Exhibit 10.22
LOAN AND SECURITY AGREEMENT
among
NATIONAL BANK OF CANADA
and
EPI TECHNOLOGIES, INC.
ENVIRONMENTAL PURIFICATION INDUSTRIES COMPANY
January __, 1998
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made and entered into
by and among NATIONAL BANK OF CANADA ("Bank"), EPI TECHNOLOGIES, INC., f/k/a
Environmental Purification Industries, Inc. ("EPI") and ENVIRONMENTAL
PURIFICATION INDUSTRIES COMPANY ("EPIC"; and together with EPI, sometimes will
be referred to collectively as "Borrowers" and individually as a "Borrower").
RECITALS
A. EPI is indebted to Bank pursuant to the terms of (i) a term note dated
February 29, 1996 in the principal amount of $300,000 (the "EPI First Term
Note"), executed by EPI and Meridian National Corporation ("MNC") pursuant to
the provisions of the Loan and Security Agreement, dated December 6, 1989,
entered into by and among MNC, Ottawa River Steel Co., National Metal
Processing, Inc., Interstate Metal Processing, Inc., Precise Pac, Inc. and
Meridian Environmental Services, Inc. and Bank, as amended (the "MNC Loan
Agreement"), and (ii) a term note dated July 25, 1996 in the principal amount of
$350,000 (the "EPI Second Term Note") executed by EPI and MNC pursuant to the
provisions of the MNC Loan Agreement.
B. Borrowers are indebted to Bank pursuant to a term note dated November
4, 1996, in the principal amount of $1,700,000 (the "EPI Third Term Note";
which, together with the EPI First Term Note and the EPI Second Term Note, as
each may be amended, modified or supplemented from time to time, together with
all notes issued in substitution thereof or replacement thereof, are referred to
collectively herein as the "EPI Term Notes") executed by Borrowers and MNC
pursuant to the provisions of the MNC Loan Agreement.
C. The EPI First Term Note was amended by Amendment Number One to Term
Note (EPI First Term Note), and the EPI Second Term Note was amended by
Amendment Number One to Term Note (EPI Second Term Note), each dated November 4,
1996.
D. Borrowers have requested that Bank provide Borrowers with a credit
facility for the purpose of (i) refinancing the EPI Term Notes, and (ii)
otherwise providing Borrowers with working capital financing.
E. Subject to the terms and conditions set forth in this Agreement, Bank
has agreed to provide such financing to Borrowers pursuant to the provisions of
this Agreement.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing and the provisions set
forth in this Agreement, it is agreed as follows:
1. GENERAL
1.1 DEFINED TERMS. When used herein, the following terms shall have the
following meanings:
ACCOUNT DEBTOR - Any Person who is or may become obligated to a
Borrower under, with respect to or on account of an Account.
ACCOUNTS - As to each Borrower, all of such Borrower's accounts,
contracts, contract rights, notes, bills, drafts, acceptances, general
intangibles, choses in action, and all other debts, obligations and
liabilities in whatever form, owing to such Borrower from any Person,
whether now existing or hereafter arising, now or hereafter received by or
belonging or owing to such Borrower, for goods sold or leased or for
services rendered, whether or not earned by performance and whether or not
evidenced by contracts, instruments or documents, or however otherwise the
same may have been established or created, all guarantees and security
therefor, all right, title and interest of such Borrower in the merchandise
or services which gave rise thereto including, without limitation, the
rights of reclamation and stoppage in transit, and all rights of an unpaid
seller of merchandise or services.
AFFILIATE - With respect to each Borrower, each other Borrower, any
Subsidiary or executive officer or director of any Borrower or any other
Person:
(A) Which, directly or indirectly, through one or more
intermediaries controls, or is controlled by, or is under common
control with, any Borrower;
(B) Which owns or controls, on an aggregate basis, including all
beneficial ownership and ownership or control as a trustee, guardian
or other fiduciary, at least ten percent (10%) or more of any class of
the Voting Stock of any Borrower; or
(C) Ten percent (10%) or more of the Voting Stock (or in the
case of a Person which is not a corporation, ten percent (10%) or more
of the equity interest) of which is beneficially owned or held by any
Borrower.
The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract, or
otherwise.
BANKRUPTCY LAWS - All applicable statutes, rules, regulations and
other forms of law, federal, state or otherwise including, without
limitation, the provisions of Title 11 of the United States Code, in each
instance as in effect from time to time, relating to the bankruptcy,
insolvency, liquidation or reorganization of Persons or the modification or
alteration of the rights of creditors.
BANK'S ACCOUNT - As defined in Section 5.1(C) of this Agreement.
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BASE RATE - The prime rate for commercial loans, as announced publicly
by Bank from time to time as its United States prime rate or its corporate
base rate or other designation which may replace its prime rate, which rate
may not be the lowest or best rate offered by Bank.
CAPITAL EXPENDITURES - As to each Borrower, amounts expended or which
such Borrower becomes obligated to expend, without regard to the manner in
which such amounts or the instrument pursuant to which they are made are
characterized by any Person, (A) for the acquisition, construction or
installation of properties that are to be included as fixed assets on such
Borrower's books, (B) for the lease of any property that would be
capitalized under GAAP, (C) for the incurring of any other capitalized cost
or (D) for any additions to or replacements of any of the foregoing.
CASH COLLATERAL. Deposits of cash or other funds on deposit in any
savings account or certificate(s) of deposit with Bank, the full amount of
which is intended to and shall be held as additional Collateral for the
repayment of the Term Loan, the Revolving Loan, and all other Obligations
of Borrowers to Bank, and to which Bank shall have an express right of
setoff, for which Borrowers hereby appoint Bank and any of its officers as
Borrowers' attorney-in-fact with full authority to withdraw or otherwise
dispose of the Cash Collateral as may be provided in this Agreement.
CODE - The Uniform Commercial Code as adopted and in force in the
State of Ohio as from time to time in effect.
COLLATERAL - The Fixed Collateral, Revolving Collateral, Cash
Collateral, Premises, and all other Property of Borrowers now or at any
time or times hereafter subject to a Lien in favor of Bank.
COLLATERAL LOCATION - As to each Borrower, such Borrower's principal
business location, and all states and counties where any Collateral is
located as of the date hereof, including, without limitation, the locations
identified on EXHIBIT A attached to this Agreement.
CONTRACT RATE - A fluctuating rate equal to one (1) percentage point
above the Base Rate.
CREDIT DOCUMENTS - This Agreement, the Notes, and all other
agreements, instruments and documents (including, without limitation, all
assignments, security agreements, lien waivers, subordinations, guarantees,
powers of attorney, and consents) heretofore, now, or hereafter executed by
any Borrower and/or delivered to Bank with respect to the transactions
contemplated by this Agreement, in each instance as the foregoing may be
amended from time to time.
DEBT INSTRUMENTS - As to each Borrower, any contract, agreement,
instrument, or other document or arrangement under which such Borrower has
(A) any indebtedness, obligation, or liability (including, without
limitation, any contingent liability under any
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guaranty) for borrowed money or for the deferred portion of the purchase
price of any capital asset or for other capital financing, or (B) the
right or obligation to incur any such indebtedness, obligation or
liability.
DEFAULT RATE - A fluctuating rate of interest equal to two (2)
percentage points above the Contract Rate.
DEPOSITORY ACCOUNT - As defined in Section 5.1(A) of this Agreement.
DEPOSITORY AGREEMENT - As defined in Section 5.1(A) of this Agreement.
DEPOSITORY BANK - As defined in Section 5.1(A) of this Agreement.
ELIGIBLE ACCOUNTS - Accounts arising out of the completed bona-fide
sale or lease of goods or rendition of services by a Borrower in the
ordinary course of such Borrower's business and in accordance with the
terms and conditions of all purchase orders, contracts or other documents
relating thereto, which are subject to Bank's perfected security interest
and no other Lien (other than Permitted Liens), and for a liquidated amount
maturing as stated in an invoice or other documentary evidence relating
thereto which has been provided, and is in form satisfactory, to Bank;
provided, however, that, unless Bank otherwise agrees, no such Account
shall be an Eligible Account if:
(A) The Account arises out of a sale made by a Borrower to an
Affiliate of such Borrower or to a Person controlled by an Affiliate
of such Borrower;
(B) The Account is due or unpaid more than ninety (90) days
after the invoice date thereof;
(C) The Account Debtor claims any right of credit, allowance or
adjustment with respect to such Account, except a discount allowed for
prompt payment, or such Account is otherwise disputed or contingent in
any respect, but only to the extent the Account Debtor claims any such
right of credit, allowance, or adjustment;
(D) The Account Debtor has returned any of the goods from the
sale of which the Account arose, but only to the extent of the amount
of the returned goods of such Account Debtor;
(E) There exists any facts, events or circumstances which Bank
determines in its reasonable discretion may be or would be reasonably
expected to impair the validity, collectibility or enforcement of such
Account or would reasonably be expected to reduce the amount payable
thereunder from the face value of the invoice related thereto, but
only to the extent of the amount by which the amount payable
thereunder is expected to be reduced;
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(F) To the extent that the Account Debtor also is a creditor of
any Borrower or to the extent that the Account otherwise is or would
be reasonably expected to become subject to any right of setoff or
offset by the Account Debtor, then the amount of the Account subject
to the right of such setoff or offset shall not be an Eligible
Account;
(G) The Account Debtor has commenced a voluntary case under any
Bankruptcy Laws, 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 any Bankruptcy Laws or any other petition or
other application for relief under any Bankruptcy Laws has been filed
against the Account Debtor, or 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;
(H) The Account arises out of a sale to an Account Debtor
outside the United States unless the sale is made to an Account
Debtor located in Canada or is made pursuant to a letter of credit,
guaranty, or acceptance terms, in each case acceptable to Bank in its
reasonable discretion;
(I) The Account arises out of a sale to an Account Debtor on a
xxxx-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is evidenced by
chattel paper;
(J) The Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless the right to
payment of such Account is assigned to Bank, pursuant to the
Assignment of Claims Act of 1940, as amended;
(K) The goods giving rise to such Account have not been shipped
and delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been fully performed by Borrower
and accepted by the Account Debtor or the Account otherwise does not
represent a final sale; or
(L) The Account, when added to the aggregate balance of all
other Accounts of the Account Debtor, exceeds a credit limit
determined by Bank, in its reasonable discretion, to the extent such
Account exceeds such limit.
ERISA - The Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
EVENT OF DEFAULT - As defined in Section 10.1 of this Agreement.
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FINANCIAL STATEMENTS - The financial statements of EPI and its
Subsidiaries heretofore provided to Bank and the financial statements of
EPI and its Subsidiaries subsequently delivered to Bank during the term
hereof as otherwise provided herein.
FIXED COLLATERAL - Borrowers' fixed assets (other than real property)
including, without limitation, all machinery, equipment, furniture,
furnishings, fixtures, tools, dies, molds, parts, material handling
equipment, supplies and motor vehicles (titled and untitled) of every kind
and description, now or hereafter owned by Borrowers, or in which Borrowers
may have or may hereafter acquire any interest, wheresoever located, and
all proceeds of the foregoing, including, without limitation, the items of
Fixed Collateral described in EXHIBIT B attached to this Agreement.
[Excepted from the Fixed Collateral is the machinery and equipment securing
the mortgage note payable to Society Bank & Trust, Trustee ("Society"),
pursuant to an Indenture with the Xxxxxx-Xxxxx County Port Authority, which
has since been assigned by Society to Mellon Bank, F.S.B.] [SUBJECT TO
REVIEW OF PORT AUTHORITY DOCUMENTS].
GAAP - Generally accepted accounting principles, consistently applied,
which are in effect from time to time.
GUARANTY - All obligations of any Person (the "guarantor") which
guarantee or assure the payment of, or performance with respect to, any
indebtedness, liability, or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly including,
without limitation, obligations incurred by such guarantor through an
agreement, contingent or otherwise:
(A) To purchase such indebtedness, liability or obligation or
any Property or assets constituting security therefor;
(B) To advance or supply funds (a) for the purchase or payment
of such indebtedness, liability or obligation, or (b) to maintain
working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such
indebtedness, liability or obligations;
(C) To lease Property or to purchase any Security or other
Property or services primarily for the purpose of assuring the owner
of such indebtedness, liability or obligation of the ability of the
primary obligor to make payment of the indebtedness, liability or
obligations; or
(D) Otherwise to assure the owner of the indebtedness, liability
or obligation of the primary obligor against loss in respect thereof.
INDEBTEDNESS - As to each Borrower, such Borrower's present and future
obligations, liabilities, debts, claims and indebtedness, contingent, fixed
or otherwise, however evidenced, created, incurred, acquired, owing or
arising (whether under written or oral agreement, by operation of law or
otherwise) including, without limitation, (A) any obligations or
liabilities of any Person which are secured by any Lien (other than
Permitted
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Liens) upon Property of such Borrower, even though such Borrower has not
assumed or otherwise become liable for the payment thereof, (B) any
obligations or liabilities created or arising under any lease (including
capitalized leases) or under any conditional sales contract or other title
retention agreement with respect to Property used or acquired by such
Borrower, even though the rights and remedies of the lessor, seller or
lender are limited to repossession, (C) any obligations or liabilities
arising under any lease or other contractual arrangement relating to
security deposits, advance payments or other prepaid funds in the hands of
or held by such Borrower subject to return or refund to any Person, (D) all
unfunded pension fund obligations and liabilities, and (E) deferred taxes
of any nature.
INVENTORY - As to each Borrower, all inventory now owned or leased or
hereafter acquired or leased by such Borrower including, without
limitation, all goods, merchandise, work-in-process, raw materials,
finished goods, inventory held for renting to other Persons and all other
materials, supplies, and tangible personal property of any kind, nature or
description held for sale or lease or for display or demonstration, or
furnished or to be furnished under contracts of service or which are or
which might be used or consumed in connection with the manufacturing,
packing, shipping, advertising, selling, leasing, or furnishing of such
goods, merchandise or other personal property and all documents of title or
other documents pertaining thereto.
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 the common law, statute or contract including, without
limitation, the security interest or lien arising from a security
agreement, mortgage, encumbrance, pledge, conditional sale, trust receipt
or assignment, lease, consignment, or bailment for security purposes.
LOCKBOX - As defined in Section 5.1(B) of this Agreement.
MATERIAL ADVERSE EFFECT - As to any events, occurrences, or
conditions, if the result thereof, either singly or in the aggregate, would
have a material and adverse effect on (1) the Property, business,
operations, prospects, profitability or condition (financial or otherwise)
of any Borrower, (2) the ability of any Borrower to repay the Obligations
as and when due or (3) Bank's Lien on any Collateral or the priority
thereof.
MATERIAL AGREEMENTS - Those contracts, agreements, documents, or other
arrangements required to be disclosed under the provisions of Section
6.1(C) of this Agreement.
MORTGAGES - Mortgages or deeds of trust, in each instance in form
satisfactory to Bank, creating mortgage liens on the Premises (subject to
the liens and encumbrances described in the Mortgages) in favor of Bank to
secure the Obligations.
NOTES - The Promissory Note, the Term Note and other notes or other
instruments evidencing Borrowers' obligation to repay any Obligations.
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OBLIGATIONS - All debts, liabilities, and obligations of Borrowers to
Bank under this Agreement and also any and all other debts, liabilities,
and obligations of Borrowers to Bank of every kind and description, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising including, without limiting the generality of the
foregoing, any debt, liability, or obligation of Borrowers to Bank under
any guaranty or to any other Person which Bank may have obtained by
assignment or otherwise and all interest, fees, charges, and expenses which
at any time may be payable by Borrowers to Bank pursuant to any of the
Credit Documents or otherwise, and all costs and expenses actually incurred
including reasonable attorney fees arising from or relating to claims or
causes of action made or filed against Bank by third parties as a result of
Borrowers' actions or inactions.
PENSION PLAN - Any pension plan, retirement payment plan,
profit-sharing plan, defined benefit or contribution plan, or "employee
pension benefit plan" as defined in Section 3(2) of ERISA that is
maintained or contributed to by Borrowers.
PERMITTED INDEBTEDNESS - As defined in Section 7.2(C) of this
Agreement.
PERMITTED LIENS - As defined in Section 7.2(G) of this Agreement.
PERSON - An individual, partnership, joint venture, corporation,
trust, or unincorporated organization, or a government or agency or
political subdivision thereof.
PREMISES - Those parcels of real property described on EXHIBIT C
attached to this Agreement including all improvements thereon and all
tenements, hereditaments, appurtenances, and other rights and estates of
any Borrower therein or thereto.
PROMISSORY NOTE - The promissory note to be executed by Borrowers in
the form attached as EXHIBIT D to this Agreement (with such changes or
modifications, if any, to which Bank and Borrowers may agree) evidencing
the revolving credit loan made by Bank pursuant to Section 2.1 of this
Agreement, together with all amendments thereto and all notes issued in
substitution therefor or replacement thereof.
PROPERTY - Any kind of property or asset, whether real, personal, or
mixed, or tangible or intangible, or any interest including, without
limitation, any leasehold interest held in any such properties or assets.
RESTRICTED INVESTMENT - As defined in Section 7.2(Q) of this
Agreement.
REVOLVING COLLATERAL - All of Borrowers'
(1) Inventory;
(2) Contract rights and general intangibles including, without
limitation, goodwill, trademarks, trademark applications, trade
styles, trade names, patents,
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patent applications, and deposit accounts whether now owned or
hereafter created or acquired;
(3) Accounts and other receivables, together with all customer
lists, original books and records, ledger and account cards, computer
tapes, discs, printouts and records, whether now in existence or
hereafter created; and
(4) Documents, warehouse receipts, instruments, and chattel
paper, whether now owned or hereafter created.
REVOLVING LOAN - As defined in Section 2.1(A) of this Agreement.
REVOLVING LOAN BORROWING BASE - Subject to the provisions of Section
2.1(B) of this Agreement, an amount equal to the lesser of:
(1) eighty-five percent (85%) of the unpaid face amount of
Eligible Accounts (less the maximum discounts, credits and allowances
which may be taken by or granted to Account Debtors in connection
therewith); or
(2) the Revolving Loan Credit Limit.
REVOLVING LOAN CREDIT LIMIT - An amount equal to One Million Five
Hundred Thousand Dollars ($1,500,000).
SECURITY - As defined in Section 2(1) of the Securities Act of 1933,
as amended.
SUBSIDIARY - As to a Borrower, any corporation of which 50% or more of
the Voting Stock is at any time, directly or indirectly, owned by such
Borrower and/or one or more of its Subsidiaries.
TERM LOAN - As defined in Section 2.2(A) of this Agreement.
TERM NOTE - The term note to be executed by Borrowers in the form
attached as EXHIBIT E to this Agreement (with such changes or
modifications, if any, to which Bank may agree) evidencing the term loan
made by Bank pursuant to Section 2.2 of this Agreement, together with
all amendments thereto and all notes issued in substitution or
replacement thereof.
UNUSED LINE FEE - As defined in Section 2.4 hereof.
VOTING STOCK - Securities of any class or classes of a corporation
which, at the time of reference thereto, entitles the holders to elect a
majority of the corporate directors.
1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement which
are not otherwise specifically defined shall have the meanings customarily given
them in accordance with GAAP.
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1.3 OTHER TERMS. Unless the context indicates to the contrary, all other
terms contained in this Agreement shall have the meanings provided for by the
Code to the extent the same are used or defined therein.
1.4 USE OF PLURAL FORM. All definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
2. LOANS AND ADVANCES
Subject to the provisions of this Agreement and each of the other Credit
Documents including, without limitation, those provisions of this Agreement or
the Credit Documents that provide that no loan advances need be made by Bank if,
at the date of request for loan advances hereunder by Borrowers, an Event of
Default, or event or condition which, with notice, lapse of time or both, would
constitute an Event of Default, then exists, Bank will provide the credit
facilities described in this Section 2 for the account of Borrowers.
2.1 REVOLVING LOAN
(A) ESTABLISHMENT OF REVOLVING LOAN. Subject to the provisions of
this Agreement, and subject at all times to Bank's right to the creation of
reserves for accrued but unpaid interest and otherwise as Bank deems
necessary or appropriate from time to time, Bank shall make such loans to
Borrowers consisting of advances made by Bank against the value of Eligible
Accounts (the "Revolving Loan"); provided, however, that the aggregate
unpaid principal of the Revolving Loan outstanding at any one time shall
not at any time exceed the Revolving Loan Borrowing Base.
(B) CHANGES IN REVOLVING LOAN BORROWING BASE. At any time and upon
providing Borrowers sixty (60) calendar days prior written notice, Bank may
increase or decrease the Revolving Loan Borrowing Base and each such
increase or decrease shall become effective thirty (30) calendar days after
such notice for the purpose of calculating the amounts which Bank may be
willing to advance or to allow to remain outstanding as revolving credit
advances; provided, however, Bank shall have the right upon three (3)
calendar days prior written notice to immediately increase or decrease the
Revolving Loan Borrowing Base if an Event of Default exists on the date of
such 3-day notice.
(C) PAYMENT. The Revolving Loan shall be payable in full upon the
earlier of an Event of Default or _______________, 1999, shall bear
interest as provided in Section 2.1(D) of this Agreement, and shall be
evidenced by, and repayable in accordance with, the Promissory Note, but in
the absence of the Promissory Note shall be evidenced by Bank's record of
disbursements and repayments, which record shall be subject to Section 2.6
hereof.
(D) INTEREST ON REVOLVING LOAN. The Revolving Loan shall bear
interest on the unpaid principal balance from time to time outstanding
until the date paid at a rate per annum equal to the Contract Rate, such
interest being payable monthly commencing
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______________, 199__ and continuing on the last day of each month so
long as any principal balance remains outstanding. Any increase or
decrease in the interest rate resulting from a change in the Base Rate
shall become effective on the date of such change. Interest shall be
computed on a 360-day year basis based upon the actual number of days
elapsed.
2.2. TERM LOAN
(A) ESTABLISHMENT OF TERM LOAN. Subject to the provisions of this
Agreement, Bank shall make a term loan to Borrowers in the amount of One
Million Six Hundred Twenty Thousand Dollars ($1,620,000; the "Term Loan").
(B) PAYMENT. The Term Loan shall bear interest as provided in
Subsection (C) of this Section 2.2 and shall be evidenced by, and repayable
in accordance with, the Term Note but, in the absence of the Term Note,
shall be evidenced by Bank's records of disbursements and repayments.
Without in any way limiting Bank's right at any time to demand payment of
the entire principal amount of the Term Loan, and all interest accrued
thereon, upon the occurrence of an Event of Default, which right is
absolute and unconditional, the principal balance of the Term Loan shall be
payable in sixty (60) monthly installments as follows: (a) fifty-nine (59)
equal monthly installments of Nineteen Thousand Dollars ($19,000.00) each,
commencing __________________ and continuing on the last day of each month
thereafter, and (b) a final payment of Four Hundred Ninety-Nine Thousand
Dollars ($499,000.00) due and payable on ______________________.
(C) INTEREST ON TERM LOAN. The Term Loan shall bear interest on the
unpaid principal balance from time to time outstanding until the date paid
at a rate per annum equal to the Contract Rate. Such interest shall be
payable monthly commencing ___________________, and continuing on the last
day of each month thereafter so long as any principal balance remains
outstanding. Any increase or decrease in the Contract Rate resulting from
a change in the Base Rate shall become effective on the date of such
change. Interest shall be computed on a 360-day year basis based upon the
actual number of days elapsed.
2.3 CONDITIONS APPLICABLE TO REQUESTS FOR REVOLVING LOAN. In addition to
all other conditions set forth in this Agreement, each request by Borrowers for
funds to be advanced to Borrowers under the Revolving Loan also shall be subject
to the following specific conditions:
(A) NOTICE OF REQUEST. The President or Chief Financial Officer of
EPI or any other Person designated in writing by the President or Chief
Financial Officer of EPI shall notify Bank in writing or telephonically of
Borrowers' request for funds to be advanced under the Revolving Loan, which
request shall be received by Bank not later than 1:00 p.m., Cleveland, Ohio time
and shall state the total amount of the funds to be advanced to Borrowers under
the Revolving Loan.
(B) BORROWING BASE CERTIFICATE. Borrowers' notice of request for a
Revolving Loan shall be accompanied by a duly completed and executed borrowing
base certificate in the
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form of EXHIBIT G-1 attached to this Agreement (the "Borrowing Base
Certificate"), demonstrating that the principal amount of the Revolving Loan,
when added to the aggregate principal amount of all Revolving Loans then
outstanding, shall not exceed the Revolving Loan Borrowing Base.
(C) BORROWERS' ACCEPTANCE OF PROCEEDS. The acceptance by any of the
Borrowers of the proceeds of any portion of the Revolving Loan, as of the date
of such acceptance, shall be deemed to constitute (1) a representation and
warranty by Borrowers to Bank that all conditions set forth in this Agreement
have been satisfied, and (2) a confirmation by Borrowers of the granting and
continuance of the Lien in favor of Bank created pursuant to this Agreement and
the Credit Documents.
(D) CONDITIONS TO MAKING REVOLVING LOAN. Bank shall not make any
advance to Borrowers under the Revolving Loan unless (1) Bank shall have
received Borrowers' written or telephonic request in the prescribed time as set
forth in Subsection (A) of this Section 2.3, (2) no Event of Default shall then
exist or, immediately after the making of any advance to Borrowers under the
Revolving Loan, would exist, (3) all provisions or covenants contained in
Section 7 of this Agreement shall have been complied with or performed, (4) all
of the Credit Documents shall be in full force and effect, (5) the
representations and warranties contained in Section 6 of this Agreement shall be
true and correct in all material respects as if made on and as of the date of
such borrowing except to the extent that any such representations or warranties
expressly relate to an earlier date, and (6) Bank shall not have made demand for
the payment of the Obligations or otherwise terminated the availability of any
portion of the Revolving Loan.
2.4 FEES AND ADDITIONAL CHARGES.
(A) CLOSING FEE. As additional consideration for the financing being
made available to Borrowers under the provisions of this Agreement, Borrowers
shall pay to Bank on the date of this Agreement a closing fee of $50,000 (the
"Closing Fee"). The Closing Fee shall be fully earned upon the execution of
this Agreement by Borrowers and Bank, and shall not be subject to proration or
rebate upon any prepayment of the loans under this Agreement or termination of
this Agreement for any reason.
(B) UNUSED LINE FEE. Until such time as the Revolving Loan is
terminated as provided in this Agreement and Borrowers' Obligations are paid
in full, Borrowers shall pay to Bank a per annum amount calculated based on a
360-day year equal to one-quarter of one percent (.250%) per annum of the
difference between the Revolving Loan Credit Limit for the preceding month
and the average daily outstanding principal balance of the Revolving Loan
during the preceding month (the "Unused Line Fee"). The Unused Line Fee
shall be due and payable in arrears on the first day of each month commencing
_____________________.
2.5 OPTIONAL CHARGE AGAINST REVOLVING LOAN. To the extent Borrowers do
not remit, when due, any payments of interest or, in the case of loans other
than the Revolving Loan, any payment of principal or any other payment required
to be made by Borrowers to the Bank pursuant to the terms of any of the Credit
Documents, the Bank may make such payment in the exercise of its reasonable
discretion by increasing the outstanding principal balance of the Revolving Loan
to
12
prevent any such amount from becoming past due, but it is expressly
acknowledged and agreed by Borrowers that Bank shall be under no obligation
to do so.
2.6 ACCOUNTINGS. Any accounting rendered by Bank to Borrowers shall be
deemed correct and conclusively binding upon Borrowers unless (A) EPI notifies
Bank by certified mail, return receipt requested, within thirty (30) calendar
days after the date when each such accounting is mailed or otherwise delivered
to Borrowers, or (B) there exists a bona fide mistake in such accounting
regardless of which party discovers such mistake.
2.7 ALL ADVANCES TO CONSTITUTE ONE LOAN. The Revolving Loan, the Term
Loan and all other amounts owed by Borrowers to Bank under this Agreement,
whether or not evidenced by a promissory note, shall constitute one obligation
of Borrowers, secured by Bank's lien on and security interest in all of the
Collateral. Each Borrower shall be jointly and severally liable to Bank for all
of the Obligations, regardless of whether such Obligations arise as a result of
advances made directly to Borrowers, it being stipulated and agreed that all
monies advanced by Bank hereunder inure to the benefit of Borrowers, and that
Bank is relying on the joint and several liability of Borrowers in extending
credit and otherwise making advances hereunder.
2.8 EXCESS INTEREST. In no contingency or event whatsoever shall the
interest rate charged 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. In the event that such a court
determines that Bank has received interest under this Agreement in excess of the
highest applicable rate, such excess interest shall be first applied to any
unpaid principal balance owed by Borrowers, and if the then remaining excess
interest is greater than the unpaid principal balance, Bank shall promptly
refund such excess interest to Borrowers.
2.9 REVIVAL. To the extent that Borrowers make a payment or payments to
Bank or to the extent Bank receives any payment or proceeds of the Collateral
for Borrowers' benefit, which payment or proceeds or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver, or any other party under
any bankruptcy act, state or federal law, common law or equitable cause, then,
to the extent of such payment or proceeds received, the Obligations or part
thereof intended to be satisfied shall be revived and shall continue in full
force and effect, as if such payment or proceeds had not been received by Bank.
3. DEFAULT INTEREST
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the Default Rate,
calculated daily on a 360-day year basis, based upon the actual number of days
elapsed.
4. COLLATERAL; GENERAL TERMS
4.1 GRANT OF SECURITY INTEREST. To secure the prompt payment and
performance of the Obligations, and in addition to any other Collateral or Lien
securing the Obligations, Borrowers
13
hereby grant to Bank a security interest in and to all of the following
Property of Borrowers, whether now owned or existing or hereafter acquired or
arising and wheresoever located:
(A) FIXED COLLATERAL. All Fixed Collateral.
(B) REVOLVING COLLATERAL. All Revolving Collateral.
(C) CASH COLLATERAL. All Cash Collateral.
(D) DEPOSITS; ACCOUNTS. Any and all deposits or other sums at any
time credited by or due from Bank to Borrowers, whether in a Depository
Account or other account, together with any and all instruments, documents,
policies and certificates of insurance, securities, goods, Accounts, choses
in action, general intangibles, chattel paper, cash or other Property, and
the proceeds of each of the foregoing, to the extent owned by Borrowers or
in which Borrowers have an interest and which now or hereafter are at any
time in the possession or control of Bank or in transit by mail or carrier
to or from Bank or in the possession of any Person acting in Bank's behalf,
without regard to whether Bank received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or
whether Bank had conditionally released the same, and any and all balances,
sums, proceeds and credits of Borrowers with, and any claims of Borrowers
against, Bank.
(E) ACCESSIONS, PRODUCTS, AND PROCEEDS. All accessions to,
substitutions for, and all replacements, products, and proceeds of the
Property described in Subsections (A), (B), (C) and (D) above including,
without limitation, proceeds of insurance policies insuring such Property.
(F) BOOKS AND RECORDS. All books, records, and other property
(including, without limitation, credit files, programs, printouts, and
other materials and records) of Borrowers pertaining to any of the Property
described in Subsections (A), (B), (C), (D) or (E) above.
4.2 PERFECTION OF BANK'S SECURITY INTEREST IN COLLATERAL. Borrowers shall
execute such financing statements provided for by applicable law, and otherwise
take such other action and execute such assignments or other instruments or
documents, in each case as Bank may request, to evidence, perfect, or record
Bank's security interest in the Collateral. Borrowers hereby authorize Bank to
execute and file any such financing statement or continuation statement on
Borrowers' behalf. The parties acknowledge that a carbon, photographic, or
other reproduction of this Agreement shall be sufficient as a financing
statement to the extent permitted by law.
4.3 INSURANCE. Borrowers shall maintain and pay for insurance including,
without limitation, insurance upon all tangible Collateral wherever located, in
storage or in transit in vehicles including goods evidenced by documents,
covering casualty, hazards, public liability, and such other risks in such
amounts and with such insurance companies as shall in each instance be
reasonably satisfactory to Bank. Borrowers shall deliver certified copies of
such policies or insurance binders thereof to Bank with satisfactory
endorsements naming Bank as an additional insured and loss payee as its interest
may appear. In the event Borrowers deliver insurance binders
14
to Bank, then Borrowers shall deliver the insurance policies relating thereto
to Bank within sixty (60) days of the date of this Agreement. Borrowers will
use reasonable efforts to have each policy of insurance or endorsement
contain a provision in substantially the same form or effect as set forth on
EXHIBIT F attached to this Agreement. Borrowers shall promptly deliver to
Bank true copies of all reports made to insurance companies. Upon the
occurrence and continuance of an Event of Default, Borrowers hereby
irrevocably make, constitute, and appoint Bank (and all officers, employees,
or agents designated by Bank) as Borrowers' true and lawful attorney-in-fact
and agent, with full power of substitution, such that Bank shall have the
right and authority to make, and adjust claims under such policies of
insurance (provided, however, that Bank shall consult with Borrowers prior to
finally making, settling, or adjusting claims under such policies of
insurance), receive, and endorse the name of Borrowers on, any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and make all determinations and decisions with respect to such
policies of insurance or to pay any premium in whole or in part relating
thereto. Without waiving or releasing any obligation or default by Borrowers
hereunder, Bank may (but shall be under no obligation to do so) at any time
or times thereafter maintain such action with respect thereto which Bank
deems advisable. All sums disbursed by Bank in connection therewith
including, without limitation, reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable, on demand, and
until paid by Borrowers to Bank, with interest thereon at the Contract Rate,
shall be additional Obligations hereunder secured by the Collateral.
4.4 PROTECTION OF COLLATERAL; REIMBURSEMENT. All insurance expenses and
all expenses of protecting, storing, warehousing, insuring, handling,
maintaining, and shipping any Collateral, any and all excise, property, sales,
use or other taxes imposed by any state, federal or local authority on any of
the Collateral, or in respect of the sale thereof, or otherwise in respect of
Borrowers' business operations which, if unpaid, could result in the imposition
of any Lien upon the Collateral, shall be borne and paid by Borrowers. If
Borrowers fail to promptly pay any portion thereof when due, except as may
otherwise be permitted hereunder or under any of the other Credit Documents,
Bank may, at its option, but shall not be required to, pay the same. All sums
so paid or incurred by Bank for any of the foregoing and any and all other sums
for which Borrowers may become liable hereunder and all costs and expenses
(including reasonable attorneys' fees, legal expenses, and court costs) which
Bank may incur in enforcing or protecting its Lien on or rights and interest in
the Collateral or any of its rights or remedies under this or any other
agreement between the parties hereto or in respect of any of the transactions to
be had hereunder shall be repayable on demand and, until paid by Borrowers to
Bank with interest thereon at the Contract Rate, shall be additional Obligations
hereunder secured by the Collateral. Bank shall not be liable or responsible in
any way for the safekeeping of any of the Collateral or for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default of
any warehouseman, carrier, forwarding agency, or other Person whomsoever.
4.5 INSPECTION. Bank (by any of its officers, employees, agents or
representatives) shall upon reasonable notice have the right to inspect the
Collateral, all books, records, journals, orders, receipts or other
correspondence related thereto (and to make extracts or copies thereof as Bank
may desire) and the premises upon which any of the Collateral is located for the
purpose of verifying the amount, quality, quantity, value and condition of, or
any other matter relating to, the Collateral.
15
5. COLLECTION OF ACCOUNTS; REPORTING
5.1 COLLECTION OF ACCOUNTS.
(A) PROCEEDS. From and after the first date Borrowers submit to Bank
a notice of request for funds to be advanced under the Revolving Loan in
accordance with Section 2.3(A), and except for minor xxxxx cash required in
the ordinary course of business of Borrowers, all checks, drafts, cash and
other proceeds realized from the sale of any Inventory or otherwise from
the sale or other disposition of any of the other Collateral including, but
not limited to, all proceeds realized from the collection of the Accounts
or otherwise pursuant to any contract right, note, xxxx, draft, acceptance,
chose in action and other like forms of general intangibles, and all
remittances received by Borrowers with respect to the foregoing, shall,
upon receipt by Borrowers, be held by Borrowers as trustee of an express
trust for Bank's sole benefit and subject to immediate deposit (in their
original form duly endorsed in blank) in a special account over which Bank
has the sole right and power of withdrawal, maintained at a financial
institution acceptable to Bank (such financial institution and account
being herein referred to as the "Depository Bank" and "Depository Account"
respectively). The Depository Account shall be subject to the written
agreement of the Depository Bank to waive any right of setoff it might
otherwise claim to have against any funds in the Depository account and to
otherwise charge any costs relative to the Depository Account to Borrowers
or such other account(s) as Borrowers may maintain with the Depository
Bank, such agreement (the "Depository Agreement") to be in form and
substance acceptable to Bank. Bank assumes no responsibility for any
claims of accord and satisfaction or release with respect to funds which
have been deposited in the Depository Account.
(B) LOCKBOX. If at any time requested by Bank, Borrowers shall
instruct all Account Debtors to mail their payments directly to a
designated post office lockbox (a "Lockbox") maintained at Borrowers'
expense, with respect to which only Bank or, should Bank so agree, a
designated financial institution shall have the right of access and all
payments so received shall be subject to immediate deposit into the
Depository Account.
(C) BANK'S ACCOUNT. All funds held in the Depository Account shall
be subject to transfer to an account designated by the Bank (the "Bank's
Account") as set forth in the Depository Agreement or as otherwise
designated by Bank and the application of any such funds to the payment of
the Obligations shall not occur until Bank's receipt of such funds in
cleared federal funds in Bank's Account. The order and method of
application of such payment to the Obligations shall be in the sole
discretion of Bank.
(D) NOTIFICATION OF ACCOUNT DEBTORS. Upon the occurrence and
continuance of an Event of Default, Bank shall have the right to notify
Account Debtors and other Persons indebted to Borrowers of Bank's interest
in any such amounts payable to Borrowers and to instruct such Account
Debtors and other Persons to remit the same and deposit in Bank's Account
of all funds arising therefrom (less any costs of collection and other
charges or expenses incurred in connection therewith as hereinafter
provided) in cleared federal funds, the same shall be applied to the
Obligations.
16
5.2 VERIFICATION OF ACCOUNTS. Any of Bank's officers, employees, or
agents shall have the right, at any time or times hereafter, in the name of
Bank, any designee of Bank or in the name of Borrowers, to verify the validity,
amount or any other matter relating to any Accounts by mail, telephone,
telegraph, or otherwise.
5.3 ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. On or before the
fifteenth (15th) calendar day of each month from and after the date hereof,
Borrowers shall deliver to Bank, in form and substance acceptable to Bank, a
detailed aged trial balance of all then existing Accounts specifying the names,
face value and dates of invoices for each Account Debtor obligated on an Account
so listed. In addition, upon Bank's reasonable request, Borrowers shall furnish
Bank with copies of proof of delivery and the original copy, if available of all
documents relating to the Accounts including, without limitation, repayment
histories and present status reports, relating to the Accounts and such other
matters and information relating to the status of then existing Accounts as Bank
shall reasonably request. If an Event of Default has occurred and is
continuing, Borrowers shall execute and deliver to Bank, on forms supplied by
Bank and at such intervals as Bank may from time to time require, written
assignments of all of its Accounts after shipment of the subject goods, together
with copies of invoices and/or invoice registers related thereto as Bank may
from time to time request.
5.4 OTHER REPORTS. Borrowers shall furnish Bank with (a) a "Borrowing
Base Certificate" in the form attached to this Agreement as EXHIBIT G-1 each
time Borrowers request Bank to advance funds under the Revolving Loan, (b) a
"Borrowing Base Certificate" in the form attached to this Agreement as EXHIBIT
G-2 on or before the fifteen (15th) calendar day of each month from and after
the date hereof, dated as of the end of the preceding accounting period, (c) on
or before the fifteenth (15th) day of each month from and after the date hereof,
a report listing Borrowers' Inventory as of the last day of the preceding
accounting period, and (d) such other reports regarding Inventory as Bank from
time to time reasonably may request. Such reports shall be on forms requested
or provided by Bank and shall contain such detailed information as is
satisfactory to Bank. Borrowers shall conduct a physical count of its Inventory
at such reasonable intervals as Bank may request (but in no event less than once
during each fiscal year) during the term of this Agreement and shall supply Bank
with a copy of such physical count accompanied by a report of the value (at the
lower of cost, calculated on a first-in, first-out basis, or market value
thereof).
6. REPRESENTATIONS AND WARRANTIES
6.1 GENERAL REPRESENTATIONS AND WARRANTIES. As an inducement to Bank to
make advances under this Agreement, Borrowers warrant and represent to Bank each
of the following:
(A) EXISTENCE; FOREIGN QUALIFICATION. EPI is a corporation duly
organized, validly existing, and in good standing under the laws of its
state of incorporation and is duly qualified and authorized to do business
and is in good standing as a foreign corporation in each other state or
jurisdiction where the character of its Property or its business activities
makes such qualification necessary, except where the failure to so qualify
will not cause or result in a Material Adverse Effect. EPIC is a general
partnership duly organized and
17
validly existing under the laws of the State of Ohio and is duly
qualified and authorized to do business and is in good standing as a
foreign partnership in each other state or jurisdiction where the
character of its Property or the nature of its activities makes such
qualification necessary, except where the failure to so qualify will not
cause or result in a Material Adverse Effect.
(B) AUTHORITY. Each Borrower has the right and power and is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Credit Documents to which it is a party.
This Agreement and each of the other Credit Documents to which a Borrower
is a party have each been duly authorized and approved by the all necessary
actions of such Borrower, and are the valid and binding obligations of such
Borrower, enforceable against such Borrower in accordance with their
respective terms. The execution, delivery and performance of this
Agreement and each of the other Credit Documents to which a Borrower is a
party will not conflict with nor result in any breach in any of the
provisions of, or constitute a default under, or result in the creation of
any Lien (other than Permitted Liens) upon any Property of such Borrower
under the provisions of, a Borrower's applicable Certificate of
Incorporation, Articles of Incorporation, Regulations, Bylaws, Partnership
Agreement or any Material Agreement.
(C) MATERIAL AGREEMENTS. Except as disclosed on EXHIBIT H attached
to this Agreement, no Borrower is a party to any (1) Debt Instrument, (2)
security agreement, mortgage, deed of trust, pledge, assignment, or other
document or arrangement whereby any Lien upon any of Borrowers' Property
exists in favor of any Person other than Bank, (3) lease (capital,
operating or otherwise), whether as lessee or lessor thereunder, (4)
contract, commitment, agreement, or other arrangement involving the
purchase or sale of any Inventory by such Borrower, or the license of any
right to or by such Borrower, (5) contract, commitment, agreement, or other
arrangement with any Affiliate of such Borrower, (6) management or
employment contract or contract for personal services with any Affiliate of
such Borrower, which is not otherwise terminable at will or on less than
ninety (90) days notice without liability, (7) collective bargaining
agreement, (8) Pension Plan, or (9) other contract, agreement,
understanding or arrangement which, if individually or in the aggregate as
to Sub-paragraphs (1) through (8) above is violated, breached, or
terminated for any reason, would have or would be reasonably expected to
have a Material Adverse Effect.
(D) OTHER CORPORATE AFFILIATES. Except as disclosed on EXHIBIT I
attached to this Agreement, no Borrower (1) has any Subsidiaries, (2) has
been the surviving corporation of any merger or consolidation during the
preceding five (5) years, or (3) has been known as or operated under or
otherwise used any other corporate or fictitious name, trade name, or trade
style during the preceding five (5) years.
(E) COMPLIANCE WITH LAWS. Each Borrower (1) holds all permits,
certificates, licenses, orders, registrations, franchises, authorizations,
and other approvals from all Federal, state, local, and foreign
governmental and regulatory bodies necessary for the conduct of its
business is in full compliance with applicable law, (2) is in full
compliance with all Federal, state, local, or foreign applicable statutes,
rules, regulations, and orders including, without limitation, those
relating to environmental protection, occupational
18
safety and health, and equal employment practices, (3) is not in
violation of or in default under any Material Agreement, and (4) has not
received any notice to the effect that it is not in full compliance with
any of the requirements of ERISA which, if individually or in the
aggregate as to Sub-paragraphs (1) through (4) above is violated,
breached, or terminated for any reason, would have a Material Adverse
Effect.
(F) LITIGATION AND ADMINISTRATIVE PROCEEDINGS. Except as disclosed
on EXHIBIT J attached to this Agreement, there are (1) no lawsuits,
actions, investigations, or other proceedings pending or, to the best of
Borrowers' knowledge, threatened against any Borrower, or in respect of
which any Borrower may have any liability, in any court or before any
governmental authority, arbitration board, or other tribunal, (2) no
grievances, disputes, or controversies outstanding with any union or other
organization of the employees of any Borrower, or threats of work stoppage,
strike, or pending demands for collective bargaining, which would have or
would be reasonably expected to have a Material Adverse Effect. Except as
disclosed on EXHIBIT J attached to this Agreement, there are no orders,
writs, injunctions, judgments, or decrees of any court or government agency
or instrumentality to which any Borrower is a party or by which any
Borrower's Property is bound.
(G) USE OF PROCEEDS. Borrowers' uses of the proceeds of any
advances made by Bank to Borrowers pursuant to this Agreement are, and
will continue to be, legal and proper corporate uses, duly authorized by
each Borrower, and such uses are and will continue to be consistent with
all applicable laws and statutes in all material respects, as in effect
from time to time. No Borrower is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of any regulation of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any loans to Borrowers
will be used to purchase or carry (or refinance any borrowing, the
proceeds of which were used to purchase or carry) any margin stock, or
to extend credit to others for the purpose of purchasing or carrying
margin stock.
(H) INTELLECTUAL PROPERTY. Each Borrower owns, possesses, or has the
right to use all the patents, patent applications, trademarks, service
marks, copyrights, licenses, and rights with respect to the foregoing
necessary for the conduct of its business without any known conflict with
the rights of others. All such patents, patent applications, trademarks,
service marks, trade names, copyrights, licenses and other similar rights
are listed on EXHIBIT K attached to this Agreement.
(I) LOCATION OF COLLATERAL. All of the Collateral is located at a
Collateral Location.
(J) TITLE TO ASSETS. Borrowers have good title to and ownership of
all Property they purport to own, which, in the case of the Collateral, is
free and clear of all Liens, except those in favor of Bank and any
Permitted Liens.
(K) FINANCIAL STATEMENTS. The Financial Statements have been
prepared in accordance with GAAP and in conformity with Borrowers' normal
accounting practices,
19
policies, and principles which have been consistently applied and which
fairly present the financial position of Borrowers at such date and the
results of operations of Borrowers for such period. There has not been
any change in the condition, financial or otherwise, of Borrowers as
shown on Borrowers' most recent interim Financial Statements, and no
change in the aggregate value of machinery and equipment reflected on
Borrowers' most recent Financial Statements, except changes in the
ordinary course of business, none of which individually or in the
aggregate will have a Material Adverse Effect, except as disclosed in
this Agreement.
(L) ACCURATE AND COMPLETE STATEMENTS. Neither this Agreement nor any
written statement made by Borrowers in connection with this Agreement
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein or in this Agreement not
misleading, except any bona fide mistakes therein. After due inquiry by
Borrowers, there is no known fact which Borrowers have not disclosed to
Bank which has a Material Adverse Effect.
(M) TAX RETURNS. All Federal, state and local tax returns and other
reports required by law to be filed in respect of the income, business,
properties and employees of each Borrower have been filed, and all taxes,
assessments, fees and other governmental charges which are due and payable
have been paid, except as otherwise permitted herein or the failure to do
so does not and will not cause or result in a Material Adverse Effect. The
provision for taxes on the books of each Borrower is adequate for all years
not closed by applicable statutes and for the current fiscal year.
(N) SECURITIES LAWS. Borrowers' execution and delivery of this
Agreement and each of the other Credit Documents to which they are a party
will not directly or indirectly violate or result in a violation of Section
7 of the Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto.
(O) ENVIRONMENTAL LAWS. Except as disclosed on EXHIBIT L attached to
this Agreement, (1) the Premises and all other real property owned or
leased by any Borrower, and all improvements, equipment or other Property
located thereon or used therein and all business operations conducted
thereupon, have been operated or maintained, and are, in compliance in all
material respects with, (a) the provisions of the Federal Occupational
Safety and Health Act, the National Environmental Protection Act, the
Resource Conservation and Recovery Act, and all rules and regulations
thereunder and all similar Federal, state and local laws, rules, and
regulations, and (b) all applicable Federal, state, and local laws, rules,
and regulations relating to air emissions, water discharge, noise
emissions, solid or liquid waste disposal, hazardous waste, or materials,
or other environmental, health or safety matters, and (2) there are no
outstanding citations, notices, or orders of non-compliance issued to any
Borrower, or relating to the respective businesses, assets, property,
leaseholds, or equipment of any Borrower under any such laws, rules, or
regulations. Borrowers shall indemnify and hold Bank harmless from and
against any liability, loss, damage, suit, action, or proceeding pertaining
to solid or hazardous waste materials or other waste-like or toxic
substances discovered at or relating to Borrowers' business operations or
the locations where Borrowers previously did, presently do, or in the
20
future may, operate their business including, without limitation, claims
of any Federal, state, or municipal government or quasi-governmental
agency, or any third person, whether arising under the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980, the
Resource Conservation and Recovery Act, or any other Federal, state, or
municipal law or regulation, or tort, contract or common law.
(P) CONTINUED BUSINESS. There exists no actual, pending, or, to the
best of Borrowers' knowledge, any threatened termination, cancellation or
limitation of, or any modification or change in the business relationship
of any Borrower and any customer or supplier, or any group of customers or
suppliers, whose purchases or supplies, individually or in the aggregate,
are material to the business of any Borrower, and there exists no present
condition or state of facts or circumstances which would materially affect
adversely any Borrower in any respect or prevent any Borrower from
conducting such business or the transactions contemplated by this Agreement
in substantially the same manner which it was theretofore conducted.
(Q) MAINTENANCE OF FIXED COLLATERAL. Except as provided in Exhibit
B, all Fixed Collateral necessary to conduct Borrowers' business is in good
operating condition and has been maintained in accordance with prevailing
industry practices.
(R) FRAUDULENT CONVEYANCE. The security interests and liens granted
by Borrowers and/or the utilization of the proceeds of the borrowings
described in this Agreement are not, and will not be, in violation or
contravention of the general corporate laws of Ohio, the Uniform Fraudulent
Conveyance Act as adopted in Ohio, or any other law designed for the
protection of the rights of creditors.
6.2 REAFFIRMATION. Each request for an advance made by Borrowers pursuant
to this Agreement shall, unless Bank is otherwise notified in writing prior to
the time of such advance, constitute (A) an automatic representation and
warranty by Borrowers to Bank that there does not then exist an Event of Default
or any event or condition which, with notice, lapse of time and/or the making of
such advance, would constitute an Event of Default, and (B) a reaffirmation as
of the date of such request of all of the representations and warranties of
Borrowers contained in this Agreement or any of the other Credit Documents,
except with respect to the Exhibits attached to this Agreement (the "Exhibits"),
provided that Borrowers provide to Bank (1) upon the occurrence of events or
conditions which have or would reasonably be expected to have a Material Adverse
Effect, information necessary to update the Exhibits describing such events,
occurrences or conditions, and (2) changes or additions to the information on
the Exhibits as otherwise required by this Agreement.
7. COVENANTS AND CONTINUING AGREEMENTS
7.1 AFFIRMATIVE COVENANTS. So long as any Obligations remain unsatisfied,
each Borrower covenants that, unless otherwise consented to by Bank in writing,
it will undertake each of the following:
21
(A) TRANSACTION FEES. Pay to Bank, on demand, any and all fees,
costs or expenses which Bank pays to a bank or other similar institution
arising out of or in connection with (1) the forwarding by Bank to
Borrowers or any other Person on behalf of Borrowers of any proceeds of
loans made by Bank pursuant to this Agreement, or (2) the depositing for
collection, by Bank, of any check or item of payment received and/or
delivered to Bank on account of the Obligations.
(B) EXISTENCE. Preserve and maintain its separate legal existence
and all rights, privileges, and franchises in connection therewith, and
maintain its qualification and good standing in all states in which such
qualification is necessary in order for Borrowers to conduct their business
in such states except where the failure to so qualify would not have a
Material Adverse Effect.
(C) TAX RETURNS AND PAYMENT OF TAXES. File all Federal, state, and
local tax returns and other reports such Borrower is required by law to
file, maintain adequate reserves for the payment of all taxes, assessments,
governmental charges, and levies imposed upon it, its income, or its
profits, or upon any Property belonging to it and pay and discharge all
such taxes, assessments, governmental charges and levies prior to the date
on which penalties attach thereto, except where the same are being
contested in good faith by appropriate proceedings and adequate book
reserves have been established with respect to each such claim being
contested.
(D) MAINTENANCE OF PROPERTY. Maintain the Property necessary
to conduct its business in good condition and make all necessary
renewals, repairs, replacements, additions and improvements thereto so
as to maintain the value and operating efficiency thereof, ordinary wear
and tear excepted.
(E) COMPLIANCE WITH LAWS. Comply with all laws, ordinances,
governmental rules and regulations to which it is subject and obtain all
licenses, permits, franchises, or other governmental authorizations
necessary to the ownership of its Properties or to the conduct of its
business or which, if violated, might result in a Material Adverse Effect.
(F) ERISA COMPLIANCE. At all times make prompt payment of any and
all contributions required to meet the minimum funding standards set forth
in Sections 302 and 305 of ERISA with respect to each Pension Plan, if any,
maintained by Borrowers and otherwise in regard thereto (1) furnish Bank,
upon Bank's request therefor, with any annual report required to be filed
pursuant to Section 103 of ERISA in connection with each Pension Plan, (2)
notify Bank as soon as practicable of any "Reportable Event" (as defined
under ERISA) other than any event not required to be reported to the
Pension Benefit Guaranty Corporation ("PBGC") in accordance with applicable
regulations and of any additional act or condition arising in connection
with any Pension Plan which might constitute grounds for the termination
thereof by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer the Pension Plan, and (3) furnish
to Bank, promptly upon Bank's request therefor, such additional information
concerning any such Pension Plan or any other such employee benefit plan as
may be reasonably requested.
22
(G) ACCOUNT DEBTOR DISCLOSURE. Promptly upon, but in no event later
than ten (10) business days after, learning thereof, inform Bank, in
writing, of the assertion of any claims, offsets or counterclaims by any
Account Debtor and of any allowances, credits and/or other monies granted
by it to any Account Debtor and not otherwise disclosed to Bank; and
furnish to and inform Bank of all material adverse information relating to
the financial condition of any Account Debtor.
(H) BOOKS AND RECORDS. Keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions.
(I) FINANCIAL INFORMATION. Cause to be prepared and furnished to
Bank the following financial information (which in the case of any
financial statements shall consist of a consolidated and consolidating
balance sheet, income statement and cash flow statement kept and prepared
in accordance with GAAP, unless Borrowers' independent certified public
accountants concur in any changes therein and such changes are disclosed to
Bank and are consistent with then generally accepted accounting
principles):
(1) On or within one hundred twenty (120) days after the close
of each fiscal year of EPI, the audited annual consolidating and
consolidated financial statements of EPI and its Subsidiaries as of
the end of such year prepared by a firm of independent certified
public accountants of recognized standing acceptable to Bank, together
with a management letter, if any, of such independent certified public
accountants;
(2) On or within thirty (30) days after the end of each calendar
month hereafter, unaudited consolidated and consolidating and interim
financial statements of EPI and its Subsidiaries as of the end of the
preceding accounting period and of the portion of Borrowers' fiscal
year then elapsed certified by the principal financial officer of EPI
as prepared in accordance with GAAP (without footnote disclosures) and
fairly presenting the financial position and results of operations of
Borrowers for such accounting period;
(3) On or within thirty (30) days after the close of each fiscal
year of Borrowers, a projected income statement and cash flow
statement of Borrowers, prepared on a consolidated basis, for their
next fiscal year;
(4) As soon as possible, but not later than fifty (50) calendar
days after the end of each fiscal quarter, (a) a copy of EPI's Form
10-Q filed with the Securities and Exchange Commission, and (b) a
financial covenant compliance worksheet, in form reasonably
satisfactory to Bank, reflecting the computation of the financial
covenants set forth in Section 7.1 and 7.2 of this Agreement as of the
end of the period covered by such financial statements.
23
(5) Concurrently with the delivery of each of the financial
statements described in Subparagraphs (1) and (2) above, a certificate
from the chief financial officer of EPI certifying to Bank that (a) to
the best of his knowledge, Borrowers have kept, observed, performed
and fulfilled each and every covenant, obligation and agreement
binding upon Borrowers contained in this Agreement or the other
documents, and that no Event of Default, or any event which with the
giving of notice or lapse of time or both, would constitute an Event
of Default, has occurred or specifying any such Event of Default, or
(b) one or more Events of Default has occurred and is continuing, and
setting forth Borrowers' proposed resolutions to remedy such Events of
Default;
(6) In addition to the Form 10-Q described above in Subparagraph
(4) of this Section 7.1(I), copies of any definitive proxy statements,
financial statements or definitive proxy statements, financial
statements or reports which Borrowers have made available to its
shareholders, and copies of any regular periodic or special reports,
schedules, registration statements or other documents (including,
without limitation, all Forms 8-K and 10-K) which Borrowers file with
the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or any national securities exchange
or self-regulatory securities organization including the National
Association of Securities Dealers, Inc.; and
(7) Such other data and information (financial and otherwise) as
Bank, from time to time, may reasonably request, bearing upon or
related to the Collateral or each Borrower's financial condition
and/or results of operations.
(J) NOTIFICATION OF CERTAIN EVENTS. Notify Bank in writing of each
of the following occurrences:
(1) Promptly upon learning thereof, of the institution of any
material suit, action, or administrative proceeding against a Borrower
or relating to any of its Property, whether or not the claim is
considered by such Borrower to be covered by insurance;
(2) At least fifteen (15) days prior thereto, of a Borrower's
opening of any new office or place of business or closing of any
existing office or place of business;
(3) Promptly upon learning thereof, of any material labor
dispute to which a Borrower may become a party, any strikes or
walkouts relating to any of their plants or other facilities, and the
expiration of any material labor contract to which such Borrower is a
party or by which it is bound;
(4) Within seven (7) business days after obtaining knowledge of
the occurrence of a Borrower's default under any Material Agreement;
24
(5) Promptly upon the occurrence thereof, of any default by any
obligor under any note or other evidence of debt payable, other than
Accounts, to a Borrower; and
(6) Promptly upon the occurrence thereof, of any Event of
Default.
(K) INVENTORY RECEIPTS. Provide Bank, upon the request of Bank, with
all warehouse receipts respecting any Inventory and copies of all
agreements between a Borrower and any bailee, warehousemen or similar party
with whom Inventory may from time to time be stored.
(L) GOVERNMENT ACCOUNTS. If any of the Accounts arise out of a
contract with the United States of America, or any department, agency,
subdivision or instrumentality thereof, promptly notify Bank thereof in
writing and execute any instruments and take any other action required or
requested by Bank to perfect Bank's security interest in such Accounts
under the provisions of the Assignment of Claims Act of 1940.
(M) DELIVERY OF EVIDENCE OF OWNERSHIP. Deliver to Bank, at Bank's
reasonable request, within two (2) business days after Bank's request: (i)
any and all evidence of ownership of Fixed Collateral, inclusive of any
certificates of title or applications therefor, and (ii) accurate,
itemized records, maintained to the best of Borrowers' ability, describing
the kind, type, quantity and value of all Fixed Collateral, a summary of
which shall be provided to Bank.
(N) DELIVERY OF ACCOUNT INSTRUMENTS. In the event any Account is or
becomes evidenced by any note, trade acceptance or other instrument,
promptly notify Bank of such fact and, upon Bank's reasonable request,
deliver the same to Bank, appropriately endorsed to Bank's order and,
regardless of the form of such endorsement, Borrowers hereby waive
presentment, demand, notice of dishonor, protest and notice of protest and
all other notices with respect thereto.
(O) TANGIBLE NET WORTH. Commencing on the date of this Agreement,
and continuing on the last day of each fiscal quarter of Borrowers
thereafter, Borrowers shall maintain on a consolidated basis, a Tangible
Net Worth which is equal to or greater than the following amounts on the
following dates:
DATE TANGIBLE NET WORTH
---- ------------------
On the date of this Agreement $4,750,000
On February 28, 1998 $4,500,000
On May 31, 1998 $4,250,000
On August 31, 1998 $4,400,000
25
On November 30, 1998 $4,550,000
On February 28, 1999 $4,750,000
On May 31, 1999 and on the $5,000,000
last day of each quarter thereafter
through February 29, 2000
On May 31, 2000 and on the $5,250,000
last day of each quarter thereafter
through February 28, 2001
On May 31, 2001 and on last day $6,250,000
of each quarter thereafter
For purposes of this Section 7.1(O) and Section 7.1(P), "Tangible Net
Worth" shall mean the amount of the shareholders' equity computed in
accordance with GAAP applied in the preparation of the certified
consolidated financial statements of EPI described in Section 7.1(I), but
deducting from such amount the sum of (1), (2), (3) and (4) below:
(1) The net book value of all intangible assets including,
without limitation, goodwill, trademarks, trade names, copyrights,
patents, and rights in any thereof, unamortized debt discount and
expense and "special technologies";
(2) The net book value of all marketable and nonmarketable
securities which are not deemed to be cash equivalents by Bank (but
excluding for this purpose up to $2,000,000 of restricted cash
received from the proceeds of the initial public offering of EPI
shares which will be earmarked for long-term asset acquisitions);
(3) Any write-up in the book value of any assets, other than
write-ups in the ordinary course of business, resulting from a
revaluation thereof which results in a corresponding increase in
shareholder equity;
(4) Loans or advances to individual shareholders, employees or
any other individual, corporation, or other entity;
(P) TOTAL DEBT/TANGIBLE NET WORTH RATIO. Commencing on
February 28, 1998, and continuing on the last day of each fiscal quarter
of Borrowers thereafter, Borrowers shall maintain, on a consolidated
basis, a Total Debt to Tangible Net Worth ratio which is equal to or
less than the following ratios on the following dates:
26
DATE TOTAL DEBT TO TANGIBLE
NET WORTH RATIO
February 28, 1998 1.25 to 1
February 28, 1999 1.50 to 1
February 29, 2000, and
thereafter 2.00 to 1
For purposes of this Section 7.1(P) "Total Debt" shall mean the sum of all
balance sheet liabilities of Borrowers, determined on a consolidated basis
in accordance with GAAP.
(Q) INTEREST COVERAGE RATIO. Commencing on February 28,
1999, and continuing on the last day of each calendar quarter
thereafter, maintain, on a consolidated rolling four (4) calendar
quarter basis, an "Interest Coverage Ratio" equal to or greater than
3.00. For purposes of this Section 7.1(Q), (1) the numerator of the
"Interest Coverage Ratio" shall equal the net consolidated cumulative
net income plus interest, taxes, depreciation, amortization and other
non-cash expenses of EPI and its Subsidiaries for the applicable four
(4) prior consecutive calendar quarters, and (2) the denominator shall
equal total consolidated cumulative interest expense of EPI and its
Subsidiaries for such period.
(R) BANK FEES; AUDIT FEES. Borrowers promptly shall
reimburse Bank for all reasonable legal fees, recording and filing fees,
and related expenses incurred by Bank in connection with the
transactions described in this Agreement. Borrowers shall pay Bank an
audit fee and any other expenses actually incurred by Bank in connection
with its periodic audit of the books and records of Borrowers.
Borrowers hereby authorize Bank to pay such fees and expenses and charge
the same to Borrowers' loan account with Bank. It is agreed that the
current audit fee charged by Bank is $500 per man day plus any
out-of-pocket expenses incurred by Bank in connection with the audit.
(S) FIXED CHARGES COVERAGE RATIO. Commencing as of November 30,
1998, and continuing on the last day of each fiscal quarter thereafter,
maintain a "Fixed Charges Coverage Ratio" equal to or greater than 1.0 to
1.0. For purposes of this Section 7.1(S), (1) the numerator of the "Fixed
Charges Coverage Ratio" shall equal Borrowers' consolidated net income
before interest expenses, taxes, depreciation and amortization for the
period for which the calculation is being made MINUS Capital Expenditures
(excluding Capital Expenditures solely made from proceeds of the initial
public offering of EPI stock) during such period, and (2) the denominator
of the "Fixed Charges Coverage Ratio" shall equal the sum of Borrowers'
interest expense and principal payments on Debt Instruments during such
period. The Fixed Charges Coverage Ratio shall be calculated for the
following periods on the following dates:
27
DATE OF CALCULATION PERIOD COVERED
November 30, 1998 August 31, 1998 -
November 30, 1998
February 28, 1999 August 31, 1998 -
February 28, 1999
May 31, 1999 August 31, 1998 -
May 31, 1999
August 31, 1999 and on the The rolling twelve (12) month
last day of each fiscal quarter period ending on the last day
thereafter of the fiscal quarter then ended
(T) CASH COLLATERAL. Maintain on deposit with Bank Cash Collateral
of not less than $750,000 at any time.
7.2 NEGATIVE COVENANTS. So long as any Obligations remain unsatisfied,
each Borrower covenants that, unless Bank has first consented thereto in
writing, it will not cause to occur or undertake any of the following:
(A) MERGERS AND ACQUISITIONS. Merge, consolidate, or acquire
all or any substantial portion of the assets or capital stock of any
Person except between any Borrowers.
(B) LOANS AND ADVANCES. Make any loans or other advances of money,
or grant extensions of credit to any Person including, without limitation,
their Affiliates, Subsidiaries, officers, employees, and shareholders,
normal extensions of trade credit in the ordinary course of business and
reasonable salary, travel, or relocation advances, advances against
commissions, and other similar advances in the ordinary course of business
which, in the aggregate, are not in excess of $25,000 at any time.
(C) PERMITTED INDEBTEDNESS. Create, incur, assume, or suffer to
exist any Indebtedness except (1) the Obligations and (2) the following
(herein referred to as "Permitted Indebtedness"):
(a) Trade payables and other liabilities incurred in the
ordinary course of business; and
(b) Such other Indebtedness as described on EXHIBIT M attached
to this Agreement, Permitted Liens, or as approved by Bank in writing.
(D) AFFILIATED TRANSACTIONS. Except as permitted by Sections 7.2(B),
7.2(H) and 7.2(I) of this Agreement, enter into, or be a party to, any
transaction with any Affiliate of any Borrower, except in the ordinary
course of, and pursuant to the reasonable requirements
28
of, such Borrower's business and upon fair and reasonable terms which
are fully disclosed to Bank and are no less favorable to such Borrower
than it would obtain in a comparable arm's length transaction with a
Person not an Affiliate of a Borrower.
(E) MODIFICATION OF ACCOUNTS. Permit or agree to any material
extension or modification with respect to, or compromise or settle any
Accounts, which singly or in the aggregate would or would be expected to
result in a Material Adverse Effect.
(F) GUARANTEES. Become or be liable with respect to any Guaranty
except (i) by endorsement of instruments or items of payment in the
ordinary course of business for deposit or collection, and (ii) the
guaranty of payment to a third party of a Borrower by another Borrower in
the ordinary course of business.
(G) PERMITTED LIENS. Permit or suffer to exist any Lien in or upon
any of the Collateral, except the following (herein referred to as
"Permitted Liens"):
(1) Those security interests granted in favor of Bank pursuant
to this Agreement and the other Credit Documents;
(2) Liens securing taxes, assessments, or governmental charges
or levies, or the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, provided the
payment thereof is not at the time required;
(3) Liens incurred or deposits made in the ordinary course of
business, and provided any amounts secured thereby are not overdue or
delinquent in any respect;
(4) Attachment, judgment, and other similar non-tax Liens
arising in connection with court proceedings, provided the execution
or other enforcement of such Liens is effectively stayed or bonded
within thirty (30) days after issuance or filing and the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings;
(5) Reservations, exceptions, encroachments, easements, rights
of way, covenants, conditions, restrictions, leases, and other similar
title exceptions or encumbrances affecting real Property, provided
they do not in the aggregate materially detract from the value of such
Properties or materially interfere with their use in the ordinary
conduct of such Borrower's business; and
(6) Such other Liens as described on EXHIBIT N attached to this
Agreement or as approved by Bank in writing.
(H) CAPITAL DISTRIBUTIONS. Except as permitted in Section 7.2(B) of
this Agreement, make loans or advances, pay dividends or make distributions
in cash or otherwise, effect any redemption or other distribution of
property to any shareholder (other than a Borrower), or invest in or
purchase any stock or securities of any individual, firm, or corporation
(other
29
than a Borrower) (collectively, the "Permitted Capital Transactions"), or
sell, pledge, encumber, or transfer any of its capital stock except to a
Borrower; provided, however, that notwithstanding the foregoing, EPI may
pay dividends on EPI's Cumulative Preferred Stock, par value $.01 per
Share, designated "Meridian Preferred Stock" as more particularly described
on Exhibit N-1.
(I) DIVESTITURES. Except as permitted in Section 7.2(B) of this
Agreement, divest themselves of any material assets or business theretofore
conducted by transferring the same to any Affiliate (other than a Borrower)
or any partnership, joint venture, or similar arrangement or subcontract
any operations to any Affiliate (other than a Borrower); provided, however,
that Borrower may (i) purchase new equipment to be used at a facility in
Mt. Pleasant, Tennessee (the "Mt. Pleasant Facility") in connection with a
proposed joint venture between EPI and Xxxxxxx Environmental Services, Inc.
("Xxxxxxx") in accordance with the terms set forth in the letter of intent
between Xxxxxxx and EPI dated November 11, 1997 (the "Letter of Intent")
and (ii) direct processable paint waste from EPI's automotive manufacturing
customers located in the southeastern United States to the Mt. Pleasant
Facility in accordance with the Letter of Intent, and any such actions
shall not be deemed a violation of this Section 7.2(I).
(J) CAPITAL EXPENDITURES. Make Capital Expenditures which would
cause the Capital Expenditures of Borrowers, determined in the aggregate on
a consolidated basis, commencing with the date of this Agreement, to exceed
the following amounts during the following time periods:
TIME PERIOD CAPITAL EXPENDITURE LIMITS
----------- --------------------------
Commencing on the date
of this Agreement and ending on
February 28, 1998 $ 500,000
Commencing on March 1, 1998
and ending on February 28, 1999 $4,500,000
Commencing on March 1, 1999
and ending on February 29, 2000 $4,500,000
Commencing on March 1, 2000
and ending on February 28, 2001 $ 500,000
Commencing on March 1, 2001
and ending on February 28, 2002
and for each succeeding twelve-
month period commencing on the
first day of March and ending on the
last day of February $ 500,000
30
(K) PRINCIPAL BUSINESS LOCATION. Transfer its executive offices, or
maintain records with respect to Accounts, at any locations other than a
principal business location identified on EXHIBIT A attached to this
Agreement, except upon providing Bank with thirty (30) days' prior written
notice thereof.
(L) DEPOSITS AND WITHDRAWALS. Except with respect to transactions
otherwise permitted hereunder, make deposits to or withdrawals from any of
its deposit accounts for the benefit of any of their Affiliates.
(M) DISPOSITION OF PROPERTY. Sell, lease, transfer or otherwise
dispose of any of its Property, other than Inventory sold in the ordinary
course of business and other than the divestitures described above in
Subparagraph (I) of this Section 7.2.
(N) NAMES. Use any business name (other than its own) or any
fictitious name, trade name, trade style or "d/b/a" except for the names
disclosed on EXHIBIT O attached to this Agreement and made a part hereof
unless EPI provides Bank with thirty (30) days prior written notice
thereof.
(O) CONDITIONAL SALES. Make a sale to any customer on approval,
consignment, xxxx-and-hold, guaranteed sale, sale and return or any other
repurchase basis, unless such sale is specifically identified on the
written assignments of Accounts delivered to Bank pursuant to Section 5.3
of this Agreement.
(P) MARGIN SECURITIES. Own, purchase or acquire (or enter into any
contract to purchase or acquire) any "margin security" as defined by any
regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, Bank shall have received an opinion of
counsel satisfactory to Bank to the effect that such purchase or
acquisition will not cause this Agreement or the Promissory Note to violate
Regulation G or any other regulation of the Federal Reserve Board then in
effect.
(Q) RESTRICTED INVESTMENTS. Make or have any Restricted Investment,
which for purposes of this Agreement shall mean any investment 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, in any Property except the following:
(1) Property to be used in the ordinary course of business;
(2) Current assets arising from the sale of goods and services
in the ordinary course of business of Borrowers;
(3) 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
(1) year from the date of acquisition thereof;
31
(4) Investments in commercial paper given the highest rating by
a national credit rating agency and maturing not more than two hundred
seventy (270) days from the date of creation thereof; and
(5) Investments in money market accounts and certificates of
deposit.
(R) LEASE/SALE OF PROPERTY. Enter into any arrangement with any
Person providing for the leasing by such Borrower of Property which has
been or is to be sold or transferred by any Borrower to such person if
funds have been or are to be advanced by such Person on the security of
such Property or rental obligations of such Borrower.
(S) PREPAYMENT OF INDEBTEDNESS. Make any prepayment of principal on
any Indebtedness, except: (1) the Obligations; and (2) payment discounts
offered by the vendors of Borrowers.
(T) PAYMENTS ON AFFILIATE LOANS. Make any payments of principal
and/or interest to any Affiliate of any Borrower on any indebtedness, loan
or advance to one or more Borrowers by any such Affiliate; provided that
Borrowers may make a payment of up to $500,000 towards indebtedness owed to
Meridian National Corporation with proceeds of the initial public offering
of EPI stock.
8. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT
Except as otherwise expressly provided for in this Agreement and in any
of the other Credit Documents, no termination or cancellation (regardless of
cause or procedure) of this Agreement or any of the other Credit Documents
shall in any way affect or impair the powers, obligations, duties, rights,
and liabilities of Borrowers or Bank in any way or respect relating to (1)
any transaction or event occurring prior to such termination or cancellation
or (2) any of the undertakings, agreements, covenants, warranties and
representations of Borrowers or Bank contained in this Agreement or the other
Credit Documents. Once all Obligations of Borrowers to Bank have been fully
paid and satisfied and this Agreement is terminated, then all such
undertakings, agreements, covenants, warranties and representations shall be
terminated and cancelled and Bank shall terminate its Lien on the Collateral
and have no further rights and remedies.
9. CONDITIONS PRECEDENT
9.1 CONDITIONS. Notwithstanding any other provision of this Agreement
or any of the other Credit Documents, and without affecting in any manner the
rights of Bank under the other Sections of this Agreement, it is understood
and agreed that Bank shall have no obligation to advance funds to Borrowers
at any time under Section 2 of this Agreement unless and until each of the
following conditions have been and continue to be satisfied, all in form and
substance satisfactory to Bank and its counsel:
(A) ABSENCE OF LEGAL ACTIONS. No legal action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any court,
32
governmental agency or legislative body to enjoin, restrain, or prohibit,
or to obtain damages in respect of, this Agreement or any of the other
Credit Documents or the consummation of the transactions contemplated
hereby or thereby, or which, in Bank's reasonable opinion would make it
inadvisable to consummate the transactions contemplated by this Agreement.
(B) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Borrowers in this Agreement are true and correct in all
material respects and no Event of Default or condition which, with notice,
lapse of time or both would constitute an Event of Default then exists.
(C) OTHER MATERIAL EVENTS. No event, occurrence or condition shall
then exist which would have a Material Adverse Effect.
(D) DELIVERY OF DOCUMENTS. Bank shall have received the following
documents, each to be in form and substance satisfactory to Bank and its
counsel:
(1) The Promissory Note duly executed by Borrowers;
(2) The Term Note duly executed by Borrowers;
(3) The written opinion of counsel to Borrowers as to the
transactions contemplated by this Agreement, in form and substance
satisfactory to Bank and its counsel;
(4) Copies of all filing receipts or acknowledgments or other
oral or written evidence issued by any governmental authority to
evidence any filing or recordation necessary to perfect or amend the
Liens of Bank in the Collateral and evidence in a form acceptable to
Bank that such Liens constitute valid and first priority perfected
Liens, subject only to any Permitted Liens;
(5) Certificates for each of Borrowers' insurance policies
evidencing the existence of the insurance coverage required pursuant
to the Credit Documents, together with all appropriate endorsements
thereto naming Bank as a lender's loss payee, mortgagee and additional
insured;
(6) A Certificate of the Secretary or an Assistant Secretary of
each Borrower, dated as of the date of this Agreement, certifying (a)
that attached thereto is a true and complete copy of the Articles (or
Certificate) of Incorporation and Code of Regulations (or Bylaws) of
such Borrower, as in effect on the date of such certification, (b)
that attached thereto is a true and complete copy of resolutions, in
form satisfactory to Bank, adopted by the Board of Directors of such
Borrower, authorizing the execution, delivery and performance of this
Agreement and each of the other Credit Documents to which it is a
party and the consummation of the transactions contemplated hereby and
thereby, and (c) as to the incumbency and
33
genuineness of the signature of each officer of such Borrower
executing this Agreement and the other Credit Documents to which
such Borrower is a party;
(7) Good standing certificates for each Borrower issued by the
Secretary of State of each jurisdiction in which such Borrower's
qualification is required under this Agreement.
(8) A certificate signed by the President or Chief Financial
Officer of each Borrower and dated as of the date of this Agreement,
stating that (a) the representations and warranties set forth in
Section 6 hereof are true and correct on and as of such date, (b) such
Borrower is on such date in compliance with all the terms and
provisions set forth in this Agreement, and (c) on such date no event
or condition has occurred or is continuing which with the giving of
notice, the lapse of time, or both, would constitute an Event of
Default;
(9) Duly executed written lien waivers and landlord consents in
favor of Bank from each lessor, bailee, warehouseman, mortgagee or
similarly situated Person who may, with respect to any location at
which any of the Collateral is to be located or stored, by operation
of law or otherwise, have any Lien in or upon such Collateral;
(10) Delivery of the Borrowing Base Certificate, dated as of the
date of this Agreement, described in Section 5.4 of this Agreement;
(11) A pro-forma balance sheet for EPI and its Subsidiaries as of
the date hereof, certified by the President or Chief Financial Officer
of EPI as being true, complete and accurate, reflecting a consolidated
Tangible Net Worth of at least $4,750,000 on the date of this
Agreement and otherwise acceptable to Bank;
(12) A summary aged trial balance of Borrowers' Accounts as of
_________, 1998, a report listing Borrowers' inventory as of
______________ and a period-end recapitulation regarding inventory and
accounts receivable of Borrowers, in each case in form and substance
acceptable to Bank;
(13) Written instructions from Borrowers directing the
disbursement of proceeds of the loans made pursuant to this Agreement;
and
(14) Such other agreements, instruments and documents including,
without limitation, assignments, security agreements, mortgages, deeds
of trust, pledges, guaranties and consents, which Bank may require to
be executed in connection with this Agreement.
(E) CLOSING OF PUBLIC OFFERING. The proposed initial public offering
of EPI stock has been completed and closed in accordance with the terms of
such offering disclosed to Bank.
34
9.2 WAIVER OF CONDITIONS PRECEDENT. If Bank makes the initial loans
hereunder prior to the fulfillment of any of the conditions precedent set
forth in Section 9.1 hereof, the making of such initial loans shall
constitute only an extension of time for the fulfillment of such condition
and not a waiver thereof unless expressly stated, and Borrowers shall
thereafter use their best efforts to fulfill each such condition promptly.
10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(A) PAYMENT OF DEBT SERVICE. Failure by Borrowers to (1) make
payment of principal, interest or any other sum on any Note on the due date
thereof, (2) pay any other Obligation on the due date thereof, or (3) to
remit Accounts or deposit funds as required by the terms of this Agreement.
(B) REPRESENTATIONS AND WARRANTIES. Any warranty, representation, or
other statement made or furnished to Bank by or on behalf of Borrowers, any
guarantor of the Obligations in this Agreement or in any of the other
Credit Documents or in any instrument furnished in compliance with or in
reference to this Agreement proves to have been false or inaccurate in any
material respect when made or furnished.
(C) OTHER PROVISIONS. Failure or neglect by Borrowers or any
guarantor of the Obligations to perform, keep, or observe any other term,
provision, condition, covenant, warranty or representation contained in
this Agreement or in any of the other Credit Documents which is required to
be performed, kept, or observed by Borrowers, any such guarantor and such
failure continues for a period of ten (10) days after Bank has given
Borrowers written notice thereof in the manner set forth in Section 12.10
of this Agreement.
(D) CROSS-DEFAULT. Upon the occurrence of any material default or
Event of Default (and the expiration of any applicable grace period
relating thereto) by any Borrower under any Obligation, or the violation
(and the expiration of any applicable grace period relating thereto) by any
Borrower of the terms of any other agreement entered into among or between
Bank and either Borrower.
(E) FALSE OR MISLEADING REPORTS. The making or delivering to Bank by
any Borrower, or any of its officers, employees, or agents any statement,
report, financial statement, or certificate which is not true and correct
in any material respect.
(F) DESTRUCTION OF COLLATERAL. The loss, theft, substantial damage
or destruction of any material portion of the Collateral to the extent not
covered by insurance in an amount equal to at least its replacement value
(as required by this Agreement and subject to such deductibles as Bank
shall have agreed to in writing), or the sale, lease, encumbrance or other
disposition of a material portion of the Collateral except in all cases as
may be specifically permitted by other provisions of this Agreement.
35
(G) VALUE OF COLLATERAL; FINANCIAL CONDITION OF BORROWERS. Any
Material Adverse Effect on the value of the Collateral or the financial
condition or operating results of Borrowers.
(H) TERMINATION OF EXISTENCE. The dissolution, termination of
existence, insolvency (failure to pay its debts as they mature or where the
fair salable value of its assets is not in excess of its liabilities) or
business failure of any Borrower or any guarantor of the Obligations.
(I) BANKRUPTCY. The commencement of any proceedings under any
Bankruptcy Laws by any Borrower or against any Borrower to the extent such
proceedings are not dismissed within sixty (60) days after the filing
thereof, or the appointment of a receiver, trustee, custodian or similar
fiduciary for any Borrower, or the assignment for the benefit of the
creditors of any Borrower or the making by any Borrower of any offer of
settlement, extension or composition to its unsecured creditors generally,
to the extent such assignment, appointment or other such action continues
for longer than thirty (30) days.
(J) CEASES TO CONDUCT BUSINESS. Except for the sale of Property as
permitted by this Agreement, any Borrower ceases to conduct all or any
material part of its business or are enjoined, restrained or in any way
prevented by court, governmental or administrative order from conducting
all or any material part of its business affairs.
(K) JUDGMENT ENTRIES. The entry by a court of any judgment in excess
of $50,000 requiring the payment of money against any Borrower, which
judgment is not discharged, bonded, stayed, vacated or set aside within
thirty (30) days of its entry, or a notice of any material Lien, levy,
attachment or assessment is filed of record with respect to all or any of
the Collateral by any Person including, without limitation, the United
States, any department, agency or instrumentality thereof, or by any state,
county, municipal or other governmental agency, or if any material taxes or
assessments owing at any time or times hereafter becomes a Lien upon the
Collateral or any other assets of any Borrower and, except Permitted Liens
or as otherwise permitted by Bank, the same is not effectively stayed,
bonded or released within thirty (30) days after the same becomes a Lien,
or in the case of ad valorem taxes, prior to the last date when payment may
be made without penalty.
(L) INSURANCE OF COLLATERAL. Failure on the part of Borrowers to
keep the Collateral or any goods evidenced by chattel paper or documents
insured against loss by fire or otherwise for insurable value thereof in
companies with coverages (including Lender's Loss Payable Endorsement) and
in amounts acceptable to Bank and make the loss, if any, payable to and
deposit the policies with Bank, all premiums on such policies to be paid by
Borrowers.
10.2 ACCELERATION OF THE OBLIGATIONS. Except upon the occurrence of an
Event of Default specified in Section 10.1(I) hereof, which shall give Bank
the right to accelerate all Obligations without notice to Borrowers, upon the
occurrence of an Event of Default, and upon notice by Bank to Borrowers in
the manner set forth in Section 12.10 hereof, all of the Obligations due or
to become due from Borrowers to Bank, whether under this Agreement, the Notes
or otherwise, shall,
36
at the option of Bank become at once due and payable, anything in the Notes
or other evidence of the Obligations or in any of the other Credit Documents
to the contrary notwithstanding.
10.3 REMEDIES. Upon and after the occurrence of an Event of Default,
Bank shall have, to the extent permitted by applicable law, and in addition
to any other right or remedy provided for in this Agreement, each of the
following rights and remedies:
(A) GENERAL RIGHTS AND REMEDIES. 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 Bank may be entitled, all of which
rights and remedies shall be cumulative, and none of which shall be
exclusive, to the extent permitted by law, in addition to any other rights
or remedies contained in this Agreement or in any of the other Credit
Documents.
(B) POSSESSION OF COLLATERAL. The right to take immediate possession
of the Collateral, and (1) require Borrowers to assemble the Collateral, at
Borrowers' expense, and make it available to Bank at Borrowers' principal
place of business, or (2) enter any of the premises of Borrowers or
wherever any Collateral shall be located and to keep and store the same on
such premises until sold. If the premises on which the Collateral is
located is owned or leased by Borrowers, then Borrowers shall not charge
Bank for storage of such Collateral on such premises for a period of at
least ninety (90) days after sale or disposition of the Collateral. Bank
is hereby granted a non-exclusive license or other right to use, without
charge, Borrowers' labels, patents, copyrights, rights of use of any name,
trade secrets, trade a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrowers' rights under
all licenses and all franchise agreements shall inure to Bank's benefit.
(C) FORECLOSE LIENS. The right to foreclose the Liens created under
this Agreement and each of the other Credit Documents or under any other
agreement relating to the Collateral.
(D) DISPOSITION OF COLLATERAL. The right to sell or to 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, wholesale dispositions, or sales pursuant to one or more contracts,
with such notice as may be required by law, in lots or in bulk, for cash or
on credit, all as Bank, in its reasonable discretion, may deem advisable.
Borrowers acknowledge and agree that ten (10) days written notice to
Borrowers of any public or private sale or other disposition of Collateral
shall be reasonable notice thereof, and such sale shall be at Borrowers'
premises or at such other locations where the Collateral then is located,
or as otherwise determined by Bank. Bank shall have the right to conduct
such sales on Borrowers' premises, without charge therefor, and such sales
may be adjourned from time to time in accordance with applicable law
without further requirement of notice to Borrowers. Bank shall have the
right to bid or credit bid at any such sale on its own behalf.
(E) SET-OFF. The right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination
thereof, and, to the extent permitted by
37
applicable law, Bank may purchase all or any part of the Collateral at
public or private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations.
Subject to the rights of the holders of any Permitted Lien having priority
over the Liens of Bank, if any, the proceeds realized from the sale of any
Collateral shall be applied first to the reasonable costs, expenses and
attorneys' fees and expenses incurred by Bank for collection and for
acquisition, completion, protection, removal, storage, sale and delivery
of the Collateral; second, to interest due upon any of the Obligations; and
third, to the principal of the Obligations. If any deficiency shall arise,
Borrowers shall remain liable to Bank therefor. In the event of any
surplus, it shall be paid promptly to Borrowers.
10.4 APPLICATION OF COLLATERAL; TERMINATION OF FINANCING. Upon the
occurrence of any Event of Default, Bank may also, with or without proceeding
with sale or foreclosure or demanding payment of the Obligations, without
notice, terminate Bank's further performance under this Agreement or any
other agreement or agreements between Bank and Borrowers, without further
liability or obligation by Bank, and may also, at any time, appropriate and
apply on any Obligations any and all Collateral in the possession of Bank.
No such termination shall absolve, release or otherwise affect the liability
of Borrowers in respect of transactions had prior to such termination, nor
affect any of the Liens, rights, powers, and remedies of Bank, but they
shall, in all events, continue until all Obligations of Borrowers to Bank are
satisfied.
10.5 REMEDIES CUMULATIVE. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrowers
contained in this Agreement, each of the other Credit Documents or in any
document referred to herein or therein or contained in any agreement
supplementary hereto or thereto or in any schedule or report given to Bank,
or contained in any other agreement between Bank and Borrowers, heretofore,
concurrently, or hereafter entered into or delivered, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrowers herein contained.
10.6 CROSS-COLLATERAL AND CROSS-DEFAULT. Each of the security interest
and liens granted to Bank by Borrowers pursuant to the Credit Documents or
otherwise shall secure any and all of Borrowers' liabilities and obligations
to Bank under the Credit Documents including, but not limited to, Borrowers'
obligations under the Term Note and the Promissory Note. It is further
understood and agreed that a default under either of the Promissory Note or
the Term Note, or any of the Credit Documents shall constitute a default
under each of the other Notes and under each of the other Credit Documents.
References in any of the other Credit Documents to events or conditions
constituting a default shall in no way impair Bank's absolute and
unconditional right to demand immediate repayment of the unpaid balance of
the Promissory Note, notwithstanding the fact that at the time of such demand
there may not exist any event or condition constituting a default.
10.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Borrowers and Bank and their respective successors
and assigns; provided, however, that Borrowers shall not assign any of their
rights under the Credit Documents in whole or in part without the prior
written consent of Bank.
38
10.8 RELATIONSHIP OF BORROWERS. The liability of each of the Borrowers
under this Agreement is joint and several, and absolute and unconditional,
without regard to the liability of any other person, and shall not in any
manner be affected by reason of the partial or complete unenforceability or
invalidity of any obligations under this Agreement or other security or
guaranty for any of the loans and may be enforced without requiring Bank to
first resort to any other right, remedy or security that Bank may have, and
that no Borrowers shall have any right of subrogation, reimbursement or
indemnity whatsoever, nor any right of recourse to security for the debts and
obligations of the Borrowers to Bank unless and until all of such debts and
obligations have been paid in full. No delay in making demand on any one of
Borrowers for satisfaction of its liability hereunder shall prejudice Bank's
right to enforce such satisfaction. Bank in its reasonable discretion may,
without prejudice to its rights under this Agreement, at any time or times
(a) grant any one or more of Borrowers whatever financial accommodations that
Bank may from time to time deem advisable, even if such Borrower might be in
default in any respect under this Agreement, (b) release any obligor or
Collateral or assent to any exchange of Collateral, if any, irrespective of
the consideration, if any, received therefor, (c) grant any waiver or consent
or forbear from exercising any right, power or privilege that Bank may have
to acquire against any one or more of Borrowers, (d) grant any other
indulgence to any obligor, and (e) accept any Collateral for, or other
obligors upon, the obligations described herein.
11. APPOINTMENT OF BANK AS BORROWERS' LAWFUL ATTORNEY
Each Borrower hereby irrevocably designates, makes, constitutes and
appoints Bank (and all persons designated by Bank) as such Borrower's true
and lawful attorney (and agent-in-fact) for the purposes designated in
Sub-paragraphs (A) through (P) of this Section 11, and, upon the occurrence
and continuance of an Event of Default, Bank, or Bank's agent, in each
Borrower's or Bank's name, may: (A) demand payment of the Accounts, (B)
enforce payment of the Accounts, by legal proceedings or otherwise, (C)
exercise all of each Borrower's rights and remedies with respect to the
collection of the Accounts and any other Collateral, (D) settle, adjust,
compromise, extend or renew the Accounts, (E) settle, adjust or compromise
any legal proceedings brought to collect the Accounts, (F) if permitted by
applicable law, sell or assign the Accounts and other Collateral upon such
terms, for such amounts and at such time or times as Bank deems advisable,
(G) discharge and release the Accounts and any other Collateral, (H) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral, (I) prepare, file and sign such Borrower's name on a proof of
claim in bankruptcy or similar document against any Account Debtor, (J)
prepare, file and sign such Borrower's name on any notice of Lien, assignment
or satisfaction of Lien or similar document in connection with the Accounts,
(K) do all acts and things necessary, in Bank's reasonable discretion, to
fulfill such Borrower's obligations under this Agreement, (L) endorse the
name of such Borrower upon any of the items of payment or proceeds relating
to any Collateral and deposit the same to the account of Bank on account of
the Obligations, (M) endorse the name of such Borrower upon any chattel paper
document, instrument, invoice, freight xxxx, xxxx of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral, (N) use such Borrower's stationery and sign the name of such
Borrower to verifications of the Accounts and notices thereof to Account
Debtors, (O) 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 to which such Borrower has
access, and (P) notify post office authorities to change the address for
delivery of such Borrower's
39
mail to an address designated by Bank, receive and open all mail addressed to
such Borrower, and, after removing all remittances and other proceeds of
Collateral, forward the mail to such Borrower.
12. MISCELLANEOUS
12.1 MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement, the
Notes and each of the other Credit Documents may not be modified, altered or
amended, except by an agreement in writing signed by each Borrower and Bank.
Borrowers may not sell, assign or transfer this Agreement, or any of the
other Credit Documents or any portion thereof including, without limitation,
Borrowers' rights, title, interests, remedies, powers, and/or duties
hereunder or thereunder. Borrowers hereby consent, except as otherwise
provided in this Agreement, to Bank's participation, sale, assignment,
transfer or other disposition, at any time or times hereafter, of this
Agreement, or any of the other Credit Documents, or of any portion hereof or
thereof including, without limitation, Bank's rights, title, interests,
remedies, powers, and/or duties hereunder or thereunder.
12.2 ATTORNEYS' FEES AND EXPENSES. If, at any time or times, whether
prior or subsequent to the date hereof, regardless of the existence of an
Event of Default, Bank employs counsel for advice or other representation or
incurs legal and/or other costs and expenses in connection with each of the
following:
(A) LOAN DOCUMENTS. The preparation of this Agreement and all of the
other Credit Documents or any amendment of or modification of this
Agreement or any of the other Credit Documents.
(B) LOAN ADMINISTRATION. The administration of this Agreement and
each of the other Credit Documents and the transactions contemplated hereby
and thereby.
(C) LITIGATION. Any litigation, contest, dispute, suit, proceeding
or action (whether instituted by Bank, Borrowers or any other Person) in
any way relating to the Collateral, this Agreement, any of the other Credit
Documents or Borrowers' affairs, but excluding any litigation between
Borrowers and Bank as adverse parties unless otherwise permitted by law in
connection with any judgment awarded in favor of the prevailing party.
(D) ENFORCEMENT OF BANK'S RIGHTS. Any attempt to enforce any rights
of Bank against any Person, other than Borrowers, which may be obligated to
Bank by virtue of this Agreement or any of the other Credit Documents
including, without limitation, any guarantor of the Obligations and any
Account Debtors.
(E) PROTECTION OF COLLATERAL. Any attempt to inspect, verify,
protect, collect, sell, liquidate or otherwise dispose of the Collateral.
(F) FILINGS. The filing and recording of all documents required by
Bank to perfect Bank's Liens in the Collateral including without
limitation, any documentary stamp tax or any other taxes incurred because
of such filing or recording.
40
In any such event, the reasonable attorneys' fees arising from such services
and all reasonably incurred expenses, costs, charges and other fees of such
counsel or of Bank or relating to any of the events or actions described in
this Section 12.2 shall be payable, on demand, by Borrowers to Bank and shall
be additional Obligations hereunder secured by the Collateral. Without
limiting the generality of the foregoing, such expenses, costs, charges and
fees may include accountants' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges, telegraph
charges; secretarial overtime charges; and expenses for travel, lodging and
food paid or incurred in connection with the performance of such legal
services. Additionally, if any taxes (other than Federal or state income
taxes payable by Bank) shall be payable on account of the execution or
delivery of this Agreement, or the execution, delivery, issuance or recording
of any of the other Credit Documents, or the creation of any of the
Obligations hereunder, by reason of any existing or hereafter enacted federal
or state statute, Borrowers shall pay all such taxes including, without
limitation, any interest and/or penalty thereon, and shall indemnify and hold
Bank harmless from and against liability in connection therewith.
12.3 WAIVER BY BANK. Bank's failure, at any time or times hereafter, to
require strict performance by Borrowers of any provision of this Agreement or
any of the other Credit Documents shall not waive, affect or diminish any
right of Bank thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Bank of an Event of Default by
Borrowers under this Agreement or any of the other Credit Documents shall not
suspend, waive or affect any other Event of Default by Borrowers under this
Agreement or any of the other Credit Documents, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of
the undertakings, agreements, warranties, covenants and representations of
Borrowers contained in this Agreement or any of the other Credit Documents
and no Event of Default by Borrowers under this Agreement or any of the other
Credit Documents shall be deemed to have been suspended or waived by Bank,
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 Bank and directed to Borrowers.
12.4 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 to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
12.5 PARTIES. This Agreement and the other Credit Documents shall be
binding upon and inure to the benefit of the successors and assigns of
Borrowers and Bank. This provision, however, shall not be deemed to modify
Section 12.1 hereof.
12.6 CONFLICT OF TERMS. The provisions of each of the other Credit
Documents and any exhibit or schedule hereto are incorporated in this
Agreement by this reference thereto. Except as otherwise provided in this
Agreement and except as otherwise provided in any of the other Credit
Documents by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in conflict with,
or inconsistent with, any provision in any of the other Credit Documents, the
provision contained in this Agreement shall govern and control.
41
12.7 WAIVERS BY BORROWERS. Except as otherwise provided for in this
Agreement or as required by applicable law, Borrowers waive (A) presentment,
demand and protest and notice of presentment, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Bank on which Borrowers may in any
way be liable, (B) notice prior to taking possession or control of the
Collateral which might be required by any court prior to allowing Bank to
exercise any of Bank's remedies, and (C) AS A SPECIFICALLY BARGAINED
INDUCEMENT FOR BANK TO ENTER INTO THIS AGREEMENT AND EXTEND CREDIT TO
BORROWERS, BORROWERS AND BANK EACH WAIVES TRIAL BY JURY WITH RESPECT TO ANY
ACTION, CLAIM, SUIT, OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS
AGREEMENT AND/OR THE CONDUCT OF THE RELATIONSHIP BETWEEN BANK AND BORROWERS.
12.8 AUTHORIZATION. Bank is authorized to make loans under the terms of
this Agreement upon the request, either written or oral, in the name of
Borrowers of the President or Chief Financial Officer of EPI or such other
persons, from time to time, holding the offices or positions with Borrowers
as designated in any separate borrowing or banking resolutions delivered by
Borrowers to Bank and all loans made by Bank to Borrowers or for its account
under this Agreement shall be conclusively deemed to have been authorized by
Borrowers and to have been made pursuant to duly authorized requests therefor.
12.9 GOVERNING LAW. THIS AGREEMENT HAS BEEN ACCEPTED BY BANK AT AND
SHALL BE DEEMED TO HAVE BEEN MADE AT CLEVELAND, OHIO. THE LOANS PROVIDED FOR
HEREIN ARE TO BE FUNDED AND REPAID TO BANK AT 000 XXXX 00 XXXXXX, XXX XXXX,
XXX XXXX 00000 (OR SUCH OTHER PLACE AS DESIGNATED TO BORROWERS), BUT THIS
AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO. AS PART
OF THE CONSIDERATION FOR NEW VALUE RECEIVED, BORROWERS HEREBY CONSENT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF OHIO
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED OR
CERTIFIED MAIL DIRECTED TO BORROWERS AT THE ADDRESS STATED IN SECTION
12.10(B) BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
ACTUAL RECEIPT THEREOF. BORROWERS WAIVE ANY OBJECTION TO JURISDICTION AND
VENUE OF ANY ACTION INSTITUTED HEREUNDER AND AGREE NOT TO ASSERT ANY DEFENSE
BASED ON LACK OF JURISDICTION OR VENUE IN ANY JURISDICTION WHERE COLLATERAL
IS LOCATED. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF BANK TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
BANK TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWERS OR THEIR PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION.
12.10 NOTICES. Except as otherwise provided herein, any notice
required hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered upon deposit in
42
the United States mails, with proper postage prepaid, and addressed to the
party to be notified as follows:
(A) If to Bank, at: National Bank of Canada
One Cleveland Center, Suite 2430
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, Xxxx 00000
ATTN: Xxxx Xxxxxxxx
With a copy to: Xxxxx & Xxxxxx
1100 Huntington Bank Building
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
ATTN: Xxxxxx X. Xxxxxxx
(B) If to Borrowers, EPI Technologies, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
ATTN: Chief Financial Officer
With a copy to: Benesch, Friedlander, Xxxxxx & Xxxxxxx, LLP
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
ATTN: Xxxxxxxx X. Xxxx
or to such other address as each party may designate for itself by like
notice given in accordance with this Section 12.10.
12.11 SECTION TITLES. The section titles and table of contents
contained in this Agreement are and shall be without substantive meaning and
content of any kind whatsoever and are not a part of the agreement between
the parties hereto.
12.12 EFFECTIVENESS OF AGREEMENT. This Agreement shall be effective
only upon Bank's acceptance hereof.
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IN WITNESS WHEREOF, the duly authorized officers of the parties to this
Agreement have executed this Agreement this _____ day of _______________,
1998.
EPI TECHNOLOGIES, INC. ENVIRONMENTAL PURIFICATION
INDUSTRIES COMPANY
By NATIONAL PURIFICATION, INC.,
By: General Partner
------------------------------
Title:
---------------------------
By:
-------------------------------
Title:
----------------------------
AND
NATIONAL BANK OF CANADA By MEPI CORP., General Partner
By: By:
------------------------------ -------------------------------
Title: Title:
--------------------------- ----------------------------
44
LIST OF EXHIBITS
EXHIBIT A Locations of Collateral
EXHIBIT B Fixed Collateral; Exceptions
EXHIBIT C Description of the Premises
EXHIBIT D Form of Promissory Note
EXHIBIT E Form of Term Note
EXHIBIT F Form of Loss Payee Endorsement
EXHIBIT G-1 Form of Borrowing Base Certificate (provide with Request for
Advance)
EXHIBIT G-2 Form of Borrowing Base Certificate (Monthly reporting)
EXHIBIT H Schedule of Material Agreements
EXHIBIT I Schedule of General Disclosures
EXHIBIT J Schedule of Litigation and Administrative Proceedings
EXHIBIT K Schedule of Patents, Trademarks, and Other
Intangible Rights
EXHIBIT L Compliance with Environmental Laws
EXHIBIT M Schedule of Permitted Indebtedness
EXHIBIT N Schedule of Permitted Liens
EXHIBIT N-1 Description of Meridian Preferred Stock
EXHIBIT O Fictitious or Other Names of Borrowers
45
EXHIBIT D
PROMISSORY NOTE
$1,500,000 Cleveland, Ohio
January __, 1998
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to pay
to the order of NATIONAL BANK OF CANADA ("Bank") the principal amount of ONE
MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000), or the aggregate unpaid
principal amount of all loans evidenced by this Note made by Bank to Borrowers
pursuant to Section 2.1 of a certain Loan and Security Agreement dated of even
date herewith, entered into by and among EPI Technologies, Inc., ("EPI"),
Environmental Purification Industries, Inc. ("EPIC") and Bank (which, as
hereafter amended, modified or supplemented from time to time, is referred to
herein as the "Loan Agreement"), whichever is less. Capitalized terms used in
this Promissory Note (the "Note") shall have the meanings ascribed to them in
the Loan Agreement.
Borrowers also promise to pay interest on the unpaid principal balance of
each loan from time to time outstanding from the date of such loan until the
payment in full thereof at a rate per annum which shall be determined in
accordance with the provisions of Section 2.1 of the Loan Agreement. Interest
shall be payable on each date provided for in Section 2.1 of the Loan Agreement;
PROVIDED, however, that interest on any principal portion which is not paid when
due shall be payable on demand.
The undersigned agree to pay the aggregate unpaid principal amount of
all loans evidenced by this Note in one installment, due and payable on
_________________.
Payment of the principal of, and interest on, this Note shall be made in
lawful money of the United States of America to Bank at 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or at such other place as the holder shall have
designated to the undersigned in writing.
This Note is secured by, among other things, the security interests and
liens described in the Loan Agreement and reference is hereby made to the Loan
Agreement for a statement of the rights and obligations of Bank and the duties
and obligations of the undersigned in relation thereto, but neither this
reference to the Loan Agreement nor any provision thereof shall affect or impair
the absolute and unconditional obligation of the undersigned to pay the
principal of, and interest on, this Note when due.
Page 1 of 3
Upon the occurrence of an Event of Default (as defined in the Loan
Agreement) which has not been waived in writing by Bank, the undersigned shall
pay Bank interest on the daily average balance of all amounts outstanding under
this Note at a per-annum rate (the "Default Rate") of two (2) percentage points
plus the rate otherwise applicable to amounts outstanding under this Note from
the date when due or the date such Event of Default has occurred, as applicable,
until all amounts due under this Note are paid in full or such Event of Default
has been waived in writing by Bank; PROVIDED, however, that the Default Rate
shall not exceed the maximum rate permitted by applicable law.
Upon the occurrence of an Event of Default (as defined in the Loan
Agreement), all or any portion of the principal and interest due or to become
due under this Note shall become at once due and payable at the option of the
holder of this Note without notice, demand, presentment, or dishonor, which the
undersigned hereby waive.
The undersigned agree to pay upon default the costs of collection including
reasonable fees of attorneys.
No delay or omission on the part of the holder in exercising any rights
under this Note shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission, or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any further
occasion. The undersigned and every endorser of this Note, regardless of the
time, order, or place of signing, waive presentment, demand, protest, and notice
of every kind, and assent to any one or more extension or postponement of the
time of payment or any other indulgences, to any substitutions, exchanges, or
releases of collateral for this Note, and to additions or releases of any other
parties or persons primarily or secondarily liable.
The undersigned authorize any attorney-at-law to (a) appear before any
court of record, state or Federal, in the County of the State of Ohio in which
this Note was executed, or in any other county of the State of Ohio or any other
State of the United States of America, after the unpaid principal of this Note
becomes due, (b) waive issuance and service of process, (c) admit the maturity
of this Note, (d) enter an appearance and confess judgment against the
undersigned in favor of Bank for the amount then appearing due, together with
interest thereon and costs of suit (including reasonable attorneys' and
paralegals' fees), and (e) thereupon to release all errors and waive all rights
of appeal and stay of execution. No such judgment against the undersigned based
upon one or more matured obligations shall be a bar to a subsequent judgment or
judgments pursuant to this warrant of attorney against the undersigned based
upon subsequently matured obligations of the undersigned. The foregoing warrant
of attorney shall survive any judgment, it being understood that should any
judgment be vacated for any reason, the foregoing warrant of attorney
nevertheless may thereafter be used for obtaining an additional judgment or
judgments.
This Note is being executed and delivered in Cleveland, Ohio.
Page 2 of 3
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
EPI TECHNOLOGIES, INC.
By:
--------------------------------------
Title:
-----------------------------------
ENVIRONMENTAL PURIFICATION
INDUSTRIES COMPANY
By National Purification, Inc.
General Partner
------------------------------------------
and
By MEPI Corp., General Partner
------------------------------------------
Page 3 of 3
EXHIBIT E
TERM NOTE
$1,620,000 Cleveland, Ohio
January __, 1998
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to
pay to the order of NATIONAL BANK OF CANADA ("Bank") the principal amount of
ONE MILLION SIX HUNDRED TWENTY THOUSAND DOLLARS ($1,620,000) as hereinafter
provided, with interest on the unpaid principal balance from time to time
outstanding at a rate per annum equal to one (1) percentage point above
Bank's Base Rate (as defined in the Loan Agreement, as described below).
Interest shall be payable monthly commencing on ____________, 1998, and
continuing on the last day of each month thereafter until the entire
principal amount has been repaid in full. Any increase or decrease in the
interest rate resulting from a change in Bank's Base Rate shall become
effective on the date of such change. Interest shall be computed on a 360-day
year basis based on the actual number of days elapsed.
The undersigned agree to pay the principal of and any unpaid interest on
this Term Note (the "Note") in full in sixty monthly installments consisting
of (a) fifty-nine (59) equal monthly installments of Nineteen Thousand
Dollars ($19,000) each, commencing _________________ and continuing on the
last day of each successive calendar month thereafter and (b) a final payment
on _________________ in the amount of Four Hundred Ninety-Nine Thousand
Dollars ($499,000), or such other amount of principal and accrued but unpaid
interest remaining unpaid on _________________.
Payment of the principal of and interest on this Note shall be made in
lawful money of the United States of America to Bank at 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, or at such other place as the holder shall have
designated to the undersigned in writing.
This Note is issued pursuant to the Loan And Security Agreement, entered
into by and among EPI Technologies, Inc. ("EPI"), Environmental Purification
Industries Company ("EPIC") and Bank dated of even date herewith (the "Loan
Agreement") to which reference is hereby made for a statement of the rights
and obligations of Bank and the duties and obligations of the Borrowers
undersigned in relation thereto, but neither this reference to the Loan
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the undersigned to pay the principal of, and
interest on, this Note when due.
This Note is secured by, among other things, the security interests and
liens described in the Loan Agreement.
Page 1 of 3
The undersigned may prepay all or any portion of this Note at any time and
in any amount without penalty.
Upon the occurrence of an Event of Default (as defined in the Loan
Agreement) which has not been waived in writing by Bank, the undersigned shall
pay Bank interest on the daily average balance of all amounts outstanding under
this Note at a rate per annum (the "Default Rate") of two (2) percentage points
plus the rate otherwise applicable to all amounts outstanding under this Note
from the date when due or the date such Event of Default has occurred, as
applicable, until all amounts due herein are paid in full or such Event of
Default has been waived by Bank; provided, however, that the Default Rate shall
not exceed the maximum rate permitted by applicable law.
Upon the occurrence of an Event of Default (as defined in the Loan
Agreement), all or any portion of the principal and interest due or to become
due under this Note shall become at once due and payable at the option of the
holder of this Note without notice, demand, presentment, or dishonor, which the
undersigned hereby waive.
The undersigned agree to pay upon default the costs of collection including
reasonable fees of attorneys.
No delay or omission on the part of the holder in exercising any right
under this Note shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future occasion.
The undersigned and every endorser of this Note regardless of the time, order or
place of signing waive presentment, demand, protest and notices of every kind
and assent to any one or more extensions or postponements of the time of payment
or any other indulgences, and to any substitutions, exchanges, or releases of
any other parties or persons primarily or secondarily liable.
The undersigned authorize any attorney-at-law to appear before any court of
record, state or Federal, in the county of the State of Ohio in which this Note
was executed or in any other State of the United States of America after the
unpaid principal of this Note becomes due, waive the issuance and service of
process, admit the maturity of this Note, confess judgment against the
undersigned in favor of Bank for the amount then appearing due, together with
interest thereon and costs of suit, and thereupon to release all errors and
waive all rights of appeal and stay of execution. The foregoing warrant of
attorney shall survive any judgment, it being understood that should any
judgment be vacated for any reason, the foregoing warrant of attorney
nevertheless may thereafter be used for obtaining an additional judgment or
judgments.
This Note is being executed and delivered in Cleveland, Ohio.
Page 2 of 3
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
EPI TECHNOLOGIES, INC.
By: ------------------------------
Title:------------------------------
ENVIRONMENTAL PURIFICATION
INDUSTRIES COMPANY
By National Purification, Inc.
General Partner
------------------------------------
and
By MEPI Corp., General Partner
------------------------------------
Page 3 of 3