Exhibit 10.3
CREDIT AGREEMENT
BY AND AMONG
DISCAS RECYCLED PRODUCTS CORPORATION,
DISCAS, INC.
(COLLECTIVELY, THE "BORROWERS")
AND
BANK OF BOSTON CONNECTICUT
(THE "BANK")
DATED AS OF
JUNE 25, 1993
TABLE OF CONTENTS
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Section Page
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Preamble
ss.1. Definitions........................................................ 1
ss.2. The Loans.......................................................... 5
ss.3. Provisions Relating to Joint and Several Liability of
Borrowers.......................................................... 6
ss.4. Interest........................................................... 9
ss.5. Changes in Circumstances........................................... 9
ss.6. Closing Fees and Payments.......................................... 9
ss.7. Representations and Warranties..................................... 10
ss.8. Conditions Precedent............................................... 11
ss.9. Covenants.......................................................... 11
ss.10. Events of Default; Acceleration.................................... 14
ss.11. Setoff............................................................. 15
ss.12. Miscellaneous...................................................... 16
ss.13. Prejudgment Remedy Waiver.......................................... 17
CREDIT AGREEMENT
This CREDIT AGREEMENT (this "AGREEMENT") is made as of June 25, 1993,
by and among DISCAS RECYCLED PRODUCTS CORPORATION and DISCAS, INC., both
Delaware corporations (collectively, the "BORROWERS"), both having their
principal place of business at 00 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000,
and BANK OF BOSTON CONNECTICUT (the "BANK"), a Connecticut banking corporation
with its head office at 00 Xxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000.
ss.1. DEFINITIONS: Certain capitalized terms are defined
below:
Accounts: All rights of the Borrowers to any payment of money for
goods sold, leased or otherwise marketed in the ordinary course of business,
whether evidenced by or under or in respect of a contract or instrument, and to
all proceeds in respect thereof.
Base Rate: The annual rate of interest announced from time to time by
The First National Bank of Boston at its head office in Boston, Massachusetts
as its "base rate, which may not be the best or lowest interest rate offered to
borrowers by the Bank in commercial transactions."
Business Day: Any day on which banks in Waterbury, Connecticut are
open for business generally.
CDA: The Connecticut Development Authority
CDA Guarantee Agreement: The Master Guarantee Agreement dated as of
November 3, 1992 between the Bank and the CDA, as amended from time to time.
CDA Guarantee Certificate: The Guarantee Certificate of even date
herewith executed and delivered by the CDA to the Bank pursuant to the terms of
the CDA Guarantee Agreement, as amended from time to time.
CDA Letter Agreement: The Letter Agreement of even date herewith by
and among the Bank and the Borrowers, as amended from time to time.
Charter Documents: In respect of any entity, the certificate or
articles of incorporation or organization and the by-laws of such entity, or
other constitutive documents of such entity.
Commitment: The obligation of the Bank to make loans to Borrowers up
to an aggregate outstanding principal amount not to exceed $500,000.
Commitment Termination Date. October 31, 1993.
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Consent: In respect of any person or entity, any permit, license or
exemption from, approval, consent of, registration or filing with any local,
state or federal governmental or regulatory agency or authority, required under
applicable law.
Consolidated Financial Obligations: For any period, an amount equal to
the sum of all payments on Indebtedness that become due and payable or that are
to become due and payable during such period pursuant to any agreement or
instrument to which either of the Borrowers is a party relating to the
borrowing of money or the obtaining of credit or in respect of capitalized
leases. Demand obligations shall be deemed to be due and payable during any
period during which such obligations are outstanding.
Consolidated Net Income (or Deficit): The net income (or deficit) of
the Borrowers and their Subsidiaries, after deduction of all expenses, taxes,
and other proper charges determined in accordance with generally accepted
accounting principles.
Consolidated Operating Cash Flow: For any period, the amount equal to
(a) the sum of (i) the earnings (or loss) from the operations of the Borrowers
for such period, after payment or provision for all expenses and other proper
charges, but before payment or provision for any income taxes or interest
expense, plus (ii) depreciation, amortization and other non-cash charges for
such period, minus (b) cash payments for all taxes paid during such period,
minus (c) capital expenditures made during such period to the extent permitted
hereunder.
Consolidated Tangible Net Worth: The excess of (a) all assets of the
Borrowers and their Subsidiaries determined in accordance with GAAP, over (b)
all liabilities of the Borrowers and their Subsidiaries determined in
accordance with GAAP, minus (c) the sum of (i) the book value all intangibles
determined in accordance with GAAP, including good will and intellectual
property, (ii) any write-up in the book value of assets since the most recent
audited Financials in existence on the date hereof, and (iii) without
duplication, any subscriptions receivable.
DED: Department of Economic Development.
DED Subordination Agreement: The Subordination Agreement to be
executed and delivered by the Bank, DED and the Borrowers that is in form and
substance satisfactory to the Bank.
Default: An event or act which with the giving of notice and/or the
lapse of time, would become an Event of Default.
Environmental Laws: All laws pertaining to environmental matters,
including without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Clean
Water Act, the
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Federal Clean Air Act, the Toxic Substances Control Act, in each case as
amended, and all rules, regulations, judgments, decrees, orders and licenses
arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended, and all rules, regulations, judgments, decrees, and orders arising
thereunder.
Event of Default: Any of the events listed in Section 10 hereof.
Financials: In respect of any period, the balance sheet of any person
or entity as at the end of such period, and the related statement of income and
statement of cash flow for such period, each setting forth in comparative form
the figures for the previous comparable fiscal period, all in reasonable detail
and prepared in accordance with GAAP.
GAAP. Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, (a)
generally, as in effect from time to time, and (b) for purposes of determining
compliance by the Borrowers with its financial covenants set forth herein, as
in effect for the fiscal year therein reported in the most recent Financials
submitted to the Bank prior to execution of this Agreement.
Guarantor: Xxxxxxx X. XxXxxxx, Xx., an individual residing at 000
Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx 00000.
Guarantor Subordination Agreement: The Subordination Agreement to be
executed and delivered by the Guarantor and the Borrower to the Bank that is in
form and substance satisfactory to the Bank.
Guaranty: The Guaranty of even date herewith from the Guarantor to the
Bank.
Indebtedness: In respect of any entity, all obligations, contingent
and otherwise, that in accordance with GAAP should be classified as
liabilities, including without limitation (a) all debt obligations, (b) all
liabilities secured by Liens, (c) all guarantees and (d) all liabilities in
respect of bankers' acceptances or letters of credit.
Inventory: All goods, merchandise and other personal property, now
owned or hereafter acquired by the Borrowers which are held for sale or leased,
or furnished under a contract for service, or are raw materials, work in
process, or materials used in the Borrowers' business.
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Liens: Any encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any entity or person.
Loans: See Section 2.
Loan Documents: This Agreement, the Note, the Subordination Agreements
and the Security Documents in each case as from time to time amended or
supplemented.
Materially Adverse Effect: Any materially adverse effect on the
financial condition or business operations of either of the Borrowers or any of
their Subsidiaries or material impairment of the ability of either of the
Borrowers to perform their joint and several obligations hereunder or under any
of the other Loan Documents.
Maturity Date: June 1, 2000 or such earlier date on which the Loans
may become due and payable pursuant to the terms hereof.
Note: See Section 2(a).
Obligations: All indebtedness, obligations and liabilities of the
Borrowers to the Bank, existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Agreement or any other Loan Document or in respect of the Loan or the Note or
other instruments at any time evidencing any thereof.
Parent Security Agreement: The Parent Security Agreement dated of even
date herewith between the Bank and Discas, Inc.
Requirement of Law: In respect of any person or entity, any law,
treaty, rule, regulation or determination of an arbitrator, court, or other
governmental authority, in each case applicable to or binding upon such person
or entity or affecting any of its property.
Security Agreements. The Parent Security Agreement and the Subsidiary
Security Agreement.
Security Documents: The Guaranty, the CDA Guarantee Agreement, the CDA
Guarantee Certificate, the CDA Letter Agreement, the Trademark Security
Agreement, the Security Agreements and any and all other documents, agreements
and instruments executed in connection herewith or therewith.
Subordinated Debt: Indebtedness of the Borrowers or any of their
Subsidiaries to the Subordinated Debt Holders that is expressly subordinated
and made junior to the payment and
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performance in full of the Obligations pursuant to the Subordination Agreements
or by another written instrument containing subordination provisions that have
been approved by the Bank in writing.
Subordinated Debt Holders: Collectively, DED and the Guarantor.
Subordination Agreements: The Guarantor Subordination Agreement and
the DED Subordination Agreement.
Subsidiary: In respect of the Borrowers, any business entity of which
the Borrowers at any time owns or controls directly or indirectly more than
fifty percent (50%) of the outstanding shares of stock having voting power,
regardless of whether such right to vote depends upon the occurrence of a
contingency.
Subsidiary Security Agreement: The Subsidiary Security Agreement of
even date herewith between the Bank and Discas Recycled Products Company.
Trademark Security Agreement: The Trademark Security Agreement of even
date herewith between the Bank and Discas Recycled Products Corporation.
ss.2. THE LOANS. (a) Upon the terms and subject to the conditions of
this Agreement, the Bank agrees to lend to the Borrower such sums
(collectively, the "LOANS") that the Borrower may request, from the date hereof
until but not including the Commitment Termination Date; provided that the
principal amount of any Loan shall not exceed one hundred percent (100%) of the
lower of the fair market value or cost of the machinery and equipment
Collateral (including the cost of installation of such machinery and equipment
Collateral) purchased with the proceeds of such Loan; and, provided, further,
that the outstanding aggregate principal amount of the Loans shall not exceed
$153,000 unless and until the Bank shall have received (i) evidence
satisfactory to the Bank that the DED has made subordinated loans in an
aggregate amount equal to $135,000 and grants in an aggregate amount equal to
$135,000 to the Borrowers on terms and conditions satisfactory to the Bank, and
(ii) a fully executed copy of the DED Subordination Agreement. Loans shall be
in the minimum aggregate amount of $25,000 or an integral multiple thereof. The
Borrower shall notify the Bank in writing or telephonically not later than 2:00
p.m. Waterbury time on the proposed Drawdown Date of the Loan being requested,
of such Drawdown Date (which must be a Business Day) and the principal amount
of such Loan. Subject to the foregoing, so long as the Commitment is then in
effect and the conditions set forth in Section 8 hereof have been met, the Bank
shall advance the amount requested to the Borrower's bank account at the Bank
in immediately available funds not later than the close of business on such
Drawdown Date. The obligation of the Borrower to repay to the Bank the
principal of the Loans and interest accrued thereon shall be
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evidenced by a promissory note in the aggregate principal amount of $500,000
executed and delivered by the Borrower and payable to the order of the Bank, in
form and substance satisfactory to the Bank (the "NOTE").
(b) The Borrower shall pay the outstanding aggregate principal amount
of the Loans in seventy-eight (78) consecutive equal monthly installments, with
such installments due and payable on the first day of each calendar month
commencing on December 1, 1993; provided, that the aggregate principal balance
of all Loans, together with all interest accrued thereon and all fees and
expenses incurred by the Bank in connection therewith, shall be due and payable
in full in cash on the Maturity Date. The amount of each monthly installment
referred to above shall be equal to one and twenty-eight one hundredths percent
(1.28%) of the aggregate principal amount of the Loans outstanding on the
Commitment Termination Date.
(c) The Borrower shall have the right at any time to prepay
voluntarily the outstanding aggregate principal amount of the Loans, as a whole
or in part, without premium or penalty upon written notice to the Bank, given
by 2:00 p.m. Waterbury time on the proposed date of such prepayment, of the
amount to be prepaid and the date of such prepayment; provided, that each such
partial prepayment shall be in the principal amount of $25,000 or any integral
multiple thereof. Any partial prepayment of the outstanding aggregate principal
amount of the Loans shall be applied, prior to the Commitment Termination Date,
to the aggregate principal amount of the Loans outstanding on the date of such
prepayment and, on and after the Commitment Termination Date, to the monthly
installments (including the final installment due on the Maturity Date) of the
aggregate outstanding principal amount of the Loans due hereunder in inverse
order of maturity. No prepaid amounts may be reborrowed and any prepayment
shall be accompanied by all interest accrued to such date of prepayment on the
principal being repaid or prepaid.
ss.3. PROVISIONS RELATING TO JOINT AND SEVERAL LIABILITY OF BORROWERS;
ss.3.1. Concerning Joint and Several Liability of the Borrowers.
(a) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodations to be provided by
the Bank under this Agreement, for the mutual benefit, directly and indirectly,
of each of the Borrowers and in consideration of the undertakings of each of
the Borrowers to accept joint and several liability for the obligations of each
of them.
(b) Each of the Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a
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surety but also as a co-debtor, joint and several liability with the other
Borrower, with respect to the payment and performance of all of the
Obligations, it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of both of the Borrowers
without preferences or distinction between them.
(c) If and to the extent that either of the Borrowers shall fail to
make any payment with respect to any of the Obligations as and when due or to
perform any of such Obligations in accordance with the terms thereof, then in
each such event the other Borrower will make such payment with respect to, or
perform, such Obligation.
(d) The obligations of each Borrower under the provisions of this
ss.3.1 constitute the absolute and unconditional obligations of such Borrower
enforceable against it to the full extent permitted under the terms hereof,
irrespective of the validity, regularity or enforceability of this Agreement or
any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each
Borrower hereby waives notice of acceptance of its joint and several liability,
notice of the Loan made under this Agreement, notice of the occurrence of any
Default or Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by the Bank under
or in respect of any of the Obligations, any requirement of diligence or to
mitigate damages and, generally, all demands, notices and other formalities of
every kind in connection with this Agreement. Each Borrower hereby assents to,
and waives notice of, any extension or postponement of the time for the payment
of any of the Obligations, the acceptance of any partial payment thereon, any
waiver, consent or other action or acquiescence by the Bank at any time or
times in respect of any default by either Borrower in the performance or
satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by the Bank in respect of any of the
obligations hereunder, and the taking, addition, substitution or release, in
whole or in part, at any time or times, of any security for any of such
obligations or the addition, substitution or release, in whole or in part, of
either Borrower. Without limiting the generality of the foregoing, each
Borrower assents to any other action or delay in acting or failure to act on
the part of the Bank including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might, but for the provisions
of this ss.3.1, afford grounds for terminating, discharging or relieving such
Borrower, in whole or in part, from any of its Obligations under this ss.3.1,
it being the intention of each Borrower that, so long as any of the Obligations
remain unsatisfied, the Obligations of such Borrower under this ss.3.1 shall
not be discharged except by performance and then only to the extent
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of such performance. The joint and several liability of the Borrowers hereunder
shall continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, membership,
constitution or place of formation of either Borrower or the Bank. If at any
time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by the Bank
upon the insolvency, bankruptcy or reorganization of either Borrower, or
otherwise, the provisions of this ss.3.1 will forthwith be reinstated in
effect, as though such payment had not been made.
ss.3.2. No Marshalling. The Bank shall not be required to xxxxxxxx any
present or future claims, rights, or remedies which it has or may have against
the Borrowers or either of them in respect of the Obligations (or any of them)
of the Borrowers or either of them under this Agreement, or to resort to such
claims, rights, or remedies in any particular order. To the extent that it
lawfully may, each Borrower hereby agrees that it will not invoke any law which
might cause delay in or impede the enforcement of the rights of the Bank under
this Agreement or any other Loan Document, and to the fullest extent it
lawfully may, each Borrower hereby irrevocably waives the benefits of all such
laws.
ss.3.3. Liabilities of Borrowers Not To Be Affected. The liability of
each Borrower to the Bank under this Agreement shall in no way be terminated,
affected, diminished or impaired by reason of the assertion of, or the failure
by, the Bank to assert against the other Borrower, any of the claims, rights or
remedies reserved to the Bank pursuant to the terms of this Agreement or (i)
any assignment, renewal or extension of this Agreement in honoring a request
therefor by the other Borrower, or (ii) any indulgence, waiver, extension of
time or other action, inaction or omission by the Bank under or in respect of
this Agreement in favor of the other Borrower, or (iii) any dealings or
transactions or matters occurring between the Bank and the other Borrower, or
(iv) any bankruptcy, insolvency, reorganization, arrangement, assignment for
the benefit of creditors, receivership or trusteeship affecting the other
Borrower or its successors or assigns, or (v) the release of the other Borrower
from the performance or observance of any of the terms, conditions or
provisions of this Agreement or (vi) any act or matter which might, but for
this provision of this Agreement, be deemed a legal or equitable discharge of
the other Borrower, or (vii) the invalidity, irregularity or unenforceability
against the other Borrower of this Agreement, or (viii) any other matter,
whether or not specifically mentioned herein, other than full, prompt and
unconditional payment and performance when due of all of the joint and several
obligations of the Borrowers to the Bank under this Agreement; whether or not
notice of any of the foregoing is given to either of the Borrowers. Each
Borrower hereby expressly waives and surrenders any defense to its joint and
several obligations hereunder based upon any of the foregoing acts, omissions,
things, agreements or waivers.
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ss.4. INTEREST; LATE CHARGES. So long as no Event of Default is
continuing, the Borrowers shall pay interest on the Loans at a rate per annum
which is equal to the sum of (i) the Base Rate in effect from time to time plus
(ii) two percent (2.0%), such interest to be payable in arrears on the first
day of each calendar month for the immediately preceding calendar month,
commencing on July 1, 1993. While an Event of Default is continuing, amounts
payable to the Bank under any of the Loan Documents shall bear interest
(compounded monthly and payable on demand in respect of overdue amounts) at a
rate per annum which is equal to the sum of (i) the Base Rate and (ii) five
percent (5.0%) until such amount is paid in full or (as the case may be) such
Event of Default has been cured or waived in writing by the Bank (after as well
as before judgment). In addition, in the event that any payment provided for
herein or in any other Loan Documents shall become overdue for a period in
excess of fifteen (15) days, a late charge of five (5) cents for each dollar so
overdue shall become immediately due and payable to the Bank for the purpose of
defraying the expenses incident to handling such delinquent payment.
ss.5. CHANGES IN CIRCUMSTANCES. If any change in banking law or
regulation or the administration thereof (whether or not having the force of
law) affects the amount of capital required or expected to be maintained by the
Bank or any entity controlling it, and such amount is increased by reason of
the Commitment or the Loans, the Bank may notify the Borrower thereof. The
Borrower and the Bank shall negotiate an adjustment payable to the Bank to
compensate for such increase. If no agreement is reached within thirty (30)
days, the Bank may increase the fees payable hereunder by the amount determined
by the Bank to be necessary to provide such compensation.
ss.6. CLOSING FEES AND PAYMENTS. (a) Contemporaneously with execution
and delivery of this Agreement, the Borrowers shall (i) pay to the Bank a
non-refundable closing fee in the amount of $1,750.00 and (ii) shall pay to CDA
its non-refundable first year annual guarantee fee in the amount $2,500.
(b) All payments to be made by the Borrowers hereunder shall be made
in U.S. dollars in immediately available funds at the Bank's head office at 00
Xxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx, without set-off or counterclaim and
without any withholding or deduction whatsoever. The Bank shall be entitled to
charge any account of either of the Borrowers with the Bank for any sum due and
payable by either of the Borrowers to the Bank or the CDA hereunder or under
any of the other Loan Documents. If any payment hereunder is required to be
made on a day which is not a Business Day, it shall be paid on the immediately
preceding Business Day. All computations of interest or of any fees payable
hereunder shall be made by the Bank on the basis of actual days elapsed and on
a 360-day year.
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ss.7. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers represents
and warrants to the Bank on the date hereof that: (a) the Borrowers and each of
their respective Subsidiaries is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified and in good standing in every other jurisdiction where it is doing
business, and the execution, delivery and performance by each of the Borrowers
and each of their respective Subsidiaries of the Loan Documents to which it is
a party (i) are within the corporate authority of the Borrowers and their
respective Subsidiaries, (ii) have been duly authorized, (iii) do not conflict
with or contravene the Charter Documents of either of the Borrowers or any of
their respective Subsidiaries; (b) upon execution and delivery thereof, each
Loan Document shall constitute the legal, valid and binding obligation of each
of the Borrowers and each of such Subsidiaries, enforceable in accordance with
its terms; (c) the Borrowers and each of their respective Subsidiaries have
good and marketable title to all their properties, subject only to Liens
permitted hereunder, and possesses all assets, including intellectual
properties, franchises and Consents, adequate for the conduct of their
respective businesses as now conducted; (d) the Borrowers have provided to the
Bank their reviewed Consolidated Financials as at April 30, 1993 and for the
period then ended, and such Financials are complete and correct and fairly
present the position of the Borrowers and their respective Subsidiaries as at
such date and for such period in accordance with GAAP consistently applied; (e)
since April 30, 1993, there has been no materially adverse change of any kind
in the Borrowers or any of their respective Subsidiaries which would have a
Materially Adverse Effect; (f) there are no legal or other proceedings or
investigations pending or threatened against either of the Borrowers or any of
their respective Subsidiaries before any court, tribunal or regulatory
authority which would, if adversely determined, alone or together, have a
Materially Adverse Effect; (g) the execution, delivery, performance of their
obligations, and exercise of their rights under the Loan Documents by each of
the Borrowers and each of their respective Subsidiaries, including borrowing
under this Agreement (i) do not require any Consents; and (ii) are not and will
not be in conflict with or prohibited or prevented by (A) any Requirement of
Law, or (B) any Charter Document, corporate minute or resolution, instrument,
agreement or provision thereof, in each case binding on either Borrower or any
of their respective Subsidiaries or affecting any of their respective
properties; (h) neither Borrower nor any of their respective Subsidiaries is in
violation of (i) any Charter Document, corporate minute or resolution, (ii) any
instrument or agreement, in each case binding on such Borrower or such
Subsidiary or affecting its property, or (iii) any Requirement of Law,
including, without limitation, all applicable federal and state tax laws, ERISA
and Environmental Laws; (i) upon execution and delivery of the Security
Documents and the filing of documents thereby required, the Bank shall have a
first-priority perfected security interest in all of the properties and assets
of each of the Borrowers, subject only to Liens
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permitted hereunder and entitled to priority under applicable law, with no
financing statements, chattel mortgages, real estate mortgages or similar
filings on record anywhere which conflict with such first-priority interest;
(j) Discas, Inc. has no Subsidiaries except for Discas Recycled Products
Corporation; (k) Discas Recycled Products Corporation has no Subsidiaries; (l)
neither Borrower is a party to any partnership or joint venture; and (m) each
fiscal year of the Borrowers begins on May 1 of each calendar year and ends on
April 30 of such calendar year.
ss.8. CONDITIONS PRECEDENT. In addition to the making of the foregoing
representations and warranties and the delivery of the Loan Documents and such
other documents and the taking of such actions as the Bank may require at or
prior to the time of executing this Agreement, the obligation of the Bank to
make the Loan to the Borrowers hereunder is subject to the satisfaction of the
following further conditions precedent: (a) each of the representations and
warranties of the Borrowers to the Bank shall be true and correct in all
material respects as of the time made or claimed to have been made; (b) no
Default or Event of Default shall be continuing; (c) all proceedings in
connection with the transactions contemplated hereby shall be in form and
substance satisfactory to the Bank and the Bank shall have received all
information and documents as it may have reasonably requested; (i) the CDA
shall have guaranteed the payment of thirty percent (30%) of the Obligations on
terms and conditions satisfactory to the Bank. Without limiting the foregoing,
the obligation of the Bank to make any Loan shall be subject to, among other
things, (1) the Bank's receipt of a purchase and sale agreement with respect to
the machinery and equipment Collateral being purchase with the proceeds of such
Loan, (1) the Borrowers shall have executed and delivered to the Bank all
documents, agreements and instruments (including, without limitation, UCC-1's
and amendments to the Security Agreement) that the Bank deems necessary to
obtain a valid and perfected security interest and Lien in such machinery and
equipment Collateral and (3) the shareholders of Discas Recycled Products
Corporation shall have made an equity contribution to Discas Recycled Products
Corporation of not less than $150,000 on terms and conditions satisfactory to
the Bank.
ss.9. COVENANTS.
(a) Each of the Borrowers agrees that as long as the Commitment is in
effect or any Loan or the Note is outstanding and until the payment and
satisfaction in full of the Loans and all of the other Obligations, the
Borrowers will comply with their joint and several obligations as set forth
throughout this Agreement and to:
(i) furnish the Bank: (A) as soon as available but in any event
within one hundred twenty (120) days after the close of each fiscal year of
the Borrowers, their reviewed consolidated Financials for such fiscal year,
prepared by the
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Borrowers' certified public accountants; (B) as soon as available but in any
event within thirty (30) days after the end of each fiscal quarter of the
Borrowers, its management prepared unaudited consolidated Financials for
such quarter, certified by the Borrowers' chief financial officers; (C) as
soon as available but in any event within fifteen (15) days after the end of
each fiscal month of the Borrowers an Accounts and accounts payable aging
report, certified by the Borrowers' chief financial officers; and (D)
together with the quarterly and annual Financials, a certificate of the
Borrowers setting forth computations demonstrating compliance with the
Borrowers' financial covenants set forth herein, and certifying that no
Default or Event of Default has occurred, or if a Default or an Event of
Default has occurred, the actions taken by the Borrowers with respect
thereto;
(ii) keep true and accurate books of account in accordance with
GAAP and to permit the Bank or its designated representatives, at the
expense of the Borrowers, to inspect the Borrowers' premises and to examine
and be advised as to such or other business records upon the request of the
Bank;
(iii) maintain their corporate existence, business and assets, to
keep their business and assets adequately insured, to maintain their chief
executive offices in the United States, to continue to engage in
substantially the same lines of business, and to comply with all
Requirements of Law, including ERISA and Environmental Laws;
(iv) notify the Bank promptly in writing of (A) the occurrence of
any Default or Event of Default, (B) any noncompliance with ERISA or any
Environmental Law or proceeding in respect thereof, (C) any change of
address or name of either Borrower, (D) any threatened or pending litigation
or similar proceeding affecting the Borrowers or any Subsidiary or any
material change in any such litigation or proceeding previously reported and
(E) claims against any assets or properties of the Borrowers or such
Subsidiary encumbered in favor of the Bank;
(v) use the proceeds of the Loan solely to purchase machinery and
equipment Collateral, and not for the carrying of "margin security" or
"margin stock" within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224;
(vi) cooperate with the Bank, take such action, execute such
documents, and provide such information as the Bank may from time to time
reasonably request in order further to effect the transactions contemplated
by and the purposes of the Loan Documents, including without limitation, the
delivery at the Borrower's expense of appraisals or environmental
assessments; and
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(vii) conform with CDA's affirmative action requests.
(b) Each of the Borrowers agrees that as long as the Loan or the Note
is outstanding and until the payment and satisfaction in full of the Loans and
all of the other Obligations, neither Borrower will:
(i) create, incur or assume any Indebtedness other than (A)
Indebtedness to the Bank arising under the Loan Documents, (B) Indebtedness
in respect of the acquisition of property which does not exceed $10,000 in
the aggregate amount, (C) current liabilities of the Borrowers not incurred
through the borrowing of money or the obtaining of credit except credit on
an open account customarily extended, (D) Indebtedness in respect of taxes
or other governmental charges contested in good faith and by appropriate
proceedings, (E) Subordinated Debt and (F) Indebtedness not included above
and listed on Schedule 9(b)(i) hereto;
(ii) create or incur any Liens on any of the property or assets of
either of the Borrowers except (A) Liens securing the Obligations; (B) Liens
securing taxes or other governmental charges not yet due; (C) deposits or
pledges made in connection with social security obligations; (D) Liens of
carriers, warehousemen, mechanics and materialmen, less than 120 days old as
to obligations not yet due; (E) easements, rights-of-way, zoning
restrictions and similar minor Liens which individually and in the aggregate
do not have a Materially Adverse Effect; (F) security interests securing
Subordinated Debt held by DED; and (G) other Liens existing on the date
hereof and listed on Schedule 9(b)(ii) hereto;
(iii) make any investments other than investments in (A)
marketable obligations of the United States maturing within one (1) year,
(B) certificates of deposit, bankers' acceptances and time and demand
deposits of United States banks having total assets in excess of
$1,000,000,000, or (C) such other investments as the Bank may from time to
time approve in writing;
(iv) make any distributions on or in respect of its capital of any
nature whatsoever, other than dividends payable solely in shares of common
stock or distributions by Subsidiaries to the Borrowers; or
(v) become party to a merger, or to effect any disposition of
assets other than in the ordinary course, or to purchase, lease or otherwise
acquire assets other than in the ordinary course.
(c) Each of the Borrowers agrees that as long as the Commitment is
in effect or any Loan or the Note is outstanding and
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until the payment and satisfaction in full of the Loan and all of the other
Obligations, the Borrowers will not:
(i) permit the ratio of Consolidated Operating Cash Flow to
Consolidated Financial Obligations for any fiscal quarter of the Borrowers
ending after January 1, 1994 to be less than 1.2:1.0.
(ii) permit Consolidated Net Income of the Borrowers to be less
than $0.00 for any period consisting of two (2) consecutive fiscal quarters
of the Borrowers ending after January 1, 1994.
(iii) permit Consolidated Tangible Net Worth of the Borrowers to
be less than the amounts set forth below at any time during any period set
forth below:
Period Amount
------ ------
May 1, 1993 through April 30, 1994 $475,000
May 1, 1994 through April 30, 1995 $525,000
May 1, 1995 through April 30, 1996 $575,000
May 1, 1996 through April 30, 1997 $625,000
May 1, 1997 through April 30, 1998 $675,000
May 1, 1998 through April 30, 1999 $725,000
May 1, 1999 through Maturity Date $775,000
ss.10. EVENTS OF DEFAULT; ACCELERATION. If any of the following events
("EVENTS OF DEFAULT") shall occur: (a) either of the Borrowers shall fail to
pay when due and payable any principal of or interest on the Loan or any other
sum due under any of the Loan Documents; (b) either of the Borrowers shall fail
to perform any term, covenant or agreement contained in Section 9 hereof; (c)
either of the Borrowers or the Guarantor shall fail to perform any other term,
covenant or agreement contained in the Loan Documents after the Bank has given
notice of such failure to the Borrowers; (d) any representation or warranty of
the Borrowers or any of their Subsidiaries or of the Guarantor in the Loan
Documents or in any certificate or notice given in connection therewith shall
have been false or misleading in any material respect at the time made or
deemed to have been made; (e) either of the Borrowers or any of their
Subsidiaries or the Guarantor shall be in default under any agreement or
agreements evidencing Indebtedness owing to (i) the Bank or any affiliates of
the Bank or (ii) any other Indebtedness to any other third party; (f) any of
the Loan Documents shall cease to be in full force and effect, (g) the
Borrowers or any of their Subsidiaries or the Guarantor (i) shall make an
assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt or
insolvent, (iii) shall seek the appointment of, or be the subject of, an order
appointing, a trustee, liquidator or receiver as to all or part of its assets,
(iv) shall commence, approve or consent
-15-
to, any case or proceeding under any bankruptcy, reorganization or similar law
and, in the case of an involuntary case or proceeding, such case or proceeding
is not dismissed within sixty (60) days following the commencement thereof, or
(v) shall be the subject of an order for relief in an involuntary case under
federal bankruptcy law; (h) either of the Borrowers or any of their
Subsidiaries or the Guarantor shall be unable to pay their respective debts as
they mature; (i) there shall remain undischarged for more than thirty (30) days
any final judgment or execution action against either of the Borrowers or any
of their Subsidiaries or the Guarantor that, together with other outstanding
claims and execution actions against such Borrower or such Subsidiaries or the
Guarantor exceeds $50,000 in the aggregate; (j) the Guarantor shall cease to
own legally or beneficially one hundred percent (100%) or more of the voting
stock of Discas, Inc. on a fully diluted basis, (k) Discas, Inc. shall cease to
own legally or beneficially sixty-eight and eight-tenths percent (68.8%) or
more of the voting stock of Discas Recycled Products Corporation on a fully
diluted basis, (l) the CDA Guarantee Certificate shall have terminated or (m)
the Borrower shall fail to provide the Bank with (i) evidence satisfactory to
the Bank that DED has made subordinated loans and grants to the Borrowers in an
aggregate amount equal to or greater than $270,000 on terms and conditions
satisfactory to the Bank and (ii) a fully executed copy of the DED
Subordination Agreement, in each case on or before July 1, 1993;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (g) or (h), the
entire unpaid principal amount of the Loan, all interest accrued and unpaid
thereof, and all other amounts payable hereunder and under the other Loan
Documents shall automatically become forthwith due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrowers; and
(2) In the case of any Event of Default other than (g) and (h), the
Bank may declare the unpaid principal amount of the Loan, all interest accrued
and unpaid thereof, and all other amounts payable hereunder and under the other
Loan Documents to be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrowers.
No remedy herein conferred upon the Bank is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and in
addition to every other remedy hereunder, now or hereafter existing at law or
in equity or otherwise.
ss.11. SETOFF. Regardless of the adequacy of any collateral for the
Obligations, any deposits or other sums credited by or due from the Bank to
either Borrower may be applied to or set off against any principal, interest
and any other amounts due from
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either Borrower to the Bank at any time without notice to the Borrowers, or
compliance with any other procedure imposed by statute or otherwise, all of
which are hereby expressly waived by the Borrowers.
ss.12. MISCELLANEOUS. Each of the Borrowers jointly and severally
agrees to jointly and severally indemnify and hold harmless the Bank against
all claims and losses of every kind arising out of the Loan Documents,
including without limitation against those in respect of the application of
Environmental Laws to the Borrowers and their Subsidiaries. Each of the
Borrowers shall pay to the Bank promptly on demand all reasonable costs and
expenses (including any taxes, other than taxes on income of the Bank, and
legal and other professional fees and fees of its commercial finance examiner)
incurred by the Bank in connection with the preparation, negotiation,
execution, amendment, administration or enforcement of any of the Loan
Documents. Any communication to be made hereunder shall (i) be made in writing,
but unless otherwise stated, may be made by telex, facsimile transmission or
letter, and (ii) be made or delivered to the address of the party receiving
notice which is identified with its signature below (unless such party has by
five (5) days' written notice specified another address), and shall be deemed
made or delivered, when dispatched, left at that address, or five (5) days
after being mailed, postage prepaid, to such address. This Agreement shall be
binding upon and inure to the benefit of each party hereto and its successors
and assigns, but the Borrowers may not assign their rights or obligations
hereunder. This Agreement may not be amended or waived except by a written
instrument signed by the Borrowers and the Bank, and any such amendment or
waiver shall be effective only for the specific purpose given. No failure or
delay by the Bank to exercise any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other right, power or privilege. The provisions of this
Agreement are severable and if any one provision hereof shall be held invalid
or unenforceable in whole or in part in any jurisdiction, such invalidity or
unenforceability shall affect only such provision in such jurisdiction. This
Agreement, together with all Exhibits and Schedules hereto, expresses the
entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement and any amendment hereby may be executed in
several counterparts, each of which shall be an original, and all of which
shall constitute one agreement. In proving this Agreement, it shall not be
necessary to produce more than one such counterpart executed by the party to be
charged. THIS AGREEMENT AND THE NOTE ARE CONTRACTS UNDER THE LAWS OF THE STATE
OF CONNECTICUT AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND GOVERNED
THEREBY. EACH OF THE BORROWERS AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY
OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CONNECTICUT
OR ANY FEDERAL COURT SITTING THEREIN. Each of the Borrowers, as an inducement
to the Bank to enter into this
-17-
Agreement, hereby waives its right to a jury trial with respect to any action
arising in connection with any Loan Document.
ss.13. PREJUDGMENT REMEDY WAIVER. EACH OF THE BORROWERS ACKNOWLEDGES THAT THE
FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. EACH OF THE BORROWERS HEREBY
WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER
CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY
OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE
BANK MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, EACH OF THE BORROWERS ACKNOWLEDGES THAT THE BANK'S ATTORNEY MAY,
PURSUANT TO CONN. GEN. STAT. ss.52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT SECURING A COURT ORDER. EACH OF THE BORROWERS ACKNOWLEDGES AND RESERVES
ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR
PREJUDGMENT REMEDY AS AFORESAID AND THE BANK ACKNOWLEDGES SUCH BORROWER'S RIGHT
TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.
-18-
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.
DISCAS RECYCLED PRODUCTS
CORPORATION
By: /s/ Xxxxxxx X. XxXxxxx, Xx.
----------------------------
Xxxxxxx X. XxXxxxx, Xx.
Its President
00 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
DISCAS, INC.
By: /s/ Xxxxxxx X. XxXxxxx, Xx.
----------------------------
Xxxxxxx X. XxXxxxx, Xx.
Its President
00 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
BANK OF BOSTON CONNECTICUT
By: /s/ Xxx X. Killnan
------------------
Xxx X. Killnan
Its Vice President
00 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Tel: (203)
Fax: (203)
-19-
SCHEDULE 9(b)(i)
----------------
Permitted Indebtedness
The principal amount of $34,837.38 owed by Discas, Inc. to the Guarantor.
The principal amount of $20,480.40 plus $9,085.69 of interest owed by Discas,
Inc. to Xxxxxxxxxxx XxXxxxx.
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SCHEDULE 9(b)(ii)
-----------------
Permitted Liens
UCC-1 financing statement number 942210 filed with the Connecticut Secretary of
State on October 16, 1991 against Discas, Inc. with respect to the lease of
equipment by Discas, Inc. from Center Capital Corporation.
UCC-1 financing statement number 940958 filed with the Connecticut Secretary of
State on October 4, 1991 against Discas, Inc. with respect to the lease of
equipment by Discas, Inc. from Center Capital Corporation.
