EXHIBIT 10.1
FORBEARANCE AGREEMENT
This Forbearance Agreement (the "Agreement") is entered into as of this
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30th day of March, 2009 by and among Ronson Corporation, a New Jersey
Corporation ("Parent"), Ronson Consumer Products Corporation, a New Jersey
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corporation ("RCPC"), Ronson Aviation, Inc., a New Jersey Corporation ("RAI")
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and Ronson Corporation of Canada Ltd., an Ontario corporation ("Ronson Canada")
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(RCPC and RAI are collectively and individually referred to as the "Domestic
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Borrower" or "Domestic Borrowers"; the Domestic Borrower and Ronson Canada are
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collectively and individually referred to as the "Borrower" or "Borrowers", and
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the Borrowers, together with Parent are collectively and individually referred
to as the "Obligors") and XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Lender"),
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acting through its Xxxxx Fargo Business Credit operating division.
RECITALS:
Borrowers and Lender are parties to a certain Credit and Security
Agreement dated as of May 30, 2008 (as same may be amended, modified,
supplemented or restated from time to time, the "Credit Agreement"), relating to
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financing by Lender to Borrowers (capitalized terms used but not specifically
defined herein shall have the meanings provided for such terms in the Credit
Agreement).
Parent has guaranteed payment and performance of the Indebtedness of
Borrowers to Lender, pursuant to a certain Guaranty Agreement dated May 30, 2008
(the "Guaranty").
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The following Events of Default have occurred and are continuing under
the Credit Agreement (the "Existing Events of Default"):
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(a) Borrowers breached the terms of that certain Post-Closing Agreement
dated as of May 30, 2008, by and among Borrowers and Lender by failing to
deliver all open items as required therein;
(b) Borrowers failed to maintain Tangible Net Worth as of September 30,
2008 of not less than <$1,500,000>, as required by Section 6.2(a) of the Credit
Agreement;
(c) Borrowers failed to achieve Net Income as of September 30, 2008 of
not less than <$437,000>, as required by Section 6.2(b) of the Credit Agreement;
(d) Borrowers failed to achieve Net Cash Flow as of September 30, 2008
of not less than <$280,000>, as required by Section 6.2(c) of the Credit
Agreement;
(e) Borrowers failed to deliver their quarterly financial statements
for the fiscal quarter ending December 31, 2008, within 45 days of the end of
such fiscal quarter as required by Section 6.1(b) of the Credit Agreement;
(f) Borrowers failed to deliver their monthly financial statements for
the month ending December 31, 2008 and January 31, 2009 within 30 days of the
end of such months as required by Section 6.1(c) of the Credit Agreement;
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(g) Obligors provided inaccurate exhibits to each of the Trademark and
Patent Security Agreements and an inaccurate Schedule 5.11 to the Credit
Agreement; and
(h) Any other Event of Default consisting of a cross-default arising
under other indebtedness of the Obligors resulting from any Existing Event of
Default.
Lender has recently been advised that Parent and the stockholders of
Parent are actively pursuing either a sale of all of the capital stock of RAI or
of all or substantially all of the assets of RAI or financing to be provided by
another lender (each a "Liquidity Transaction"), in either case in an amount
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sufficient to enable the Obligors to fully pay and satisfy the Indebtedness. As
a result, Obligors have requested that Lender forbear from exercising its rights
and remedies under the Loan Documents as a result of the Existing Events of
Default and amend certain terms of the Credit Agreement.
Lender has reviewed this request and, in an effort to continue to work
with the Obligors, Lender has agreed to forbear from exercising certain of its
rights and remedies and to amend certain terms of the Credit Agreement as set
forth herein.
NOW, THEREFORE, for and in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Acknowledgments of Obligors. Obligors acknowledge and agree that:
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(a) The recital of facts set forth in this Agreement is true and
correct in all material respects.
(b) Lender has a valid and perfected security interest in and to the
Collateral.
(c) The Existing Events of Default have occurred and are continuing.
(d) Lender's rights and remedies contained in the Loan Documents,
including without limitation the right to charge and collect interest at the
Default Rate pursuant to Section 2.8(b) of the Credit Agreement, effective as of
July 1, 2008, have vested.
(e) Lender's agreement to forbear as provided in this Agreement shall
not invalidate, impair, negate, or otherwise affect Lender's ability to exercise
its rights and remedies under the Loan Documents and otherwise.
2. Forbearance.
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(a) In consideration for, and subject to, compliance by the Obligors
with the terms and conditions of this Agreement, Lender hereby agrees to forbear
from exercising its rights and remedies under the Loan Documents (except as set
forth in Paragraph 7 below) and applicable law as a result of the occurrence of
the Existing Events of Default until the occurrence of a Termination Event (as
such term is defined below). This forbearance is given as a one time
accommodation by Lender to the Obligors and nothing contained herein shall
require Lender to waive any Default or Event of Default or forbear from
exercising any of its rights or remedies
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with respect to the occurrence of any other Default or Event of Default existing
on the effective date of this Agreement or occurring after the effective date of
this Agreement.
(b) For purposes of this Agreement, a "Termination Event" shall mean
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the earliest to occur of (i) four weeks from the Accommodation Overadvance
Funding Date, (ii) April 24, 2009, and (iii) any one or more of the following:
(A) the failure of the Obligors to comply with the terms,
covenants, agreements and conditions of this
Agreement;
(B) any representation or warranty made herein shall be
incorrect in any material respect;
(C) the occurrence of any Event of Default under the
Credit Agreement, other than (i) the Existing Events
of Default or (ii) breach by Obligors of their
obligation pursuant to Section 6.1(a) of the Credit
Agreement to deliver audited year end annual
financial statements for the fiscal year ending
December 31, 2008 within 90 days of the end of such
fiscal year;
(D) Obligors shall fail to employ a CRO (as defined
below) throughout the Forbearance Period;
(E) in the Lender's discretion, it determines that Parent
is no longer actively pursuing a Liquidity
Transaction;
(F) Obligors shall fail to deliver their quarterly
financial statements for the fiscal quarter ending
December 31, 2008 required by Section 6.1(b) of the
Credit Agreement on or before April 1, 2009;
(G) Obligors shall fail to deliver their monthly
financial statements for the months ending January
31, 2009 and February 28, 2009, as required by
Section 6.1(c) of the Credit Agreement, on or before
April 15, 2009; and
(H) Any Person, other than Lender, shall exercise its
rights and remedies against the Obligors as a result
of defaults or events of defaults arising under any
agreement between Obligors and such Person due to
cross-defaults arising from the Existing Events of
Default.
(c) Upon the occurrence of a Termination Event, Lender's agreement to
forbear from exercising its rights and remedies under the Loan Documents and
applicable law shall automatically terminate, with or without notice to the
Obligors.
(d) Nothing in this paragraph 2 shall be deemed a waiver by Lender of
the Existing Events of Default or of future compliance by the Obligors with the
covenants set forth above or otherwise set forth in the Loan Documents.
(e) This Agreement is written without prejudice as to the rights of
Lender to pursue any and all remedies available to Lender pursuant to the Loan
Documents, at law and in equity, upon the occurrence of a Termination Event.
This Agreement shall not constitute a waiver or
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modification of any of Lender's rights and remedies, the Existing Events of
Default, any other Default or Event of Default under the Loan Documents, or any
of the terms, conditions, warranties, representations or covenants contained in
the Loan Documents.
3. Conditions. Lender's agreement to forbear from exercising its rights
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and remedies pursuant to this Agreement is conditioned upon:
(a) execution and delivery by the Obligors and Lender of this
Agreement;
(b) Obligors' agreement to cooperate with Hilco Appraisal Services, LLC
in its efforts to cause an updated appraisal of Borrowers' Inventory to be
delivered to Lender on or before March 25, 2009, which appraisal shall be
acceptable to Lender in form and substance;
(c) execution and delivery by the Obligors of Amended and Restated
Patent and Trademark Security Agreements, in form and substance acceptable to
Lender;
(d) execution and delivery by Parent of an Amended and Restated
Security Agreement, in form and substance acceptable to Lender;
(e) receipt by Lender of evidence that Obligors have engaged a Chief
Restructuring Officer ("CRO"), on terms and conditions set forth below; and
(f) such other matters as Lender may require.
4. Chief Restructuring Officer. Obligors shall deliver to Lender
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evidence establishing that the Obligors have engaged a Chief Restructuring
Officer ("CRO"), including, without limitation, copies of any engagement letter
executed by the Obligors with a CRO and a certified copy of the resolutions of
the Board of Directors of the Obligors approving the engagement of a CRO, all of
which shall be in form and substance acceptable to Lender. The CRO shall be
selected by Obligors and acceptable to Lender. At all times during the term of
this Agreement, Obligors will continue to employ the CRO with such duties and
responsibilities as shall be approved by the Board of Directors of the Obligors
and acceptable to the Lender. Obligors consent to Lender having access to the
CRO and Obligors hereby agree and consent to Lender meeting with the CRO without
Obligors present and Obligors hereby release and agree to hold the CRO and
Lender harmless from any information or discussions held between the CRO and
Lender.
5. Forbearance Fee. In consideration for Lender's agreement to enter
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into this Agreement, Obligors shall pay to Lender a forbearance fee in an amount
equal to Four Hundred Fifty Thousand Dollars ($450,000), which shall be fully
earned and non-refundable upon execution and delivery of this Agreement, shall
be included as part of the Indebtedness of Obligors to Lender under the Credit
Agreement and shall be charged as a Revolving Advance under the Credit Agreement
upon the earlier of (a) the occurrence of a Termination Event or (b) payment of
the Indebtedness.
6. Amendments to Credit and Security Agreement.
(a) Section 1.1 of the Credit Agreement shall be amended by adding or
amending, as the case may be, the following definitions:
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"Accommodation Overadvance" is defined in Section 2.1.1
"Accommodation Overadvance Funding Date" shall mean the date
the Forbearance Agreement is executed.
"Accommodation Overadvance Limit" means up to $500,000 from
the Accommodation Overadvance Funding Date through the occurrence of a
Termination Event (as such term is defined in the Forbearance
Agreement).
"Accounts Advance Rate" means up to eighty-five percent (85%),
or such lesser rate as the Lender in its sole discretion may deem
appropriate from time to time; provided that, as of any date of
determination, the Accounts Advance Rate shall be reduced by one (1)
percentage point for each percentage by which Dilution is in excess of
five percent (5.0%).
"Domestic Borrower Borrowing Base" means at any time the
lesser of:
(b) The Maximum Line Amount (less Advances made to or for the benefit
of Ronson Canada under this Agreement); or
(c) Subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) The product of the Accounts Advance Rate times
Eligible Accounts owned by the Domestic Borrowers,
plus
(ii) The lesser of (A) sixty percent (60%), or such lesser
rate as the Lender in its sole discretion may deem
appropriate from time to time, of Eligible Inventory
owned by the Domestic Borrowers, (b) eighty-five
percent (85%), or such lesser rate as the Lender in
its sole discretion may deem appropriate from time to
time, of the Net Orderly Liquidation Value of
Eligible Inventory owned by the Domestic Borrowers,
or (C) $700,000 less Advances made to or for the
benefit of Ronson Canada against Eligible Inventory
owned by Ronson Canada, less
(iii) The L/C Amount (less the Ronson Canada L/C Amount),
less
(iv) The Domestic Borrowing Base Reserve, less
(v) Indebtedness that the Domestic Borrowers owe to the
Lender that has not yet been advanced on the
Revolving Note, and an amount that the Lender in its
reasonable discretion finds on the date of
determination to be equal to the Lender's net credit
exposure with respect to any swap, derivative,
foreign exchange, hedge, deposit, treasury management
or other similar transaction or arrangement extended
to the Domestic Borrowers by the Lender that is not
described in Article II of this Agreement and any
indebtedness owed by the Domestic Borrowers to Xxxxx
Fargo Merchant Services, L.L.C.
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"Floating Rate" means with respect to (i) Revolving Advances
evidenced by the Revolving Note (other than the Accommodation
Overadvance), an annual interest rate equal to the sum of the Prime
Rate plus one-half of one percent (0.50%), (ii) with respect to the
Accommodation Overadvance, an annual interest rate equal to the sum of
the Prime Rate plus eight percent (8.00%), (iii) with respect to
Equipment Term Advances evidenced by the Equipment Term Note, the Prime
Rate plus three-quarters of one percent (0.75%) and (iv) with respect
to Real Estate Term Advances evidenced by the Real Estate Term Note,
the Prime Rate plus one percent (1.00%).
"Forbearance Agreement" shall mean that certain Forbearance
Agreement executed by and among Obligors and Lender and dated as of
March 30, 2009.
"Maximum Line Amount" means $2,000,000, unless this amount is
reduced pursuant to Section 2.12, in which event it means such lower
amount.
(d) Section 2.1 of the Credit Agreement is amended by adding the
following new Section 2.1.1 which shall provide as follows:
2.1.1 Accommodation Overadvance. Notwithstanding
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anything contained in Section 2.1 or otherwise in this
Agreement to the contrary, the Lender agrees, subject to the
terms and conditions of this Agreement, to make Revolving
Advances to the Domestic Borrowers in amounts which may cause
the outstanding balance of the aggregate Revolving Advances to
exceed the Availability or which may cause the outstanding
balance of Revolving Advances to exceed the Borrowing Base
(any such excess Revolving Advances are herein referred to
collectively as "Accommodation Overadvances"); provided that
the aggregate of any such Accommodation Overadvances
outstanding at any one time shall not exceed the Accommodation
Overadvance Limit. All Accommodation Overadvances shall
constitute Revolving Advances and in no event shall the total
of Revolving Advances exceed the Maximum Line Amount. The
Accommodation Overadvance shall be exempt from the provisions
of Section 2.13(a) of this Agreement.
(e) Section 3.1 of the Credit Agreement shall be amended in restated in
its entirety to provide as follows:
The Borrower hereby pledges, assigns and grants to the Lender,
for the benefit of itself and as agent for Xxxxx Fargo
Merchant Services, L.L.C., a lien and security interest
(collectively referred to as the "Security Interest") in the
Collateral, as security for the payment and performance of:
(a) all present and future Indebtedness of the Borrower to the
Lender; (b) all obligations of the Borrower and rights of the
Lender under this Agreement; and (c) all present and future
obligations of the Borrower to the Lender of other kinds. Upon
request by the Lender, the Borrower will grant to the Lender,
for the benefit of itself and as agent for Xxxxx Fargo
Merchant Services, L.L.C., a security interest in all
commercial tort claims that the Borrower may have against any
Person. Notwithstanding any provision to the contrary
contained in this Agreement, (a) the Security Interest granted
by Parent in its interest in Ronson Canada shall be
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limited as provided in the Security Agreement by Parent in
favor of Lender and (b) the Security Interest granted by
Ronson Canada hereunder (including, without limitation, the
rights under Section 3.3 hereof) shall secure the Ronson
Canada Indebtedness only. This Section 3.1, as amended by the
Forbearance Agreement, is not intended to create a new
relationship between Lender and Borrower, but rather to
restate and supplement the terms, conditions, and provisions
of an existing relationship and shall be deemed to ratify the
existing Security Interest of Lender in the Collateral to the
extent such Security Interest existed prior to the date
hereof, and to create a Security Interest to the extent that
no Security Interest therein existed in favor of Lender.
(f) Section 7.3 of the Credit Agreement shall be amended and restated
in its entirety to provide as follows:
Section 7.3 Reserved.
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(g) In addition to all reporting requirements otherwise set forth in
the Credit Agreement, Borrower shall deliver, or cause to be delivered, to
Lender the following on the second Business Day of each calendar week or more
frequently if Lender shall request:
(i) A report detailing the actual cash receipts and cash
disbursements of Borrowers for the immediately
preceding calendar week and the deviation from the
cash receipts and cash disbursements as shown on the
Cash-Flow Forecast for such period, which report
shall be certified by the CRO as being true and
correct;
(ii) A written summary approved and/or prepared by the
CRO, in form and substance acceptable to the Lender,
as to the progress in connection with the planned
sale of stock or assets of RAI or refinancing as
described in this Agreement;
(iii) Weekly perpetual Inventory reports;
(iv) Written updates approved and/or prepared by the CRO
on the RAI sale efforts, including, but not limited
to, copies of all correspondence, whether in hardcopy
or electronic format, a log of contacts with
potential buyers, copies of all letters of interest,
letters of intent and asset purchase agreements
received by Borrowers, summaries of any significant
discussions with potential buyers, time lines for
potential sales, copies of any and all proxy
materials Borrowers are required to disseminate to
shareholders of Parent or file with the Securities
Exchange Commission in connection with a sale of RAI,
and such additional information as Lender may
request.
(h) Notwithstanding anything contained in the Credit Agreement to the
contrary, Lender hereby agrees that it will, as a one time accommodation to
Obligors, extend Obligors' time to deliver the monthly financial statements
required by Section 6.1(c) of the Credit Agreement for the month ending February
28, 2009 to April 15, 2009.
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7. Default Interest. Obligors acknowledge and agree that the
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outstanding principal balance of all Revolving Advances (other than the
Accommodation Overadvance, which shall accrue interest at the applicable
non-default Floating Rate until the occurrence of a Termination Event) and Term
Advances shall continue to accrue interest at the Default Rate.
8. Payment of Term Advances. Notwithstanding anything contained in
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Section 2.6 or Section 2.7 of the Credit Agreement to the contrary, monthly
payments of principal under the Equipment Term Note and the Real Estate Term
Note shall be deferred until the occurrence of a Termination Event.
9. Inventory Advance Rate/Appraisal. Obligors acknowledge and agree
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that (a) as of the date of this Agreement Lender shall reduce the Eligible
Inventory advance rate by two percent (2%) until such time as Lender has
received an updated appraisal of Borrowers' Inventory and (b) Lender shall,
based upon the results of such appraisal, adjust the Eligible Inventory advance
rates in an amount not to exceed eighty-five percent (85%) of the Net Orderly
Liquidation Value of Eligible Inventory of the Domestic Borrowers.
10. Cash Flow Forecast. Obligors have provided Lender with a cash flow
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forecast, including a detailed summary of all projected cash receipts and cash
disbursements (the "Cash-Flow Forecast") for the 13-week period ending June 12,
2009, a copy of which has been previously delivered to Lender. Obligors
represent and warrant that such Cash-Flow Forecast has been reviewed and
approved by Xxxxxxx Xxxxxxx & Associates LLC, and represents a reasonable
estimate of the future cash flow needs of the Borrowers for the period
presented. Obligors further agree that Lender shall only be obligated to fund
the Accommodation Overadvance in accordance with the Cash-Flow Forecast.
11. Permitted Liens and Indebtedness. Notwithstanding anything
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contained in the Credit Agreement to the contrary, Lender hereby acknowledges
and agrees that the liens granted, or to be granted, by Obligors to Xxxxxxx
Xxxxxxx & Associates LLC in connection with those certain engagement letters
dated January 6, 2009 and March 30, 2009 by and between Xxxxxxx Xxxxxxx &
Associates LLC and Obligors (collectively, the "Engagement Letters"), and the
indebtedness to be incurred by the Obligors and payable to Xxxxxxx Xxxxxxx &
Associates LLC in the amounts set forth in the Engagement Letters, shall not
constitute breaches of Sections 6.3 or 6.4 of the Credit Agreement.
12. Sums Secured; Estoppel. The Obligors acknowledge and reaffirm that
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their obligations to Lender as set forth in and evidenced by the Loan Documents
are due and owing without any defenses, set-offs, recoupments, claims or
counterclaims of any kind as of the date hereof. To the extent that any
defenses, set-offs, recoupments, claims or counterclaims may exist as of the
date hereof, the Obligors waive and release Lender from the same.
13. Waiver and Release of Claims and Defenses. The Obligors hereby
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waive and release all claims and demands of any nature whatsoever that they now
have or may have against Lender, whether arising under the Loan Documents or by
any acts or omissions of Lender, or any of its directors, officers, employees,
affiliates, attorneys or agents, or otherwise, and whether known or unknown,
existing as of the date of the execution of this Agreement, and further waive
and release any and all defenses of any nature whatsoever to the payment of the
Obligations or the performance of their obligations under Loan Documents.
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14. Reaffirmation of Loan Documents. The Obligors hereby agree with,
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reaffirm and acknowledge their representations and warranties contained in the
Loan Documents. Furthermore, the Obligors represent that their representations
and warranties contained in the Loan Documents continue to be true and in full
force and effect. This agreement, reaffirmation and acknowledgment is given to
Lender by the Obligors without defenses, claims or counterclaims of any kind. To
the extent that any such defenses, claims or counterclaims against Lender may
exist, the Obligors waive and release Lender from same.
15. Ratification and Reaffirmation of Loan Documents. The Obligors
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ratify and reaffirm all terms, covenants, conditions and agreements contained in
the Loan Documents.
16. No Preferential Treatment. No Obligor has entered into this
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Agreement to provide any preferential treatment to Lender or any other creditor.
No Obligor intends to file for protection or seek relief under the United States
Bankruptcy Code or any similar federal or state law providing for the relief of
debtors.
17. Legal Representation. Each of the parties hereto acknowledge that
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they have been represented by independent legal counsel in connection with the
execution of this Agreement, that they are fully aware of the terms and
conditions contained herein, and that they have entered into and executed the
within Agreement as a voluntary action and without coercion or duress of any
kind.
18. Partial Invalidity; No Repudiation. If any of the provisions of
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this Agreement shall contravene or be held invalid under the laws of any
jurisdiction, this Agreement shall be construed as if not containing such
provisions and the rights, remedies, warranties, representations, covenants, and
provisions hereof shall be construed and enforced accordingly in such
jurisdiction and shall not in any manner affect such provision in any other
jurisdiction, or any other provisions of this Agreement in any jurisdiction.
19. Binding Effect. This Agreement is binding upon the parties hereto
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and their respective heirs, administrators, executors, officers, directors,
representatives and agents.
20. Governing Law. This Agreement shall be governed by the laws of the
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State of New York.
21. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVE THE RIGHT TO
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A TRIAL BY JURY, AS TO ANY ACTION WHICH MAY ARISE AS A RESULT OF THE LOAN
DOCUMENTS, THIS AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH.
22. Counterparts. This Agreement and/or any documentation contemplated
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or required in connection herewith may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
be considered one and the same document. Delivery of an executed counterpart of
a signature page of this document by facsimile shall be effective as delivery of
a manually executed counterpart of this document.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, do hereby execute this Agreement the date and year first above written.
RONSON CORPORATION
By: s/XXXXX X. XXXXXXX XX
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Name: Xxxxx X. Xxxxxxx XX
Title: President and C.E.O.
RONSON CONSUMER PRODUCTS CORPORATION
By: s/XXXXX X. XXXXXXX XX
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Name: Xxxxx X. Xxxxxxx XX
Title: President and C.E.O.
RONSON AVIATION, INC.
By: s/XXXXX X. XXXXXXX XX
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Name: Xxxxx X. Xxxxxxx XX
Title: President and C.E.O.
RONSON CORPORATION OF CANADA LTD.
By: s/XXXXX X. XXXXXXX XX
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Name: Xxxxx X. Xxxxxxx XX
Title: President and C.E.O.
XXXXX FARGO BANK, NATIONAL ASSOCIATION
By: s/XXXXX XXXXXX - V.P.
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Xxxxx Xxxxxx, Vice President
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