Exhibit 10.12
JEH ACQUISITION CORP., AS BORROWER
LOAN AND SECURITY AGREEMENT
Dated as of July 8, 1997
$20,000,000
FLEET CAPITAL CORPORATION, AS LENDER
TABLE OF CONTENTS
SECTION 1. CREDIT FACILITY..............................................................................1
1.1 Revolving Credit Loans.................................................................1
1.2 Term Loan..............................................................................2
1.3 Equipment Loan.........................................................................2
SECTION 2. INTEREST, FEES AND CHARGES...................................................................3
2.1 Interest...............................................................................3
2.2 Documentation Fee......................................................................5
2.3 Collateral Monitoring Fee..............................................................5
2.4 Unused Availability Fee................................................................5
2.5 Audit and Appraisal Fees...............................................................6
2.6 Capital Adequacy Change................................................................6
2.7 Reimbursement of Expenses..............................................................8
2.8 Bank Charges...........................................................................8
2.9 Collection Charges.....................................................................9
SECTION 3. LOAN ADMINISTRATION...........................................................................9
3.1 Manner of Borrowing Revolving Credit Loans.............................................9
3.2 Payments..............................................................................14
3.3 Prepayments...........................................................................15
3.4 Application of Payments and Collections...............................................16
3.5 All Loans to Constitute One Obligation................................................16
3.6 Loan Account..........................................................................16
3.7 Statements of Account.................................................................16
SECTION 4. TERM AND TERMINATION........................................................................17
4.1 Term of Agreement.....................................................................17
4.2 Termination...........................................................................17
SECTION 5. SECURITY INTERESTS..........................................................................19
5.1 Security Interest in Collateral.......................................................19
5.2 Lien Perfection; Further Assurances...................................................20
SECTION 6. COLLATERAL ADMINISTRATION...................................................................20
6.1 Location of Collateral................................................................20
6.2 Insurance of Collateral...............................................................20
6.3 Protection of Collateral..............................................................21
6.4 Administration of Accounts............................................................21
6.5 Administration of Inventory...........................................................24
6.6 Records and Schedules of Equipment....................................................24
6.7 Payment of Charges....................................................................24
SECTION 7. REPRESENTATIONS AND WARRANTIES..............................................................24
7.1 General Representations and Warranties................................................24
7.2 Continuous Nature of Representations and Warranties...................................32
7.3 Survival of Representations and Warranties............................................33
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS.........................................................33
8.1 Affirmative Covenants.................................................................33
8.2 Negative Covenants....................................................................36
8.3 Specific Financial Covenants..........................................................41
SECTION 9. CONDITIONS PRECEDENT........................................................................42
9.1 Documentation.........................................................................42
9.2 No Default............................................................................44
9.3 Other Loan Documents..................................................................44
9.4 Adjusted Availability.................................................................44
9.5 No Litigation.........................................................................45
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.....................................45
10.1 Events of Default.....................................................................45
10.2 Acceleration of the Obligations.......................................................49
10.3 Other Remedies........................................................................49
10.4 Remedies Cumulative; No Waiver........................................................51
SECTION 11. MISCELLANEOUS..............................................................................51
11.1 Power of Attorney.....................................................................51
11.2 Indemnity.............................................................................53
11.3 Modification of Agreement; Sale of Interest...........................................53
11.4 Severability..........................................................................54
11.5 Successors and Assigns................................................................54
11.6 Cumulative Effect, Conflict of Terms..................................................54
11.7 Execution in Counterparts.............................................................54
11.8 Notice................................................................................54
11.9 Lender's Consent......................................................................56
11.10 Credit Inquiries......................................................................56
11.12 Entire Agreement......................................................................56
11.13 Interpretation........................................................................56
11.14 GOVERNING LAW; CONSENT TO FORUM.......................................................56
11.15 WAIVERS BY BORROWER.....................................................................57
11.16 Parties to Act in a Commercially Reasonable Manner......................................59
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made as of this 8th day of July,
1997, by and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island
corporation with an office at 200 Glastonbury Blvd., Glastonbury, Connecticut
06033, and JEH ACQUISITION CORP. ("Borrower"), a Delaware corporation with its
executive office and principal place of business at 122 East 42nd Street, Suite
1116, New York, NY 10168. Capitalized terms used in this Agreement have the
meanings assigned to them in Appendix A, General Definitions. Accounting terms
not otherwise specifically defined herein shall be construed in accordance with
GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to Twenty Million
Dollars ($20,000,000) available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Lender agrees, for so long as no
Default or Event of Default exists, to make Revolving Credit Loans to
Borrower from time to time, as requested by Borrower in the manner set forth
in subsection 3.1.1 hereof, up to a maximum principal amount at any time
outstanding equal to the Borrowing Base at such time less reserves, if any.
Lender shall have the right to establish reserves in such amounts, and with
respect to such matters, as Lender shall deem necessary or appropriate,
against the amount of Revolving Credit Loans which Borrower may otherwise
request under this subsection 1.1.1, including, without limitation, with
respect to (i) price adjustments, damages, unearned discounts, returned
products or other matters for which credit memoranda are issued in the
ordinary course of Borrower's business; (ii) shrinkage, spoilage and
obsolescence of Inventory; (iii) slow moving Inventory, (iv) other sums
chargeable against Borrower's Loan Account as Revolving Credit Loans under
any section of this Agreement; (v) amounts owing by Borrower to any Person to
the extent secured by a Lien (other than a Permitted Lien) on, or trust over,
any Collateral of Borrower; and (vi) such other matters, events, conditions
or contingencies as to which Lender, in
its sole credit judgment, determines reserves should be established from time to
time hereunder.
1.1.2 Overadvances. Lender may in its sole discretion make
Revolving Credit Loans to Borrower as requested by Borrower in accordance
with the terms of subsection 3.1.1 hereof at a time when the unpaid balance
of Revolving Credit Loans exceeds, or would exceed with the making of any
such Revolving Credit Loan, the Borrowing Base (any such loan being herein
referred to individually as an "Overadvance" and collectively as
"Overadvances"). All Overadvances shall be repaid on demand, shall be secured
by all of the Collateral and shall bear interest as provided in this
Agreement for Revolving Credit Base Rate Loans.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be used
for Borrower's general working capital needs in a manner consistent with the
provisions of this Agreement and applicable law, as well as initially to fund
the acquisition of certain assets from JEH Company in accordance with the
terms of the Asset Purchase Agreement.
1.2 Term Loan. Lender agrees to make a Term Loan to Borrower on the
Closing Date in the principal amount of $3,000,000, which shall be repaid in
successive monthly installments in accordance with the terms of the Term
Note. The monthly payments under the Term Loan shall be based on a four-year
amortization schedule with each installment due and payable on the first day
of each month, commencing on September 1, 1997, followed by a final
installment which shall be due and payable on the earlier to occur of August
1, 2001, or the termination of this Agreement. The Term Loan shall be secured
by all of the Collateral.
1.3 Equipment Loan. Lender agrees to make an Equipment Loan to
Borrower on the Closing Date in the principal amount of $1,725,000, which
shall be repaid in successive monthly installments in accordance with the
terms of the Equipment Note. The monthly payments under the Equipment Loan
will be based on a seven-year amortization schedule, with each installment
due and payable on the first day of each month, commencing on September 1,
1997. The Equipment Loan shall be repaid in full upon the earlier to occur of
the end of the seven-year term, the end of the Original
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Term or any Renewal Term, or the termination of this Agreement. The Equipment
Loan shall be secured by all of the Collateral.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Revolving Credit Interest:
(a) Rate Options. At the time of each Revolving Credit Loan
under the Revolving Credit Facility, and thereafter from time to time, Borrower
shall have the right, subject to the terms and conditions of this Agreement and
provided no Default or Event of Default has occurred, to designate to Lender in
writing that all, or a portion of the Revolving Credit Loans shall bear interest
at either the (i) Revolving Credit LIBOR Rate or (ii) Revolving Credit Base
Rate. Interest on each portion thereof shall accrue and be paid at the time and
rate applicable to the respective option selected by Borrower or otherwise
governing under the terms of this Agreement. If for any reason the Revolving
Credit LIBOR Rate option is unavailable, or Borrower does not designate that the
Revolving Credit LIBOR Rate should apply, the Revolving Credit Base Rate shall
apply. The rate of interest on Revolving Credit Base Rate Loans shall increase
or decrease by an amount equal to any increase or decrease in the Base Rate
effective as of the opening of business on the day that any such change in the
Base Rate occurs.
(b) Revolving Credit LIBOR Rate Option. Provided no Default
or Event of Default has occurred, and subject to the provisions of Section 2.1.1
(a)(i) if Borrower desires to have the Revolving Credit LIBOR Rate apply to all
or a portion of the Revolving Credit Loans, Borrower shall give Lender a written
irrevocable request no later than 11:00 A.M. Eastern time on the third (3rd)
Business Day prior to the requested borrowing date specifying (i) the date the
Revolving Credit LIBOR Rate shall apply (which shall be a Business Day), (ii)
the Interest Period, and (iii) the amount to be subject to the Revolving Credit
LIBOR Rate provided that such amount shall be an integral multiple of Five
Hundred Thousand Dollars ($500,000.00).
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2.1.2 Term Interest:
(a) Rate Options. On the Closing Date, and thereafter from
time to time, Borrower shall have the right, subject to the terms and conditions
of this Agreement, and provided no Default or Event of Default has occurred, to
designate to Lender in writing that all, or a portion of the outstanding
principal balance of the Term Loan or the Equipment Loan (as so designated to
Lender in writing) shall bear interest at either the (i) Term LIBOR Rate or the
Equipment LIBOR Rate, as applicable, or (ii) Term Base Rate or Equipment Base
Rate, as applicable. Interest on each portion thereof shall accrue and be paid
at the time and rate applicable to the respective option selected by Borrower or
otherwise governing under the terms of this Agreement. If for any reason an
option is unavailable, Borrower may designate another option. If Borrower does
not elect any such option or, if, for any reason the Term LIBOR Rate or the
Equipment LIBOR Rate are not available, the Term Loan and Equipment Loan shall
bear interest at the Term Base Rate and/or the Equipment Base Rate, as
applicable. The rate of interest on the Term Base Rate Loans and Equipment Base
Rate Loans shall increase or decrease by an amount equal to any increase or
decrease in the Base Rate, effective as of the opening of business on the date
that any such change in the Base Rate occurs.
(b) Term LIBOR Rate Option. Provided no Default or Event
of Default has occurred, and subject to the provisions of Section 2.1.2(a)(i) if
Borrower desires to have the Term LIBOR Rate apply to all or a portion of the
Term Loan or the Equipment LIBOR Rate apply to all or a portion of the Equipment
Loan (as so designated to Lender in writing), Borrower shall give Lender a
written irrevocable request no later than 11:00 A.M. Eastern Time on the third
(3rd) Business Day prior to the requested borrowing date specifying (i) the date
the Term LIBOR Rate or Equipment LIBOR Rate, as applicable, shall apply (which
shall be a Business Day), (ii) the Interest Period, and (iii) the amount of the
Loan to be subject to the Term LIBOR Rate and/or the Equipment LIBOR Rate;
provided that such amount shall be an integral multiple of Five Hundred Thousand
($500,000.00).
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2.1.3 Default Rate of Interest. Upon and after the occurrence of
an Event o Default, and during the continuation thereof, the principal amount
of the Loans shall bear interest at a rate per annum equal to two percent
(2%) above the rate applicable with respect to Base Rate Loans.
2.1.4 Computation of Interest and Fees. Interest, fees and
collection charges hereunder shall be calculated daily and shall be computed
on the actual number of days elapsed over a year consisting of three hundred
and sixty (360) days.
2.1.5 Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder and charged or collected
pursuant to the terms of this Agreement exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If any provisions of this Agreement
are in contravention of any such law, such provisions shall be deemed amended
to conform thereto.
2.2 Documentation Fee. Borrower shall pay to Lender a documentation
fee of $100,000, which shall be fully earned and nonrefundable on the Closing
Date and shall be paid concurrently with the initial Loans hereunder.
2.3 Collateral Monitoring Fee. Borrower shall pay to Lender each
month, in arrears, on the first day of the following month, a collateral
monitoring fee of $1,000, which fee shall be pro-rated for any month during
which this Agreement is in effect for less than a full month.
2.4 Unused Availability Fee. Borrower shall pay to Lender an unused
availability fee, which shall be payable in arrears on the last day of each
calendar month hereafter. The unused availability fee shall equal one-quarter
of one percent (1/4%) per annum on the average daily amount during each month
by which the Total Credit Facility exceeds the aggregate amount of the Loans
outstanding as of the close of business on such day. Such fee shall be
pro-rated for any month during which this Agreement is in effect for less
than a full month.
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2.5 Audit and Appraisal Fees. Borrower shall pay to Lender audit and
appraisal fees from time to time in connection with Lender's periodic audits
and appraisals of Borrower's books and records and such other matters as
Lender shall deem appropriate, plus all out-of--pocket expenses incurred by
Lender in connection with such audits and appraisals. Such audit and
appraisal fees shall be calculated at the rate of $500 for each member of
Lender's field examination staff engaged in any such audit and appraisal for
each day during which such examination is being conducted and, absent the
occurrence and continuance of an Event of Default, such audits and appraisals
shall be conducted not more than three (3) times during each twelve (12)
month period, commencing as of the Closing Date. Audit fees shall be payable
on the first day of the month following the date of issuance by Lender of a
request for payment thereof to Borrower. Upon Borrower's request, Lender
shall provide to Borrower in reasonable detail the back-up and support of any
out-of-pocket expenses referred to herein.
2.6 Capital Adequacy Change. If Lender shall have determined that
the adoption of any law, rule or regulation regarding capital adequacy, or
any change therein or in the interpretation or application thereof, or
compliance by Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or
governmental authority (each such law, rule, regulation, request
or--directive a "Capital Adequacy Rule"), does or shall have the effect of
reducing the rate of return on Lender's capital as a consequence of its
obligations hereunder to a level below that which Lender could have achieved
but for such adoption, change or compliance (taking into consideration
Lender's policies with respect to capital adequacy) by a material amount,
then from time to time, after submission by Lender to Borrower of a written
demand therefor (a "Capital Adequacy Demand"), the Borrower shall pay to
Lender such additional amount or amounts (each a "Capital Adequacy Amount",
it being understood that Capital Adequacy Amount may include an increase in
the Applicable Interest Rate Margin) as will compensate Lender for such
reduction. A certificate of Lender claiming entitlement to payment as set
forth above shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to such
reduction, the additional Capital Adequacy Amount or Amounts to be paid to
Lender, and the method by
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which such Capital Adequacy Amounts were determined. In determining such Capital
Adequacy Amount, Lender may use any reasonable averaging and attribution method.
2.6.1 Termination of Agreement following Capital Adequacy
Demand. At its option, Borrower may elect to terminate this Agreement
following its receipt of a Capital Adequacy Demand, provided Borrower gives
Lender notice of such election not more than thirty (30) days following its
receipt of such Capital Adequacy Demand, and provided, further, that so long
ast and satisfaction in full of all Obligations occurs within one hundred and
eighty (180) days from the date of such notice, Borrower shall not be
obligated to pay any of the charges described in subsection 4.2.3, it being
understood, however, that until such effective date of termination and the
payment and satisfaction in full of all Obligations, Borrower shall continue
to be obligated to pay Lender for each Capital Adequacy Amount theretofore
requested by Lender pursuant to a Capital Adequacy Demand.
2.6.2 Subsequent Change in Capital Adequacy Rules. In the event
that any Capital Adequacy Rule, the adoption or change in or compliance by
Lender with which shall have resulted in a Capital Adequacy Demand, shall be
revised subsequent to the date of such Capital Adequacy Demand, such that, in
Lender's determination, its rate of return on capital shall be improved to a
level more favorable than the rate of return which, as a result of the
initial change in such Capital Adequacy Rule, precipitated such Capital
Adequacy Demand, then, in such event, effective promptly following such
determination, provided Borrower shall not have theretofore given to Lender a
notice of election to terminate in accordance with subsection 2.6.1: (i) in
the case of a Capital Adequacy Demand to increase the Applicable Interest
Rate Margin, Lender shall reduce the Applicable Interest Rate Margin by a
percentage; and (ii) in the case of a Capital Adequacy Demand for payment of
a fee or other charge, Lender shall rebate to Borrower a portion of such
payment, in each case which Lender shall determine to be reasonably
commensurate with the improvement in Lender's rate of return on capital
caused by the subsequent revision to the Capital Adequacy Rule.
Notwithstanding anything hereinabove to the contrary, Lender shall have no
obligation whatsoever to make any such adjustment to
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the Applicable Interest Rate Margin, or to otherwise rebate any Capital Adequacy
Amount to Borrower, at any time of an Event of Default; (ii) the date of
Borrower's notice of election to terminate in accordance with subsection 2.6.1;
or (iii) the effective date of termination of this Agreement.
2.7 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender or any Participating
Lender incurs reasonable legal or reasonable accounting expenses or any other
reasonable costs or reasonable out-of-pocket expenses in connection with (i) the
negotiation and preparation of this Agreement or any of the other Loan
Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents; (ii) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby; (iii)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, Borrower or any other Person) in any way relating to the Collateral,
this Agreement or any of the other Loan Documents or Borrower's affairs; (iv)
any attempt to enforce any rights of Lender or any Participating Lender against
Borrower or any other Person which may be obligated to Lender by virtue of this
Agreement or any of the other Loan Documents, including, without limitation, the
Account Debtors; or (v) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then all such reasonable legal and reasonable accounting expenses
and other reasonable costs and reasonable out of pocket expenses of Lender shall
be charged to Borrower. All amounts chargeable to Borrower under this Section
2.7 shall be Obligations secured by all of the Collateral, shall be payable on
demand to Lender or to such Participating Lender, as the case may be, and shall
bear interest from the date such demand is made until paid in full at the rate
applicable to Base Rate Loans from time to time. Borrower shall also reimburse
Lender for reasonable expenses incurred by the Lender in its administration of
the Collateral to the extent and in the manner provided in Section 6 hereof.
2.8 Bank Charges. Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender or any
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Participating Lender pays to a bank or other similar institution (including,
without limitation, any fees paid by the Lender to any Participating Lender)
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of Borrower, by Lender or any Participating Lender, proceeds of
Loans and (ii) the depositing for collection, by Lender or any Participating
Lender, of any check or item of payment received or delivered to Lender or any
Participating Lender on account of the Obligations.
2.9 Collection Charges. If items of payment are received by Lender at a
time when there are no Loans outstanding, such items of payment shall be subject
to a collection charge equal to two (2) days' interest on the amount thereof at
the rate then applicable to Revolving Credit Base Rate Loans, which collection
charges shall be payable on the first Business Day of each month.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the
Credit Facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Revolving Credit Loan Requests. A request for a Revolving
Credit Loan shall be made, or shall be deemed to be made, in the following
manner: (i) Borrower shall give Lender same day notice, no later than 11:00
A.M. (Eastern time) of such day, of its intention to borrow a Revolving
Credit Base Rate Loan, and at least three (3) Business Days prior notice of
its intention to borrow a Revolving Credit LIBOR Rate Loan, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date; provided, however, that no such request may be made at a time
when there exists a Default or an Event of Default and (ii) the becoming due
of any amount required to be paid under this Agreement, whether as interest
or for any other Obligation, shall be deemed irrevocably to be a request for
a Revolving Credit Loan on the due date in the amount required to pay such
interest or other Obligation. As an accommodation to Borrower, Lender may
permit telephone requests for Revolving Credit Loans and electronic
transmittal of instructions, authorizations, agreements or reports to Lender
by Borrower. Unless Borrower specifically directs Lender
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in writing not to accept or act upon telephonic or electronic communications
from Borrower, Lender shall have no liability to Borrower for any loss or damage
suffered by Borrower as a result of Lender's honoring any requests, executions
of any instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Lender by Borrower, and Lender shall have no duty to verify the origin
of any such communication or the authority of the person sending it. Each notice
of borrowing shall be irrevocable by and binding on Borrower, and if such notice
requests the borrowing of a LIBOR Rate Loan, such notice shall state the Inits
option, may choose Base Rate Loans or LIBOR Rate Loans, provided that any LIBOR
Rate Loan shall be in a minimum amount of $500,000, and provided, further, that
the right of Borrower to choose any LIBOR Rate Loan is subject to the provisions
of subsection 3.1.4.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes
Lender to disburse the proceeds of each Revolving Credit Loan requested, or
deemed to be requested, pursuant to this subsection 3.1.2. as follows: (i)
the proceeds of each Revolving Credit Loan requested under subsection
3.1.1(i) shall be disbursed by Lender via wire transfer, in the case of the
initial borrowing, in accordance with the terms of the written disbursement
letter from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Lender
from time to time or elsewhere if pursuant to a written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan requested under
subsection 3.1.1(ii) shall be disbursed by Lender by way of direct payment of
the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum
sufficient to pay all interest accrued on the Obligations during the
immediately preceding month and to pay all costs, fees and expenses at any
time owed by Borrower to Lender hereunder.
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3.1.4 Notice of Continuation and Notice of Conversion.
(a) Subject to the provisions of subsection 3.1.4(c),
Borrower may elect to maintain any borrowing consisting of LIBOR Rate Loans,
or any portion thereof, as a LIBOR Rate Loan by selecting a new Interest
Period for such borrowing, which new Interest Period shall commence on the
last day of the then existing Interest Period. Each selection of a new
Interest Period (a "Continuation") shall be made on three (3) Business Days'
prior notice, given by Borrower to Lender not later than 11:00 A.M. (Eastern
time) on the third (3rd) Business Day preceding the date of any proposed
Continuation. If the Borrower elects to maintain more than one borrowing
consisting of LIBOR Rate Loans by combining such borrowings into one
borrowing and selecting a new Interest Period pursuant to this subsection,
each of the borrowings so combined shall consist of Loans having Interest
Periods ending on the same date provided that Borrower may not combine
Revolving Credit LIBOR Rate Loans, Term LIBOR Loans and Equipment LIBOR Rate
Loans with each other. If the Borrower shall fail to select a new Interest
Period for any borrowing consisting of LIBOR Rate Loans in accordance with
this subsection, such LIBOR Rate Loans will automatically convert into
corresponding Base Rate Loans.
(b) Subject to the provisions of subsection 3.1.4 (c),
Borrower may, on three (3) Business Days' prior notice given to Lender,
convert the entire amount of or a portion of all Loans of the same Type into
Loans of another Type (a "Conversion"), provided, that no Default or Event of
Default shall have occurred and be continuing, and provided, further, that
any Conversion of any LIBOR Rate Loans into Base Rate Loans may only be made
on the last day of the Interest Period for such LIBOR Rate Loans, and upon
Conversion of any Base Rate Loans into LIBOR Rate Loans, Borrower shall pay
accruch such notice shall be given not later than 11:00 A.M. (Eastern time)
on the third (3rd) Business Day preceding the date of any proposed
Conversion. Each Conversion shall be in an aggregate amount of not less than
$500,000. Borrower may elect to convert the entire amount of or a portion of
all Loans of the same Type comprising more than one borrowing into Loans of
another Type by
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combining such borrowings into one borrowing consisting of Loans of such other
Type; provided, however, that if the borrowings so combined consist of LIBOR
Rate Loans, such LIBOR Rate Loans shall have Interest Periods ending on the same
date and provided further that Borrower may not combine Revolving Credit Loans,
all or a portion of the Term Loans and all or a portion of the Equipment Loans,
with each other.
(c) Notwithstanding anything contained in clauses (a) and
(b) above to the contrary:
(i) In the event that Borrower shall have requested a
LIBOR Rate Loan(s) in accordance with the terms hereof and Lender shall have
reasonably determined that Eurodollar deposits equal to the amount of the
principal of the requested LIBOR Rate Loan and for the Interest Period
specified are unavailable, impractical or unlawful, or that the rate based on
the LIBOR Rate will not adequately and fairly reflect the cost of funds of
the LIBOR Rate Loan applicable to the specified Interest Period, of making or
maintaining the principal amount of the requested LIBOR Rate Loan specified
by Borrower during the Interest Period specified, or that by reason of
circumstances affecting Eurodollar markets, adequate and reasonable means do
not exist for ascertaining the rate based on the LIBOR Rate applicable to the
specified Interest Period, Lender shall promptly give notice of such
determination to Borrower that the rate based on the LIBOR Rate is not
available. A reasonable determination by Lender hereunder shall be conclusive
evidence of the correctness of tsuch a determination, (A) the right of
Borrower to select, continue or convert to, or maintain a LIBOR Rate Loan at
the rate based on the LIBOR Rate shall be suspended until Lender shall have
notified Borrower that such conditions shall have ceased to exist, and (B)
the requested LIBOR Rate Loans shall accrue interest as if such Loans were
Base Rate Loans.
(ii) The LIBOR Rate may be automatically adjusted by
Lender on a prospective basis to take into account the additional or
increased cost of maintaining any necessary reserves for Eurodollar deposits
or increased costs due to changes in applicable law or regulation or the
interpretation thereof by
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Lender based on the Federal Reserve Board's or any other applicable agency's or
governing body's directive, mandate or interpretation, occurring subsequent to
the commencement of the then applicable Interest Period, including but not
limited to changes in tax laws (except changes of general applicability in
corporate income tax laws) and changes in the reserve requirements imposed by
the Board of Governors of the Federal Reserve System (or any successor or other
applicable governing body), excluding the Reserve Percentage and any Reserve
which has resulted in a payment pursuant to Section 2.6 below, that increase the
cost to Lender of funding the LIBOR Rate Loans. Lender shall promptly give
Borrower notice of such a determination and adjustment, which determination
shall be conclusive absent manifest error.
(iii) there shall not be outstanding at any one time
more than an aggregate of six (6) LIBOR Rate Loans.
(d) Each notice of Continuation or Conversion shall be
irrevocable and binding on Borrower. In the case of (i) any borrowing of a
Loan, Continuation or Conversion that the related notice of borrowing, notice
of Continuation or notice of Conversion specifies is to be comprised of LIBOR
Rate Loans, or (ii) any payment of principauch Loan as a result of a payment,
prepayment, Conversion or Continuation of such Loan or acceleration of the
maturity of any of the Obligations pursuant to Section 10 hereof, or for any
other reason, then in any such case, upon Lender's demand, Borrower shall pay
to Lender and indemnify Lender from and against (i) any loss, cost or expense
incurred by Lender as a result of any failure to fulfill, on or before the
date for such borrowing, Continuation or Conversion, the applicable
conditions set forth in Section 9 hereof, and (ii) any additional losses,
costs or expenses which Lender may reasonably incur as a result of such
payment, including, without limitation in each such case, any loss (excluding
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by Lender to
fund the LIBOR Rate Loans to be made as part of such borrowing, Continuation
or Conversion.
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3.1.5 Borrowing Base Certificates. Borrower shall give Lender a
Borrowing Base Certificate on a monthly basis; provided that if Borrower's
Availability is, at any time, less than $750,000, Borrower shall give Lender a
Borrowing Base Certificate on such more frequent basis as Lender may request.
3.2 Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to Lender specifically containing payment provisions
which are in conflict with this Section 3.2 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), the
Obligations shall be payable as follows:
3.2.1 Principal.
(a) Principal payable on account of Revolving Credit Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i)
the receipt by Lender or Borrower of any proceeds of any of the Collateral
other than Equipment, to the extent of said proceeds, (ii) the occurrence of
an Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations, or (iii) termination of this
Agreement pursuant to Section 4 hereof; provided, however, that if an
Overadvance shall exist at any time, Borrower shall, on demand, repay the
Overadvance.
(b) Principal payable on account of the Term Loan and the
Equipment Loan shall be payable by Borrower as set forth in Sections 1.2 and
1.3, respectively and the corresponding Term Note and Equipment Note.
3.2.2 Interest. Interest accrued on all Loans shall be due on the
earliest of (i) the first calendar day of each month (for the immediately
preceding month), computed through the last calendar day of the preceding month,
(ii) the occurrence of an Event of Default in consequence of which Lender elects
to accelerate the maturity and payment of the Obligations, or (iii) termination
of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by
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Borrower as and when provided in Section 2 hereof, to Lender or to any other
Person designated by Lender in writing.
3.2.4 Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to
Lender as and when provided in this Agreement, the Other Agreements or the
Security Documents, or on demand, whichever is later.
3.3 Prepayments.
3.3.1 Except for dispositions of Inventory permitted by Section
8.2.7, if Borrower sells any of the Collateral or if any of the Collateral is
lost or destroyed or taken by condemnation, Borrower shall pay to Lender, unless
otherwise agreed to by Lender, or as otherwise expressly authorized by this
Agreement, as and when received by Borrower and as a mandatory prepayment of the
outstanding Loans, until paid and satisfied in full, a sum equal to the proceeds
(including insurance proceeds) received by Borrower from such sale, loss or
destruction. Any such prepayment shall be applied first to the Term Loan or
Equipment Loan, as determined by Lender in its sole discretion, in the inverse
order of maturity and then to the Revolving Credit Loans; provided that if such
Loan is accruing interest at the LIBOR Based Rate, such prepayment shall be
delivered to Lender as and when received by Borrower but applied at the end of
the applicable Interest Period.
3.3.2 LIBOR Rate Loans. No portion of the LIBOR Rate Loans may be
prepaid during an Interest Period unless Borrower first satisfies in full its
obligations under Section 3.1.4(d) above arising from such prepayment.
3.3.3 Excess Cash Flow Recapture. Borrower shall, on an annual
basis, within ten (10) Business Days of delivery to Lender of Borrower's annual
consolidated financial statement, pursuant to Section 8.1.2(i), prepay the Term
Loan in an amount equal to fifty percent (50%) of Borrower's Cash Flow ("Cash
Flow Payments"). All Cash Flow Payments shall be applied to the Term Loan as
determined by Lender in the inverse order of maturity.
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3.4 Application of Payments and Collections. All items of payment
received by Lender by 12:00 noon, New York City time, on any Business Day shall
be deemed received on that Business Day. All items of payment received after
12:00 noon, New York City time, on any Business Day shall be deemed received on
the following Business Day. For the purpose of computing interest hereunder, all
items of payment received by Lender shall be deemed applied by Lender on account
of the Obligations (subject to final payment of such items) on the second
Business Day after receipt by Lender of good funds in Lender's account located
in Chicago, Illinois, or such other account as to which Lender may advise
Borrower in writing. Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Borrower upon
any of its books and records. If as the result of collections of Accounts as
authorized by subsection 6.4.6 hereof a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrower, but
shall be available to Borrower at any time or times for so long as no Default or
Event of Default exists.
3.5 All Loans to Constitute One Obligation. The Loans shall constitute
one general Obligation of Borrower, and shall be secured by Lender's Lien upon
all of the Collateral.
3.6 Loan Account. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are paid to Lender, and
may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrower.
3.7 Statements of Account. Lender will account to Borrower monthly with
a statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender
16
shall be deemed final, binding and conclusive upon Borrower unless Lender is
notified by Borrower in writing to the contrary within thirty (30) days of the
date such accounting is mailed to Borrower. Such notice shall only be deemed an
objection to those items specifically objected to therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Lender's right to cease making Loans
to Borrower upon or after the occurrence of any Default or Event of Default,
this Agreement shall be in effect for a period of five (5) years from the date
hereof, through and including July 8, 2002 (the "Original Term"), and this
Agreement shall automatically renew itself for one (1) year periods thereafter
(the "Renewal Terms"), unless (a) the party which elects not to renew this
Agreement gives at least one hundred and eighty (180) days written notice
thereof to the other party prior to the expiration of the Original Term (or the
then current Renewal Term, as the case may be) or (b) this Agreement shall be
sooner terminated as provided in Section 4.2 hereof.
4.2 Termination.
4.2.1 Termination by Lender. Lender may terminate this Agreement
without notice at any time on or after the occurrence of an Event of Default.
4.2.2 Termination by Borrower. Upon at least ninety (90) days
prior written notice to Lender, Borrower may, at its option, terminate this
Agreement; provided, however, no such termination shall be effective until
Borrower has paid all of the Obligations in immediately available funds. Any
notice of termination given by Borrower shall be irrevocable unless Lender
otherwise agrees in writing, and Lender shall have no obligation to make any
Loans on or after the termination date stated in such notice. Borrower may elect
to terminate this Agreement in its entirety only. No section of this Agreement
or Type of Loan available hereunder may be terminated singly.
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4.2.3 Termination Charges. At the effective date of any
termination of this Agreement by Borrower pursuant to subsection 4.2.2 hereof,
Borrower shall pay to Lender (in addition to the then outstanding principal,
accrued interest and other charges owing under the terms of this Agreement and
any of the other Loan Documents) as liquidated damages for the loss of the
bargain and not as a penalty, an amount equal to two percent (2%) of the Total
Credit Facility if termination occurs during the period from the Closing Date
through and including July 7, 1998, one percent (1%) of the Total Credit
Facility if termination occurs during the period from July 8, 1998 through and
including July 7, 1999, and one-half of one percent (1/2%) of the Total Credit
Facility if termination occurs during the period from July 8, 1999 through and
including July 7, 2000. Notwithstanding anything hereinabove to the contrary, no
termination charge shall be payable under any of the following circumstances:
(a) if termination of this Agreement occurs pursuant to and in accordance with
the terms of subsection 2.6.1; or (b) if termination of this Agreement occurs
after July 7, 2000, but on or before the last day of the Original Term or on the
last day of any Renewal Term.
4.2.4 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination, and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds, together with the applicable
termination charge, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests in
the Collateral unless, with respect to any loss or damage Lender may incur as a
result of dishonored checks or other items of payment received by Lender from
Borrower or any Account Debtor and applied to the Obligations, Lender shall, at
its option, (i) have received a written agreement executed by Borrower and by
any Person whose loans or other advances to Borrower are used in whole or in
part to satisfy the Obligations, indemnifying Lender from any such loss or
damage; or (ii) have retained such monetary reserves and Liens on
18
the Collateral for such period of time as Lender, in its reasonable discretion,
may deem necessary to protect Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing Lien upon all of the following Property and interests in such
Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) Deposit Accounts, Investment Property, money market
accounts and security entitlements, of every nature wherever located;
(vi) All monies, checks, notes and instruments of any kind,
now or at any time or times hereafter, in the possession or under the control of
Lender or a bailee or Affiliate of Lender;
(vii) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (vi) above;
and
(viii) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (vii)
above, including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral;
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5.2 Lien Perfection; Further Assurances. Borrower shall execute such
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's Lien
upon any of the Collateral and shall take such other action as may be required
to perfect or to continue the perfection of Lender's Lien upon the Collateral.
Unless prohibited by applicable law, Borrower hereby authorizes Lender to
execute and file any such financing statement on Borrower's behalf. The parties
agree that a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof. At Lender's request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 Location of Collateral. All Collateral, other than Inventory in
transit, will at all times be kept by Borrower at one or more of the business
locations set forth in Exhibit 6.1 hereto and shall not, without the prior
written approval of Lender, be moved therefrom except, prior to an Event of
Default and Lender's acceleration of the Obligations in consequence thereof, for
sales of Inventory in the ordinary course of business.
6.2 Insurance of Collateral. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability, flood and such other
risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Borrower shall deliver the originals or copies of such
policies to Lender with lender's loss payable endorsements, in form satisfactory
to Lender, naming Lender as sole loss payee, assignee or additional insured, as
appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than (30) days prior written notice to
Lender in the event of cancellation of the policy for any reason whatsoever and
a clause specifying that the interest of Lender shall not be impaired
20
or invalidated by any act or neglect of Borrower or the owner of the Property or
by the occupation of the premises for purposes more hazardous than are permitted
by said policy. If Borrower fails to provide and pay for such insurance, Lender
may, at its option, but shall not be required to, procure the same and charge
the Borrower therefor. Borrower agrees to deliver to Lender, promptly as
rendered, true copies of all reports made in any reporting forms to insurance
companies.
6.3 Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal or
local authority on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrower. If Borrower fails to promptly pay any portion
thereof when due, Lender may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. Lender shall not be liable or responsible
in any way for the safekeeping of any of the Collateral or for any loss or
damage thereto (except for reasonable care in the custody thereof while any
Collateral is in Lender's actual possession) or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier, forwarding
agency or other person whomsoever, but the same shall be at Borrower's sole
risk.
6.4 Administration of Accounts.
6.4.1 Records, Schedules and Assignments of Accounts. Borrower
shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Lender on such periodic basis as
Lender shall request a sales and collections report for the preceding period,
in form satisfactory to Lender. On or before the fifteenth day of each month
from and after the date hereof, Borrower shall deliver to Lender, in form
acceptable to Lender, a detailed aged trial balance of all Accounts existing
as of the last day of the preceding month, specifying the names, addresses,
face value, dates of invoices and due dates for each Account Debtor obligated
on an Account so listed ("Schedule of Accounts"), and, upon Lender's request
therefor, copies of proof of delivery and the original copy of all documents,
including, without limitation, repayment histories and present status reports
relating
21
to the Accounts so scheduled and such other matters and information relating to
the status of then existing Accounts as Lender shall reasonably request. In
addition, if at any time following the Closing Date, Accounts in an aggregate
face amount in excess of Five Hundred Thousand Dollars ($500,000) become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Eligible Accounts or otherwise
established by Lender, Borrower shall notify Lender of such occurrence on the
first Business Day following such occurrence and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of invoices
or invoice registers related thereto.
6.4.2 Discounts, Allowances, Disputes. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrowercredits, as the case may be, to Lender as part
of the next required Schedule of Accounts. If any amounts due and owing in
excess of One Hundred Thousand Dollars ($100,000) are in dispute between
Borrower and any Account Debtor, Borrower shall provide Lender with written
notice thereof at the time of submission of the next Schedule of Accounts,
explaining in detail the reason for the dispute, all claims related thereto and
the amount in controversy. Upon and after the occurrence of an Event of Default
which continues without cure for a period of fifteen (15) days, Lender shall
have the right to settle or adjust all disputes and claims directly with the
Account Debtor and to compromise the amount or extend the time for payment of
the Accounts upon such terms and conditions as Lender may deem advisable, and to
charge the deficiencies, costs and expenses thereof, including attorneys' fees,
to Borrower.
6.4.3 Taxes. If an Account includes a charge for any tax payable
to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing Authority for the
account of Borrower and to charge Borrower therefor; provided, however, that
Lender shall not
22
be liable for any taxes to any governmental taxing authority that may be due by
Borrower.
6.4.4 Account Verification. Whether or not a Default or an Event
of Default has occurred, any of Lender's officers, employees or agents shall
have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, telegraph or otherwise.
Borrower shall cooperate fully with Lender in an effort to facilitate and
promptly conclude any such verification process.
6.4.5 Maintenance of Dominion Account. Borrower shall maintain a
Dominion Account pursuant to a tripartite arrangement a arrangement shall
include such terms and conditions as are acceptable to Lender. All funds
deposited in the Dominion Account shall immediately become the property of
Lender, and Borrower shall obtain the agreement by such banks in favor of
Lender to waive any offset rights against the funds so deposited. Lender
assumes no responsibility for such arrangement, including, without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder.
6.4.6 Collection of Accounts; Proceeds of Collateral. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of its Accounts for Lender. All remittances received by Borrower
on account of Accounts, together with the proceeds of any other Collateral,
shall be held as Lender's property by Borrower as trustee of an express trust
for Lender's benefit, and Borrower shall immediately deposit same in kind in
the Dominion Account, except as otherwise permitted in this Agreement. Lender
retains the right at all times after the occurrence of a Default or an Event
of Default to notify Account Debtors that Accounts have been assigned to
Lender and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including reasonable attorneys' fees to
Borrower. Lender has no duty to protect, insure, collect or realize upon the
Accounts or preserve rights therein.
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6.5 Administration of Inventory.
6.5.1 Records and Reports of Inventory. Borrower shall keep
accurate and complete records of its Inventory. Borrower shall furnish to
Lender Inventory reports in form and detail satisfactory to Lender at such
times as Lender may request, but at least once each month, not later than the
twentieth day of such month. Borrower shall conduct a physical inventory no
less frequently than annually and shall provide to Lender a report based on
each such physical inventory promptly thereafter, together with such
supporting information as Lender shall request.
6.5.2 Returns of Inventory. If at any time or times hereafter
any Account Debtor returns any Inventory to Borrower, the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
Fifty Thousand Dollars ($50,000), Borrower shall immediately notify Lender of
the same, specifying the reason for such return and the location, condition
and intended disposition of the returned Inventory.
6.6 Records and Schedules of Equipment. Borrower shall keep accurate
records, itemizing and describing the kind, type, quality, quantity and value of
its Equipment, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
6.7 Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Base Rate Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to
enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender that:
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7.1.1 Organization and Qualification. Each of Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on Exhibit 7.1.1 hereto and in all other states and jurisdictions where
the character of its business or the nature of its activities make such
qualification necessary.
7.1.2 Corporate Power and Authority. Each of Borrower and its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the shareholders
of Borrower or any of its Subsidiaries; (ii) contravene Borrower's or any of its
Subsidiaries' charter, articles or certificate of incorporation or bylaws; (iii)
violate, or cause Borrower or any of its Subsidiaries to be in default under,
any provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award in effect having applicability to Borrower or any
of its Subsidiaries; (iv) result in a breach of or constitute a default under
any indenture or loan or credit agreement or any other agreement, lease or
instrument to which Borrower or any of its Subsidiaries is a party or by which
it or its Properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any of the Properties now owned or hereafter acquired by Borrower or
any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each of Borrower and its Subsidiaries
enforceable against it in accordance with its respective terms.
7.1.4 Capital Structure. Exhibit 7.1.4 hereto states (i) the
correct name of each of the Subsidiaries of Borrower, its jurisdiction of
incorporation and the percentage of its Voting
25
Stock owned by Borrower, (ii) the name of each of Borrower's corporate or joint
venture Affiliates and the nature of the affiliation, (iii) the number, nature
and holder of all outstanding Securities of Borrower and each Subsidiary of
Borrower and (iv) the number of authorized, issued and treasury shares of
Borrower and each Subsidiary of Borrower. Borrower has good title to all of the
shares it purports to own of the stock of each of its Subsidiaries, free and
clear in each case of any Lien other than Permitted Liens. All such shares have
been duly issued and are fully paid and non-assessable. There are no outstanding
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of Borrower or any of its Subsidiaries. There are no outstanding
agreements or instruments binding upon any of Borrower's shareholders relating
to the ownership of its shares of capital stock.
7.1.5 Corporate Names. Neither Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit 7.1.5 hereto. Except as set forth on Exhibit
7.1.5, neither Borrower nor any of its Subsidiaries has been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person.
7.1.6 Business Locations, Agent for Process. Each of Borrower's
and its Subsidiaries' executive offices and other places of business are as
listed on Exhibit 6.1 hereto. During the preceding one (1) year period, neither
Borrower nor any of its Subsidiaries has had an office, place of business or
agent for service of process other am as listed on Exhibit 6.1. Except as shown
on Exhibit 6.1, no Inventory is stored with a bailee, warehouseman or similar
party, nor is any Inventory consigned to any Person.
7.1.7 Title to Properties, Priority of Liens. Each of Borrower and
its Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its real
Property, and good title to all of the Collateral and all of its other Property,
in each case,
26
free and clear of all Liens except Permitted Liens. Borrower has paid or
discharged all lawful claims which, if unpaid, might become a Lien against any
of Borrower's Properties that is not a Permitted Lien. Exceically and expressly
provide otherwise, the Liens granted to Lender under Section 5 hereof are first
priority perfected Liens.
7.1.8 Accounts. Lender may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to
be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide 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 and forming a part of the
contract between Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest therein, is
not, and will not (by voluntary act or omission of the Borrower) be in the
future, subject to any offset, Lien, deduction, defense, dispute, counterclaim
or any other adverse condition known to Borrower (or with respect to which
Borrower should reasonably have had such knowledge), except for a dispute
resulting in returned goods where such dispute is deemed by Lender to be
immaterial, and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
27
(v) Borrower has made no agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of any such
Account or any deduction therefrom, except discounts or allowances which are
granted by Borrower in the ordinary course of its business for prompt payment
and which are reflected in the calculation of the net amount of each respective
invoice related thereto and are reflected in the Schedules of Accounts submitted
to Lender pursuant to Section 6.4 hereof;
(vi) There are no facts, events or occurrences which in any
way impair the validity or enforceability of any Accounts or tend to reduce the
amount payable thereunder from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account Debtor
thereunder (i) had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor is
Solvent; and
(viii) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
7.1.9 Equipment. The Equipment is in good operating condition and
repair, and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted.
7.1.10 Financial Statements, Fiscal Year. Borrower has caused
to be furnished year end audited financial statements for JEH Company as of
December 31, 1994, December 31, 1995 and December 31, 1996. Borrower shall
deliver to Lender a Closing Balance Sheet (as defined in the Asset Purchase
Agreement), within 120 days following the Closing Date. The fiscal year of
Borrower and each of its Subsidiaries ends on June 30 of each year.
28
7.1.11 Full Disclosure. The financial statements referred to
in subsection 7.1.10 hereof do not (to the best of Borrower's knowledge), nor
does this Agreement or any other written statement of Borrower to Lender,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading.
There is no fact which Borrower has failed to disclose to Lender in writing
which materially affects adversely or, so far as Borrower can now foresee, will
materially affect adversely the Property, business, prospects, profits or
condition (financial or otherwise) of Borrower or any of its Subsidiaries or the
ability of Borrower or its Subsidiaries to perform this Agreement or the other
Loan Documents.
7.1.12 Solvent Financial Condition. Each of Borrower and its
Subsidiaries is now, and, after giving effect to the Loans to be made, at all
times will be, Solvent.
7.1.13 Surety Obligations. Neither Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract nor has Borrower or any of its Subsidiaries issued or
entered into any agreement to assure payment, performance or completion of
performance of any undertaking or obligation of any other Person.
7.1.14 Taxes. Borrower's federal tax identification number is
58-2324924. The federal tax identification number of each of Borrower's
Subsidiaries is shown on Exhibit 7.1.14 hereto. Borrower and each of its
Subsidiaries has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all taxes, assessments, fees, levies and other governmental charges
upon it, its income and property as and when such taxes, assessments, fees,
levies and charges are due and payable, unless and to the extent any thereof are
being actively contested in good faith and by appropriate proceedings, and
Borrower maintains reasonable reserves on its books therefor. The provision for
taxes on the books of Borrower and its Subsidiaries is adequate for all years
not closed by applicable statutes, and for its current fiscal year.
29
7.1.15 Brokers. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement, other than the $350,000 fee to be paid by
Borrower to Geneva Corporate Finance, Inc. in connection with the acquisition
contemplated by the Asset Purchase Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each of
Borrower and its Subsidiaries owns or possesses all the patents, trademarks,
service marks, trade names, copyrights and licenses necessary for the present
and planned future conduct of its business without any known conflict with the
rights of others. All such patents, trademarks, service marks, tradenames,
copyrights, licenses and other similar rights are listed on Exhibit 7.1.16
hereto.
7.1.17 Governmental Consents. Each of Borrower and its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate
its Property as now owned or leased and operated by it.
7.1.18 Compliance with Laws. Each of Borrower and its
Subsidiaries has duly complied with, and its Property, business operations
and leaseholds are in compliance in all material respects with, the
provisions of all federal, state and local laws, rules and regulations
applicable to Borrower or such Subsidiary, as applicable, its Property or the
conduct of its business, and there have been no citations, notices or orders
of noncompliance issued to Borrower or any of its Subsidiaries under any such
law, rule or regulation. Each of Borrower and its Subsidiaries has
established and maintains an adequate monitoring system to insure that it
remains in compliance with all federal, state and local laws, rules and
regulations applicable to it. No Inventory has been produced in violation of
the Fair Labor Standards Act (29 U.S.C. ss. 201 et seq.), as amended.
7.1.19 Restrictions. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement or
30
charter or other corporate restriction which materially and adversely af a
party or subject to any contract or agreement which restricts its right or
ability to incur Indebtedness, other than as set forth on Exhibit 7.1.19
hereto, none of which prohibit the execution of or compliance with this
Agreement or the other Loan Documents by Borrower or any of its Subsidiaries,
as applicable.
7.1.20 Litigation. Except as set forth on Exhibit 7.1.20
hereto, there are no actions, suits, proceedings or investigations pending, or,
to the knowledge of Borrower, threatened, against or affecting Borrower or any
of its Subsidiaries, or the business, operations, Property, prospects, profits
or condition of Borrower or any of its Subsidiaries. Neither Borrower nor any of
its Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
or Borrower's performance hereunder, constitute a Default or an Event of
Default. Neither Borrower nor any of its Subsidiaries is in default, and no
event has occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default in
the payment of any Indebtedness to any Person for Money Borrowed.
7.1.22 Leases. Exhibit 7.1.22(a) hereto is a complete listing
of all capitalized leases of Borrower and its Subsidiaries, and Exhibit
7.1.22(b) hereto is a complete listing of all operating leases of Borrower and
its Subsidiaries. Each of Borrower and its Subsidiaries is in full compliance
with all of the terms of each of its respective capitalized and operating
leases.
7.1.23 Pension Plans. Except as disclosed on Exhibit 7.1.23
hereto, neither Borrower nor any of its Subsidiaries has any Plan. Borrower and
each of its Subsidiaries is in full compliance with the requirements of ERISA
and the regulations promulgated thereunder with respect to each Plan. No fact or
situation that
31
could result in a material adverse change in the financial condition of Borrower
or any of its Subsidiaries exists in connection with any Plan. Neither Borrower
nor any of its Subsidiaries has any withdrawal liability in connection with a
Multiemployer Plan.
7.1.24 Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower or any of its Subsidiaries and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower or any of its Subsidiaries,
or with any material supplier, and there exists no present condition or state of
facts or circumstances which would materially affect adversely Borrower or any
of its Subsidiaries or prevent Borrower or any of its Subsidiaries from
conducting such business after the consummation of the transaction contemplated
by this Agreement in substantially the same manner in which it has heretofore
been conducted.
7.1.25 Labor Relations. Except as described on Exhibit 7.1.25
hereto, neither Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any of
its Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and in the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Borrower's or its Subsidiaries' business or operations
that would render the information in any exhibit attached hereto either
inaccurate, incomplete or misleading, so long as Lender has consented to such
changes or such changes are expressly permitted by this Agreement.
32
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 Visits and Inspections. Permit representatives of Lender,
from time to time, as often as may be reasonably requested, but only during
normal business hours, to visit and inspect the Property of Borrower and each of
its Subsidiaries, inspect, audit and make extracts from its books and records,
and discuss with its officers, its employees and its independent accountants,
Borrower's and each of its Subsidiaries' business, assets, liabilities,
financial condition, business prospects and results of operations.
8.1.2 Financial Statements. Keep, and cause each Subsidiary to
keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with sound financial
and business practices, in a manner consistent with the information previously
provided to Lender, reflecting all its financial transactions, and cause to be
prepared and furnished to Lender the following:
(i) not later than one hundred and twenty (120) days after the
close of each fiscal year of Borrower, unqualified 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
(except for a qualification with respect to (A) the reasonableness
33
of fees, charges or credits between or among Borrower, Parent or any Affiliates
or (B) changes in accounting principles with which the accountants concur);
(ii) not later than forty-five (45) days after the end of each
fiscal month hereafter (other than the first and last fiscal month of each
fiscal year, as to which Borrower shall have no obligation to deliver to Lender
financial statements as at and for the end of such fiscal months), 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 chief financial officer
of Borrower as 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;
(iii) 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 Public 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;
(iv) promptly after the filing thereof, copies of any
annual report to be filed with ERISA in connection with each Plan;
(v) 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 Borrower's and each of its Subsidiaries' financial condition
or results of operations.
Concurrently with the delivery of the financial statements described in
clause (i) of this subsection 8.1.2, Borrower shall forward to Lender a copy of
the accountants' letter, if any, to Borrower's management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall
34
furnish to Lender a certificate of the aforesaid certified public accountants
certifying to Lender that, based upon their examination of the financial
statements of Borrower and its Subsidiaries performed in connection with their
examination of said financial statements, they are not aware of any Default or
Event of Default, or, if they are aware of such Default or Event of Default,
specifying the nature thereof, and acknowledging, in a manner satisfactory to
Lender, that they are aware that Lender is relying on such financial statements
in making its decisions with respect to the Loans. Concurrently with the
delivery of the financial statements described in clauses (i) and (ii) of this
subsection 8.1.2, or mpliance certificate in the form of Exhibit 8.1.2 hereto
executed by the chief financial officer of Borrower.
8.1.3 Landlord and Storage Agreements. Provide Lender with
copies of all agreements between Borrower or any of its Subsidiaries and any
landlord or warehouseman which owns any premises at which any Inventory may,
from time to time, be kept.
8.1.4 Subordinations. Provide Lender with a debt subordination
agreement or other instrument, in form and substance satisfactory to Lender,
executed by Borrower and in the case of such agreement executed by any Person
who is an officer, director or Affiliate of the Person to whom Borrower is or
hereafter becomes indebted for Subordinated Debt, subordinating in right of
payment and claim all of such Subordinated Debt, and any future advances thereon
to the full and final payment and performance of the Obligations.
8.1.5 Guarantor Financial Statements. Deliver or cause to be
delivered to Lender financial statements for each Guarantor in form and
substance satisfactory to Lender at such intervals and covering such time
periods as Lender may request. Without limiting the generality of the foregoing,
Borrower shall deliver to Lender, or cause the Parent to deliver to Lender:
(i) no later than one hundred and twenty (120) days after the
close of each fiscal year of the Parent, unqualified audited financial statement
of the Parent and its Subsidiaries as
35
of the end of such year, on a Consolidated and consolidating basis; and
(ii) not later than forty-five (45) days after the end of
each fiscal quarter hereafter, unaudited interim financial statements of the
Parent and its Subsidiaries as of the end of such quarter and of the portion of
the Parent's fiscal year then elapsed, on a Consolidated and consolidating
basis, certified by the chief financial officer of the Parent as fairly
presenting the Consolidated financial position and results of operations of the
Parent and its Subsidiaries for such quarter and period subject only to changes
from audit and year-end adjustments and except that such statements need not
contain notes;
8.1.6 Projections. No later than ten (10) days prior to the
end of each fiscal year of Borrower, deliver to Lender Projections of the
financial conditions and results of operation of Borrower for the next
succeeding fiscal year, such Projections to be prepared on a month-to-month
basis.
8.1.7 Notices. Promptly notify Lender in writing of the
occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or in any of the other Loan
Documents inaccurate, incomplete or misleading.
8.2 Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1 Mergers, Consolidations, Acquisitions. Merge or onsolidate,
or permit any Subsidiary of Borrower to merge or consolidate, with any Person;
nor acquire, nor permit any of its Subsidiaries to acquire, all or any
substantial part of the Property of any Person, without Lender's prior written
consent.
8.2.2 Loans. Make, or permit any Subsidiary of Borrower to
make, any loans or other advances of money (other than for salary, travel
advances, advances against commissions and other similar advances in the
ordinary course of business) to (i) Persons other than Parent or an Affiliate,
in excess of $250,000, in the
36
aggregate outstanding at any one time during any fiscal year of the Borrower,
and (ii) Parent and/or any Affiliate in excess of $500,000, in the aggregate
outstanding at any one time during any fiscal year of the Borrower.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to
exist, or permit any Subsidiary of Borrower to create, incur or suffer to exist,
any Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Indebtedness of any Subsidiary of Borrower to Borrower;
(iii) accounts payable to trade creditors and obligations and
accruals for current operating expenses (other than for Money Borrowed) which
are not aged more than one hundred twenty (120) days from billing date or more
than thirty (30) days from due date, in each case incurred in the ordinary
course of business and paid within such time period, unless the same are being
actively contested in good faith and by appropriate and lawful proceedings; and
Borrower or such Subsidiary shall have set aside such reserves, if any, with
respect thereto as are required by GAAP and deemed adequate by Borrower or
such Subsidiary and its independent accountants;
(iv) Obligations to pay Rentals permitted by subsection 8.2.9;
(v) Permitted Purchase Money Indebtedness;
(vi) contingent liabilities arising out of (A) guarantees
permitted under subsection 8.2.6 or as otherwise permitted in this Agreement,
(B) endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business and (C) payments under lease
agreements, employment agreements and other agreements entered into in the
ordinary course of business upon fair and reasonable terms;
(vii) Indebtedness owing by Borrower or any Subsidiary of
Borrower to the Parent or to any other Affiliate in
37
respect of intercompany advances or charges, provided such advances or charges
are made and incurred in the ordinary course of business pursuant to and
consistent with prior practices of the Parent or any Affiliate of the Parent;
(viii) Indebtedness which is secured exclusively by real
Property;
(ix) Subordinated Debt;
(x) Indebtedness of Borrower under the Asset Purchase
Agreement; and
(xi) Indebtedness not included in paragraphs (i) through (x)
above, or not otherwise specifically permitted under this Agreement, which does
not exceed at any time, in the aggregate, the sum of One Million Five Hundred
Thousand Dollars ($1,500,000).
8.2.4 Affiliate Transactions. Enter into, or be a party to, or
permit any Subsidiary of Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower, except: (i) in the ordinary course
of Borrower's or such Subsidiary's business and on terms no less favorable to
Borrower or such Subsidiary than Borrower or such Subsidiary could obtain in a
comparable arm's length transaction with a Person not an Affiliate of Borrower
or such Subsidiary; (ii) as otherwise specifically permitted in this Agreement,
in the other Loan Documents or in any waiver of the terms of this covenant
agreed to in writing by Lender (which waiver will not be unreasothe first year
of the Agreement and up to $1,200,000 per each year of the Agreement thereafter
(exclusive of amounts paid by Borrower to Parent for federal income tax
obligations of Borrower), rent, interest and other intercompany transactions by
and between Borrower or any Subsidiary of Borrower, on the one hand, and an
Affiliate of or Parent of Borrower, on the other hand, in fact or in substance
not inconsistent with past practices of Parent and its Affiliates.
38
8.2.5 Limitation on Liens. Create or suffer to exist, or permit
any Subsidiary of Borrower to create or suffer to exist, any Lien upon any of
its Property (exclusive of real Property) income or profits, whether now owned
or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to
any of the Provisions of ERISA) not yet due, or being contested in the manner
described in subsection 7.1.14 hereto, but only if in Lender's judgment such
Lien does not adversely affect Lender's rights or the priority of Lender's Lien
in the Collateral;
(iii) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if payment in respect of
any such Lien is not at the time required and such Liens do not, in the
aggregate, materially detract from the value of the Property (exclusive of real
Property) of Borrower or materially impair the use thereof in the operation of
Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or to another such Subsidiary;
(vi) such other Liens as appear on Exhibit 8.2.5 hereto; and
(vii) such other Liens as Lender may hereafter approve in
writing.
8.2.6 Guarantees. Guaranty, indemnify, or otherwise agree to
become liable for the payment or performance by any other Person of any
Indebtedness or other liabilities or obligations of such Person, except:
(i) as otherwise described under subsection 8.2.3 (vi)(B) and
8.2.3(x); and
39
(ii) for the guaranty by Borrower of an Affiliate's payment or
performance obligations arising under any instrument or agreement in respect of
Indebtedness for which such Affiliate is liable and which Indebtedness is
secured by a mortgage or deed of trust in favor of the holder of such
Indebtedness against real Property the title to or ownership of which is in such
Affiliate, provided, that, (A) Borrower is the tenant-in-possession of such real
Property and (B) the maximum liability of Borrower under all such guarantees
does not exceed $1,500,000 in the aggregate at any one time outstanding.
8.2.7 Disposition of Assets. Sell or otherwise dispose of any of,
or permit any Subsidiary of Borrower to sell or otherwise dispose of any of,
its Property (exclusive of real Property), including any disposition of Property
(exclusive of real Property) as part of a sale and leaseback transaction, to or
in favor of any Person, except, in each case, for so long as no Event of Default
exists hereunder: (i) sales of Inventory and sales of other Property which does
not constitute Collateral, in each case in the ordinary course of business; (ii)
a transfer of Property to Borrower by a Subsidiary of Borrower; (iii) transfers
of Property (other than Collateral) by Borrower to (A) any Affiliate, including
the Parent, in satisfaction of indebtedness and (B) the Parent as a dividend, so
long as, in each case, such transfer is made in the ordinary course of business
or pursuant to and consistent with prior practices of any Affiliate, including
Parent, so long as such dividends are otherwise permitted by this Agreement, or
(iv) other dispositions expressly authorized by this Agreement.
8.2.8 Bill-and-Hold Sales, Etc. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
8.2.9 Leases. Become, or permit any of its Subsidiaries to
become, a lessee under any operating lease (other than a lease under which
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of twelve (12) consecutive
months under the lease in question and all other leases under which Borrower or
any of its Subsidiaries is then lessee would exceed One Million
40
Five Hundred Thousand Dollars ($1,500,000); provided, however, that not more
than an additional aggregate sum of Seven Hundred Fifty Thousand Dollars
($750,000) may be payable during any current or future period of twelve (12)
consecutive months for Rentals payable (a) under operating leases and (b)
pursuant to Capitalized Lease Obligations, in each case entered into or
incurred, as the case may be, on or after the Closing Date with respect to
Property consisting of Equipment. The term "Rentals" means, as of the date of
determination, all payments which the lessee is required to make by the terms of
any lease, exclusive of occupancy costs.
8.2.10 Capital Expenditures. Make Capital Expenditures (other
than payments on Capitalized Lease Obligations) which, as to Borrower and/or any
of its Subsidiaries exceed $600,000, in the aggregate, during any fiscal year of
Borrower or be obligated for Capitalized Lease Obligations in excess of $750,000
during any fiscal year of Borrower or any of its Subsidiaries.
8.2.11 Distributions. Declare or make, or permit any Subsidiary of
Borrower to declare or make, any Distributions.
8.2.12 Stock of Borrower and/or Subsidiaries. Issue, or permit
any of its Subsidiaries to issue, any additional shares of its capital stock
except director's qualifying shares and except in respect to stock options to
Borrower's directors or management, or in conjunction with an initial public
offering.
8.2.13 Restricted Investment. Make or have, or permit any
Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.14 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than Parent or a Subsidiary
of Borrower.
8.3 Specific Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants and agrees that unless otherwise consented to by Lender in writing, it
shall:
41
8.3.1 Minimum Adjusted Tangible Net Worth. Maintain at all times
an Adjusted Tangible Net Worth of not less than the amount of the actual Net
Worth as shown on Closing Balance Sheet less $500,000.
8.3.2 Cash Flow. Achieve Cash Flow of not less than the amount
shown below for the period corresponding thereto:
Period Amount
-------- ------
3 month period ending September 30, 1997 $(150,000)
6 month period ending December 31, 1997 $(150,000)
9 month period ending March 31, 1998 $(150,000)
12 month period ending June 30, 1998,
September 30, 1998 and December 31, 1998 $(150,000)
12 month period ending March 31, 1999, and
for each fiscal quarter thereafter on a
rolling 4-quarter basis $ 0.00
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other sections of this Agreement, Lender shall not be required to make
any Loan under this Agreement unless and until each of the following conditions
has been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments, opinions and certificates as Lender and its counsel shall require
in connection therewith from time to time, all in form and substance
satisfactory to Lender and its counsel, including without limitation, the
following:
42
(A) Certified copies of Borrower's casualty insurance policies,
together with loss payable endorsements on Lender's standard form of Lender Loss
Payee naming Lender as lender loss payee, and certified copies of Borrower's
liability insurance policies, together with endorsements naming Lender as
additional insured;
(B) Certified copies of (i) resolutions of Borrower's and
Parent's respective board of directors authorizing the execution and delivery of
this Agreement and the Loan Documents (as applicable) and the performance of all
transactions contemplated hereby and thereby, (ii) Borrower's and Parent's
by-laws, and (iii) an incumbency certificate of Borrower and Parent;
(C) A copy of the Articles or Certificate of Incorporation of
Borrower and Parent, and all amendments thereto, certified by the Secretary of
State or other appropriate official of its respective jurisdiction of
incorporation;
(D) Good standing certificates for Borrower and Parent, issued
by the Secretary of State or other appropriate official of Borrower's and
Parent's jurisdiction of incorporation and each jurisdiction where the conduct
of Borrower's business activities or the ownership of its Properties
necessitates qualification;
(E) A closing certificate signed by the Chief Executive Officer of
Borrower dated as of the date hereof, stating that (i) the representations and
warranties set forth in Section 7 hereof are true and correct on and as of such
date, (ii) Borrower is, on such date, in compliance with all the terms and
provisions set forth in this Agreement and (iii) on such date no Default or
Event of Default has occurred or is continuing;
(F) The Security Documents duly executed, accepted and
acknowledged by or on behalf of each of the signatories thereto;
(G) The Other Agreements duly executed and delivered by Borrower;
(H) The favorable, written opinion of Carlton, Fields, Ward,
Emmanuel, Smith & Cutter, P.A., counsel to Borrower, as to
43
the transactions contemplated by this Agreement and any of the other Loan
Documents;
(I) Written instruction from Borrower directing the application of
proceeds of the initial Loans made pursuant to this Agreement, and an initial
Borrowing Base Certificate from Borrower;
(J) Duly executed agreement establishing the Dominion Account
with a financial institution acceptable to Lender for the collection or
servicing of the Accounts;
(K) Payment of all fees and expenses owing hereunder;
(L) Landlord Waivers for each of Borrower's locations as listed
on Exhibit 6.1 hereto;
(M) Surety Agreement from Parent;
(N) UCC-1 Financing Statements;
(O) Duly executed subordination agreements with respect to the
Subordinated Debt;
(P) Evidence that the transactions contemplated by the Asset
Purchase Agreement have been consummated.
(Q) Such other documents, instruments and agreements as Lender
shall reasonably request in connection with the foregoing matters.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in
the other Loan Documents, shall have been satisfied or waived by Lender in
writing.
9.4 Adjusted Availability. Lender shall have determined that
immediately after giving effect to (i) the making of the initial Loans requested
to be made on the Closing Date and (ii) the payment or reimbursement by Borrower
to Lender for all fees and costs incurred or payable in connection with the
transactions
44
contemplated hereby and due on the Closing Date, Adjusted Availability shall not
be less than One Million Five Hundred Thousand Dollars ($1,500,000), where
Adjusted Availability shall mean the excess, if any, of Availability over that
portion, if any, of Borrower's trade accounts payable outstanding on the Closing
Date which remains unpaid beyond the due date of the relevant account payable.
9.5 No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of, this
Agreement or the consummation of the transactions contemplated hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrower shall: (i) fail to make
any payment of interest, fees, expenses or principal under the Term Loan or
the Equipment Loan, or other Obligations (except those described in clause (ii)
hereof) payable under this Agreement on the due date thereof and such failure
shall continue without cure for three (3) days, provided that such three (3) day
cure period shall not be applicable if such payments are due and payable due to
maturity, or on demand or acceleration following an Event of Default; or (ii)
fail to make any payment of principal under the Revolving Credit Loans on the
due date thereof (whether due at stated maturity, on demand, upon acceleration
or otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or Guarantor in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
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10.1.3 Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2, 6.1,
6.4, 8.1.1, 8.1.2, 8.2 (other than subsection 8.2.5, but only to the extent set
forth in subsection 10.1.4) or 8.3 hereof, on the date that Borrower is required
to perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Borrower shall fail or neglect
to keep or observe (i) any covenant contained in subsection 8.2.5 (ii) or (iii),
to the extent any Lien referred to therein and which Borrower has suffered to
exist has been created or arises without Borrower's knowledge or consent or (ii)
any other covenant contained in this Agreement (other than a covenant which is
dealt with specifically elsewhere in Section 10.1 hereof) and in either case the
breach of such covenant is not cured to Lender's satisfaction within twenty (20)
days after the sooner to occur of Borrower's receipt of notice of such breach
from Lender or the date on which such failure or neglect first becomes known to
any officer of Borrower.
10.1.5 Default Under Security Documents/Other Agreements. Any
event of default shall occur under, or Borrower shall default in the performance
or observance of any covenant, condition or agreement contained in, any of the
Security Documents or the Other Agreements and such default shall continue
beyond any applicable grace period.
10.1.6 Other Defaults. There shall occur any default or event of
default on the part of Borrower under any agreement, document or instrument to
which Borrower is a party or by which Borrower or any of its Property is bound,
creating or relating to any Indebtedness (other than the Obligations) if the
payment or maturity of such Indebtedness is accelerated in consequence of such
event of default or demand for payment of such Indebtedness is made.
10.1.7 Uninsured Losses. Any loss, theft, damage or destruction
of any of the Collateral not fully covered (subject to such deductibles as
Lender shall have permitted) by insurance shall have occurred, and such loss,
theft, damage or destruction shall
46
have a material adverse effect on Borrower's financial condition, Property or
business prospects.
10.1.8 Adverse Changes. There shall occur any material adverse
change in the financial condition, Property or business prospects of Borrower.
10.1.9 Insolvency and Related Proceedings. Borrower or any
Guarantor shall cease to be Solvent or shall suffer the appointment of a
receiver, trustee, custodian or similar fiduciary, or shall make an assignment
for the benefit of creditors, or any petition for an order for relief shall be
filed by or against Borrower, any Subsidiary of Borrower or any Guarantor under
the Bankruptcy Code (if against Borrower, any Subsidiary of Borrower or any
Guarantor, the continuation of such proceeding for more than sixty (60) days),
or Borrower or any Guarantor shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally.
10.1.10 Business Disruption. There shall occur a cessation of
a substantial part of the business of Borrower or any Subsidiary of Borrower for
a period which significantly affects Borrower's or such Subsidiary's capacity to
continue its business, on a profitable basis; or Borrower or any Subsidiary of
Borrower shall suffer the loss or revocation of any license or permit now held
or hereafter acquired by Borrower or such Subsidiary which is necessary to the
continued or lawful operation of its business; or Borrower or any Subsidiary
shall be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs.
10.1.11 Change of Ownership; etc. The Parent or the shareholders
of Parent as of the Closing Date shall cease to own or control, beneficially and
of record, all of the issued and outstanding capssued and outstanding capital
stock of the Parent or Borrower, or Frederick M. Friedman shall cease to own or
control beneficially, at least fifteen percent (15%) of the issued and
outstanding capital stock of the Parent or Borrower, or both Douglas P. Fields
and Frederick M. Friedman shall cease to be
47
actively engaged in the senior management of Borrower's business affairs or upon
any sale or transfer permitted hereunder by the Parent of the issued and
outstanding capital stock of Borrower, the Parent shall fail to then deliver to
Lender a writing executed by the Parent confirming the continuing effectiveness
of the Guaranty Agreement executed by it in favor of the Lender, which writing
shall contain a reaffirmation by the Parent of its continuing liability under
the Surety Agreement in accordance with its terms.
10.1.12 ERISA. A Reportable Event shall occur which Lender, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower, any Subsidiary of Borrower or any Guarantor is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrower's, such Subsidiary's or such
Guarantor's complete or partial withdrawal from such Plan.
10.1.13 Challenge to Agreement. Borrower, any Subsidiary of
Borrower or any Guarantor, or any Affiliate of any of them, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted to
Lender.
10.1.14 Repudiation of or Default Under Surety Agreement. Any
Guarantor shall revoke or attempt to revoke the Surety Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
10.1.15 Criminal Forfeiture. Borrower, any Subsidiary of
Borrower or any Guarantor shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Property of Borrower, any Subsidiary
of Borrower or any Guarantor.
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10.1.16 Judgments. Any money judgment, writ of attachment or
similar process, singly, or in the aggregate, in each case in excess of
$250,000, is filed against Borrower, any Subsidiary of Borrower or any
Guarantor, or any of their respective Property and such judgment, writ of
attachment or similar process is not satisfied, bonded to the satisfaction of
Lender or stayed, in each case within 45 days of such filing.
10.2 Acceleration of the Obligations. Without in any way limiting
the right of Lender to demand payment of any portion of the Obligations
payable on demand in accordance with Section 3.2 hereof, upon or at any time
after the occurrence of an Event of Default, all or any portion of the
Obligations shall, at the option of Lender and without presentment, demand
protest or further notice by Lender, become at once due and payable, and
Borrower shall forthwith pay to Lender the full amount of such Obligations,
provided, that upon the occurrence of an Event of Default specified in
subsection 10. 1.9 hereof, all of the Obligations shall become automatically
due and payable without declaration, notice or demand by Lender.
10.3 Other Remedies. Upon and after the occurrence of an Event of
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
10.3.1 All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable rights
to which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of
49
Borrower, Borrower agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable. Borrower agrees that ten (10) days
written notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Lender may designate in said notice. Lender shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
law, private sale and, in lieu of actual payment of such purchase price, may set
off the amount of such price against the Obligations. The proceeds realized from
the sale of any Collateral may be applied, after allowing two (2) Business Days
for collection, first to the costs, expenses and attorneys' fees incurred by
Lender in collecting the Obligations, in enforcing the rights of Lender under
the Loan Documents and in collecting, retaking, completing, protecting,
removing, storing, advertising for sale, selling and delivering any Collateral;
second to the interest due upon any of the Obligations; and third, to the
principal of the Obligations. If any deficiency shall arise, Borrower shall
remain liable to Lender therefor.
10.3.4 Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral, and Borrower's rights under all licenses
and all franchise agreements shall inure to Lender's benefit.
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10.4 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary
hereto or in any schedule or in any Surety Agreement given to Lender or
contained in any other agreement between Lender and Borrower, heretofore,
concurrently, or hereafter entered into, shall be deemed cumulative to and
not in derogation or substitution of any of the terms, covenants, conditions,
or agreements of Borrower herein contained. The failure or delay of Lender to
require strict performance by Borrower of any provision of this Agreement or
to exercise or enforce any rights, Liens, powers, or remedies hereunder or
under any of the aforesaid agreements or other documents or security or
Collateral shall not operate as a waiver of such performance, Liens, rights,
powers and remedies, but all such requirements, Liens, rights, powers, and
remedies shall continue in full force and effect until all Loans and all
other Obligations owing or to become owing from Borrower to Lender shall have
been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any
of the other Loan Documents and no Event of Default by Borrower under this
Agreement or any other Loan Documents shall be deemed to have been suspended
or waived by Lender, unless such suspension or waiver is by an instrument in
writing specifying such suspension or waiver and is signed by a duly
authorized representative of Lender and directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact), solely for the purposes
set forth below, and Lender, or Lender's agent, may, without notice to Borrower
and in either Borrower's or Lender's name, but at the cost and expense of
Borrower:
11.1.1 At such time or times upon or after the occurrence of a
Default or an Event of Default as Lender or said
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agent, in its sole discretion, may determine, endorse Borrower's name on any
checks, notes, acceptances, drafts, money orders or any other evidence of
payment or proceeds of the Collateral which come into the possession of Lender
or under Lender's control.
11.1.2 At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors, (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, and any
other Collateral; (xi) make and adjust claims under policies of insurance, and
(xii) do all other acts and thin Lender's determination, to fulfill Borrower's
obligations under this Agreement.
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11.2 Indemnity. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) as the result of Borrower's failure, or alleged
failure, to observe, perform or discharge Borrower's duties hereunder. In
addition, Borrower shall defend Lender against and save it harmless from all
claims of any Person with respect to the Collateral. Without limiting the
generality of the foregoing, these indemnities shall extend to any claims
asserted against Lender by any Person under any Environmental Laws or similar
laws by reason of Borrower's or any other Person's failure to comply with laws
applicable to solid or hazardous waste materials or other toxic substances.
Notwithstanding any contrary provision in this Agreement, the obligation of
Borrower under this Section 11.2 shall survive the payment in full of the
Obligations and the termination of this Agreement.
11.3 Modification of Agreement; Sale of Interest. This Agreement may
not be modified, altered or amended except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were "Lender" hereunder, and Lender shall be relieved of all
obligations hereunder upon any such assignments. Borrower agrees that it will
use its best efforts to assist and cooperate with Lender in any manner
reasonably requested by Lender to effect the sale of participations in or
assignments of any of the Loan Documents or any portion thereof or interest
therein, including, without limitation, assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit
53
information regarding Borrower and its Subsidiaries to any potential participant
or assignee.
11.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
11.6 Cumulative Effect, Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made coextensive with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.8 Notice. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered
54
against receipt, five (5) days after deposit in the mail, postage prepaid, or
one (1) Business Day after deposit with an overnight courier or in the case of
facsimile notice, when sent, addressed as follows:
If to Lender: Fleet Capital Corporation
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: The Northeast Loan
Administration Manager
Facsimile No.: 860-657-7759
With a copy to: Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Harvey I. Forman, Esquire
Facsimile No.: 215-569-5555
If to Borrower: JEH Acquisition Corp.
122 East 42nd Street, Suite 1116
New York, NY 10168
Attention: Frederick M. Friedman,
Executive Vice President
Facsimile No.: 212-972-0326
With a copy to: TDA Industries, Inc.
122 East 42nd Street
New York, NY 10168
Attention: Mr. Frederick M. Friedman
Facsimile No.: 212-972-0326
With a copy to: Carlton Fields
One Harbour Place
777 South Harbour Island Drive
Tampa, Florida 33602
Attention: Nathaniel L. Doliner, Esquire
Facsimile No.: 813-229-4133
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8, provided,
55
however, that any notice, request or demand to or upon Lender pursuant to
subsection 3.1.1 or 4.2.2 hereof shall not be effective until received by
Lender.
11.9 Lender's Consent. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction condition or event,
Lender shall be authorized to give or withhold such sole and absolute discretion
and to condition its consent upon the giving of additional collateral security
for the Obligations, the payment of money or any other matter.
11.10 Credit Inquiries. Borrower hereby authorizes and permits Lender
to respond to usual and customary credit inquiries from third parties concerning
Borrower or any of its Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
11.12 Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
11.13 Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS
OF SUCH
56
JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NEW YORK AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER,
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPREME COURT OF THE STATE OF NEW
YORK, SITTING IN NEW YORK COUNTY, OR, AT LENDER'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY, SUCH
COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. 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 SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY 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; (ii) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
57
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY
BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS
REGARD; (iii) NOTICE PRIOR TO 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; (iv) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. 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 ITS 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.
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11.16 Parties to Act in a Commercially Reasonable Manner. Each party
hereto agrees to act at all times in its dealings with the other party hereto in
a commercially reasonable manner.
IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year specified at the beginning of this Agreement.
Attest: JEH ACQUISITION CORP.
("Borrower")
[Illegible] [Illegible]
By: --------------------------- By:-------------------------------
Secretary
CEO
[Corporate Seal] Title: ----------------------------
Accepted in -----------------------
FLEET CAPITAL CORPORATION
("Lender")
[Illegible]
By: -------------------------------
VP
Title:-----------------------------
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of July 8, 1997, by
and between Fleet Capital Corporation and JEH Acquisition Corp., the
following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and
vice versa):
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts - all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter created or acquired by any Borrower
or in which any Borrower or in which any Borrower now has or hereafter
acquires any interest.
Adjusted Availability - as defined in Section 9.4 of the Agreement.
Adjusted Net Earnings From Operations - with respect to any fiscal
period, means the net earnings (or loss) after provision for income taxes for
such fiscal period of Borrower, as reflected on the financial statement of
Borrower supplied to Lender pursuant to subsection 8.1.2 of the Agreement,
but excluding:
(i) any gain or loss arising from the sale of capital assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of Borrower accrued prior to the
date it became a Subsidiary;
(iv) earnings of any corporation, substantially all the assets of
which have been acquired in any manner by Borrower, realized by such
corporation prior to the date of such acquisition;
(v) net earnings of any business entity (other than a Subsidiary
of Borrower) in which Borrower has an ownership interest unless such net
earnings shall have actually been received by Borrower in the form of
cash distributions;
(vi) any portion of the net earnings of any Subsidiary of Borrower
which for any reason is unavailable for payment of dividends to Borrower;
(vii) the earnings of any Person to which any assets of Borrower
shall have been sold, transferred or disposed of, or into which Borrower
shall have merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction;
(viii) any gain arising from the acquisition of any Securities of
Borrower; and
(ix) any gain arising from extraordinary or nonrecurring items.
Adjusted Tangible Assets - all assets except each of the following that
are acquired, created or arise subsequent to the date of the Closing Balance
Sheet: (i) any surplus resulting from any write-up of assets subsequent to
July 1, 1997; (ii) deferred assets, other than prepaid insurance and prepaid
taxes; (iii) patents, copyrights, trademarks, trade names, non-compete
agreements, franchises and other similar intangibles; (iv) goodwill,
including any amounts, however designated on a Consolidated balance sheet of a
Person or its Subsidiaries, representing the excess of the purchase price
paid for assets or stock over the value assigned thereto on the books of such
Person; (v) Restricted Investments; (vi) unamortized debt discount and
expense; (vii) assets located and notes and receivables due from obligors
outside of the United States of America; and (viii) Accounts, notes and other
receivables due from Affiliates or employees.
Adjusted Tangible Net Worth - at any date means an amount equal to:
(i) the net book value (after deducting related depreciation,
obolescence, amortization, valuation, and other proper reserves) at which
the Adjusted Tangible Assets of a Person would be shown on a balance
sheet at such date in accordance with GAAP, minus
(ii) the amount at which such Person's liabilities (other than
capital stock and surplus and Subordinated
2
Debt) and including as liabilities all reserves for contingencies and
other potential liabilities, all as would be shown on such balance sheet in
accordance with GAAP.
Affiliate - a Person (other than a Subsidiary or JEH Company, James E.
Halzer, his wife, and any of their affiliated Persons): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, a Person; or (ii) which beneficially owns or
holds 5% or more of any class of the Voting Stock of a Person; or (iii) 5% or
more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially
owned or held by a Person or a Subsidiary of a Person.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits thereto and this Appendix A.
Applicable Inventory Sublimit - an amount equal to $10,000,000.
Asset Purchase Agreement - that certain Asset Purchase Agreement dated as
of July 8, 1997 between JEH Company, as seller, and Borrower, as purchaser.
Availability - the amount of money which Borrower is entitled to borrow
from time to time as Revolving Credit Loans, such amount being the difference
derived when the sum of the principal amount of Revolving Credit Loans then
outstanding (including any amounts which Lender may have paid for the account
of Borrower pursuant to any of the Loan Documents and which have not been
reimbursed by Borrower) and any established reserves, is subtracted from the
Borrowing Base. If the amount outstanding is equal to or greater than the
Borrowing Base, Availability is 0.
Bank - Fleet Bank, N.A.
Base Rate - the rate of interest announced or quoted by Bank from time to
time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if such
prime rate for
3
commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
Base Rate Loans - that portion of the Revolving Credit Loans, the Term
Loan and the Equipment Loan which bear interest based on the Base Rate.
Borrowing Base - as at any date of determination thereof, an equal amount
to the lesser of:
(i) Twenty Million Dollars ($20,000,000) minus the aggregate
outstanding balance under the Equipment Loan and the Term Loan; or
(ii) an amount equal to:
(a) up to eighty percent (80%) of the net amount of Eligible
Accounts outstanding at such date;
PLUS
(b) (without duplication) up to seventy percent (70%) of the net
amount of the Drury Brothers Accounts and the North Star Construction
Accounts, so long as the value of the Accounts with respect to such entities
which are unpaid for more than sixty (60) days after the due date ("Delinquent
Accounts") does not increase by more than 20% from the value of the Delinquent
Accounts corresponding to such entity as of the Closing Date:
PLUS
(c) an amount equal to the lesser of (1) the Applicable Inventory
Sublimit or (2) up to sixty percent (60%) of the Eligible Inventory
calculated on the basis of the lower of cost or market with cost of Eligible
Inventory calculated on a first-in, first-out basis.
MINUS
4
(d) the amount of any reserves and any amounts which Lender shall
have paid pursuant to any of the Loan Documents for the account of Borrower
and which have not been reimbursed by Borrower.
For purposes hereof, the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns,
rebates, discounts (which may, at Lender's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time.
Borrowing Base Certificate - that certificate signed by the chief financial
officer of Borrower showing the status of Borrower's Accounts and Inventory,
outstanding Revolving Credit Loans and other information, in the form of
Exhibit A-1 to the Agreement.
Business Day - any day exluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are closed.
Capital Adequacy Amount, Capital Adequacy Demand and Capital Adequacy
Rules - each as defined in Section 2.6 of the Agreement.
Capital Expenditures - cash expenditures made for the acquisition of any
fixed assets or improvements, replacements, substitutions or additions thereto
which have a useful life of more than one year, including the total principal
portion of Capitalized Lease Obligations excluding expenditures for the
replacement of any assets leased under a Capitalized Lease Obligation in
connection with a casualty or loss thereof.
Capitalized Lease Obligation - any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
Cash Flow - with respect to any fiscal year, an amount equal to income (or
loss) after federal income tax provision
5
(or benefit), inclusive of intercompany charges (or credits) between Borrower
and Parent or any Affiliate, as shown on the financial statements of Borrower
required to be delivered pursuant to subsection 8.1.2(i) of the Agreement,
plus (i) depreciation and amortization expenses which were deducted in
determining such income (or loss) for such fiscal year and (ii) loss arising
from the sale of Property which was deducted in determining such income (or
loss) for such fiscal year, minus (a) gain arising from the sale of Property
which was included in determining such income (or loss) for such fiscal year,
(b) capital expenditures (net of Indebtedness incurred to finance such
expenditures) for such fiscal year, (c) dividends paid in cash during such
fiscal year, (d) scheduled principal payments made during such fiscal year in
respect of Indebtedness and (e) without duplication, payments made or to be
made by Borrower with respect to the fiscal year(s) being measured to JEH
Company pursuant to the Asset Purchase Agreement, all as determined in
accordance with GAAP.
Closing Balance Sheet - the audited balance sheet of JEH Company prepared
by Waters & Murray dated as of June 30, 1997, and delivered pursuant to
Section 2.3 of the Asset Purchase Agreement.
Closing Date - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied and the initial Loan is made under
the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the State of
New York, as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 5 of the Agreement, and all other Property and interests in Property
that now or hereafter secure the payment and performance of any of the
Obligations.
Consolidated - the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
Continuation - as defined in subsection 3.1.4 of the Agreement.
6
Conversion - as defined in subsection 3.1.4 of the Agreement.
Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP.
Default - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, beome an Event of
Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Deposit Accounts - all now existing or hereafter acquired or arising
deposit accounts, investment accounts, commercial paper, and
certificates of deposit of every nature, wherever located and all
documents and records associated therewith.
Distributions - in respect of any corporation means and includes (i)
the payment of any dividends or other distributions on capital stock of
the corporation (except distributions in such stock) and (ii) the
redemption or acquisition of Securities unless made contemporaneously
from the net proceeds of the sale of such Securities.
Dominion Account - a special blocked account owned and established
by Borrower pursuant to the Agreement at a bank selected by Borrower,
but acceptable to Lender in its reasonable discretion, and over which
Lender shall have sole and exclusive access and control for withdrawal
purposes.
Drury Brothers Accounts - those Accounts owed by Drury Brothers to
Borrower which would otherwise be Eligible Accounts but for item (iii)
of the definition of "Eligible Accounts".
Eligible Account - an Account arising in the ordinary course of any
Borrower's business from the sale of goods or rendition of services
which Lender, in its sole credit judgment, deems to be an Eligible
Account. Without limiting the generality of the foregoing, no Account
shall be an Eligible Account if:
7
(i) it arises out of a sale made by Borrower to a Subsidiary or
an Affiliate of Borrower or to a Person controlled by an Affiliate of
Borrower; or
(ii) it is unpaid for more than sixty (60) days after the original
due date calculated pursuant to the payment terms reflected on the
invoice; or
(iii) fifty percent (50%) or more of the Accounts from the Account
Debtor are not deemed Eligible Accounts hereunder; or
(iv) the total unpaid Accounts of the Account Debtor exceed twelve
and one-half percent (12 1/2%) of the net amount of all Eligible
Accounts, to the extent of such excess; or
(v) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vi) the Account Debtor is also Borrower's creditor or supplier,
or the Account Debtor has disputed liability with respect to such
Account, or the Account Debtor has made any claim with respect to any
other Account due from such Account Debtor to Borrower, or the Account
otherwise is or may become subject to any right of setoff by the Account
Debtor; or
(vii) the Account Debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors, or a decree or order for
relief has been entered by a court having jurisdiction in the premises in
respect of the Account Debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
petition or other application for relief under the federal bankruptcy
laws has been filed against the Account Debtor, or if the Account Debtor
has failed, suspended business, ceased to be Solvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; or
8
(viii) it arises from a sale to an Account Debtor outside the United
States, unless the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Lender in its sole discretion; or
(ix) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; or
(x) Lender believes, in its reasonable judgment, that collection
of such Account is insecure or that payment thereof is doubtful or will be
delayed by reason of the Account Debtor's financial condition; or
(xi) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower
assigns its right to payment of such Account to Lender, in a manner
satisfactory to Lender, so as to comply with the Assignment of Claims Act
of 1940 (31 U.S.C. Section 203 et seq., as amended); or
(xii) the Account is not at all times subject to Lender's duly
perfected, first priority security interest or if it is subject to a Lien
other than a Permitted Lien; or
(xiii) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Account have not been performed by the Borrower and accepted
by the Account Debtor or the Account otherwise does not represent a final
sale; or
(xiv) the total unpaid Accounts of the Account Debtor exceed a
credit limit determined by Lender, in its reasonable discretion, to the
extent such Account exceeds such limit; or
(xv) the Account is evidenced by chattel paper or an instrument of
any kind, or has been reduced to judgment; or
9
(xvi) Borrower has made any agreement with the Account Debtor for
any deduction therefrom, except for discounts or allowances which are
made in the ordinary course of business for prompt payment and which
discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or
(xvii) Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof; or
(xviii) such Account includes finance charges, late charges or
similar type charges or fees, to the extent of such charges and fees.
Eligible Inventory - such Inventory of Borrower (other than packaging
materials and supplies) which Lender, in its sole credit judgment, deems to
be Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if:
(i) it does not consist of finished goods that are, in Lender's
opinion, readily marketable in their current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is obsolete or unmerchantable or remains unsold and on
Borrower's books and records for more than one year; or
(iv) it does not meet all standards imposed by any governmental
agency or authority; or
(v) it does not conform in all respects to the warranties and
representations set forth in the Agreement,
(vi) it is not at all times subject to Lender's duly perfected,
first priority Lien and no other Lien except a Permitted Lien; or
(vii) it is not situated at a location in compliance with the
Agreement or is in transit.
10
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description owned or used in Borrower's
operations in which such Borrower has an interest, whether now owned or
hereafter acquired by Borrower and wherever located, and all parts,
accessories and special tools and all increases and accessions thereto and
substitutions and replacements therefor.
Equipment Base Rate - the per annum rate equal to the sum of the Base
Rate plus 50 basis points.
Equipment Base Rate Loans - that portion of the Equipment Loan that bears
interest at the Equipment Base Rate.
Equipment LIBOR Rate - the per annum rate equal to the sum of the LIBOR
Rate plus 250 basis points.
Equipment LIBOR Rate Loan - that portion of the Equipment Loan (as
designated by Borrower) that bears interest on which interest accrues at the
Equipment LIBOR Rate.
Equipment Loan - the Loans to be made by Lender to Borrowers pursuant to
subsection 1.3 of the Agreement.
Equipment Note - the secured promissory note to be executed by Borrower
in favor of Lender to evidence Borrower's obligations to repay the Equipment
Loan as provided in Section 1.3 of the Agreement, which shall be in the form
of Exhibit A-2 to the Agreement.
ERISA - the Employee Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
11
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
General Intangibles - collectively, all personal Property of Borrower
other than goods, Accounts, chattel paper, documents, instruments and money,
whether now owned or hereafter created or acquired by any Borrower, including
without limitation, all of Borrower's existing and future rights (including
indemnification rights), claims, privileges and benefits in, to and under the
Asset Purchase Agreement.
Guarantor - Parent and any other Person who may hereafter guarantee
payment or performance of the whole or any part of the Obligations pursuant
to a Surety Agreement.
Indebtedness - as applied to a Person means, without duplication
(i) all items, which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance
sheet of such Person as at the date as of which Indebtedness is to be
determined, including, without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has
guaranteed,
(iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such
Person, and
(iv) in the case of Borrower (without duplication), the Obligations
and Borrower's obligations under and pursuant to the Asset Purchase
Agreement.
Interest Period - for any LIBOR Rate Loan the period commencing on the
date of the borrowing thereof and ending on the last day of the period
selected by Borrower pursuant to the provisions contained herein. The
duration of each such Interest Period shall be for 30, 60 or 90 days, in each
case as Borrower may select, pursuant to an appropriate notice of borrowing,
notice of Continuation or notice of Conversion; provided, however, that
Borrower may not select any Interest
12
Period that ends after the last day of the Original Term, or if the Agreement
is renewed in accordance with the terms of Section 4.1, the last day of the
Renewal Term then in effect. Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended so as to occur on the next succeeding
Business Day; provided, however, if such extension would cause the last day
of such Interest Period to occur during the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day.
Inventory - all of Borrower's Inventory, whether now owned or hereafter
acquired, including, without limitation, all goods intended for sale or lease
by Borrower, or for display or demonstration; all work in process; all raw
materials and other materials and supplies of every nature and description
used or which might be used in connection with the manufacture, printing,
packing, shipping, advertising, selling, leasing or furnishing of such goods
or otherwise used or consumed in any Borrower's business; and all Documents
evidencing and General Intangibles relating to any of the foregoing, whether
now owned or hereafter acquired by Borrower.
Investment Property - as defined in the Code.
LIBOR Rate - shall mean, with respect to the Interest Period applicable
to the borrowing of a LIBOR Rate Loan, the rate obtained (rounded upwards to
the nearest 1/100 of 1%) by dividing (i) the rate of interest per annum
offered to the Bank in the London interbank foreign currency deposits market
as of approximately 9:00 A.M. (Eastern time) two (2) Business Days prior to
the commencement of such Interest Period for U.S. dollar deposits of amounts
in immediately available funds comparable to the principal amount of the LIBOR
Rate Loan for which the LIBOR rate is being determined with maturities
comparable to the Interest Period for which such LIBOR Rate will apply, by
(ii) a percentage equal to 1 minus the stated Reserve (expressed as a
decimal), if any, required to be maintained against "Eurocurrency
Liabilities" as specified in Regulation D of the Board of Governors of the
Federal Reserve System as from time to time shall be in effect (or against
any other category of liabilities, which includes deposits, by
13
reference to which the interest rate on LIBOR Rate Loans is determined or any
category of extension of credit on other assets, which includes loans by a
non-U.S. office of Bank or Lender to U.S. residents). In the absence of
manifest error, each determination by Lender of the applicable LIBOR Rate
shall be deemed conclusive.
LIBOR Rate Loans - that portion of the Revolving Credit Loans, the Term
Loan and the Equipment Loan which bear interest based on the LIBOR Rate.
Lien - 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. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose(s) of the 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.
Loan Account - the loan account established on the books of Lender
pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loans - collectively, the Revolving Credit Loans, the Term Loan, the
Equipment Loan and all other loans and advances of any kind made by Lender
pursuant to the Agreement.
London Business Day - Any Business Day on which banks in London, England
are open for business.
Money Borrowed - means (i) Indebtedness arising from the lending of money
by any Person to Borrower; (ii) Indebtedness, whether or not in any such case
arising from the lending by any Person of money to Borrower, (A) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures,
notes or similar instruments, or (C) upon which
14
interest charges are customarily paid (other than accounts payable) or that
was issued or assumed as full or partial payment for Property; (iii)
reimbursement obligations with respect to letters of credit or guaranties of
letters of credit and (iv) Indebtedness of Borrower under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under
clauses (i) through (iii) hereof, if owed directly by Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
Net Worth - Assets minus liabilities, as shown on the Closing Balance
Sheet.
North Star Construction Accounts - those Accounts owed by North Star
Construction to Borrower which would otherwise be Eligible Accounts but for
item (iii) of the definition of "Eligible Accounts".
Notes - collectively, the Revolving Credit Note, the Term Note and the
Equipment Note.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees, costs,
expenses and other charges thereon, owing, arising, due or payable from
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether arising under
the Agreement or any of the other Loan Documents or otherwise whether direct
or indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired. The term includes without limitation, all interest
charges, fees, expenses, attorneys' fees, and any other sums chargeable to
Borrowers under any of the Loan Documents.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed or delivered
15
by Borrower, any Subsidiary of Borrower or any other third party and
delivered to Lender in respect of the transactions contemplated by the
Agreement, as each may be amended, modified, renewed, extended, replaced,
restated or substituted from time to time.
Overadvance - the amount, if any, by which the aggregate outstanding
principal amount the Loans exceeds the Borrowing Base.
Parent - TDA Industries, Inc., a New York corporation and the owner,
beneficially and of record, of one hundred percent (100%) of the issued and
outstanding shares of capital stock of Borrower.
Participating Lender - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement and who
shall have entered into a participation agreement in form and substance
satisfactory to Lender.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of the
Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien and which, when aggregated with the principal amount of all other such
Indebtedness and Capitalized Lease Obligations of Borrower at the time
outstanding, does not exceed $1,000,000.
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
Projections - Borrower's forecasted Consolidated and consolidating (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements, and
(d) capitalization statements, all prepared on a consistent basis with
Borrower's
16
historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the
purchase price of any real Property or Equipment, (ii) any Indebtedness
(other than the Obligations) incurred at the time of or within ten (10)
days prior to or after the acquisition of any real Property or Equipment
for the purpose of financing all or any part of the purchase price
thereof, and (iii) any renewals, extensions or refinancings thereof, but
not any increases in the principal amounts thereof outstanding at the
time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be
confined solely to the fixed assets the purchase price of which was
financed through the incurrence of the Purchase Money Indebtedness
secured by such Lien.
Regulation D - Regulation D of the Board of Governors of the Federal
Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, any any successor thereto.
Rentals - as defined in subsection 8.2.9 of the Agreement.
Renewal Terms - as defined in Section 4.1 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Reserve - For any day, that reserve (expressed as a decimal) which is
in effect (whether or not actually incurred) with respect to Bank on
such day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor or any other banking authority to which Bank
is subject including any board or governmental or administrative agency
of the United States or any other jurisdiction to which Bank
17
is subject), for determining the maximum reserve requirement (including
without limitation any basic, supplemental, marginal or emergency reserves)
for Eurocurrency liabilities as defined in Regulation D.
Reserve Percentage - For Bank on any day, that percentage (expressed as a
decimal) which is in effect on such day, prescribed by the Board of
Governors of the Federal Reserve System (or any successor or any other
banking authority to which Lender is subject, including any board or
governmental or administrative agency of the United States or any other
jurisdiction to which Bank is subject) for determining the maximum reserve
requirement (including without limitation any basic supplemental, marginal or
emergency reserves) for (i) deposits of United States Dollars or (ii)
Eurocurrency liabilities as defined in Regulation D, in each case used to
fund a LIBOR Rate Loan subject to an LIBOR Rate. The LIBOR Rate shall be
adjusted automatically on and as of the effective day of any change in the
Reserve Percentage.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(i) investments otherwise permitted by this Agreement or investments
in one or more Subsidiaries of Borrower to the extent existing on the
Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in
the ordinary course of business of Borrower and its Subsidiaries;
(iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one year
from the date of acquisition thereof;
18
(v) investments in certificates of deposit maturing within one
year from the date of acquisiton issued by a bank or trust company
organized under the laws of the United States or any state thereof
having capital surplus and undivided profits aggregating at least
$100,000,000; and
(vi) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from
the date of creation thereof.
Revolving Credit Base Rate - a per annum rate equal to the Base Rate plus
50 basis points.
Revolving Credit Base Rate Loan - that portion of the Revolving Credit
Loans that bears interest at the Revolving Credit Base Rate.
Revolving Credit Facility - the credit facility established for Borrower
by Lender under and pursuant to the terms of this Agreement under which
Revolving Credit Loans may be made from time to time.
Revolving Credit LIBOR Rate - a per annum rate equal to the sum of the
LIBOR Rate plus 250 basis points.
Revolving Credit LIBOR Rate Loan - that portion of the Revolving Credit
Loans on which interest accrues at the Revolving Credit LIBOR Rate.
Revolving Credit Loan - a Loan made by Lender as provided in Section 1.1
of the Agreement.
Revolving Credit Note - the secured promissory note to the executed by
Borrower on the Closing Date in favor of Lender to evidence Borrower's
obligation to repay the Revolving Credit Loans, which shall be in the form of
Exhibit A-4 to the Agreement.
Schedule of Accounts - as defined in subsection 6.4.1 of the Agreement.
19
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - each Guaranty Agreement and all other instruments and
agreements now or at any time hereafter securing the whole or any part of the
Obligations, as each may be amended, modified, renewed, extended, replaced,
restated or substituted from time to time.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all
of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
Subordinated Debt - Indebtedness of Borrower which by its terms, or by the
terms of the agreement pursuant to which such Indebtedness is issued, is
subordinated to the Obligations in a manner satisfactory to Lender, including
without limitation, the Indebtedness of Borrower to JEH Company which is
subordinated to the Obligations pursuant to that certain Subordination
Agreement of even date herewith from JEH Company to Lender.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
Surety Agreement - a Surety Agreement executed by a Guarantor in form and
substance satisfactory to Lender.
Term Base Rate - a per annum rate equal to the sum of the Base Rate plus
150 basis points.
Term Base Rate Loan - that portion of the Term Loan that bears interest of
the Term Base Rate.
Term LIBOR Rate - a per annum rate equal to the sum of the LIBOR Rate plus
325 basis points.
20
Term LIBOR Rate Loan - that portion of the Term Loan (as designated by
Borrower) on which interest accrues at the Term LIBOR Rate.
Term Loan - the Loan described in subsection 1.2 of the Agreement.
Term Note - the secured promissory note to be executed by Borrowers on or
about the Closing Date in favor of Lender to evidence Borrowers' obligation
to repay the Term Loan, which shall be in the form of Exhibit A-5 to the
Agreement.
Total Credit Facility - $20,000,000.
Treasury Rate - with respect to the Term Loan, the average coupon
equivalent yield, in secondary market, that Lender could obtain by purchasing
United States Treasury Securities in an amount approximately equal to the
Term Loan, maturing on the schedule maturity date of the Term Loan.
Type - respect to any Loan, whether such Loan, or portion thereof, is a
Base Rate Loan or a LIBOR Rate Loan.
Voting Stock - Securities of class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
Other Terms - All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the Code to the extent
the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. The section titles, table
of contents and list of exhibits appear as a matter of convenience only and
shall not affect the interpretation of the Agreement. All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. All references to any of
21
the Loan Documents shall include any and all modifications thereto and any
and all extensions or renewals thereof.
22
OFFICER'S CERTIFICATE
Fleet Capital Corporation
200 Glastonbury Blvd.
Glastonbury, CT 06033
Attn: Kim Bushey, Vice President
Ladies and Gentlemen:
This Certificate is executed and delivered by the undersigned pursuant to
Paragraph 9.1 of that certain Loan and Security Agreement ("Agreement")
between JEH Acquisition Corp. ("Borrower") and Fleet Capital Corporation
bearing even date herewith. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in the Agreement.
The undersigned hereby certifies to Fleet Capital Corporation as follows:
1. All warranties and representations set forth in the Agreement and
all related instruments, agreements and documents are true and correct as of
the date hereof;
2. No Default or Event of Default has occurred;
3. All of the conditions specified in Section 9 of the Agreement have
been fulfilled;
4. The undersigned is the _______________________ of Borrower.
Very truly yours,
____________________________ (SEAL)
(Print name and title)
TERM NOTE
$3,000,000.00 July 8, 1997
FOR VALUE RECEIVED, and intending to be legally bound, JEH Acquisition
Corp. ("Borrower") hereby promises to pay to the order of Fleet Capital
Corporation, a Rhode Island corporation ("Lender"), in such coin or currency
of the United States which shall be legal tender in payment of all debts and
dues, public and private, at the time of payment, the maximum principal sum
of Three Million Dollars ($3,000,000), or such lesser sum which represents
the aggregate unpaid principal balance hereunder, together with interest
from and after the date hereof on the unpaid principal balance outstanding at
the rates per annum set forth in the Loan Agreement (as defined below).
Interest shall be computed in the manner provided in Section 2 of the Loan
Agreement.
This Term Note (the "Note") is the Term Note referred to in, and is
issued pursuant to, that certain Loan and Security Agreement between Borrower
and Lender dated the date hereof (hereinafter, as amended from time to time,
the "Loan Agreement"), and is entitled to all of the benefits and security of
the Loan Agreement. All of the terms, covenants and conditions of the Loan
Agreement and the Security Documents are hereby made a part of this Note and
are deemed incorporated herein in full. All capitalized terms used herein,
unless otherwise specifically defined in this Note, shall have the meanings
ascribed to them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due and
payable on the dates and in the manner hereinafter set forth:
(i) Interest on the outstanding principal balance shall be due and
payable monthly, in arrears on the first day of each month, commencing on
August 1, 1997, and continuing until such time as the full principal
balance, tother with all other amounts owing hereunder, shall have been
paid in full.
(ii) The principal amount hereunder shall be due and payable in 48
consecutive monthly installments of principal, on the first day of each
calendar month commencing on September 1, 1997, comprised of 47 equal
consecutive monthly payments of $62,500 each and a final (48th)
installment in an amount equal to the entire remaining principal amount
then outstanding under this Note, together with any and all other amounts
due hereunder.
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and
payable immediately upon acceleration of the Obligations following an Event
of Default under the Loan Agreement or termination of the Loan Agreement
pursuant to Section 4 thereof.
This Note shall be subject to mandatory prepayment (and prepayment
premium, if applicable) in accordance with the provisions Sections 3.2 and 3.3
of the Loan Agreement. Borrower may also terminate the Loan Agreement and, in
connection with such termination, prepay this Note in the manner and subject
to the conditions provided in Section 4 of the Loan Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of the
rights and remedies set forth in Section 10 of the Loan Agreement.
Time is of the essence under this Note. To the fullest extent permitted
by applicable law, Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice
of dishonor, notice of nonpayment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in
collection, and the benefit of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note. No delay or failure on the part of Lender in the
exercise of any right or remedy hereunder shall operate as a waiver thereof,
nor as an acquiescence in any default, nor shall any single or partial
exercise by Lender of any right or remedy preclude any other right or remedy.
Lender, at its option, may enforce its rights against any Collateral securing
this Note without enforcing its rights against Borrower or any other property
or indebtedness due or to become due to Borrower. Borrower agrees that,
without releasing or impairing Borrower's liability hereunder, Lender may at
any time release, surrender, substitute or exchange any Collateral securing
this Note and may at any time release any party primarily or secondarily
liable for the indebtedness evidenced by this Note.
IN ANY LITIGATION ARISING OUT OF OR RELATING TO ANY OF THE MATTERS
CONTAINED IN THIS NOTE OR ANY OF THE DOCUMENTS DELIVERED IN CONNECTION
HEREWITH IN WHICH THE LENDER AND BORROWER ARE ADVERSE PARTIES. THE LENDER AND
BORROWER WAIVE TRIAL BY JURY.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York.
2
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and
delivered on the date first above written.
ATTEST: JEH ACQUISITION CORP.
[Illegible] By: [Illegible]
- ----------------------------------- ----------------------------------
Title: CEO
-------------------------[SEAL]
3
REVOLVING CREDIT NOTE
$20,000,000.00 July 8, 1997
FOR VALUE RECEIVED, and intending to be legally bound, JEH Acquisition
Corp. ("Borrower") hereby promises to pay to the order of Fleet Capital
Corporation, a Rhode Island corporation ("Lender"), in such coin or currency
of the United States which shall be legal tender in payment of all debts and
dues, public and private, at the time of payment, the maximum principal sum
of Twenty Million ($20,000,000) Dollars or such lesser sum which then
represents the aggregate unpaid principal balance of Revolving Credit Loans,
together with interest from and after the date hereof on the unpaid principal
balance outstanding at the rates per annum set forth in the Loan Agreement
(as defined below). Interest shall be computed in the manner provided in
Section 2 of the Loan Agreement.
This Revolving Credit Note (the "Note") is the Revolving Credit Note
referred to in, and is issued pursuant to, that certain Loan and Security
Agreement between Borrower and Lender, dated the date hereof (as amended from
time to time, the "Loan Agreement"), and is entitled to all of the benefits
and security of the Loan Agreement. All of the terms, covenants and
conditions of the Loan Agreement and the Security Documents are hereby made a
part of this Note and are deemed incorporated herein in full. All capitalized
terms used herein, unless otherwise specifically defined in this Note, shall
have the meanings ascribed to them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due and
payable on the dates and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on the
first day of each month, commencing on August 1, 1997, and continuing until
such time as the full principal balance, together with all other amounts
owing hereunder, shall have been paid in full.
(b) Principal shall be payable in accordance with the Loan Agreement
and all outstanding principal, together with any and all other amounts
due hereunder, shall be due and payable on the last day of the Original
Term or any Renewal Term of the Loan Agreement.
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and payable immediately upon
acceleration of the Obligations following an Event of Default under the Loan
Agreement or termination of the Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to prepayment (and prepayment premium, if
applicable) in accordance with the provisions of Sections 3.2 and 3.3 of the
Loan Agreement. Borrowers may also terminate the Loan Agreement and, in
connection with such termination, prepay this Note in the manner and
subject to the conditions provided in Section 4 of the Loan Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of the
rights and remedies set forth in Section 10 of the Loan Agreement.
Time is of the essence under this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice
of dishonor, notice of nonpayment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in
collection, and the benefit of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note. No delay or failure on the part of Lender in the
exercise of any right or remedy hereunder shall operate as a waiver thereof,
nor as an acquiescence in any default, nor shall any single or partial
exercise by Lender of any right or remedy preclude any other right or remedy.
Lender, at its option, may enforce its rights against any Collateral
2
securing this Note without enforcing its rights against Borrower or any other
property or indebtedness due or to become due to Borrower. Borrower agrees
that, without releasing or impairing Borrower's liability hereunder, Lender
may at any time release, surrender, substitute or exchange any Collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
IN ANY LITIGATION ARISING OUT OF OR RELATING TO ANY OF THE MATTERS
CONTAINED IN THIS NOTE OR ANY OF THE DOCUMENTS DELIVERED IN CONNECTION
HEREWITH IN WHICH THE LENDER AND BORROWER ARE ADVERSE PARTIES, THE LENDER AND
BORROWER WAIVE TRIAL BY JURY.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and
delivered on the date first above written.
ATTEST: JEH ACQUISITION CORP.
[Illegible] By: [Illegible]
- ------------------------ -------------------------------
Title: CEO (SEAL)
----------------------------
3
EQUIPMENT NOTE
$1,725,000.00 July 8, 1997
FOR VALUE RECEIVED, and intending to be legally bound, JEH Acquisition
Corp. ("Borrower") hereby promises to pay to the order of Fleet Capital
Corporation, a Rhode Island corporation ("Lender"), in such coin or
currency of the United States which shall be legal tender in payment of all
debts and dues, public and private, at the time of paymennt, the maximum
principal sum of One Million, Seven Hundred and Twenty-Five Thousand Dollars
($1,725,000.00), or such lesser sum which represents the aggregate unpaid
principal balance hereunder, together with interest from and after the date
hereof on the unpaid principal balance outstanding at the rates per annum set
forth in the Loan Agreement (as defined below). Interest shall be computed in
the manner provided in Section 2 of the Loan Agreement.
This Equipment Note (the "Note") is the Equipment Note referred to in, and
is issued pursuant to, that certain Loan and Security Agreement between
Borrower and Lender dated the date hereof (hereinafter, as amended from time
to time, the "Loan Agreement"), and is entitled to all of the benefits and
security of the Loan Agreement. All of the terms, covenants and conditions
of the Loan Agreement and the Security Documents are hereby made a part of
this Note and are deemed incorporated herein in full. All capitalized terms
used herein, unless otherwise specifically defined in this Note, shall have
the meanings ascribed to them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due and
payable on the dates and in the manner hereinafter set forth:
(i) Interest on the outstanding principal balance shall be due and
payable monthly, in arrears, on the first day of each month, commencing
on August 1, 1997, and continuing until such time as the full principal
balance, together with all other amounts owing hereunder, shall have
been paid in full.
(ii) The principal amount hereunder shall be due and payable in equal
consecutive monthly installments of principal based on an 84 month
amortization
schedule, on the first day of each calendar month commencing on
September 1, 1997.
(iii) The entire remaining principal amount then outstanding under
this Note, together with any and all other amounts due hereunder, shall
be due and payable upon the earlier to occur of August 1, 2004 or the
end of the Original Term or any Renewal Term of the Loan Agreement.
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and payable immediately upon
acceleration of the Obligations following an Event of Default under the Loan
Agreement or termination of the Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to mandatory prepayment (and prepayment
premium, if applicable) in accordance with the provisions of Sections 3.2
and 3.3 of the Loan Agreement. Borrower may also terminate the Loan Agreement
and, in connection with such termination, prepay this Note in the manner and
subject to the conditions provided in Section 4 of the Loan Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of the
rights and remedies set forth in Section 10 of the Loan Agreement.
Time is of the essence under this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice
of dishonor, notice of nonpayment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in
collection, and the benefit of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note. No delay or failure on the part of Lender in the
exercise of any right or remedy hereunder shall
2
operate as a waiver thereof, nor as an acquiescence in any default, nor shall
any single or partial exercise by Lender of any right or remedy preclude any
other right or remedy. Lender, at its option, may enforce its rights against
any Collateral securing this Note without enforcing its rights against
Borrower or any other property or indebtedness due or to become due to
Borrower. Borrower agrees that, without releasing or impairing Borrower's
liability hereunder, Lender may at any time release, surrender, substitute or
exchange any Collateral securing this Note and may at any time release any
party primarily or secondarily liable for the indebtedness evidenced by this
Note.
IN ANY LITIGATION ARISING OUT OF OR RELATING TO ANY OF THE MATTERS
CONTAINED IN THIS NOTE OR ANY OF THE DOCUMENTS DELIVERED IN CONNECTION
HEREWITH IN WHICH THE LENDER AND BORROWER ARE ADVERSE PARTIES, THE LENDER AND
BORROWER WAIVE TRIAL BY JURY.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and
delivered on the date first above written.
ATTEST JEH ACQUISITION CORP.
[Illegible] By: /s/ Douglas P. Fields
- ----------------------------------- -----------------------------------
Title: CEO
---------------------------[SEAL]
3
REVOLVING CREDIT NOTE
$20,000,000.00 July 8, 1997
FOR VALUE RECEIVED, and intending to be legally bound, JEH Acquisition
Corp. ("Borrower") hereby promises to pay to the order of Fleet Capital
Corporation, a Rhode Island corporation ("Lender"), in such coin or currency
of the United States which shall be legal tender in payment of all debts and
dues, public and private, at the time of payment, the maximum principal sum
of Twenty Million ($20,000,000) Dollars or such lesser sum which then
represents the aggregate unpaid principal balance of Revolving Credit Loans,
together with interest from and after the date hereof on the unpaid principal
balance outstanding at the rates per annum set forth in the Loan Agreement
(as defined below). Interest shall be computed in the manner provided in
Section 2 of the Loan Agreement.
This Revolving Credit Note (the "Note") is the Revolving Credit Note
referred to in, and is issued pursuant to, that certain Loan and Security
Agreement between Borrower and Lender, dated the date hereof (as amended from
time to time, the "Loan Agreement"), and is entitled to all of the benefits
and security of the Loan Agreement. All of the terms, covenants and
conditions of the Loan Agreement and the Security Documents are hereby made a
part of this Note and are deemed incorporated herein in full. All capitalized
terms used herein, unless otherwise specifically defined in this Note, shall
have the meanings ascribed to them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due and
payable on the dates and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on the
first day of each month, commencing on August 1, 1997, and continuing until
such time as the full principal balance, together with all other amounts
owing hereunder, shall have been paid in full.