EXHIBIT 10.09
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), made as of the 24 day of July, 1997, by
and between G-P PLASTICS, INC., a Michigan corporation ("Borrower"), and CAPITAL
BIDCO, INC a Michigan business and industrial development corporation
("Lender").
BACKGROUND The Borrower needs $500,000 in debt financing. The Lender is
willing to provide such financing on the terms and conditions set forth in this
Agreement.
SECTION I. DEFINITIONS.
1.1 Defined Terms. The following terms shall have the following
respective meanings:
"Accounts," "Chattel Paper," "Documents," "Equipment," "Fixtures," "General
Intangibles," "Goods," "Investments" and "Inventory" shall have the meanings
assigned to them in the UCC on the date of this Agreement.
"Affiliate" of a person shall mean any person (a) who or which, directly or
indirectly, controls, is controlled by or is under common control with such
person, (b) who is director, officer or employee of such person or of an
Affiliate or (c) who is related by blood or marriage to an Affiliate.
"Assignment" shall mean an assignment pursuant to which the Borrower
provides to the Lender a collateral assignment of the Policy, in such form as
the Lender shall, in its sole discretion. require.
"Bankruptcy Code" shall mean the Bankruptcy Code of 1978 of the United
States. as amended, or any successor act or code.
"Borrower's Address" shall mean 0000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxx,
Xxxxxxxx 00000.
"Business Day" shall mean a day on which banks in Michigan are open to
carry on their normal commercial banking, business.
"Cash Flow" shall mean, as of any applicable date of determination, net
earnings before interest, taxes, depreciation and amortization expense paid,
payable or chargeable for the twelve (12) month period immediately preceding
such date of determination.
"Charter" shall mean the certificate or articles of incorporation pursuant
to which a corporation was formed or is subsisting.
1
"Collateral" shall mean all of Borrower' s properties, rights,- and assets
whether now owned or hereafter acquired, and whether real, personal or mixed,
including but not limited to, Borrower's Accounts, Chattel Paper, Documents,
Equipment, Fixtures, General Intangibles, Goods, Instruments and Inventory, the
Policy and any other properties or assets in which a lien or security interest
is granted to the Lender pursuant to the Security Agreement, the Assignment or
any other instrument or agreement executed and delivered in connection with this
Agreement.
"Debt" shall mean, as of any applicable date of determination, all items of
indebtedness, obligation or liability of a person, whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, joint or
several, that should be classified as liabilities in accordance with GAAP.
"Debt Service" shall mean, as of any applicable date of determination, all
principal and interest expense for borrowed money, all capitalized lease
obligation payments and payments with respect to similar items of indebtedness
paid or payable for the twelve (12) month period immediately preceding such date
of determination.
"Default" shall mean a condition or event which, with the giving of notice
or the passage of time, or both, would become an Event of Default.
"Disbursement Date" shall mean each date upon which the Lender makes a loan
under Section 2.1 of this Agreement.
"Environmental Laws" shall mean any United States, state, local or foreign
statute, code, ordinance, rule, regulation, permit, consent, approval, license,
judgment, order, writ, decree, injunction or other authorization or mandate
relating to:
(i) emissions, discharges, releases or threatened releases of
Hazardous Substances into ambient air, surface water, ground water, publicly
owned treatment works, septic systems or land;
(ii) the use, treatment, storage, disposal, handling, manufacture,
sale, transportation, generation, or shipment of any hazardous waste, toxic
waste, solid waste, medical waste, infectious waste, radioactive waste or
material or by-product material, other material, pollutant or contaminant,
substance, product or by-product; or
(iii) otherwise relating to pollution or the protection of health,
safety or environment.
-2-
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any successor act or code.
"Event of Default" shall mean any of those conditions or events listed in
Section 8.1 of this Agreement after the expiration of any applicable notice or
cure periods set forth in Section 8.1.
"Financial Statements" shall mean all those balance sheets, earnings
statements, cash flows, projections and other financial data (whether of the
Borrower, any Subsidiary, any Guarantor or otherwise) which have been, or will
be, under Section 6.1, furnished to the Lender for the purposes of, or in
connection with, this Agreement and the transactions contemplated hereby.
"Financing Statements" shall mean UCC financing statements or similar filing
instruments describing the Lender as secured party and the Borrower as debtor
covering the Collateral and otherwise in such form, for filing in such
jurisdictions and with such filing offices as the Lender shall reasonably deem
necessary or advisable.
"GAAP" shall mean, as of any applicable date of determination, Generally
accepted accounting principles consistently applied.
"Gross Sales" shall mean, for any applicable period of determination
aggregate gross revenues received by a party from all sales of its products or
services, net of discounts, returns and allowances.
"Guarantor" shall mean each of Xxxx Xxxxxx and Xxxxx Xxxxxxxx.
"Guaranty" shall mean a conditional guaranty pursuant to which the Guarantor
guarantees the Indebtedness if the Guarantor shall voluntarily leave the employ
of the Borrower, in such form as the Lender shall, in its sole discretion,
require.
"Hazardous Materials" shall mean hazardous waste, solid waste, pollutant or
contaminant, toxic substance or hazardous substance as defined in any
Environmental Laws, or any of the regulations adopted and publications
promulgated pursuant to said laws, any asbestos, asbestos fibers or friable
asbestos, any PCBs, any medical or infectious waste, radioactive waste or
material or by-product material, any petroleum or petroleum products, paint
containing lead, urea formaldehyde foam insulation, discharges of sewage or
effluent, or any other hazardous. toxic, foreign or obnoxious pollutant or
material or substance.
"Horizon" shall mean Horizon BIDCO Investment Company, a Michigan business
and industrial development corporation, and its successors and assigns.
-3-
"Indebtedness" shall mean all indebtedness, obligations and liabilities
whatsoever of the Borrower to the Lender, including, without limitation,
indebtedness, obligations and liabilities arising under the Note, this Agreement
and the transactions contemplated hereby, including, without limitation Revenue
Participation Payments, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, joint or several, due
or to become due or now existing or hereafter arising, and however evidenced.
"Inmold" shall mean Inmold, Inc., an Indiana corporation.
"Intercreditor Agreement" shall mean an agreement between Lender and Horizon
relating to the relative priority of Lender and Horizon in the Collateral in
such form as Lender shall, in its sole discretion, require.
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"Lender's Address" shall mean 0000 Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx
00000.
"Mortgage" shall mean a mortgage granted to secure up to 75% of a purchase
price not exceeding $ 1,800,000 incurred in the purchase of the facilities
located at Borrower's Address and currently leased to the Borrower.
"Net Worth" shall mean, as of any applicable date of determination, net
worth of a person determined in accordance with GAAP.
"Note" shall mean a promissory note payable to the Lender in the form of
Exhibit A and executed and delivered under Section 2.1.
"Notice Date" shall mean the earlier of (i) the date of notice to the
Borrower by the Lender of a Default or (ii) the date the Lender is notified, or
should have been notified, pursuant to the Borrower's obligation under Section
6.1.6 of this Agreement, of such Default.
"Option" shall mean an option in favor of Capital to purchase 75,000 shares
of common stock of Inmold, in such form and with such terms and conditions as
Capital shall, in its sole discretion, require.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any person
succeeding to the present powers and functions of the Pension Benefit Guaranty
Corporation.
"Permitted Liens" shall mean:
(a) Liens and encumbrances in favor of the Lender;
-4-
(b) Liens and encumbrances in favor of the Senior Lender;
(c) Liens and encumbrances in favor of Horizon, for so long as the
Intercreditor Agreement shall remain in effect;
(d) The Mortgage;
(e) Existing liens (other than in favor of Senior Lender or Horizon and in
no event including outstanding federal or state tax liens, including property
tax and MESC liens) described on Schedule 5.21;
(f) Liens for taxes, assessments or other governmental charges incurred in
the ordinary course of business and not yet past due or being contested in good
faith by appropriate proceedings;
(g) Liens not delinquent created by statute in connection with worker's
compensation, unemployment insurance, social security and similar statutory
obligations;
(h) Liens of mechanics, materialmen, carriers, warehousemen or other like
statutory or common law liens securing obligations incurred in good faith in
the ordinary course of business that are not yet due and payable;
(i) Encumbrances consisting of zoning restrictions, rights-of-way, easements
or other restrictions on the use of real property, none of which materially
impairs the use of such property in the operation of the business for which it
is used and none of which is violated in any material respect by any existing or
proposed structure or land use; and
(j) Purchase money security interests in fixed assets granted to secure not
more than the purchase price of such fixed assets, provided that any such
purchase giving rise to such security interest does not otherwise violate any
provision of this Agreement.
"Person" (whether or not capitalized) shall mean any individual, corporation,
partnership, joint venture, association, trust, unincorporated association,
joint stock company, government, municipality, political subdivision or agency
or other entity.
"Plans" shall mean any employee benefit or pension plan governed by ERISA.
"Policy" shall mean a policy of key-man life insurance upon the life of each
Guarantor in the respective amount of not less than $500,000 each.
"Revenue Participation Payment" shall have the meaning set forth in Section 2.2.
-5-
"Revenue Participation Termination Date" shall mean June 30, 2002.
"Security Agreement" shall mean a security agreement pursuant to which
Borrower grants to the Lender a security interest in the Collateral to be
provided by Borrower, in such form as the Lender shall, in its sole discretion,
require.
"Senior Lender" shall mean The CIT Group/Credit Finance, Inc. and any
subsequent commercial bank or financial such initial Senior Lender on terms
substantially commercial bank or financial institution replacing similar to
those applicable to such initial Senior Lender.
"Senior Lender Subordination Agreement" shall mean an agreement pursuant to
which the Lender subordinates the Indebtedness owing the Lender to the Debt
owing the Senior Lender, in such form as the Lender and the Senior Lender shall,
in their respective sole discretion, agree.
"Subsidiaries" shall mean any person of which more than fifty percent (50%)
of the outstanding voting rights or securities shall, as of any applicable date
of determination, be owned directly, or indirectly through one or more
subsidiaries, by a person.
"UCC" shall mean Public Act 174 of 1962 of the State of Michigan, as
amended.
1.2 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP.
1.3 Singular and Plural. Where the context herein requires. the singular
number shall be deemed to include the plural, and vice versa.
SECTION 2. THE LOAN.
2.1 Term Loan. Lender agrees to make to the Borrower in a single
disbursement on the date of this Agreement, subject to the satisfaction of the
conditions set forth in Section 4, a term loan in the principal amount of Five
Hundred Thousand Dollars ($500,000) evidenced by, and payable as set forth in,
the Note. The loan shall be disbursed directly to the Borrower, unless otherwise
directed in writing by the Borrower.
2.2 Revenue Participation Payments. In consideration of the Lender's
agreements hereunder, the Borrower agrees to pay to the Lender, on the dates and
calculated in the manner set forth below, during, the period commencing on the
date of this Agreement and ending on the forth below, during, Revenue
Participation Termination Date amounts (each a "Revenue Participation Payment")
equal to (a) Seventy Five-Hundreths (0.75%) per cent of Borrower's annual Gross
Sales in excess of Twelve Million ($12,000,000) Dollars up to and including
Fifteen Million Five Hundred Thousand ($15,500,000) Dollars and (b) One and
one-quarter (1.25%) per cent of Borrower's annual Gross Sales in excess of
Fifteen Million Five Hundred Thousand ($15,500,000) Dollars.
-6-
Gross Sales for periods other than a full fiscal year shall be annualized as
provided below and the percentages set forth above shall be used to calculate an
interim Revenue Participation Payment on the basis of such annualized Gross
Sales.
The Borrower acknowledges that the Revenue Participation Payments will
continue, notwithstanding the prepayment of the Note or any other event, until
June 30, 2002 (the Revenue Participation Termination Date).
Revenue Participation Payments under this Agreement shall be due and payable
as follows:
(v) On each January 20, April 20, July 20 and October 20, commencing
October 20, 1997, the Borrower shall pay to the Lender a Revenue Participation
Payment equal to the difference between (A) the product of (1) an amount
calculated on the basis of the percentages set forth above for the Borrower's
Annualized Gross Sales (as defined below) for the period from the commencement
of the fiscal year with respect to which such amount is calculated through the
end of the fiscal quarter ending twenty (20) days prior to such payment date,
multiplied by (II) a fraction, the numerator of which is the number of days
from the commencement of such fiscal year (or from the commencement of this
Agreement, in the case of the first fiscal year in which this Agreement is in
effect) through the end of such fiscal quarter and the denominator of which is
the number of days in such fiscal year (whether 365 or 366), minus (B) the
Revenue Participation Payments already paid by the Borrower under this
paragraph (v) for prior quarters of such fiscal year. If such difference
equals a negative number (meaning that the Borrower has overpaid to such date
Revenue Participation Payments due under this Agreement), the overpayment shall
be credited to the Revenue Participation Payments next coming due.
(w) Not later than ninety (90) days after the end of each fiscal year
(including the fiscal year ending September 30, 1997), the Borrower shall
provide to the Lender a reconciliation describing (i) the Borrower's Gross Sales
for such year as set forth on the Borrower's annual financial statements, (ii)
the aggregate annual Revenue Participation Payment due to the Lender on the
basis of such Gross Sales (prorated as required by paragraph (x) below in the
case of any partial fiscal years) and (iii) the amount of Revenue Participation
Payments already made quarterly as above in paragraph (v) required. If the
Revenue Participation Payment calculated on Gross Sales as set forth in such
annual financial statements exceeds the aggregate quarterly Revenue
Participation Payments made by the Borrower with respect to such year, the
Borrower shall pay the difference to the Lender, together with the delivery of
the Borrower's annual reconciliation; if the Borrower has overpaid the Revenue
Participation Payment with respect to such year, the overpayment hall be
credited to the Revenue Participation Payments next coming due (or, if no
further payments are due, shall be refunded to the Borrower by the Lenders,
without interest, promptly after the determination that no further Revenue
Participation Payments are due).
-7-
(x) In the case of any year during the effective period of this
Section 2.2 which is less than a full year, the Revenue Participation
Payment calculated under paragraph (w) above shall be equal to the product
of (i) a fraction, the numerator of which is the number of days during
such fiscal year during which this Section 2.2 is in effect (commencing on
July 1, 1997, in the case of the first such year) and the denominator of
which is the number of days in such fiscal year (whether 365 or 366),
multiplied by (ii) the Revenue Participation Payment calculated on the
basis of the percentages set forth in paragraphs (a) and (b) above for the
entire cumulative annual Gross Sales of the Borrower for such fiscal year
(without regard to whether such Gross Sales occurred during the effective
period of this Agreement).
(y) Any revenue Participation Payment not paid when due shall bear
interest at 18% per annum (or, if less, the maximum rate permitted by law)
until paid in full .
(z) This Section 2.2 is drafted on the basis that the Borrower's
fiscal year end is September 30. The Borrower may change its fiscal
year with the prior consent of the Lender (which consent shall not be
unreasonably withheld). In such case, the payment due dates, calculations
and prorations set forth in this Section 2.2 shall be mutually and
equitably adjusted, if necessary, to conform to such different fiscal
year, provided that in all events the Lender shall be entitled to Revenue
Participation Payments calculated on the basis set forth in paragraph (a)
above for the entire period from July 1, 1997, through the Revenue
Participation Termination Date.
"Annualized Gross Sales" shall mean, for each respective period for
which a Revenue Participation Payment shall be payable, the product of (1)
Borrower's cumulative Gross Sales from the commencement of the fiscal year (or
from July 1, 1997, in the case of the first year in which this Agreement is in
effect) in which such fiscal period occurs through the end of the fiscal period
for which such Revenue Participation Payment is calculated, multiplied by (2) a
fraction, the numerator of which is the number of days in such fiscal year
(whether 365 or 366) and the denominator of which is the number of days from the
commencement of such year (or from the date of this Agreement, in the case of
the first year in which this Agreement is in effect) through the end of such
period. "Annualized Gross Sales" for a full fiscal year of the Borrower shall
equal Gross Sales for such fiscal year.
2.3 Maximum Rate. If at any time the amount of interest payable on any
date under this Agreement would exceed the maximum interest permitted to be paid
by the Borrower or received by the Lender under applicable law, then the amount
of interest payable on such date shall be automatically reduced to such maximum
amount and any amounts previously paid to Lender in excess of such maximum
amounts shall be automatically deemed to be a payment of principal due under
this Agreement.
-8-
SECTION 3. SECURITY.
The Borrower agrees to grant and assign (or cause to be granted and
assigned) a lien upon and security interest in the Collateral to the Lender,
subject only to the Permitted Liens, pursuant to the Assignment, the Security
Agreement and other instruments and agreements satisfactory to the Lender to
create, perfect and maintain such liens and security interests to secure full
and timely performance of the Indebtedness.
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE LENDER.
The obligations of the Lender to make the loan under Section 2.1 of this
Agreement are subject to the occurrence, prior to or on the Disbursement Date,
of each of the following conditions:
4.1 Documents Executed and Filed. There shall have been EXECUTED and
delivered and, as appropriate, there shall have been filed with such
filing offices as the Lenders shall deem appropriate, the following:
(a) The Note;
(b) The Assignment;
(c) The Security Agreement, and
(d) The Financing Statements.
4.2 Third Party Actions. There shall have been executed and delivered
the following:
(a) Each Guarantor shall have executed and delivered to Lender
the Guaranty, and
(b) Inmold shall have executed and delivered to Lender the Option.
4.3 Corporate Documents. The Borrower shall have furnished to the
Lender copies of the following, certified by such persons and as of such
dates as shall be required by the Lender:
(a) The Borrower's Charter;
(b) The Borrower's bylaws;
(c) The Borrower's and Inmold's resolutions authorizing
the transactions described in this Agreement;
(d) The Borrower's good standing certificate in the
jurisdictions of its respective incorporation and where
qualified to do business; and
-9-
(e) The incumbency and signatures of the officers of the Borrower and
Inmold executing any agreements or documents delivered pursuant to this
Agreement.
4.4 Opinion of Counsel. The Borrower shall have furnished to the
Lender the favorable written opinion of the Borrower's and Inmold's legal
counsel, in form and substance satisfactory to the Lender.
4.5 UCC Lien Search. The Lender shall have received UCC record and
copy searches, evidencing the appropriate filing and recording of the Financing
Statements and disclosing no notice of any liens or encumbrances filed against
any of the Collateral or other assets and properties of the Borrower in any
relevant jurisdiction other than as relate to Permitted Liens.
4.6 Other Lenders. The Senior Lender and the Borrower shall have
entered into a loan transaction for a term of not less than one year and
otherwise on terms and conditions satisfactory to Lender and the Lender and the
Senior Lender shall have executed and delivered the Senior Lender Subordination
Agreement. Horizon and Lender shall have executed and delivered the
Intercreditor Agreement.
4.7 Hazard and Liability Insurance. The Borrower shall have furnished
to the Lender, in form and amounts and with companies satisfactory to the
Lender, evidence of insurance policies complying in all respects with Section
6.2.
4.8 Closing and Preparation Fees. The Borrower shall pay to the Lender
(a) a closing fee of $7,500 and (b) the amount of the Lender's legal fees and
related out-of-pocket expenses incurred by the Lender in connection with the
preparation of this Agreement and related agreements and instruments and the
negotiation and closing of the loan under this Agreement.
4.9 Due Diligence. The Lender shall have been provided an opportunity
to review all material agreements, records and documents relating to the
business of the Borrower and the Lender shall be satisfied with the form and
substance of all such items. Without limitation of the foregoing, (a) Lender
shall have verified all orders and scheduled production start dates of each new
job listed in Borrower's projections with start dates of August 1, 1997, through
January 1, 1998, and (b) Lender shall have received written evidence of the
satisfaction and discharge of all outstanding federal tax liens and written
evidence of payment plans with appropriate authorities on delinquent MESC and
property taxes.
4.10 Lender Satisfaction. The Lender shall not know or have any
reasonable reason to believe that, as of the Disbursement Date:
-10-
(a) Any Default or Event of Default has occurred and is
continuing;
(b) Any warranty or representation set forth in Section 5 of
this Agreement shall not be true and correct; or
(c) Any provision of law, any order of any court or other agency
of government or any regulation, rule or interpretation thereof shall have
had any material adverse effect on the validity or enforceability of this
Agreement or the agreements or instruments contemplated hereunder,
including, but not limited to, the Guaranty, the Security Agreement, the
Assignment or the financing Statements.
4.11 Approval of Lender's Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental thereto and all other related legal matters
shall have been satisfactory to and approved by legal counsel for the Lender,
and said counsel shall have been furnished with such certified copies of actions
and proceedings and such other instruments and documents as it shall have
reasonably requested.
SECTION 5. WARRANTIES AND REPRESENTATIONS.
The Borrower represents and warrants to the Lender, as of the date of this
Agreement and on each Disbursement Date, that:
5.1 Organization and Good Standing. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Michigan and has full power and authority to own its properties
and to carry on its business as now conducted, and is in good standing and
duly qualified to conduct business as a foreign corporation in each
jurisdiction in which the ownership or leasing of its properties or the
conduct of its business requires such qualification.
5.2 Capitalization. Borrower's authorized capital stock consists solely
of 50,000 shares of common stock, 43,610 of which shares are validly issued
and outstanding and owned, beneficially and of record, by Inmold. All
shares of the capital stock of the Borrower are validly issued, fully paid
and nonassessable, there are no options, calls, warrants or other
securities or rights outstanding which are convertible into, exercisable
for or relate to any shares of capital stock of the Borrower and all shares
of the capital stock of the Borrower were offered and sold in compliance
with all applicable federal and state securities laws.
5.3 Authority. The Borrower has the full right, power and authority to
execute and deliver this Agreement and to execute and deliver the other
agreements and instruments contemplated hereunder and to perform its
respective obligations hereunder and thereunder. This Agreement is, and
the Note, Security Agreement, Assignment and other agreements and
-11-
instruments contemplated hereunder will be, upon execution and delivery thereof,
the legal, valid and binding obligations of the Borrower and are (or will be)
enforceable in accordance with their respective terms, except as the enforcement
thereof may be limited by laws of general application relating to bankruptcy,
insolvency and the relief of debtors.
5.4 Subsidiaries and Investments. Borrower does not have any
Subsidiaries or own directly or indirectly any interest or have any investment
in any other person.
5.5 Corporate Records. All corporate actions, including stock transfers,
of the Borrower have been duly authorized and adopted in accordance with
applicable law and the Borrower's Charter and bylaws and have been duly recorded
in the Borrower's corporate minute books, and all stock transfers of the
Borrower have been duly recorded in the Borrower's stock transfer books.
5.6 Financial Statements. The Financial Statements
(i) are true, complete and correct in all material respects;
(ii) fairly present the properties, assets, financial position
and results of operations of the parties as of the dates and for the
periods stated therein or,if the same are projected or pro forma results,
are reasonably expected to occur and are based on reasonable assumptions;
and
(iii) have been prepared to the extent applicable pursuant to and
in accordance with GAAP.
5.7 Unreported and Contingent Liabilities. The Borrower does not have
any liabilities or obligations, whether accrued, absolute, contingent or
otherwise, other than such matters as are specifically and expressly set forth
in the Financial Statements or Schedule 5.7 (if any).
5.8 Environmental Matters. Except as set forth in Schedule 5.8 (if any),
(a) neither the Borrower nor any Affiliate of the Borrower has used Hazardous
Materials on or affecting any premises occupied by the Borrower or such
Affiliate in any manner which violates Environmental Laws and, to the best of
the Borrower's knowledge, no prior owner of any premises occupied by the
Borrower or such Affiliate or any current or prior occupant has used Hazardous
Materials on or affecting any premises occupied by the Borrower or such
Affiliate in any manner which violates Environmental Laws, (b) neither the
Borrower nor any Affiliate of the Borrower has ever received any notice of any
violations (and are not aware of any existing violations) of any Environmental
Laws, received any information or known any facts or circumstances which would
cause a reasonable person to suspect that there may be or may have been any
violations of any Environmental Laws and to the best
-12-
of the Borrower's knowledge, there have been no actions commenced or threatened
by any party for noncompliance with any Environmental Laws, and (c) the Borrower
has no accrued or contingent liability to any federal, state or local government
or to any private party on account of or arising out of sewage, waste or
hazadous waste disposal, air, water or land pollution or other environmental
matters.
5.9 No Adverse Change. Except as set forth in Schedule 5.7 (if any), since
the date of the latest annual Financial Statements, there have not been any
material adverse changes, either individually or in the aggregate, in the
general affairs, business, prospects, customers, franchisees, competition,
properties, financial position, results of operations or net worth of the
Borrower, nor have there been any material casualties affecting the Borrower or
loss, damage or destruction to any of its properties (whe ther or not covered by
insurance).
5.10 Taxes. Except as set forth in Schedule 5.10 (if any), the Borrower
has prepared in accordance with law and filed all tax returns required to be
filed by them respectively under the laws of the United States and any state,
and have paid or established an adequate reserve in respect of all taxes,
penalties, interest and related charges and fees for the periods covered by such
returns and the Borrower has received no notice of any pending or threatened
audit by the Internal Revenue Service or any state or local taxing authority
related to the Borrower's tax returns or tax liability for a ny period and no
claim for assessment or collection of taxes has been asserted against the
Borrower.
5.11 Litigation. Except as disclosed in Schedule 5.11 (if any), there are
no material claims, demands, disputes, actions, suits, proceedings or
investigations pending or, to the knowledge of the Borrower, threatened against
or directly or indirectly affecting the Borrower, at law or in equity or
admiralty or before or by any federal, state, municipal or other governmental
court, department commission board, bureau, agency or instrumentality, domestic
or foreign, nor is the Borrower subject to any presently effective adverse
order, writ, injunction or decree of any such body.
5.12 Insurance. All policies of insurance covering the Borrower's plant,
machinery and equipment, inventory and other assets or providing for business
interruption, personal and product liability coverage, or insuring against other
risks, are in amounts sufficient with respect to the Borrower's assets,
properties, business, operations, products and services as the same are
presently owned or conducted. All such policies are in full force and effect and
the premiums therefor have been paid as they become due and payable.
5.13 Employee Pension Plans. Each of the Borrower's Plans is a "qualified
plan" within the meaning of the IRC, and no Plan has been terminated or
experienced any "reportable event" within the meaning of ERISA. Based upon an
actuarial method of valuation of assets which complies with ERISA and upon
actuarial assumptions and methods which comply with ERISA: (i) the present value
of all accrued pension benefits under each
-13-
of the Plans, determined as of the date of the latest actuarial valuation
report, did not exceed the value of the assets of such Plan on that date and no
amendment or proposed amendment to such Plan adopted or proposed subsequent to
such date would, retroactively applied, make the foregoing information
inaccurate; and (ii) as of the date of the latest actuarial valuation report
there existed no "accumulated finding deficiency" as defined in ERISA with
respect to any pension plan. No termination or partial termination of the Plans
has created, or will create or give rise to, any liability to the PBGC under
ERISA or otherwise operate in a manner so as to permit the PBGC to acquire a
lien upon any of the Borrower's properties or assets. The Borrower does not
participate, nor has the Borrower ever participated, in any "multi-employer
plan" as defined in ERISA.
5.14 Labor Relations. There is not any strike, lock-out, sit-down, slow-
down, grievance or other labor dispute or trouble of any nature whatsoever
pending or threatened against the Borrower which to any extent or in any manner
affects the Borrower.
5.15 Payments to Employees. All accrued obligations of the Borrower
relating to employees, whether arising by operation of law, by contract or by
past service, have been paid when due by the Borrower.
5.16 Warranties; Product Liability. There are no liabilities of the
Borrower, fixed or contingent, with respect to any product liability or any
claim for the breach of any express or implied product warranty, or any similar
claim that relates to any product sold by the Borrower and the Borrower has no
knowledge of any product defects which could give rise to any such liabilities
or claims.
5.17 Compliance with Laws. Except as set forth in Schedule 5.7 (if any),
the Borrower has complied fully and faithfully with all laws, orders,
regulations, rules, decrees and ordinances affecting to any material extent or
in any material manner any aspect of its business. There are no existing or
proposed laws, orders, regulations, rules, decrees or ordinances of such a
nature as could be expected to adversely affect the continued conduct of the
Borrower's business in the manner presently being carried on and conducted.
5.18 Compliance with Agreements, Etc. Neither the execution of this
Agreement nor the consummation of the transactions contemplated herein will
constitute or cause a breach or violation of the Charter, bylaws or other
covenants or obligations binding upon the Borrower or affecting any of the
Borrower's properties, or cause a lien or other encumbrance to attach to any of
its respective properties, or result in the termination of or the right to
terminate any license, franchise, lease, permits, approval or agreement to
which the Borrower is a party or by which the Borrower is bound, or require a
consent of any person to prevent any such breach, default, violation, lien,
encumbrance, right or termination. The Borrower has complied with all licenses,
franchises, eases, permits, approvals and agreements to which the Borrower is a
party or by which the Borrower is bound the breach of which would
-14-
materially and adversely affect the operations or condition, financial or
otherwise, of the Borrower.
5.19 Approvals. No approval of or filing with any federal, state or local
court authority or administrative agency is necessary to authorize the
execution and delivery of this Agreement by the Borrower or the consummation by
the Borrower of the transactions contemplated herein.
5.20 Franchises, Licenses, Trademarks, Patents and Other Rights. The
Borrower has all franchises, permits, licenses and other similar authority
necessary for the conduct of its businesses as now being conducted and as
planned to be conducted, the lack of which could materially and adversely affect
the operations or condition, financial or otherwise, of the Borrower. The
Borrower possesses all patents, patent rights, trademarks, trademark rights,
trade names, trade name rights and copyrights necessary to conduct their
respective businesses as now being conducted and as planned to be conducted
without conflict with or infringement upon any rights of others and the lack of
which could materially and adversely affect the operations or condition,
financial or otherwise, of the Borrower, and the Borrower has not received any
notice of infringement upon or conflict with the asserted rights of others in
any such patents, patent rights, trademarks, trademark rights, trade names,
trade name rights or copyrights. The Borrower has no knowledge that there
exists, or there is pending or planned, any patent, invention, device,
application or principle, or any statute, rule, law, regulation, standard or
code which would materially adversely affect the condition, financial or
otherwise, or the operations of the Borrower.
5.21 Title to Properties: Liens and Encumbrances. The Borrower has a valid
and indefeasible ownership interest in all the real and personal property and
assets recorded in the Financial Statements (including but not limited to the
Collateral), free from all mortgages, pledges, liens, security interests,
conditional sale agreements, encumbrances or other charges, of any nature
whatsoever, other than Permitted Liens and the rights of purchasers of Inventory
in the ordinary course of the Borrower's business.
5.22 Leases. All premises on which the Borrower conducts business which
are not owned by the Borrower are possessed by the Borrower pursuant to leases
which are legal, valid, binding and enforceable obligations of the Borrower and,
to the knowledge of the Borrower, the lessor thereof, which leases are not in
default and which leases are not terminable by the lessor, any mortgagor or
other person in the absence of a breach of such lease by the Borrower.
5.23 Guarantor. Each Guarantor has the full right, power and authority to
execute and deliver the Guaranty and to perform his respective obligations
thereunder. The Guaranty is the legal, valid and binding obligation of each
Guarantor and is enforceable in accordance with its terms, except as the
enforcement thereof may be limited by laws of general
-15-
application relating to bankruptcy, insolvency and the relief of debtors.
Neither the execution of the Guaranty nor the consummation of the
transactions contemplated therein will constitute or cause a breach or
violation of the covenants or obligations binding upon the Guarantor or
affecting any property of the Guarantor, or cause a lien or other
encumbrance to attach to any properties of the Guarantor, or result in the
termination of or the right to terminate any license, franchise, lease,
permit, approval or agreement to which the Guarantor is a party, or
require a consent of any person (other than those which have been obtained
and disclosed in writing to the Lender) to prevent any such breach,
default, violation. lien, encumbrance, right or termination. No approval
of or filing with any federal, state or local court, authority or
administrative agency is necessary to authorize the execution and delivery
of the Guaranty by the Guarantor or the consummation by the Guarantor of
the transactions contemplated therein.
5.24 Inmold. Inmold has the full right, power and authority to execute
and deliver the Option and to perform its obligations thereunder. The
Option is the legal, valid and binding obligation of Inmold and is
enforceable in accordance with its terms, except as the enforcement
thereof may be limited by laws of general application relating to
bankruptcy, insolvency and the relief of debtors. Neither the execution of
the Option nor the consummation of the transactions contemplated requires
the consent of an y person (other than those which have been obtained and
disclosed in writing to the Lender). No approval of or filing with any
federal, state or local court authority or administrative agency is
necessary to authorize the execution and delivery of the Option by Inmold
or the consummation by Inmold of the transactions contemplated therein.
5.25 Materiality. No statements in this Agreement or in any document,
schedule, certificate or exhibit furnished or to be furnished by the
Borrower to the Lender pursuant to this Agreement, or in connection with
the transactions contemplated by this Agreement, contain or will contain
any untrue statement of a material fact, or fail to contain any material
facts necessary in order to make the statements therein not misleading.
Except as already disclosed in this Agreement, there are no events,
transactions or other facts which, either individually or in the
aggregate, might reasonably give rise to circumstances or conditions which
might have a material adverse effect on any of the general affairs,
business, prospects, customers, competition, properties, financial
position, results of operation or net worth of the Borrower.
SECTION 6. COVENANTS OF THE BORROWER.
From the date hereof until all obligations of the Borrower under this
Agreement have been satisfied and performed, the Borrower covenants and agrees
that it will:
-16-
6.1 Reporting.
6. 1.1 Annual Financial Reports. Furnish to the Lender in form
satisfactory to the Lender as soon as available and in any event not later
than ninety (90) days after the close of each fiscal year of the Borrower,
a balance sheet as at the close of each such fiscal year, statements of
income and retained earnings and changes in financial position for each
such fiscal year and such other comments and financial details as are
usually included in similar reports. Such reports shall be prepared in
accordance with GAAP, reviewed by independent certified public
accountants of recognized standing and accompanied by a customary
statement of such accountants relating to such review.
6.1.2 Monthly Financial Statements. Furnish to the Lender not later
than twenty (20) days after the close of each month financial statements
containing the balance sheet of the Borrower as of the end of each such
period, consolidated and consolidating statements of income and retained
earnings of the Borrower with comparisons to previous years' statements
(for both the current month and year-to-date) and to budgets (and
accompanied by an analysis from the Borrower's management explaining all
significant variances, whether positive or negative) and a consolidated
statement of changes in financial position of the Borrower for the portion
of the fiscal year up to the end of such period. These statements shall be
prepared on substantially the same accounting basis as the Borrower's
annual financial statements and shall be in such detail as the Lender may
reasonably require, and the accuracy of the statements (subject to year-
end adjustments) shall be certified by the chief executive or financial
officer of the Borrower.
6.1.3 Monthly Agings. Furnish to the Lender not later than twenty (20)
days after the close of each month agings of the Borrower's accounts
payable and accounts receivable as of the end of such month.
6.1.4 No Default Certificate. Furnish to the Lender together with each
delivery of the financial statements required by Section 6.1.1 or 6.1.2 of
this Agreement a certificate of the Borrower's chief executive or
financial officer stating that no Event of Default or Default has occurred
or, if any such Event of Default or Default exists, stating its nature,
its period of existence and what action the Borrower proposes to take with
respect thereto.
6.1.5 Monthly Compliance Certificate. Furnish to the Lender not later
than ten (10) days after the close of each calendar month a certificate
demonstrating compliance with the financial covenants set forth in Section
6.8 as of the end of such calendar month.
6.1.6 Adverse Events. Promptly inform the Lender of the occurrence of
any Event of Default or Default, or of any other occurrence which has or
could reasonably be expected to have a materially adverse effect upon the
Borrower's business, properties, financial condition or ability to comply
with the Borrower's obligations hereunder.
-17-
6.1.7 Board and Shareholder Reports. Promptly furnish to the Lender
upon becoming available a copy of all financial statements, reports,
notices and proxy statements sent by the Borrower to its board of
directors or stockholders, and all regular and periodic reports filed by
the Borrower with any securities exchange, the Securities and Exchange
Commission or any other governmental authorities.
6.1.8 Management Letters. Furnish to the Lender,promptly upon receipt
thereof, copies of all management letters and other reports of substance
submitted to the Borrower by independent certified public accountants in
connection with any annual or interim audit of the books of the Borrower.
6.1.9 Other Information As Requested. Promptly furnish to the Lender
such other information regarding the operations, business affairs and
financial condition of the Borrower as the Lender may reasonably request
from time to time, permit the Lender, its employees, attorneys and agents,
to inspect all of the books, records and properties of the Borrower at any
reasonable time and in no event shall the Lender have information,
observation and inspection rights less favorable than those granted to
other creditors of the Borrower (including Horizon and the Senior
Lender).
6.2 Insurance. Keep the Borrower's insurable properties adequately insured
and maintain insurance against fire, public liability, product liability and
other risks customarily insured against by companies engaged in the same or a
similar business to that of the Borrower, necessary worker's compensation
insurance and such other insurance as may be required by law. All such policies
shall contain a provision whereby they may not be canceled except upon thirty
(30) days' prior written notice to the Lender. The Borrower will deliver to the
Lender, at the Lender's request, evidence satisfactory to the Lender that such
insurance has been so procured and made payable to the Lender, as its interest
appear, and that the Lender has been named as an additional insured (with
respect to liability insurance).
6.3 Taxes. Pay promptly and within the time that they can be paid without
interest or penalty all taxes, assessments and similar imposts and charges of
every kind and nature lawfully levied, assessed or imposed upon the Borrower,
and its property, except to the extent being contested in good faith.
6.4 Maintain Corporation and Business. Do or cause to be done all things
necessary to preserve and keep in full force and effect the Borrower's corporate
existence, rights and franchises and to comply with all applicable laws;
maintain adequate records of its respective transactions and affairs and
complete and accurate books of account; continue to conduct and operate its
respective business substantially as conducted and operated during the present
and preceding calendar year; at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its respective
property used or useful in the conduct of its business and keep the same in good
repair, working, order and condition; and from time to time make, or cause to be
made, all needed
-18-
and proper repairs, renewals, replacements, betterments and improvements thereto
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
6.5 ERISA. (a) At all times meet the minimum funding requirements of ERISA
with respect to the Borrower's Plans and (b) promptly after the Borrower knows
or has reason to know (i) of the occurrence of any event which would constitute
a reportable event or prohibited transaction under ERISA, or (ii) that the PBGC
or the Borrower has instituted or will institute proceedings to terminate a
Plan, deliver to the Lender a certificate of the chief financial officer of the
Borrower setting forth details as to such event or proceedings and the action
which the Borrower proposes to take with respect thereto, together with a copy
of any notice of such event which may be required to be filed with the PBGC.
6.6 Board Matters.
6.6.1 Notice. Provide the Lender reasonable notice of all meetings
of the Board of Directors of the Borrower and of any action to be taken by
written consent of the members of the Board of Directors of the Borrower and
permit a representative of the Lender to attend all meetings of the Board of
Directors of the Borrower.
6.6.2 Frequency. Hold meetings of the Board of Directors of the
Borrower not less frequently than semi-annually.
6.6.3 Annual Budget. Cause the Borrower's annual operating budget to
be presented to and approved by the Board of Directors of the Borrower at a
meeting of the respective Board of Directors prior to the commencement of
the new fiscal year.
6.7 Key Man Life Insurance. Maintain the Policy in full force and effect at
all times, not borrow for any purpose (including, but not limited to the payment
of premiums thereunder) any cash value of the Policy or any other amounts
secured by the Policy, pay when due all premiums and assessments from time to
time due under the Policy and provide to the Lenders upon request reasonable
evidence of the payment of such premiums.
6.8 Financial Covenants.
6.8.1 Net Worth. Maintain Borrower's Net Worth at not less than:
(a) $ 1,000,000 at September.30, 1998;
(b) $ 1,750,000 at September 30, 1999;
(c) $ 2,500,000 at September 30, 2000, and
(d) $ 3,250,000 at September 30, 2001.
-19-
6.8.2 Debt Ratio. Maintain Borrower's ratio of Debt to Net Worth at
not more than:
(a) 8.0 to 1.0 at September 30, 1998;
(b) 5.0 to 1.0 at September 30, 1999;
(c) 4.0 to 1.0 at September 30, 2000, and
(d) 3.0 to 1.0 at September 30, 2001.
6.8.3 Debt Service Coverage Ratio. Maintain Borrower's ratio of
Cash Flow to Debt Service at each September 30, commencing September 30,
1998, at not less than 2.0 to 1.0.
6.8.4 Fixed Asset Expenditures. Not permit Borrower to acquire or
expend for, or commit itself to acquire or expend for by lease, purchase or
otherwise, fixed assets (other than the property secured by the Mortgage) in
excess of $500,000 in any fiscal year during the term of this Agreement without
the prior written consent of the Lender, which consent shall not be unreasonably
withheld.
6.9 Negative Covenants.
6.9.1 Dividends. Not declare or pay any dividend on, or make any
other distribution with respect to (whether by reduction of capital or
otherwise) any shares of its capital stock without the prior written consent of
Lender, which consent shall not be unreasonably withheld.
6.9.2 Stock Issuance. Not issue or otherwise sell or transfer any
shares of its capital stock, or any warrant, right or option relating thereto or
any security convertible into any of the foregoing without the prior written
consent of Lender, which consent shall not be unreasonably withheld, provide
that Inmold thereafter retains control of the Borrower and owns not less than
51% of the outstanding capital stock of Borrower.
6.9.3 Stock Acquisition. Not purchase, redeem, retire or otherwise
acquire any of the shares of its capital stock, or make any commitment to do so.
6.9.4 Liens and Encumbrances. Not create, incur,assume or suffer to
exist any mortgage, pledge, encumbrance, security interest, lien or charge of
any kind (including any charge upon property purchased under a conditional sales
or other title retaining agreement) upon any of its property or assets whether
now owned or hereafter acquired other than Permitted Liens.
6.9.5 Indebtedness. Not incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
or liability for borrowed
-20-
money, or any other indebtedness or liability evidenced by notes, bonds,
debentures or similar obligations, or any obligations evidenced by capital or
operating leases, or any other indebtedness whatsoever, except for (a) the Note,
(b) trade indebtedness incurred and paid in the ordinary course of business, (c)
contingent indebtedness to the extent permitted by Section 6.9.7 of this
Agreement and (d) indebtedness secured by Permitted Liens.
6.9.6 Extension of Credit. Not make loans, advances or extensions of
credit to any person, except for loans, advances or sales on open account in the
ordinary course of business.
6.9.7 Guarantee Obligations. Not guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
person, whether by agreement to purchase the indebtedness of any other person,
agreement for the furnishing of funds to any other person through the furnishing
of goods, supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other person, or otherwise,
except for the endorsement of negotiable instruments in the ordinary course of
business for deposit or collection.
6.9.8 Investments. Not purchase or hold beneficially any stock or
other securities of or make any investment or acquire any interest in, or
assets or properties as a going concern of, any other person. except for
direct obligations of the United States maturing within one year from the date
of acquisition.
6.9.9 Subordinate Indebtedness. Not subordinate any indebtedness due
to it from a person to indebtedness of other creditors of such person.
6.9.10 Property Transfer, Merger or Lease-Back. Not, without the
Lender's prior written consent (which consent shall not be unreasonably
withheld), (a) sell, lease, transfer or otherwise dispose of all or any material
part of its properties and assets (whether in one transaction or in a series of
related transactions), except as to the sale of Inventory in the ordinary course
of business, (b) change its name, consolidate with or merge into any other
corporation, permit another corporation to merge into it, acquire all or
substantially all the properties or assets of any other person, enter into any
reorganization or recapitalization or reclassify its capital stock, or (c) enter
into any sale-leaseback or joint-venture transaction.
6.9.11 Pension Plans. Not(a) allow any fact,condition or event
to occur or exist with respect to a Plan of the Borrower, or any of the
Subsidiaries, which might constitute grounds for termination of any such plan or
for the appointment by a United States District Court of a trustee to administer
any such Plan, or (b) permit any such Plan to be the subject of termination
proceedings (whether voluntary or involuntary) from which termination
proceedings there may result a liability of the Borrower or any of the
Subsidiaries to the
-21-
PBGC, which will have a materially adverse effect upon the operations,
business, property, assets, financial condition or credit of the Borrower.
6.9.12 Transactions With Affiliates. Not (a) enter into any
contract, arrangement or other transaction with any Affiliate, including
but not limited to a purchase, sale, lease or exchange of property or the
rendering of services through an employment or consulting relationship,
other than a contract, arrangement or other transaction in the ordinary
course of its business which is upon fair and commercially reasonable terms
no less favorable to it than would be obtained from a person not an
Affiliate, (b) permit the conduct of its business to be undertaken by any
Affiliate or (c) make any advance or loan whatsoever to an Affiliate (other
than travel and entertainment advances made in the ordinary course of the
its business and in accordance with its standard practices); provided,
however that Inmold may, at its discretion. place new business of a type
otherwise performed by Borrower with any of Inmold's operating subsidiaries
without violation of this Section 6.9.12, so long as Borrower's annual
sales are at a rate which would generate not less than $17,500,000 in
annual sales.
6.9.13 Misrepresentation. Not furnish the Lender with any
certificate or other document that contains any untrue statement of a
material fact or omits to state a material fact necessary to make such
certificate or document not misleading in light of the circumstances under
which it was furnished.
6.10 Use of Proceeds. Use the proceeds of the Lender's loans under this
Agreement for ordinary working capital and fixed asset expenditures (subject, in
any event to the other limitations of this Agreement).
SECTION 7.INDEMNIFICATION.
The Borrower shall indemnify, defend and hold harmless the Lender and the
Lender's employees, agents, successors and assigns from, against and with
respect to any claim, liability, obligation, loss, damage, assessment, judgment,
cost and expense (including, without limitation, reasonable attorney's and
accountant's fees and costs and expenses reasonably incurred in investigating,
preparing, defending against or prosecuting any litigation or claim, action,
suit proceeding or demand), of any kind or character, arising out of or in any
manner incident, relating or attributable to (and without giving effect to ANY
tax benefit to the indemnified party) (i) any inaccuracy in ANY representation
or WARRANTY of the Borrower contained in this Agreement or in any certificate or
other document or agreement executed or delivered by the Borrower in connection
with this Agreement or otherwise made or given in connection with this
Agreement, (ii) ANY failure by the Borrower to perform or observe, or to have
performed or obs erved, in full any covenant, agreement or condition to be
performed or observed by it under this Agreement or under any certificate or
other document or agreement executed by the Borrower in connection with this
Agreement, (iii) reliance BY the Lender on any books or records of the Borrower
or reliance by the
-22-
Lender on any information furnished pursuant to this Agreement by the Borrower
or any of the Borrower's officers to the Lender, or (iv) the general business
and operations of the Borrower. Any amounts not paid when due under this Section
7 shall bear interest at 18% per annum (but not in excess of the maximum rate
permitted by law).
SECTION 8. DEFAULTS AND REMEDIES.
8.1 Events of Default. The Borrower shall be in default of this Agreement
upon the occurrence of any of the following conditions or events:
8.1.1 Failure to Pay Monies Due. If any of the Indebtedness shall
not be paid when due.
8.1.2 Non-Compliance with Certain in Covenants. If the Borrower
shall fail to perform any of its obligations or covenants contained in
Section 3 (Security), Section 6.1 (Reporting), Section 6.7 (Key Man Life
Insurance), Section 6.8 (Financial Covenants), Section 6.9 Negative
Covenants) or Section 7 (Indemnifcation) and such failure shall not be
cured by the Borrower or waived by the Lender within ten (10) Business
Days after the Notice Date.
8.1.3 Misrepresentation. If any warranty or representation in
connection with or contained in this Agreement, or if any financial data or
other information now or hereafter furnished to the Lender in connection
with this Agreement or the transactions contemplated by this Agreement
shall prove to be false or misleading in any material respect.
8.1.4 Other Non-Compliance. If the Borrower shall fail to perform
any of its obligations and covenants (other than those described in
Sections 8.1.1 or 8.1.2) under, or shall fail to comply with any of the
provisions of, this Agreement or any other agreement with Lender to which
the Borrower may be a party and such failure shall not be cured by the
Borrower or waived by Lender within twenty (20) Business Days after the
Notice Date.
8.1.5 Change in Management or Control. If the employment of either
Guarantor or other senior management by Borrower shall be terminated for
any reason ,without the prior consent of Lender, or if Inmold shall no
longer control Borrower.
8.1.6 Cross-Defaults. If (a) there shall occur any event which
permits the Senior Lender to accelerate the due date of any Debt owing the
Senior Lender, (b) there shall occur any event which permits Horizon to
accelerate the due date of any Debt owing Horizon, (c) the Borrower shall
default in the due payment of any of its Debt (other than that owing to the
Senior Lender or Horizon) or in the due observance or performance of any term,
covenant or condition in any agreement or instrument evidencing, securing or
relating to such Debt, or in the due observance or performance of any other
material contract or undertaking and such default shall continue beyond any
grace periods described therein or (d) either
-23-
Guarantor shall default in the observance or performance of any term,
covenant or condition in the Guaranty.
8.1.7 Judgments, Garnishments, Etc. If there shall be rendered
against the Borrower one or more judgments or decrees involving an
aggregate liability of $10,000 or more, which has or have become non-
appealable and shall remain undischarged, unsatisfied by insurance and
unstayed for more than twenty (20) days, whether or not consecutive; or if
a writ of attachment or garnishment against the property of the Borrower
shall be issued and levied in an action claiming $10,000 or more, and not
released or appealed and bonded in a manner satisfactory to the Lender.
8.1.8 Business Suspension, Bankruptcy, Etc. If the Borrower shall
voluntarily suspend transaction of its business, shall not pay its debts as
they mature or shall make a general assignment for the benefit of
creditors; or proceedings in bankruptcy or for reorganization or
liquidation of the Borrower under the Bankruptcy Code or under any other
state or federal law for the relief of debtors shall be commenced by the
Borrower or shall be commenced against the Borrower and shall not be
discharged within thirty (30) days after commencement; or a receiver,
trustee or custodian shall be appointed for the Borrower or for any
substantial portion of its properties or assets.
8.2 Acceleration of Indebtedness. Upon the occurrence of an Event of
Default, and at any time thereafter, Lender may at its option declare the Note
and any other Indebtedness owing to the Lender to be immediately due and payable
in full without presentation, demand, protest, notice of dishonor or other
notice of any kind, all of which are expressly waived.
8.3 Application of Proceeds. The proceeds arising from any sale or other
disposition of the Collateral or from the exercise of any right or remedy
exercised or undertaken under or in connection with this Agreement shall be
applied first to all costs and expenses authorized by this Agreement, the
Security Agreement, the Assignment, any other document contemplated hereby or
the UCC, and the balance shall be applied to the Indebtedness, first to
interest, next to unpaid Revenue Participation Payments and then to principal
and the balance, if any, shall be paid to the Borrower or to such other person
or persons as may be entitled thereto under applicable law. The Borrower shall
remain liable for any deficiency which it shall pay on demand.
8.5 Non-Exclusive Remedies. The remedies provided for herein are cumulative
to the remedies available to the Lender as provided by law or equity, by the
Guaranty, the Security Agreement, the Assignment or any other document
contemplated hereby. Nothing herein contained is intended, nor should it be
construed, to preclude the Lender from pursuing any other remedy for the
recovery of any other sum to which the Lenders may be or become entitled for the
breach of this Agreement by the Borrower.
SECTION 9. MISCELLANEOUS.
9.1 Governing Law. This Agreement shall be governed in all respects by the
internal laws of the State of Michigan.
-24-
9.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive (i) any investigation made by the Lender and (ii) the
Disbursement Date.
9.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto; provided, however, that the
Borrower may not assign its rights and obligations hereunder. The Borrower
specifically acknowledges and agrees that the Lender may assign any of its
rights hereunder or the Note in whole or in any part.
9.4 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto (including the Exhibits hereto and thereto) constitute
the full and entire understanding and agreement among the parties with regard to
the subject matter hereof and thereof and supersede the letter dated July 17,
1997, in its entirety. Neither this Agreement nor any term hereof may be
amended, waived. discharged or terminated orally, except by a written instrument
signed by the Borrower and the Lender.
9.5 Notices and Other Communications. All notices and other communications
required or permitted hereunder shall be in writing, and shall be mailed by
first-class mail, postage prepaid, or delivered, either by hand or by messenger,
addressed (a) if to Lender, at Lender's Address, or at such other address as
Lender shall have furnished to the Borrower in writing, and (b) if to the
Borrower, at the Borrower's Address, or at such other address as the Borrower
shall have furnished to the Lender in writing. Notices shall be effective on
the earlier of receipt or three days after mailing by first class mail as above
described.
9.6 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to the Lender, upon any breach or default of the Borrower
under this Agreement, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter be deemed a waiver
of any other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of the Lender
of any breach or default under this Agreement, or any waiver of any provisions
or conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. Without limitation of
the foregoing, no agreement by the Lender with any lender to, or other creditor
of, the Borrower to subordinate, defer, waive or otherwise agree not to enforce
any or all of the obligations of the Borrower (or any other party) to the Lender
under this Agreement, the Note, the Security Agreement, the Assignment, the
Guaranty or any other document contemplated hereby shall amend, waive or
otherwise forgive such obligations or affect in any way the right of the Lender
to take any action, or to exercise any remedy, permitted to the Lender under
this Agreement or under such other agreements and instruments, including,
without limitation, the right of the Lender to charge and receive default
interest or late payment charges, to declare an Event of Default and to exercise
the Lender's remedies arising upon the occurrence of an Event of Default.
9.7 Covenant Independence. Each covenant in this Agreement shall be deemed
to be independent of any other covenant, and an exception in one covenant shall
not create an exception in another covenant.
-25-
9.8 Agent's Fees. The Borrower (i) represents and warrants that the
Borrower has retained no finder or broker, other than Guiness Xxxxx Andover in
connection with the transactions contemplated by this Agreement and (ii) hereby
agree to indemnify and to hold the Lender harmless of and from any liability for
commission or compensation in the nature of an agent's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability, including reasonable attorney's fees and
disbursements), including without limitation Guiness Xxxxx Andover, arising from
any act by the Borrower or any of its employees, representatives or agents.
9.9 Loan Administration Expenses. The Borrower agrees to reimburse Lender,
on demand, for all reasonable out-of-pocket costs, fees, charges and expenses,
including legal fees, incurred or arising in connection with (a) the enforcement
or protection, or attempted enforcement or protection, of the Lender's rights
and remedies under this Agreement, the Note, the Security Agreement, the
Assignment, the Guaranty or any other document contemplated hereby, including
without limitation the commencement, defense or intervention in any litigation,
taking any other action in or with respect to any suit or proceeding (bankruptcy
or otherwise), the protection, collection, lease, sale, taking possession of or
liquidation of any of the Collateral, and any other attempt to enforce or
protect any rights or claimed rights of the Lender to collect the Indebtedness,
(b) protecting Lender's security interest and lien in the Collateral, including
without limitation title and UCC reports, the cost of audits (announced and
unannounced) and the cost of appraisals, surveys, environmental reports and
consultants, in each case as deemed reasonably necessary by the Lender or (c)
any other matters arising out of or contemplated by this Agreement, the Note,
the Security Agreement, the Assignment, the Guaranty or any other document
contemplated hereby, including without limitation the review, preparation or
making of any amendments, modifications, waivers or consents with respect to
this Agreement, the Note, the Security Agreement, the Assignment, the Guaranty
or any other document contemplated hereby. Any such charges or expenses shall be
payable by Borrower upon demand by Lender and shall bear interest at 18% per
annum (or, if less, the maximum rate permitted by law) until paid in full.
9.10 Exhibits, Etc. All exhibits and schedules referred to in this
Agreement shall be deemed to be attached to and made a part of this Agreement.
9.11 Headings. Section headings used in this Agreement are included for
convenience of reference only and shall not constitute a part of this Agreement
for any purpose.
9.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
9.13 Jury Trial Waiver. THE LENDER AND THE BORROWER, AFTER
CONSULTING OR HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE
-26-
CONSTITUTIONAL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION BASED ON OR ARISING
OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT OR INSTRUMENT OR ANY OF THE
TRANSACTIONS EVIDENCED THEREBY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
G-P PLASTICS, INC.
By:Xxxxxx X. Xxxxxxx
------------------------------
Its:(Illegible)
----------------------------
CAPITAL BIDCO INC
By:(Illegible)
-----------------------------
Its:President
----------------------------
-27-
SCHEDULE 5.21
Permitted Liens
(1) Rights of General Motors Corporation in inventory and tooling owned by
General Motors Corporation
(2) Security interest of Cincinnati Milacron in a Cincinnati Milacron
CH-90-R-40mm-12.00 (serial number 3987AOI/94-10)
EXHIBIT A
(Copy of Term Note]
THE INDEBTEDNESS EVIDENCED BY THIS TERM NOTE IS SUBORDINATED TO INDEBTEDNESS
OWING TO THE CIT GROUP/CREDIT FINANCE INC. PURSUANT TO A SUBORDINATION
AGREEMENT AMONG MAKER, PAYEE AND THE CIT GROUP/CREDIT FINANCE, INC.
TERM NOTE
Lansing, Michigan $500,000
Date: July______1997
FOR VALUE RECEIVED, the undersigned promise to pay to the order of Capital
BIDCO, Inc., a Michigan business and industrial development corporation
("Payee"), at any office of the Payee in the State of Michigan, the sum of
Five Hundred Thousand ($500,000) Dollars with interest from the date hereof at
the Contract Rate (as defined below) until maturity, whether by acceleration or
otherwise. in sixty one (61) monthly payments as follows:
(a) One (1) payment due on the first day of the month immediately
following the date of this Note, in the amount of interest accrued at the
Contract Rate on the outstanding principal balance of this Note from the
date of this Note through the end of the preceding month;
(b) Nine (9) payments due on the first day of each month,
commencing with the payment due on September 1, 1997, and ending with the
payment due on May 1, 1998, each in the amount of interest accrued at the
Contract Rate on the outstanding principal balance of this Note during the
preceding month;
(c) Fifty (50) payments due on the first day of each month,
commencing with the payment due on June 1, 1998, and ending with the
payment due on July 1, 2002, each in the amount of the Amortizing Payment
(as defined below), and
(d) A final balloon payment due on August 1, 2002, in an amount
sufficient to fully amortize all outstanding principal and interest accrued
under this Note to such date.
As used in this Note:
"Contract Rate" shall mean the per annum interest rate equal to the
greater of (a) thirteen and one-half percent (13-1/2%) or (b) four
percent (4%) plus the prime rate as from time to time published in the Wall
Street Journal (or in a substitute national daily financial publication
selected by Payee if the Wall Street Journal shall no longer be published)
(or the predominant prime rate, if more than one is so published). The
prime rate in effect on the last business day of a calendar quarter shall
be applicable for purposes of calculating the Contract Rate at all times
during, the following calendar quarter. Payee shall endeavor to notify the
undersigned of any change in the Contract Rate at least ten (10) business
days after the end of the calendar quarter in which such change is
effective and Payee's calculation of the Contract Rate shall be binding on
the undersigned, absent fraud, willful misconduct or manifest error in
calculation.
"Amortizing Payment" shall mean a payment, inclusive of principal
and interest, calculated as of the date such Amortizing Payment is due in
an amount which would cause the complete amortization of the outstanding
principal balance of the Note at the Contract Rate in effect on such date
if paid over a term of (i) sixty (60) months minus (ii) the number of
months in which Amortizing Payments have been made prior to such date.
Payee shall
endeavor to notify the undersigned of the amount of each Amortizing
Payment at least ten (1O) business days in advance of its respective due
date and Payee's calculation of the Amortizing Payment shall be binding on
the undersigned, absent fraud, willful misconduct or manifest error in
calculation.
Any provision of this Note to the contrary notwithstanding, (a) the entire
amount of principal and interest accrued and outstanding, hereunder shall be due
and payable on August 1, 2002, and (b) this Note shall bear interest at a
default rate after maturity, whether by acceleration or otherwise, of the
Contract Rate plus five (5%) per cent per annum on unpaid principal and ten
(10%) per cent per annum on accrued and unpaid interest.
If any installment of this Note is not paid when due (if due prior to an
acceleration of the due date of this Note by Payee), the undersigned shall owe
and immediately pay to the Payee a late charge in the amount of four (4%) per
cent of the late installment. Neither Payee's demand for nor receipt of such
late charge shall waive any default or otherwise affect Payee's rights and
remedies under this Note.
This Note is issued pursuant to a Loan Agreement, of even date, between the
undersigned and the Payee (the "Agreement"). In addition to the payment of
principal and interest, the undersigned is obligated to pay Revenue
Participation Payments as described in the Agreement. This Note is secured by
the Collateral described in the Agreement and is cross-defaulted with other
indebtedness of the undersigned as described in the Agreement.
This Note may not be prepaid in whole or in part prior to August 1, 1999,
without the consent of the Payee and then only upon such conditions, including
the payment of a premium, as Payee shall in its sole discretion require. From
and after such date, this Note may be prepaid in whole or in partial increments
of not less than $5,000 without Payee's consent or premium or penalty. Partial
prepayments shall be applied to the installments last coming due under this
Note. Revenue Participation Payments shall continue, notwithstanding prepayment,
as provided in the Agreement.
Any payment due hereunder on a day which is not a day on which banks in
Michigan are open to carry on their normal commercial banking business shall be
extended to the next succeeding business day and interest shall be payable
through such extended date.
Interest shall be calculated for the actual number of days outstanding on
the basis of a 360 day year. If at any time the amount of interest payable on
any date under this Note would exceed the maximum interest permitted to be paid
by the undersigned or received by the Payee under applicable law, then the
amount of interest payable on such date shall be automatically reduced to such
maximum amount and any amounts previously paid to the Payee hereunder in excess
of such maximum amounts shall be automatically deemed to be a payment of
principal due under this Note.
Upon the occurrence of an Event of Default (as defined in the Agreement),
the Payee may at its option and without prior notice to the undersigned declare
this Note to be immediately due and payable, sell or liquidate all or any
portion of the Collateral, offset against the indebtedness any amounts owing by
the Payee to the undersigned, charge interest at the default rate herein
provided and exercise any one or more of the rights and remedies granted to the
Payee by any agreement with the undersigned or given it under applicable law.
-2 -
This Note shall bind the undersigned and the undersigned's respective
successors and assigns and may be negotiated or assigned, in whole or in part,
by Payee.
Each maker and indorser waives presentment, demand, protest and notice of
dishonor, and agrees that no extension or indulgence to the undersigned or
release or nonenforcement of any security, or release of any party, whether with
or without notice, shall affect the obligations of any maker, indorser or
accommodation party.
Each maker and indorser agrees to reimburse the holder of this Note for
any and all costs and expenses (including, but not limited to, reasonable
attorney fees) incurred in collecting or attempting to collect this Note.
THE UNDERSIGNED AND THE PAYEE, AFTER CONSULTING OR HAVING THE OPPORTUNITY
TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
CONSTITUTIONAL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION BASED ON OR ARISING
OUT OF THIS NOTE, ANY RELATED AGREEMENT OR INSTRUMENT OR ANY OF THE TRANSACTIONS
EVIDENCED THEREBY.
G-P PLASTICS, INC.
By_____________________________
Its____________________________
-3-
