have been given when
received or when delivery is refused by the recipient.
9.2 Severability. If any provision of this Agreement, or the application
thereof to or circumstance, is held to be void or unenforceable by any, court of
competent jurisdiction, such defect shall not affect the remainder of this
Agreement, which shall continue in full force and effect.
9.3 Integration. This Agreement and the other Loan Documents represent the
final, entire and complete agreement between Borrower and Lender and supersede
all prior and contemporaneous negotiations, oral representations and agreements,
all of which are merged and integrated into this Agreement. THERE ARE NO ORAL
UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 Waivers. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Documents shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Lender
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 Amendment. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
9.6 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement and the other Loan Documents.
9.7 Attorneys Fees and Cents. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and
negotiate this Agreement and the other Loan Documents; to obtain legal advice in
connection with this Agreement and the other Loan Documents or Borrower or any
Obligor, to administer this Agreement and the other Loan Documents (including
the cost of periodic financing statement, tax lien and other searches conducted
by Lender); to enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; to commence, intervene in, or
defend any action or proceeding; to initiate any complaint to be relieved of the
automatic stay in bankruptcy; to file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; to examine, audit, copy, and inspect
any of the Collateral or any of Borrower's books and records; to protect, obtain
possession of, lease, dispose of, or otherwise enforce Lender's security
interests in, the Collateral, and to otherwise represent Lender in any
litigation relating to Borrower. If either Lender or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of, execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Lender may be entitled pursuant to this
Section shall immediately become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
9.8 Benefit of Agreement; Assignability. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Lender;
provided, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Lender, and any prohibited
assignment shall be void. No consent by Lender to any assignment shall release
Borrower from its liability for any of the Obligations. Lender shall have the
right to assign all or any of its rights and obligations under the Loan
Documents, and to sell participating interests therein, to one or more other
Persons, and Borrower agrees to execute all agreements, instruments and
documents requested by Lender in connection with each such assignment and
participation.
9.9 Headings; Construction. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any role of construction or
otherwise.
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL, BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY
IN SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND FEDERAL
COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL IS
LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND WAIVES ANY
OBJECTION WHICH BORROWER HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENTS. BORROWER ALSO AGREES THAT ANY CLAIM OR DISPUTE
BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL COURTS OF NEW YORK COUNTY.
BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTTER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER AND SHALL BE
DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE EXTENT PERMITTED
BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT
OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN
ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED IT'S JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of
the date set forth in the heading.
Borrower: Lender:
COFFEE HOLDING CO., INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT FUNDING
DIVISION
By_______________________ By___________________________
Name_____________________ Its Authorized Signatory
Title____________________
SCHEDULE A
Description of Certain Terms
This Schedule is an integral part of the Loan and Security Agreement
between COFFEE HOLDING CO., INC. and NATIONSCREDTT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDTT COMMERCIAL FUNDING DIVISION (the "Agreement").
1. Loan Limits for Revolving
Loans:
(a) Maximum Facility
Amount: $5,000,000
(b) Advance Rates:
(i) Accounts 85%; provided, that if the
Advance Rate: Dilution Percentage exceeds
4%, such advance rate will
be reduced by the number of
full or partial percentage
points of such excess
(ii) Inventory
Advance
Rate(s):
(A) Finished
goods: 60 %
(B) Raw
materials: 60 %
(C) Work in
process: Not Applicable
(c) Accounts Sublimit: Not Applicable
(d) Inventory
Sublimit(s):
(i) Overall sublimit on $750,000 or, if less, the
advances against aggregate advances against
Eligible Inventory Accounts at any time of
determination
(ii) Sublimit on advances Not Applicable
against finished goods
(iii) Sublimit on advances Not Applicable
against raw materials
(e) Credit $500,000
Accommodation
Limit:
(f) Permanent Reserve Not Applicable
Amount:
(g) Overadvance Amount: Not Applicable
2. Loan Limits for Term Loan:
(a) Principal Amount:
(i) Equipment The lesser of $500,000 and
Advance: 80% of the appraised
auction sale value of
Borrower's Eligible
Equipment
(ii) Real Property Not Applicable
Advance:
(b) Repayment Schedule:
(i) Equipment The Equipment Advance shall
Advance: be repaid in equal
consecutive monthly
installments amortized over
60 months payable on the
first day of each calendar
month commencing January 1,
1998, with the entire
unpaid balance due and
payable on the Maturity
Date
(ii) Real Property Not Applicable
Advance:
3. Interest Rates:
(a) Revolving Loans: 1 % per annum in excess of
the Prime Rate
(b) Term Loan: 1 % per annum in excess of
the Prime Rate
4. Minimum Loan Amount: $2,750,000
5. Maximum Days:
(a) Maximum days after
original invoice date
for Eligible Accounts: 90 days
(b) Maximum days after
original invoice date
due date for Eligible
Accounts: 60 days
6. Fees:
(a) Closing Fee: Not Applicable
(b) Facility Fee:
(i) Initial Term: $50,000
(ii) Renewal
Term(s) $75,000
(c) Servicing Fee: $300 per month
(d) Unused Line Fee: Not Applicable
(e) Minimum Borrowing
Fee:
(i) Applicable Each Year
period:
(ii) Date payable: Each anniversary of the
date of the Agreement
(f) Success Fee: Not Applicable
(g) Warrants: Not Applicable
(h) Early Termination
Fee: 3% of the Maximum Facility
Amount if terminated during
the first year of the Term,
2% of the Maximum Facility
Amount if terminated during
the second year of the
Term, and 1 % of the
Maximum Facility Amount if
terminated thereafter and
prior to the Maturity Date;
provided that the Early
Termination Fee will be
waived by Lender if
Borrower transfers the
Loans and all of its other
Obligations hereunder to
another division of
NationsCredit Commercial
Corporation or NationsBank,
N.A.
(i) Fees for letters of 1% per annum of the face
credit and other Credit amount of each open Credit
Accommodations (or Accommodation, plus all
guaranties thereof by costs and fees charged by
Lender): the issuer
7. Initial Maturity Date: November 20, 2000
8. Financial Covenants:
(a) Capital Expenditure
Limitation: Not Applicable
(b) Minimum Net Worth
Requirement: Not Applicable
(c) Minimum Tangible
Net Worth: Not Applicable
(d) Minimum Working
Capital: Not Applicable
(e) Maximum Cumulative
Net Loss: Not Applicable
(f) Minimum Cumulative
Net Income: Not Applicable
(g) Maximum Leverage
Ratio: Not Applicable
(I) Limitation on
Equipment Leases: Not Applicable
(h) Limitation on
Purchase Money Not Applicable
Security Interests: Not Applicable
(j) Additional Financial
Covenants: Not Applicable
9. Borrower Information:
(a) Prior Names of None
Borrower:
(b) Prior Trade Names of None
Borrower:
(c) Existing Trade Names None
of Borrower
(d) Inventory Locations: 54A Hackensack Avenue
River Terminal
Kearny, New Jersey 09032
(e) Other Locations: 4425a First Avenue
Brooklyn, New York 11232
(f) Litigation: Borrower is currently
involved in a workmen's
compensation claim which is
not material to the
financial condition or
operation of the business
of Borrower
(g) Ownership of Andrew Gordon - 21%
Borrower: David Gordon - 21%
Rachelle Gordon - 58%
Grantor Retained
Annuity Trust
(h) Subsidiaries (and None
ownership thereof):
(i) Facsimile Numbers:
Borrower: 718-832-0892
Lender: 212-597-1666
10. Description of Real Property: None
11. Lender's Bank: First Chicago NBD
12. Other Covenants: None
13. Exceptions to Negative None
Covenants:
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as of
the date set forth in the heading to the Agreement.
Borrower: Lender:
COFFEE HOLDING CO., INC. NAITIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL
FUNDING DIVISION
By_______________________ By_________________________
Name_____________________ Its Authorized Signatory
Title____________________
Schedule B
Definitions
This Schedule is an integral pan of the Loan and Security Agreement
between COFFEE HOLDING CO., INC. and NATIONSCREDTT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDTT COMMERCIAL FUNDING DIVISION ("Agreement")
As used in the Agreement. the following terms have the following meanings:
"Account" means any right to payment for Goods sold or leased or for
services rendered which is not evidenced by an Instrument or Chattel Paper;
whether or not it has been earned by performance.
"Account Debtor" means the obligor on an Account or Chattel Paper.
"Account Proceeds" has the meaning set forth in Section 4.1.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, member, manager, director, officer, or employee of such Person, any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person or any other Person affiliated, directly
or indirectly, by virtue of family membership, ownership, management or
otherwise.
"Agreement" and "this Agreement" mean the Loan and Security Agreement of
which this Schedule B is a part and the Schedules thereto.
"Availability" has the meaning set forth in Section 1.1(a).
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.ss.101
et seq.), as the same may be amended from time to time.
"Blocked Account" has the meaning set forth in Section 4.1.
"Borrower" has the meaning set forth in the heading to the Agreement.
"Borrower's Address" has the meaning set forth in the heading to the
Agreement.
"Business Day" means a day other than a Saturday or Sunday or any other
day on which Lender or banks in New York are authorized to close.
"Chattel Paper" has the meaning set forth in the UCC.
"Collateral" means all property and interests in property, in or upon
which a security interest or other Lien is granted pursuant to this Agreement or
the other Loan Documents.
"Credit Accommodation" has the meaning set forth in Section 1.1(a).
"Credit Accommodation Balance" means the sum of (i) the aggregate undrawn
face amount of all outstanding Credit Accommodations and (ii) all interest, fees
and costs due or, in Lenders estimation, likely to become due in connection
therewith.
"Default" means any event which with notice or passage of time, or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 2.1.
"Deposit Account" has the meaning set forth in the UCC.
"Dilution Percentage" means the gross amount of all returns, allowances,
discounts, credits, write-offs and similar items relating to Borrower's Accounts
computed as a percentage of Borrower's gross sales, calculated on a ninety (90)
day rolling average.
"Document" has the meaning set forth in the UCC.
"Early Termination Fee" has the meaning set forth in Section 7.2.
"Eligible Account" means, at any time of determination, an Account which
satisfies the general criteria set forth below and which is otherwise acceptable
to Lender (provided, that Lender may, in its sole discretion, change the general
criteria for acceptability of Eligible Accounts upon at least fifteen days'
prior notice to Borrower). An Account shall be deemed to meet the current
general criteria if (1) neither the Account Debtor nor any of its Affiliates is
an Affiliate, creditor or supplier of Borrower; (ii) it does not remain unpaid
more than the earlier to occur of (A) the number of days after the official
invoice date set forth in Section 5(a) of Schedule A or (B) the number of days
after the original invoice due date set forth in Section 5(b) of Schedule A;
(iii) the Account Debtor or its Affiliates are not past due on other Accounts
owing to Borrower comprising more than 50% of all of the Accounts owing to
Borrower by such Account Debtor or its Affiliates; (iv) all Accounts owing by
the Account Debtor or its Affiliates do not represent more than 20% of all
otherwise Eligible Accounts (except in the case of the Preferred Products
Account, which Account may represent up to 25% of all otherwise Eligible
Accounts) (provided, that Accounts which are deemed to be ineligible solely by
reason of this clause (iv) shall be considered Eligible Accounts to the extent
of the amount thereof which does not exceed 20% of all otherwise Eligible
Accounts); (v) no covenant, representation or warranty contained in this
Agreement with respect to such Account (including any of the representations set
forth in Section 5.4) has been breached; (vi) the Account is not subject to any
contra relationship, counterclaim, dispute or set-off (provided, that Accounts
which are deemed to be ineligible solely by reason of this clause (vi) shall be
considered Eligible Accounts to the extent of the amount thereof which is not
affected by such contra relationships, counterclaims, disputes or set-offs);
(vii) the Account Debtor's chief executive office or principal place of business
is located in the United States or Provinces of Canada which have adopted the
Personal Property Security Act or a similar act, unless (A) the sale is fully
backed by a letter of credit, guaranty or acceptance acceptable to Lender in its
sole discretion, and if backed by a letter of credit, such letter of credit has
been issued or confined by a bank satisfactory to Lender, is sufficient to cover
such Account, and if required by Lender, the original of such letter of credit
has been delivered to Lender or Lenders agent and the issuer thereof notified of
the assignment of the proceeds of such letter of credit to Lender or (B) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender; (viii) it is absolutely
owing to Borrower and does not arise from a sale on a bill-and-hold, guarantied
sale, sale-or-return, sale-on-approval, consignment, retainage or any other
repurchase or return basis or consist of progress billings; (ix) Lender shall
have verified the Account in a manner satisfactory to Lender; (x) the Account
Debtor is not the United States of America or any state or political subdivision
(or any department,
agency or instrumentality thereof unless Borrower has compiled with the
Assignment of Claims Act of 1940 (31 U.S.C. ss. 203 et seq.) or other applicable
similar state or local law in a manner satisfaction, to Lender; (xi) it is at
all times subject to Lenders duly perfected, fast priority security interest and
to no other Lien that is not a Permitted Lien, and the goods giving rise to such
Account (A) were not, at the time of sale, subject to any Lien except Permitted
Liens and (B) have been delivered to and accepted by the Account Debtor, or the
services giving rise to such Account have been performed by Borrower and
accepted by the Account Debtor; (xii) the Account is not evidenced by Chattel
Paper or an Instrument of any kind and has not been reduced to judgment; (xiii)
the Account Debtor's total indebtedness to Borrower does not exceed the amount
of any credit limit established by Borrower or Lender and the Account Debtor is
otherwise deemed to be creditworthy by Lender (provided, that Accounts which are
deemed to be ineligible solely by reason of this clause (xiii) shall be
considered Eligible Accounts to the extent the amount of such Accounts does not
exceed the lower of such credit limits); (xiv) there are no facts or
circumstances existing, or which could reasonably be anticipated to occur, which
might result in any adverse change in the Account Debtor's financial condition
or impair or delay the collectibility of all or any portion of such Account;
(xv) Lender has been furnished with all documents and other information
pertaining to such Account which Lender has requested, or which Borrower is
obligated to deliver to Lender, pursuant to this Agreement; (xvi) Borrower has
not made an agreement with the Account Debtor to extend the time of payment
thereof beyond the time periods set forth in clause (ii) above without the prior
written consent of Lender, and (xvii) Borrower has not posted a surety or other
bond in respect of the contract under which such Account arose.
"Eligible Equipment" means, at any time of determination, Equipment owned
by Borrower which Lender, in its sole discretion, deems to be eligible for
borrowing purposes.
"Eligible Inventory" means, at any time of determination, Inventory (other
than packaging materials and supplies) which satisfies the general criteria set
forth below and which is otherwise acceptable to Lender (provided, that Lender
may, in its sole discretion, change the general criteria for acceptability of
Eligible Inventory upon at least fifteen days' prior written notice to
Borrower). Inventory shall be deemed to meet the current general criteria if (i)
it consists of raw materials or finished goods, or work-in-process that is
readily marketable in its current form; (ii) it is in good, new and saleable
condition; (iii) it is not slow-moving obsolete, unmerchantable, returned or
repossessed; (iv) it is not in the possession of a processor, consignee or
bailee, or located on premises leased or subleased to Borrower, or on premises
subject to a mortgage in favor of a Person other than Lender, unless such
processor, consignee, bailee or mortgagee or the lessor or sublessor of such
premises, as the case may be, has executed and delivered all documentation which
Lender shall require to evidence the subordination or other limitation or
extinguishment of such Person's rights with respect to such Inventory and
Lender's right to gain access thereto; (v) it meets all standards imposed by any
governmental agency or authority; (vi) it conforms in all respects to any
covenants, warranties and representations set forth in the Agreement; (vii) it
is at all times subject to Lender's duly perfected, first priority security,
interest and no other Lien except a Permitted Lien; and (viii) it is situated at
an Inventory Location listed in Section 9(d) of Schedule A or other location of
which Lender has been notified as required by Section 5.6.
"Eligible Real Property" means, at any time of determination, Real
Property owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
"Equipment" means all Goods which are used or bought for use primarily in
business (including farming or a profession) or by a Person who is a non-profit
organization or governmental subdivision or agency, and which are not Inventory,
farm products or consumer goods, including all machinery, molds, machine tools,
motors, furniture, equipment, furnishings, fixtures, trade fixtures, motor
vehicles, tools, pans, dies and jigs, and all attachments, accessories,
accessions, replacements, substitutions, additions or improvements to, or spare
parts for, any of the foregoing.
"Equipment Advance" has the meaning set forth in Section 1.1(b).
"ERISA" means the Employee Retirement Income Security Act of 1974 and all
roles, regulations and orders promulgated thereunder.
"Event of Default" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in effect from
time to time, consistently applied.
"General Intangibles" has the meaning set forth in the UCC, and includes
all books and records pertaining to the Collateral and other business and
financial records in the possession of Borrower or any other Person, inventions,
designs, drawings, blueprints, patents, patent applications, trademarks,
trademark applications (other than "intent to use" applications until a verified
statement of use is filed with respect to such applications) and the goodwill of
the business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, causes of action and other rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, rights to
purchase or sell real or personal property rights licensor or licensee of any
kind, telephone numbers, internet addresses, proprietary, information, purchase
orders, and all insurance policies and claims (including life insurance, key man
insurance, credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, letters of credit, banker's acceptances and
guaranties, computer programs, discs, tapes and tape files in the possession of
Borrower or any other Person, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature.
"Goods" means all things which are movable at the time the security
interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"Initial Term" has the meaning set forth in Section 7.1.
"Instrument" has the meaning set forth in the UCC.
"Inventory" means all Goods held for sale or lease or furnished or to be
furnished under contracts of service, including all raw materials, work in
process, finished goods, goods in transit and materials and supplies which are
or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.
"Investment Property" shall mean all of Borrower's securities, whether
certificated or uncertificated, securities entitlements, securities accounts,
commodity contracts and commodity accounts.
"Lender" has the meaning set forth in the heading to the Agreement.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on common law, statute or contract, including rights of sellers under
conditional sales contracts or title retention agreements and reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
property. For the purpose of this Agreement, Borrower shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
"Lien" has the meaning set forth in Section 2.4.
"Loan Account" means the Agreement and all notes, Agreement, security
agreements, certificates, landlord's agreements, Lock Box and Blocked Account
agreements and all other agreements, documents and instruments now or hereafter
executed or delivered by Borrower or any Obligor in connection with, or to
evidence the transactions contemplated by this Agreement.
"Loan Limits" means, collectively, the Availability limits and all other
limits on the amount of Loans and Credit Accommodations set forth in this
Agreement.
"Loans" means, collectively, the Revolving Loans and any Term Loan.
"Lock Box" has the meaning set forth in Section 4.1.
"Maturity Date" has the meaning set forth in Section 7.1.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender, whether evidenced by this Agreement or any
other Loan Document, whether arising from an extension of credit, opening of a
Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, loan fees, Early Termination Fees, Minimum Borrowing Fees and any
other sums chargeable to Borrower under this Agreement or under any other loan
Document.
"Obligor" means any guarantor, endorser, acceptor, surety or other person
liable on, or with respect to, the Obligations or who is the owner of any
property which is security for the Obligations, other than Borrower.
"Permitted Liens" means: (i) purchase money security interests in specific
items of Equipment in an aggregate amount net to exceed the limit set forth in
Section 8(h) of Schedule A; (ii) leases of specific items of Equipment in an
aggregate amount not to exceed the limit set forth in Section 8(i) of Schedule
A; (iii) Liens for taxes not yet due and payable; (iv) additional Liens which
are fully subordinate to the security interests of Lender and are consented to
in writing by Lender; (v) security interests being terminated concurrently with
the execution of this Agreement; (vi) Liens of materialmen, mechanics,
warehousemen or carriers arising in the ordinary course of business and securing
obligations which are not delinquent; (vii) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clause (i) or (ii) above;
provided, that any extension, renewal or replacement Lien is limited to the
property encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods; (ix) security
deposits posted in connection with real property, leases or subleases; and (x)
Liens existing on the date of this Agreement which are listed, and the property
subject thereto described, in Schedule C but only to the, respective date, if
any, set forth in such Schedule C for the removal and termination of any such
Liens. Lender will have the right to require, as a condition to its consent
under clause (iv) above, that the holder of the additional Lien sign an
interereditor agreement in form and substance satisfactory to Lender, in its
sole discretion, acknowledging that the Lien is subordinate to the security
interests of Lender, and agreeing not to take any action to enforce its
subordinate Lien so long as any Obligations remain outstanding, and that
Borrower agree that any uncured default in any obligation secured by the
subordinate lien shall also constitute an Event of Default under this Agreement.
"Person" means an, individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"Prime Rate" means, at any given time, the prime rate as quoted in The
Wall Street Journal as the base rate on corporate loans posted as of such time
by at least 75% of the nation's 30 largest banks (which rate is not necessarily
the lowest rate offered by such banks).
"Real Property" means the real property described in Section 10 of
Schedule A.
"Real Property Advance" has the meaning set forth in Section 1.1(b).
"Released Parties" has the meaning set forth in Section 6.1.
"Renewal Terms" has the meaning set forth in Section 7.1.
"Reserves" has the meaning set forth in Section 1.2.
"Revolving Loans" has the meaning set forth in Section 1.1(a).
"Sale" has the meaning set forth in Section 8.2.
"Subsidiary" means any corporation or other entity of which a Person owns,
directly or indirectly, through one or more intermediaries, more than 50 % of
the capital stock or other equity interest at the time of determination.
"Term" means the period commencing on the date of this Agreement and
ending on the Maturity Date.
"Term Loan" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as adopted and
in effect at such time in the State of New York.
All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein. The
term "including," whenever used in this Agreement, shall mean "including but not
limited to." The singular form of any term shall include the plural form, and
vice versa, when the context so requires. References to Sections, subsections
and Schedules are to Sections and subsections of, and Schedules to, this
Agreement. All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as of
the date set forth in the heading to the Agreement.
Borrower: Lender:
COFFEE HOLDING CO., INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL
FUNDING DIVISION
By_______________________ By_________________________
Name_____________________ Its Authorized Signatory
Title____________________
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule C as of
the date set forth in the heading to the Agreement.
Borrower: Lender:
COFFEE HOLDING CO., INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL
FUNDING DIVISION
By_______________________ By_________________________
Name_____________________ Its Authorized Signatory
Title____________________