LOAN AGREEMENT
by and between
STAR STRUCK, INC.
("Borrower")
and
PEOPLE'S BANK("Lender")
Dated as of October 29, 1998
TABLE OF CONTENTS
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Page
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ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS.......................................................................................1
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Section 1.1 Defined Terms.........................................................................................1
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Section 1.2 Terms Generally......................................................................................11
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ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS........................................................................................12
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A. THE LOAN.........................................................................................................12
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Section 2.1 Revolving Loan.......................................................................................12
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Section 2.2 Certain Fees and Charges.............................................................................13
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Section 2.3 Interest Provisions..................................................................................13
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Section 2.4 Notice and Manner of Borrowing; Conversion or Continuation of
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Interest Rate............................................................................................14
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Section 2.5 Excess Advances......................................................................................14
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Section 2.6 Method of Payment....................................................................................14
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Section 2.7 Collection of Funds..................................................................................15
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B. CERTAIN GENERAL PROVISIONS.......................................................................................15
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Section 2.8 Payments Free of Deductions..........................................................................15
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Section 2.9 Computations.........................................................................................15
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Section 2.10 Additional Payments ................................................................................15
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Section 2.11 Capital Adequacy....................................................................................16
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Section 2.12 Certificate; Protection.............................................................................17
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Section 2.13 Obligations Absolute ...............................................................................17
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C. MISCELLANEOUS....................................................................................................17
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Section 2.14 Use of Proceeds.....................................................................................17
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Section 2.15 Termination.........................................................................................18
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Section 2.16 Limitations on Interest ............................................................................18
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ARTICLE 3
CONDITIONS PRECEDENT..................................................................................................18
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Section 3.1 Conditions Precedent to Effectiveness................................................................18
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Section 3.2 Conditions Precedent to All Advances, Etc............................................................21
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES........................................................................................21
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Section 4.1 Existence and Due Qualification......................................................................21
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Section 4.2 Power and Authority.................................................................................21
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Section 4.3 Legally Enforceable Agreement.......................................................................22
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Section 4.4 Financial Statements and Condition: Full Disclosure.................................................22
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Section 4.5 Other Agreements; No Default........................................................................23
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Section 4.6 Litigation..........................................................................................23
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Section 4.7 No Defaults on Outstanding Judgments or Orders......................................................23
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Section 4.8 Ownership and Liens.................................................................................23
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Section 4.9 Subsidiaries........................................................................................23
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Section 4.10 Operation of Business...............................................................................23
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Section 4.11 Taxes...............................................................................................23
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Section 4.12 Debt................................................................................................24
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Section 4.13 Intentionally.......................................................................................24
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Section 4.14 Margin Securities...................................................................................24
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Section 4.15 Fiscal Year.........................................................................................24
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Section 4.16 No Broker's Fees, et................................................................................24
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Section 4.17 Governmental Consents and Regulatory Approvals......................................................24
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Section 4.18 Eligible Accounts Receivable........................................................................24
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Section 4.19 Eligible Inventory..................................................................................24
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Section 4.20 Environmental Compliance............................................................................25
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Section 4.21 Compliance with Laws................................................................................25
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Section 4.22 Events of Default...................................................................................25
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Section 4.23 Labor Disputes and Acts of God......................................................................25
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Section 4.24 ERISA...............................................................................................25
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ARTICLE 5
AFFIRMATIVE COVENANTS..................................................................................................26
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Section 5.1 Maintenance of Existence............................................................................26
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Section 5.2 Maintenance of Records..............................................................................26
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Section 5.3 Maintenance of Properties...........................................................................26
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Section 5.4 Conduct of Business.................................................................................26
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Section 5.5 Maintenance of Insurance............................................................................26
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Section 5.6 Compliance With Laws................................................................................26
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Section 5.7 Right of Inspection.................................................................................27
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Section 5.8 Reporting Requirements..............................................................................27
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Section 5.9 Eligible Accounts Receivable; Eligible Inventory....................................................28
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Section 5.10 Collateral..........................................................................................29
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Section 5.11 Defend Collateral...................................................................................29
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Section 5.12 Environmental Covenants.............................................................................29
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Section 5.13 Operating Accounts..................................................................................30
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ARTICLE 6
NEGATIVE COVENANTS ...................................................................................................30
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Section 6.1 Liens...............................................................................................30
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Section 6.2 Debt................................................................................................30
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Section 6.3 Mergers, Etc........................................................................................31
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Section 6.4 Leases..............................................................................................31
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Section 6.5 Sale and Leaseback..................................................................................31
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Section 6.6 Restricted Payments.................................................................................31
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Section 6.7 Sale of Assets......................................................................................31
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Section 6.8 Investments.........................................................................................31
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Section 6.9 Guaranties, Etc.....................................................................................31
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Section 6.10 Transactions With Affiliates........................................................................32
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Section 6.11 Subsidiaries........................................................................................32
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Section 6.12 Fiscal Year.........................................................................................32
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Section 6.13 Accounting Methods..................................................................................32
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Section 6.14 Inventory Locations.................................................................................32
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Section 6.15 Fixed Asset Expenditures............................................................................32
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Section 6.16 Account Balances....................................................................................32
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ARTICLE 7
FINANCIAL COVENANTS.....................................................................................................32
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Section 7.1 Current Ratio........................................................................................32
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Leverage Ratio...................................................................................................33
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Section 7.3 Tangible Net Worth...................................................................................33
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Section 7.4 Debt Service Coverage Ratio..........................................................................33
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Section 7.5 Certain Financial Terms..............................................................................33
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ARTICLE 8
SECURITY..............................................................................................................34
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ARTICLE 9
EVENTS OF DEFAULT.....................................................................................................34
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Section 9.1 Events of Default.....................................................................................34
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ARTICLE 10
GENERAL PROVISIONS....................................................................................................37
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Section 10.1 Amendments, Etc ....................................................................................37
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Section 10.2 Notices, Etc........................................................................................37
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Section 10.3 No Waiver; Remedies.................................................................................38
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Section 10.4 Successors and Assigns/Participants.................................................................38
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Section 10.5 Costs, Expenses, and Taxes; indemnification.........................................................39
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Section 10.6 Right of Setoff.....................................................................................40
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Section 10.7 Governing Law: Jurisdiction.........................................................................40
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Section 10.8 Entire Agreement: Severability of Provisions........................................................41
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Section 10.9 Estoppel Certificates...............................................................................41
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Section 10.10 Waiver of Jury Trial and Consequential Damages.....................................................42
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Section 10.11 Replacement of the Notes...........................................................................42
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Section 10.12 Survival of Representations and Warranties.........................................................43
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Section 10.13 Further Assurances.................................................................................43
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Section 10.14 Construction.......................................................................................43
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Section 10.15 Captions...........................................................................................43
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Section 10.16 Opinion Letter.....................................................................................43
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Section 10.17 Examination of Records.............................................................................43
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Section 10.18 Releases...........................................................................................43
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Section 10.19 Counterparts.......................................................................................44
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LOAN AGREEMENT
LOAN AGREEMENT ("Agreement"), dated as of October 29, 1998, by and between
STAR STRUCK, INC., a Connecticut corporation with its chief executive office and
principal place of business at 8 Xxxxxxx X. Xxxxxx Circle, Bethel, Connecticut
06801-0308 (the "Borrower") and PEOPLE'S BANK, a national banking association
with an office at 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000-0000
(hereinafter referred to as the "Lender").
WITNESSETH:
Borrower has requested that Lender extend credit in the form of a
$2,000,000.00 revolving credit facility to the Borrower. Lender is willing to
provide such credit, but only on the terms and subject to the conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of these premises and the covenants and
agreements herein contained, Borrower and Lender agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
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Section 1.1 Defined Terms. The following capitalized terms are used in
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this Agreement with the respective meanings set forth in this Section 1.1.
Terms defined in the singular shall have the same meaning when used in the
plural, and vice versa.
"Account Debtor" means any Person who is or may become obligated to
Borrower on or under a Receivable.
"Affiliate" means any Person: (1) that, directly or indirectly, controls,
is controlled by, or is under common control with, Borrower; (2) that is a
shareholder, member, manager, officer, or director of Borrower or of any Person
that, directly or indirectly, controls, is controlled by, or is under common
control with, Borrower, together with, in each case, their respective relatives
(whether by blood or marriage), heirs, executors, administrators, personal
representatives, successors, and assigns; and (3) any trust of which any of the
foregoing Persons is a settlor, trustee, or beneficiary. For the purposes of
this definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; and "controlled" shall have the meaning correlative
thereto.
"Agreement" means this Loan Agreement, as amended, supplemented, or
modified and in effect from time to time.
"Business Day" means a day other than a Saturday, Sunday, or other day on
which The Federal Reserve is required or authorized by law to be closed.
"Borrowing Base" means, at the relevant time of reference, the amount which
is equal to (i) 80% of Eligible Accounts Receivable, plus (ii) the lesser of (a)
40% of Eligible Inventory or (b) $750,000.00, provided that Lender may, at any
time and from time to time in its discretion, adjust the advance rates set forth
within this definition of "Borrowing Base".
"Borrowing Base Certificate" means that term as defined in Section 5.8(d).
"Borrowing Request" means that term as defined in Section 2.3.
"Capital Lease" means all leases of property (whether real, personal, or
mixed) which have been or should be capitalized on the books of the lessee in
accordance with GAAP.
"Collateral" means all property of Borrower now or hereafter subject to the
Liens granted in the Security Documents.
"Commitment" means Lender's commitment to make Revolving Advances to
Borrower pursuant to Section 2.1 of this Agreement in an outstanding aggregate
principal amount not to exceed at any time $2,000,000.00.
"Contaminant" means any pollutants, hazardous or toxic substances or wastes
or contaminated materials including but not limited to oil and oil products,
asbestos, asbestos containing materials, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls, flammables, explosives, radioactive materials,
laboratory wastes, biohazardous wastes, chemicals, elements, compounds or any
other materials and substances (including materials, substances or things which
are composed of or which have as constituents any of the foregoing substances),
which are or may be subject to regulation under, or the Release of which or
exposure to which is prohibited, limited or regulated under any Environmental
Law.
"Corporate Guarantor" means SBM Industries, Inc.
"Credit Availability" means, at the relevant time of reference, the dollar
amount equal to the lesser of (a) the Borrowing Base and (b) the Commitment,
less, in each case, the sum of the aggregate outstanding principal amount of all
Revolving Advances.
"Current Assets" means that term as defined in Section 7.5(a).
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"Current Liabilities" means that term as defined in Section 7.5(b).
"Current Maturities of Long Term Debt" means that term as defined in
Section 7.4(c).
"Debt", as applied to any Person, means: (1) indebtedness or liability of
such Person for borrowed money, or with respect to deposits or advances of any
kind, or for the deferred purchase price of property or services (including
trade obligations); (2) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments; (3) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person; (4) all obligations of such Person for the
deferred purchase price of property or services (including trade obligations);
(5) all obligations of such Person as lessee under Capital Leases; (6) current
liabilities of such Person in respect of the present value of unfunded vested
benefits under any Plan; (7) obligations of such Person under letters of credit,
bankers acceptances, or comparable arrangements; (8) obligations of such Person
arising under acceptance facilities; (9) guaranties, endorsements (other than
for collection or deposit in the ordinary course of business), and other
contingent obligations of such Person to purchase, to provide funds for payment,
to supply funds to invest in any Persons, or otherwise to assure a creditor
against loss; (10) all obligations of such Person secured by any Lien on any of
such Person's assets or property, whether or not the obligations have been
assumed; and (11) all obligations of such Person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements. The Debt of any Person shall include the
Debt of any partnership in which such person is a general partner.
"Default" means an event or condition the occurrence or existence of which,
with the lapse of time or the giving of a required notice, or both, would become
an Event of Default.
"Default Rate" means that rate of interest that is equal to the greater of
(a) the sum of 4% plus the rate of interest otherwise applicable to the
outstanding principal amounts of the Loans under the terms of this Agreement or
(b) the sum of 4% plus the Prime Rate.
"Drawdown Date" means the date on which any Revolving Advance is made.
"EBITDA" means that term as defined in Section 7.5(d).
"Eligible Accounts Receivable" means, at the time of calculation, bona fide
outstanding Receivables of Borrower, in which the Lender has a first priority
perfected security interest, which satisfy all of the following requirements:
(A) It is owing to Borrower and is subject to a validly perfected security
interest in favor of Lender having priority over any and all other liens or
encumbrances thereon;
(B) It arises from the sale or lease of goods by Borrower or the rendering
of services by Borrower which have been shipped or delivered to an Account
Debtor (i) on an absolute sale basis
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and not on consignment, on approval, or on a sale or return basis or subject
to any other repurchase or return agreement, and (ii) on an open receivable
basis, which is not evidenced by chattel paper or an instrument of any kind;
provided that in any case, no material part of the subject goods or services has
been returned, rejected, lost or damaged, and the Account Debtor is not
insolvent or the subject of any bankruptcy or insolvency proceeding of any kind;
(C) If the Account Debtor is located outside the United States, (i) the
subject goods shall have been shipped after receipt, by Borrower from the
Account Debtor, of (a) an irrevocable letter of credit, which letter of credit
shall have been issued or confirmed by a financial institution acceptable to
Lender and shall be in form and substance acceptable to Lender and shall be
transferred, assigned or otherwise made payable to Lender in form and substance
satisfactory to Lender, or (b) credit insurance in form and substance and issued
by an insurer satisfactory to Lender, and (ii) the Receivable shall be payable
in the full amount of the face value of the Receivable in United States dollars;
(D) It is a valid, legally enforceable obligation of the Account Debtor
thereunder and is not and may not become subject to any offset, counterclaim,
right of return, unapplied cash, unapplied credits or, in the opinion of Lender,
contra or other defense on the part of such Account Debtor or to any claim on
the part of such Account Debtor denying liability thereunder;
(E) It is subject to no lien or security interest whatsoever (including
purchase money security interests), except for the security interest of Lender
hereunder and liens or security interests which have been expressly subordinated
to the security interest of Lender in form and substance satisfactory to Lender;
(F) It is evidenced by an invoice or other proof of delivery in form
acceptable to Lender;
(G) Except as specifically approved in writing by Lender, it has not
remained unpaid for a period exceeding the lesser of (i) ninety (90) days after
the date of invoice, or (ii) sixty (60) days after the due date thereof;
(H) It is not owing from an Account Debtor from whom 50% or more of the
amounts owing Borrower have remained unpaid for a period exceeding the lesser of
(i) ninety (90) days from the date of invoice, or (ii) sixty (60) days after the
due date thereof;
(I) It does not arise out of transactions with an employee, officer,
director, Affiliate, or Subsidiary of Borrower;
(J) It does not arise out of a transaction with, and is not owing from, the
United States of America, unless Borrower has complied with the Federal
Assignment of Claims Act, when applicable;
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(K) It is not owing from an Account Debtor located in any jurisdiction in
which the Borrower has not complied with any laws which might restrict the
ability of the Borrower to collect such Receivables; and
(L) Lender has determined in its sole discretion that it is an Eligible
Account Receivable.
With respect to the Receivables, Borrower warrants and represents to Lender
that, unless otherwise indicated in writing by Borrower: (A) They are genuine,
are in all respects what they purport to be, are not evidenced by a judgment and
are only evidenced by one, if any, executed original instrument, agreement,
contract or document, which has been delivered to Lender; (B) They represent
undisputed, bona fide transactions completed in accordance with the terms and
provisions contained in any documents related thereto; (C) The amounts of the
face value shown on any schedule of accounts or accounts receivable aging report
provided to Lender, and all invoices and statements delivered to Lender with
respect to any Receivable are actually and absolutely owing to Borrower and are
not contingent for any reason; (D) There are no setoffs, counterclaims or
disputes existing or asserted with respect thereto and Borrower has not made any
agreement with any Account Debtor thereunder for any deduction therefrom; (E)
There are no facts, events or occurrences which in any way impair the validity
or enforcement thereof or tend to reduce the amount payable thereunder from the
amount of the invoice face value with respect to any Eligible Accounts
Receivable, and on all contracts, invoices and statements delivered to Lender
with respect thereto; (F) To the best knowledge of Borrower's officers,
directors and key employees (including, without limitation, any sales personnel
dealing with any such Account Debtor), all Account Debtors, under any Eligible
Accounts Receivable, (i) had the capacity to contract at the time any contract
or other document giving rise to the Receivable was executed, (ii) are solvent,
and (iii) are not the subject of a bankruptcy or insolvency proceeding of any
kind; (G) The goods giving rise thereto are not, and were not at the time of the
sale thereof, subject to any lien, claim, encumbrance or security interest,
except those of Lender, those terminated prior to the date hereof or those
subordinate to Lender's security interest; (H) Borrower has no knowledge of any
fact or circumstance which would materially impair the validity or
collectibility thereof; (I) To the best of Borrower's officers, directors and
key employees (including, without limitation, any sales personnel dealing with
any such Account Debtor) knowledge, there are no proceedings or actions which
are threatened or pending against any Account Debtor thereunder which might
result in any material adverse change in the financial condition of such Account
Debtor; and (J) They have not been pledged, assigned or transferred to any other
Person.
In the event of any dispute as to whether a Receivable is or has ceased to
be an Eligible Account Receivable, the decision of Lender shall control.
"Eligible Inventory" means that portion of the inventory of Borrower
consisting of finished goods held for sale by the Borrower, normally and
currently saleable in the ordinary course of the Borrower's business, and which
at all times pertinent hereto is of good and merchantable quality, free from
defects, as to which Lender has a perfected first priority Lien, and which is
located at the locations set forth in the Security Agreement, and as to which
Borrower has satisfied all terms,
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conditions, warranties and representations of this Agreement and the other Loan
Documents; but Eligible Inventory does not include any of the following: (a)
catalogs and other promotional materials of any kind; (b) used items; (c) any
returned items (unless returned in a salable form and any account receivable
arising from the sale of such returned item has been reversed); (d) any damaged,
defective or recalled items; (e) any obsolete items; (f) any items used as
demonstrators, prototypes or salesmen's samples; (g) any items of inventory
which have been consigned to Borrower or as to which a Person claims a Lien; (h)
any items of inventory which have been consigned by the Borrower to a consignee;
(i) packing and shipping materials; (j) inventory located on premises leased by
the Borrower from a landlord with whom Lender has not entered into a landlord's
waiver and, if applicable, obtained a mortgagee's consent letter on terms
satisfactory to Lender in its reasonable judgment; (k) inventory in transit; (1)
spare parts; and (m) inventory which in the reasonable judgment of Lender is
considered to be slow-moving or otherwise not merchantable. Eligible Inventory
shall be valued at the lower of (a) cost, (b) market value, or (c) the valuation
consistent with that employed in the preparation of the financial statements of
the Borrower referred to in Section 4.4 hereof.
"Enforcement Action" means any action, proceeding or investigation
(administrative or judicial, civil or criminal) instituted or threatened by U.S.
Environmental Protection Agency, or any other federal, state or local
governmental agency related to any alleged or actual violation of any
Environmental Law with respect to any property owned or leased by the Borrower
and/or any business conducted thereon, including, but not limited to, actions
seeking Remediation, the imposition or enforcement of liability pursuant to any
Environmental Law and compliance with any Environmental Law. Enforcement Action
shall also include any similar actual or threatened action by any private party
pursuant to any Environmental Law.
"Environmental Laws" means any and all present and future: federal, state,
and local laws, statutes, ordinances, rules, and regulations, relating to
protection of human health and the environment from Contaminants including but
not limited to the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, (CERCLA), 42 USC (S)9601 et seq.; the Resource
-- ---
Conservation and Recovery Act, as amended, (RCRA), 42 USC (S)6901 et seq. the
-- ---
Clean Air Act, as amended, 42 USC (S)7401 et seq.; the Federal Water Pollution
-- ---
Control Act, as amended (including but not limited to as amended by the Clean
Water Act), 33 USC (S)1251 et seq.; The Toxic Substances Control Act, as
-- ---
amended (TSCA), 15 USC (S)2601 et seq.; the Emergency Planning and Community
-- ---
Right-to-Know Act (also known as XXXX Title III), as amended, (EPCRA), 42 USC
(S)11001 et seq.; the Safe Drinking Water Act, as amended, 42 USC (S)300(f) et
-- --- --
seq.; the Federal Insecticide, Fungicide and Rodenticide Act, as amended
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(FIFRA), 7 USC (S)136 et seq.; the Occupational Safety and Health Act, as
-- ---
amended, (OSHA), 29 USC (S)651 et seq.; the Endangered Species Act, as
-- ---
amended, 16 USC (S)1531 et seq.; the National Environmental Policy Act, as
-- ---
amended, (NEPA), 42 USC (S)4321 et seq.; the Rivers and Harbors Act of 1899 33
-- ---
USC (S)401 et seq.; state and local laws,rules and regulations similar to or
-- ---
addressing similar matters as the foregoing federal laws; laws, rules and
regulations governing underground or above-ground storage tanks; laws, rules and
regulations imposing liens for response costs or costs of other Remediation,
whether or not those liens have a higher priority than existing liens; laws,
rules and regulations conditioning
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transfer of property upon a form of negative declaration or other approval of a
Governmental Authority of the environmental condition of a property; laws, rules
and regulations requiring the disclosure of conditions relating to Contaminants
in connection with transfer of title to or interest in property law; laws, rules
and regulations requiring notifying of any government entity with regard to a
Release of any Contaminant; conditions or requirements imposed in connection
with any permits; government orders and demands and judicial orders pursuant to
any of the foregoing; laws, rules and regulations relating to the Release, use,
treatment, storage, disposal, transportation, transfer, generation, processing,
production, refining, control, management, or handling of Contaminants; any and
all other laws, rules, regulations, guidance, guidelines and common law of any
governmental entity relating to the protection of human health or the
environment from Contaminants. The reference in this paragraph to state laws
specifically includes, but is not limited to, the applicable laws of the State
of Connecticut.
"Equipment" means all "Equipment" as that term is defined in the Uniform
Commercial Code, as in effect in the State of Connecticut as of the date hereof,
of Borrower, whether presently owned or hereafter acquired, and including,
without limitation, machinery, furniture, furnishings, and fixtures, and any and
all goods used or bought for use in or being used for use in the conduct of
Borrower's business and all goods used or bought for use in business which are
not included within the definition of Inventory, and all accessions and
additions thereto, replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which, together with the Borrower, would be treated as a single employer under
Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section 9.1 of this
Agreement.
"GAAP" means (i) when used in general, other than as provided below,
generally accepted accounting principles in the United States as in effect from
time to time, applied on a consistent basis and, (ii) when used in Article 7,
whether directly or indirectly through reference to a capitalized term used or
defined therein, principles that are consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal year ended on December 31, 1997.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantee" means collectively the Guaranty Agreements of even date
herewith from Guarantor in favor of Lender.
"Guarantor" means collectively the Individual Guarantors and the Corporate
Guarantor.
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"Guaranty" means any obligation, contingent or otherwise, of any Person
guaranteeing or having the economic effect of guaranteeing any Debt of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
and including any obligation of such Person, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such Debt or
to purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Debt, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such Debt of the payment of
such Debt, or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Debt; provided, however, that the term
Guaranty shall not include endorsements for collection or deposit in the
ordinary course of business.
"Head Office" means the principal office of the Lender at 000 Xxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxx.
"Individual Guarantors" shall mean collectively, Xxxxxxx Xxxxxx and Xxxxx
Xxxxxxx.
"Interest Expense" means that term as defined in Section 7.5(e) of this
Agreement.
"Inventory" means all "Inventory" as that term is defined in the Uniform
Commercial Code, as in effect in the State of Connecticut as of the date hereof,
including, without limitation, any and all goods, merchandise or other personal
property, wheresoever located and whether or not in transit, now owned or
hereafter acquired by Borrower in the normal course of business, which is or may
at any time be held for sale or lease, or furnished or to be furnished under any
contract or service or held as raw materials, work in process, supplies or
materials used or consumed in Borrower's business, and all such property the
sale or other disposition of which has given rise to accounts, chattel paper,
documents, or instruments (as such terms are defined in the Uniform Commercial
Code) and which has been returned to or repossessed or stopped in transit by
Borrower.
"Lender" means People's Bank, or any successors or assigns of all or any
part of the obligations of Borrower.
"Lender Parties" means that term as defined in Section 10.5(b).
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on common law, statute, or contract, and including but not limited to
the security interest lien arising from a security agreement, mortgage,
encumbrance, pledge, collateral assignment, conditional sale or trust receipt,
or a lease, consignment, or bailment for security purposes.
"Loans" means collectively, the Revolving Advances made or to be made
pursuant to this Agreement.
8
"Loan Documents" means this Agreement, the Note, the Security Documents and
all other promissory notes, guaranties, mortgages, security documents, deeds to
secure debt, deeds of trust, pledges, assignments, contracts, negative pledges,
powers of attorney, trust account agreements, and written matters, whenever
executed and delivered to Lender, with respect to the transactions contemplated
by this Agreement.
"Lockbox Account" means that term as defined in Section 2.6.
"Lockbox Agreement" means the lockbox agreement of even date herewith
executed by Borrower and Lender.
"Material Adverse Effect" means, with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, results in a
material adverse change in, or a material adverse effect upon, any of (i) the
condition (financial or otherwise), operations, business, properties or
prospects of the Borrower and its Subsidiaries taken as a whole; (ii) the rights
and remedies of the Lender hereunder or under any of the other Loan Documents,
or the ability of the Borrower to perform its respective Obligations; or (iii)
the legality, validity or enforceability of this Agreement or any of the other
Loan Documents.
"Maturity Date" means October 31, 2001, or earlier as set forth in this
Agreement.
"Mortgage" means that certain Open-End Mortgage Deed, Assignment of Rents
and Financing Statement over the Mortgaged Property of even date herewith
executed by Borrower in favor of Lender.
"Mortgaged Property" means 8 Xxxxxxx X. Xxxxxx Circle, Bethel,
Connecticut.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or
accruing an obligation to make contributions or has within any of the preceding
five plan years made or accrued an obligation to make contributions.
"Note" means the Revolving Credit Note.
"Obligations" means all present and future indebtedness and other
liabilities of the Borrower owing to the Lender or any of Lender's respective
successors, transferees or assigns, of every type and description, whether or
not evidenced by any note, guaranty or other instrument, arising under or in
connection with this Agreement, the Notes or any other Loan Document, whether or
not for the payment of money, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all principal, interest, charges, expenses, fees, attorneys' fees
and
9
disbursements and any other sum chargeable to the Borrower under this Agreement
or any other Loan Document.
"Overadvance" means that term as defined in Section 2.1(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means a human being, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
association, organization, joint venture, institution, Governmental Authority,
or other entity of any nature whatsoever.
"Plan" means any plan established, maintained, or to which contributions
have been made by the Borrower or any ERISA Affiliate for the benefit of any of
their employees.
"Prime Rate" means the variable per annum rate of interest so designated
from time to time by Lender as its prime rate. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate being charged to
any customer.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time
to time.
"Property" means all real property with improvements thereon owned or
leased by the Borrower.
"Receivable" means the right to payment for goods sold or leased or for
services rendered by Borrower.
"Release" means any spilling, leaking, migrating, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment of any Contaminant.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Restricted Payment" means (i) any cash or property dividend, distribution
or payment of any kind, direct or indirect, by the Borrower or any of its
Subsidiaries to any Person who now or in the future may hold an equity interest
in the Borrower or any of its Subsidiaries, whether evidenced by a security or
not, other than stock options or regular compensation or bonuses paid to
employees or directors of the Borrower and its Subsidiaries in the ordinary
course of business and consistent with past practices, (ii) any payment on
account of the purchase, redemption, retirement or other acquisition for value
of any capital stock of the Borrower or its Subsidiaries, or any other payment
or distribution made in respect thereof, either directly or indirectly, and
(iii) any management or similar fees paid or payable by the Borrower or any of
its Subsidiaries to any Person who now or in
10
the future may, directly or indirectly, hold an equity interest in the Borrower
or any of its Subsidiaries.
"Revolving Advance" or "Revolving Advances" means that term as defined in
Section 2.1(a).
"Revolving Loan" means the Revolving Advance or Revolving Advances made
pursuant to Section 2.1(a).
"Revolving Credit Note" means that term as defined in Section 2.1(c).
"Security Agreement" means the Security Agreement between Lender and
Borrower of even date herewith.
"Security Documents" means the Security Agreement, the Guarantee, the
Mortgage, all assignments of contracts, documents or instruments in favor of the
Lender, all hazardous waste indemnity letters in favor of Lender and all other
documents, contracts, assignments, instruments and the like now or hereafter
securing the Loan.
"Solvent" means, as to any Person, that such Person (a) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage; (b) is able to pay its debts as
they mature; and (c) owns property whose fair salable value is greater than the
amount required to pay its debts.
"Subsidiary" means any Person of which the Borrower directly or indirectly
through one or more intermediaries (i) owns shares of stock having ordinary
voting power to elect a majority of the Board of Directors (or equivalent
managing body) of such Person (irrespective of whether at the time stock of any
other class or classes of such Person shall or might have voting power upon the
occurrence of any contingency), or (ii) owns more than 50% of any other equity
or ownership interest in such Person.
"Tangible Net Worth" means that term as defined in Section 7.5(f).
"Total Liabilities" means that term as defined in Section 7.5(g).
Section 1.2 Terms Generally. Whenever the context may require, any pronoun
---------------
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". All references herein to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, (a) any reference in
this Agreement to any Loan Document shall mean such document as amended,
restated, supplemented or otherwise modified from time to time, and (b) all
terms of an accounting or financial nature shall be construed in accordance with
GAAP, as in effect from time to time.
11
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS
------------------------------
A. THE LOAN
-------
Section 2.1 Revolving Loan.
--------------
(a) Subject to the terms and conditions set forth in this Agreement and so
long as no Default or Event of Default exists, Lender agrees to make advances
(each a "Revolving Advance" and collectively "Revolving Advances") to Borrower
from time to time during the period from the date of this Agreement up to, but
not including, the Maturity Date; provided, however, that at no time shall the
-------- -------
aggregate outstanding principal balance of all Revolving Advances exceed the
Credit Availability. Subject to the limits of this Agreement, Borrower may
borrow, pay, prepay (pursuant to Section 2.1(d) below), and re-borrow under
this Section 2.1. Any formulas or advance rates contained within or comprising
the Borrowing Base may be increased or decreased at any time and from time to
time by Lender in its discretion.
(b) Notwithstanding the provisions of Section 2.1(a), Lender may, in its
sole discretion and subject to the terms and conditions set forth in this
Agreement or any other conditions which Lender may impose in its sole
discretion, including without limitation the payment of fees, an increased
interest rate, or posting of additional collateral, make temporary advances in
excess of the Borrowing Base to Borrower from time to time (each such temporary
Revolving Advance is referred to herein as an "Overadvance"), provided that in
no event shall the aggregate principal amount of outstanding Overadvances, when
combined with the outstanding principal amount of all other Revolving Advances
exceed the Commitment. To the extent that the Borrowing Base increases at any
time during which an Overadvance is outstanding, the portion of the Overadvance
which, as a result of such increase, would be available for borrowing under
Section 2.1(a) shall be deemed to be prepaid as of the date of such increase
and reborrowed as a Revolving Advance under Section 2.1(a) as of such date. To
the extent that the Borrowing Base decreases at any time, the portion of the
outstanding Revolving Advances which exceeds the Borrowing Base as a result of
such decrease shall be deemed, subject to the provisions of this Agreement, to
be prepaid as of the date of such decrease and reborrowed as an Overadvance
under this Section 2.1(b) as of such date. Nothing contained in this Section
2.1(b) or elsewhere in this Agreement shall constitute or be deemed to
constitute a commitment or agreement by Lender to make any Overadvances, nor
shall the making of an Overadvance at any time or from time to time constitute
or be deemed to constitute a course of dealing by Lender with respect to
Overadvances.
(c) All Revolving Advances shall be evidenced by, and repaid with interest
in accordance with a single promissory note of Borrower in the form of Exhibit A
---------
hereto, duly completed, executed, and delivered to Lender, in the principal
amount of up to U.S. $2,000,000, dated the date of this Agreement, payable to
Lender on the Maturity Date (such promissory note is referred to herein as the
"Revolving Credit Note"). Borrower hereby authorizes Lender to record on the
12
Revolving Credit Note or in its internal computerized records the amount of each
Revolving Advance and of each payment of principal received by Lender on account
of the Revolving Loan, which recordation shall, in the absence of manifest
error, be conclusive as to the outstanding principal balance of the Revolving
Loan and shall be considered correct and binding on Borrower provided, however,
------------------
that the failure to make such recordation with respect to any Revolving Advance
or payment shall not limit or otherwise affect the obligations of Borrower under
this Agreement or the Revolving Credit Note.
(d) Borrower may, upon sixty (60) days written notice to Lender,
irrevocably reduce the Commitment, in whole or in part, together with (i) if a
prepayment accompanies or is required in connection with such reduction, accrued
interest to the date of prepayment on the amount prepaid and (ii) a fee equal to
(1) three percent (3%) of the amount by which the commitment is reduced if the
reduction occurs on or prior to October 30, 1999, (2) two percent (2%) of the
amount by which the commitment is reduced if such reduction occurs on or after
October 31, 1999 and prior to October 31, 2000, and (3) one percent (1%) of the
amount by which the commitment is reduced if such prepayment and reduction
occurs on or after October 31, 2000 but prior to October 31, 2001.
(e) Until Lender exercises its rights to collect the Receivables as
provided for in this Agreement, Borrower may continue its present policies for
returned merchandise and adjustments, but shall promptly notify Lender of any
credits, adjustments or disputes arising about the goods or services represented
by Receivables. In any event, Borrower will immediately pay Lender from its own
funds (and not from the proceeds of Receivables), for application to the
Revolving Loans, an amount equal to any credit or adjustment made to any
Eligible Receivables; provided, however, that so long as Borrower is not in
default hereunder, such payment need not be made if Borrower shall have, after
making such credit or adjustment, sufficient Eligible Receivables to maintain
the aggregate outstanding balance of the Revolving Loans under the Borrowing
Base.
Section 2.2 Certain Fees and Charges. Borrower shall, in addition to all
------------------------
other amounts required hereunder, pay to Lender the following:
(a) a loan servicing charge of $500 per month, payable monthly in arrears
on the first Business Day of each calendar month; and
(b) a one-time commitment fee equal to $10,000, payable on or prior to the
date hereof.
Section 2.3 Interest Provisions.
--------------------
(a) Commencing with the first such date following the date of this
Agreement, Borrower promises to pay interest to Lender on the outstanding and
unpaid principal balance of the Revolving Advances at a rate per annum equal to
the Prime Rate plus one percent (1%), monthly in arrears on the first day of
each calendar month and on the Maturity Date.
13
(b) For purposes of the computation of interest, and notwithstanding
anything to the contrary contained in this Agreement, items shall not be deemed
to be collected until two (2) business days after their actual receipt by
Lender.
(c) The interest rate on each Prime Rate Advance shall change when and as
Lender's Prime Rate changes. Any change in the interest rate resulting from a
change in the Prime Rate shall become effective as of the opening of business on
the day on which such change in the Prime Rate shall become effective.
(d) Overdue principal and interest and, upon the occurrence and during
the continuance of an Event of Default, all principal and accrued but unpaid
interest shall bear interest until paid in full, payable on demand, at the
Default Rate.
(e) If the entire amount of any required principal and/or interest is not
paid in full within ten (10) days after the same is due, Borrower shall pay to
the Lender a late fee equal to five percent (5%) of the required payment to
cover the extra expense involved in handling such delinquent payment.
Section 2.4 Notice and Manner of Borrowing; Conversion or Continuation of
-------------------------------------------------------------
Interest Rate. Borrower shall give Lender irrevocable notice by telecopy or
-------------
otherwise in writing of its request that Lender make a Revolving Advance (each a
"Borrowing Request") not later than 12:00 p.m. Connecticut time on the proposed
Drawdown Date thereof. Notice received by Lender after 12:00 p.m. Connecticut
time shall be loaned against by Lender on the next Business Day after the
proposed Drawdown Date. Subject to the fulfillment of the applicable conditions
set forth in Article 3 hereof, Lender will make the Revolving Advance in
immediately available funds by crediting the amount thereof to Borrower's
account with Lender.
Section 2.5 Excess Advances. Except to the extent that any excess
---------------
constitutes an Overadvance permitted by Section 2.1(b), if at any time the
aggregate outstanding principal amount of the Revolving Loan exceeds the Credit
Availability, Borrower shall immediately pay the amount of such excess to Lender
for application to the Revolving Loan.
Section 2.6 Method of Payment. Borrower shall make each payment due under
-----------------
this Agreement and under the Notes to Lender at its Head Office not later than
12:00 P.M., Connecticut time, on the date when due in lawful money of the United
States in immediately available funds. Borrower hereby authorizes Lender to
charge from time to time (including without limitation any time at which any
amount is due under this Agreement) any amount due under this Agreement or the
Notes, including without limitation principal, interest, fees and charges,
against any account of Borrower with Lender. Whenever any payment to be made
under this Agreement or under the Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
the payment of interest.
14
Section 2.7 Collection of Funds. All proceeds of notes, instruments,
--------------------
Inventory and Receivables of Borrower shall be collected into a lockbox account
established by Borrower with Lender pursuant to the Lockbox Agreement (the
"Lockbox Account"). Promptly after the execution of this Agreement, Borrower
shall direct each of its Account Debtors to make all payments to Borrower
directly into the Lockbox Account. Borrower shall hold in trust for Lender and
immediately remit to Lender by depositing the same into the Lockbox Account all
checks, notes, cash and other proceeds of its Receivables as well as all
proceeds from the sale of inventory, securities (other than securities issued by
Borrower) and other Collateral and other cash receipts of every kind and nature
(other than the proceeds of other borrowings expressly permitted by this
Agreement). Borrower agrees that all payments received in the Lockbox Account
will be the sole and exclusive property of Lender and that the Lockbox Account
will be under the dominion and control of Lender. Lender will on the Business
Day on which any payment is received into the Lockbox Account, and on a
provisional basis until the final receipt of good funds, credit such payments to
the principal amount of the outstanding Revolving Advances as a prepayment of
such Revolving Advances. Any such provisional credit is subject to reversal if
the final collection of a payment is not received by Lender within five (5)
Business Days following the initial receipt of such payment and will thereafter
be credited when such payment is actually received in good funds. If at the time
of any such credit there are no outstanding Revolving Advances such credit shall
(i) if a Default or an Event of Default shall exist, be credited to a cash
collateral account under the sole dominion and control of Lender until such
Default or Event of Default is cured by Borrower or waived by Lender or (ii)
otherwise be made to Borrower's regular account with Lender.
B. CERTAIN GENERAL PROVISIONS
--------------------------
Section 2.8 Payments Free of Deductions. All payments by Borrower hereunder
---------------------------
and under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon Borrower with respect to any
amount payable by it hereunder or under any of the other Loan Documents,
Borrower will pay to Lender on the date on which such amount is due and payable
hereunder or under such other Loan Document, such additional amount in dollars
as shall be necessary to enable Lender to receive the same net amount which
Lender would have received on such due date had no such obligation been imposed
upon Borrower. Borrower will deliver promptly to Lender certificates or other
valid vouchers for all taxes or other charges deducted from or paid with respect
to payments made by Borrower hereunder or under such other Loan Document.
Section 2.9 Computations. All computations of interest on the Loans and of
-------------
fees or other charges shall be based on a 360-day year and paid for the actual
number of days elapsed.
Section 2.10 Additional Payments. If any present or future applicable law,
--------------------
statute, rule or regulation thereunder or any interpretation thereof by any
competent court or by any Governmental
15
Authority charged with the administration or the interpretation thereof, or any
request, directive, instruction or notice at any time or from time to time
hereafter made upon or otherwise issued to Lender by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law),
shall:
(a) subject Lender to any tax, levy, impost, duty, charge, fee, deduction
or withholding of any nature with respect to this Agreement, the other Loan
Documents, the Commitment or the Loan (other than taxes based upon or measured
by the income or profits of Lender), or
(b) materially change the basis of taxation (except for changes in taxes on
income or profits) of payments to Lender of the principal of or the interest on
the Loan or any other amounts payable to Lender under this Agreement or any of
the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held by, or deposits in
or for the account of, or loans by, or letters of credit issued by, or
commitments of an office of Lender, or
(d) impose on Lender any other conditions or requirements with respect to
this Agreement, the other Loan Documents, the Loan, the Commitment or any class
of loans, letters of credit or commitments of which the Commitment forms a part,
and the result of any of the foregoing is
(i) to increase the cost to Lender of making, funding, issuing,
renewing, extending or maintaining the Loan or the Commitment; or
(ii) to reduce the amount of principal, interest, or other amount
payable to Lender hereunder on account of the Loan or the Commitment; or
(iii) to require Lender to make any payment or to forego any interest
or fee or other sum payable hereunder, the amount of which payment of
foregone interest or other sum is calculated by reference to the gross
amount of any sum receivable or deemed received by Lender from Borrower
hereunder,
then, and in each such case, Borrower will, upon demand made by Lender at any
time and from time to time and as often as the occasion therefor may arise, pay
to Lender such additional amounts as will be sufficient to compensate Lender for
such additional cost, reduction, payment, foregone interest or other sum.
Section 2.11 Capital Adequacy. If any present or future law, governmental
-----------------
rule, regulation, policy, guideline or directive (whether or not having the
force of law) or the interpretation thereof by a court or governmental authority
with appropriate jurisdiction affects the amount of capital
16
required or expected to be maintained by Lender or any corporation controlling
Lender and Lender determines that the amount of capital required to be
maintained by it is increased by or based upon the existence of Lender's
commitment with respect to the Loan, then Lender may notify Borrower of such
fact. To the extent that the costs of such increased capital requirements are
not reflected in the Prime Rate, Borrower and Lender shall thereafter attempt to
negotiate in good faith, within thirty (30) days of the day on which Borrower
receives such notice, an adjustment payable hereunder that will adequately
compensate Lender in light of these circumstances. If Borrower and Lender are
unable to agree to such adjustment within thirty (30) days of the date on which
Borrower receives such notice, then commencing on the date of such notice (but
not earlier than the effective date of any such increased capital requirement),
the amounts payable hereunder shall increase by an amount that will, in Lender's
reasonable determination, provide adequate compensation. Lender shall allocate
such cost increases among its customers in good faith and on an equitable basis.
Section 2.12 Certificate; Protection. A certificate setting forth any
------------------------
additional amounts payable pursuant to Sections 2.10 or 2.11 and a brief
explanation of such amounts which are due, submitted by Lender to the Borrower,
shall be conclusive, absent manifest error, that such amounts are due and owing.
The protection of Sections 2.10 or 2.11 shall be available to Lender regardless
of any possible contention of the invalidity or inapplicability of the law,
rule, regulation, agreement guideline or other change or condition which shall
have been imposed or shall have occurred.
Section 2.13 Obligations Absolute. The obligations of Borrower under this
---------------------
Agreement shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and such other agreement or
instrument under all circumstances, and irrespective of, the following
circumstances:
(a) any lack of validity or enforceability of all or any portion of this
Agreement or any other agreement or any instrument relating hereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the obligations of Borrower;
(c) the existence of any claim, setoff, defense or other right that
Borrower may have; or
(d) any amendment or waiver of or consent to departure from any of the Loan
Documents, or all or any of the obligations of Borrower in respect of the Loan
or this Agreement.
C. MISCELLANEOUS
-------------
Section 2.14 Use of Proceeds. The proceeds of the Revolving Loan made
----------------
hereunder shall be used by Borrower for Borrower's short term working capital
requirements. Borrower will not, directly or indirectly, use any part of the
proceeds of any of the Loan for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
17
Federal Reserve System or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock.
Section 2.15 Termination. The Commitment shall be automatically terminated
------------
on the Maturity Date.
Section 2.16 Limitations on Interest. All agreements between Borrower and
------------------------
Guarantors and Lender are hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of acceleration of maturity of the
indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to
be paid to Lender for the use or the forbearance of the indebtedness evidenced
hereby exceed the maximum permissible under applicable law. As used herein, the
term "applicable law" shall mean the law in effect as of the date hereof
provided, however, that in the event there is a change in the law which results
in a higher permissible rate of interest, then this Agreement and the Notes
shall be governed by such new law as of its effective date. In this regard, it
is expressly agreed that it is the intent of Borrower and Lender in the
execution, delivery and acceptance of this Agreement and the Notes to contract
in strict compliance with the laws of the State of Connecticut from time to time
in effect. If, under or from any circumstance whatsoever, fulfillment of any
provision hereof or of any of the Loan Documents or the Security Documents at
the time of performance of such provision shall be due, shall involve
transcending the limit of such validity prescribed by applicable law, then the
obligation to be fulfilled shall automatically be reduced to the limits of such
validity, and if under or from circumstances whatsoever Lender should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between
Borrower, Guarantors and Lender.
ARTICLE 3
CONDITIONS PRECEDENT
--------------------
Section 3.1 Conditions Precedent to Effectiveness. The effectiveness of
--------------------------------------
this Agreement and the obligations of the Lender to make the Loan shall be
subject to the prior satisfaction of each of the following conditions:
(a) Lender shall have received each of the following, in form and substance
satisfactory to Lender and its counsel:
(1) This Agreement and the Note, duly executed and delivered by
Borrower;
(2) A Security Agreement duly executed and delivered by Borrower
securing the payment and performance of all Obligations together with: (1)
copies of the existing UCC- 1 Financing Statements duly filed under the
Uniform Commercial Code of all jurisdictions necessary or, in the opinion
of the Lender, desirable to perfect the security interest created
18
by the Security Agreement; (2) UCC-I search reports identifying all of the
financing statements on file with respect to Borrower in all jurisdictions
referred to in clause (1) above, indicating that, no Person other than the
Lender has a Lien on any of the Collateral; and (3) copies of all of the UCC-1
financing statements (and, where applicable, related Form UCC-3s) on file with
respect to Borrower, as of dates acceptable to Lender, in all jurisdictions in
which Collateral is or may be located, indicating that no Person other than the
Lender has a Lien on any of the Collateral, or with respect to any Liens other
than those of Lender, Form UCC-3s in form and substance satisfactory to Lender,
duly executed by the holders of such Liens, terminating all such Liens;
(3) Copies of all corporate action taken by Borrower, including resolutions
of its Board of Directors and, if applicable, its shareholders, authorizing the
execution, delivery, and performance of the Loan Documents and each other
document to be delivered pursuant to this Agreement, certified as of the date of
this Agreement by the Secretary of Borrower;
(4) A certificate, dated as of the date of this Agreement, of the Secretary
of Borrower certifying the names and true signatures of the officers of Borrower
authorized to sign the Loan Documents and the other documents to be delivered by
Borrower under this Agreement;
(5) The Mortgage duly executed by Borrower;
(6) The Guarantee duly executed by the Guarantor;
(7) A favorable opinion of independent counsel for Borrower and Guarantor,
satisfactory to Lender, dated the date of this Agreement;
(8) Such agreements and instruments as Lender may deem necessary in
connection with the grant by Borrower to Lender of a Lien on, and the collateral
assignment of, the deposit accounts of Borrower pursuant to the Security
Agreement;
(9) Certificates of insurance and copies of insurance policies evidencing
compliance with the insurance requirements of this Agreement;
(10) The articles of incorporation (certified by the Secretary of the State
of Connecticut) and bylaws of Borrower;
(11) The articles of incorporation (certified by the Secretary of the State
of Corporate Guarantor's jurisdiction of organization) and bylaws of Corporate
Guarantor;
(12) A Certificate of Existence issued by the Secretary of the State of
Borrower's and Corporate Guarantor's jurisdiction of organization and each state
in which it is qualified
19
to do business evidencing that Borrower and Corporate Guarantor are domestic or,
as applicable, foreign corporations in good standing or existence in such
jurisdiction;
(13) Due diligence from Borrower in form and substance satisfactory to
Lender;
(14) A hazardous waste indemnity agreement in favor of Lender in form and
substance satisfactory to Lender from Borrower and Corporate Guarantor;
(15) A Certificate by Officers of Borrower in form and substance
satisfactory to Lender;
(16) A Borrowing Base Certificate of Borrower dated the date of this
Agreement;
(17) Satisfactory completion of Lender's customary due diligence, including
but not limited to an independent audit of Borrower's Eligible Accounts
Receivable and Eligible Inventory;
(18) Receipt of any financial information which Lender requires;
(19) An assignment of patents and patent applications in form and substance
satisfactory to Lender duly executed by Borrower;
(20) An assignment of trademarks and trademark applications in form and
substance satisfactory to Lender duly executed by Borrower;
(21) A notice of security interest in copyrights in form and substance
satisfactory to Lender duly executed by Borrower;
(22) The Lender shall have received landlord's waivers and, if applicable,
mortgagee consents and "non-offset" letters with respect to all real property
owned or leased by the Borrower or at which the Borrower maintains inventory;
(23) Evidence of repayment of any debt of Borrower to The Chase Manhattan
Bank;
(24) Receipt of Borrower's December 31, 1997 and September 30, 1998
Financial Statements;
(25) A subordination agreement in form and substance satisfactory to Lender
duly executed by Corporate Guarantor and Borrower; and
(26) All other documents, instruments and agreements that Lender shall
reasonably require in connection with this Agreement.
20
(b) All representations and warranties contained in this Agreement shall
be true and correct in all material respects.
Section 3.2 Conditions Precedent to All Advances, Etc. The obligation of
------------------------------------------
the Lender to make each Revolving Advance (including the initial Revolving
Advance), in addition, shall be subject to the prior satisfaction of each of the
following additional conditions:
(a) On the Drawdown Date of each Revolving Advance, the following
statements shall be true, and each request by Borrower for a Revolving Advance,
shall be deemed to be a representation and warranty by Borrower that:
(1) The representations and warranties contained in Article 4 of this
Agreement and contained in each of the other Loan Documents containing
representations and warranties are correct on and as of the date of each
Revolving Advance or such issuance, extension or renewal as though made on
and as of such date; and
(2) No Default or Event of Default has occurred and is continuing, or
would result from or after giving effect to such Revolving Advance or such
issuance, extension or renewal; and
(b) At the time of each Revolving Advance or such issuance, extension or
renewal, the sum of the aggregate outstanding principal amount of all Revolving
Advances does not exceed the Credit Availability.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement, Borrower represents and
warrants to Lender that:
Section 4.1 Existence and Due Qualification. Borrower: (a) is a corporation
-------------------------------
duly organized and validly existing under the laws of the State of Connecticut;
(b) has all power and authority necessary to own its properties and to carry on
the business in which it is now engaged or proposed to be engaged; and (c) is
duly qualified and in good standing as a foreign corporation under the laws of
each other jurisdiction in which such qualification is required except where the
failure to so qualify shall not have a Material Adverse Effect.
Section 4.2 Power and Authority. The execution and delivery by Borrower
---------------------
of the Loan Documents and the performance by Borrower of the Loan Documents, and
the borrowings hereunder, are within the powers of Borrower and have been duly
authorized by all necessary corporate and, if required, shareholder action, and
do not and will not (a) violate (i) the articles of organization or other
constitutive documents or bylaws of Borrower, or (ii) any provision of any law,
21
rule, regulation (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination, or award presently in effect having applicability to
Borrower, or (b) be in conflict with, result in a breach of or constitute (along
or with notice or lapse of time or both) a default under any indenture or loan
or credit agreement or any other agreement, lease, or instrument to which
Borrower is a party or by which Borrower or its properties may be bound or
affected, or (c) result in the creation or imposition of any Lien upon or with
respect to any property or assets now owned or hereafter acquired by Borrower.
Section 4.3 Legally Enforceable Agreement. This Agreement is, and each of
-----------------------------
the other Loan Documents when executed and delivered will be, legal, valid, and
binding obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws affecting
creditors' rights generally.
Section 4.4 Financial Statements and Condition; Full Disclosure.
---------------------------------------------------
(a) Borrower has submitted to Lender various financial statements and
information, including, without limitation, its audited financial statements for
the fiscal year ended December 31, 1997 and its unaudited financial statements
for the period ended September 30, 1998, and Borrower represents that all of
said financial information is true and correct in all material respects; such
financial information fairly presents the financial condition and the results of
operations of Borrower as of the dates thereof and for the periods indicated
therein; that such financial statements disclose all material liabilities,
direct or contingent of the Borrower as of the dates hereof and the periods
indicated; that such financial statements have been prepared in accordance with
generally accepted accounting principles and practices consistently maintained
throughout the periods involved; and that, as of the date of said financial
information submitted, there were no material unrealized or anticipated losses
from any unfavorable commitments of Borrower; and that there has been no
Material Adverse Effect since the date of said financial statements.
(b) Borrower is, and on the Drawdown Date of each Revolving Advance will
be, Solvent.
(c) Except as set forth in Schedule 4.4, upon consummation of the
------------
transactions contemplated under the Loan Documents, Borrower will not have any
outstanding Debt other than the obligations and indebtedness under this
Agreement and trade debt incurred in the ordinary course of business.
(d) Neither this Agreement nor any written information, exhibit, report,
document, or certificate furnished to Lender by or on behalf of the Borrower and
Corporate Guarantor in connection with this Agreement contained or contains any
material misstatement of fact or omitted or omits to state a material fact or
any fact necessary to make the statements contained herein or therein not
misleading. There is no fact known to Borrower that materially adversely affects
or that, insofar as the Borrower can now reasonably foresee, may materially
adversely affect, the condition,
22
financial or otherwise, operations, properties, or prospects of Borrower or the
ability of Borrower to carry out its obligations under any of the Loan
Documents.
Section 4.5 Other Agreements; No Default. Borrower has no material
----------------------------
contracts, agreements, leases or commitments other than those set forth on
Schedule 4.5. Borrower is not in default in any respect in the performance,
------------
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any contract, agreement, lease or instrument to which Borrower is
a party. Borrower enjoys peaceful and undisturbed possession under all leases to
which it is a party.
Section 4.6 Litigation. Except as set forth in Schedule 4.6, there is no
---------- -------------
pending or, to Borrower's officers', directors', or key employees' knowledge,
threatened action, suit or proceeding before any court, Governmental Authority,
board of arbitration, or arbitrator against Borrower or for or on behalf of
Borrower or in which Borrower or any of its properties or assets is or may
otherwise become involved nor is there any basis therefor. Except as set forth
in Schedule 4.6, Borrower has not received any summons, citation, directive,
------------
letter, or other communication from any Governmental Authority concerning any
intentional or unintentional violation or alleged violation of any Environmental
Laws.
Section 4.7 No Defaults on Outstanding Judgments or Orders. Borrower is not
----------------------------------------------
in default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any Governmental Authority.
Section 4.8 Ownership and Liens. Borrower has good and marketable title to
-------------------
all of its assets and none of its assets is subject to any security interest or
lien except in favor of Lender.
Section 4.9 Subsidiaries. Borrower has no Subsidiaries, except for RC
------------
Manufacturing, Inc.
Section 4.10 Operation of Business. Borrower possesses all licenses,
---------------------
permits, franchises, patents, copyrights, trademarks, trade names, or rights
thereto, and other intellectual property necessary to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
Borrower is not in violation of any rights of others with respect to any of the
foregoing. Nothing has come to the attention of Borrower's officers, members or
key employees to the effect that (i) any product, process, method, substance,
part or other material presently contemplated to be sold by or employed by it in
connection with such business may infringe any patent, trademark, service marks,
trade name, copyright, license or other right owned by any other Person or (ii)
there is pending or threatened any claim or litigation against or affecting it
contesting its right to sell or use any such product, process, method,
substance, part or other material.
Section 4.11 Taxes. Borrower has filed all tax returns (federal, state, and
-----
local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
23
Section 4.12 Debt. Set forth in Schedule 4.4 hereto is a complete and
---- ------------
correct list of all Debt of Borrower. The maximum principal or face amounts of
the obligations set forth, which are outstanding and which can be outstanding,
are correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in such Schedule.
Section 4.13 Intentionally Omitted.
---------------------
Section 4.14 Margin Securities. The Loans will not be used, directly or
-----------------
indirectly, for the purpose of purchasing or carrying any margin security, as
that term is defined in Regulation U of the Board of Governors of the Federal
Reserve system (the "Federal Reserve Board"), or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security, or for any other purpose which might cause any of such advances
and other financial accommodations under this Agreement to be considered a
"purpose credit" within the meaning of Regulation T, U, or X of the Federal
Reserve Board. None of Borrower's assets and none of the Collateral constitute
margin securities. Borrower will neither take, nor permit any agent acting on
its behalf to take, any action which might cause any transaction or obligation,
or right created by this Agreement, or any document or instrument delivered
pursuant hereto, to violate any regulation of the Federal Reserve Board.
Section 4.15 Fiscal Year. The fiscal year of Borrower for financial
-----------
accounting purposes ends on December 31 of each calendar year.
Section 4.16 No Broker's Fees, etc. Borrower is not obligated to pay any
---------------------
brokerage commissions, finder's fees, appraisal fees, or investment banking fees
in connection with the transactions contemplated by this Agreement.
Section 4.17 Governmental Consents and Regulatory Approvals. Borrower has
----------------------------------------------
obtained all consents, licenses, and other approvals from all governmental
authorities required in connection with the execution, delivery, and performance
by Borrower of the Loan Documents and the transactions contemplated thereby.
Section 4.18 Eligible Accounts Receivable. Each Receivable that Borrower
----------------------------
represents or warrants to Lender to be an Eligible Account Receivable in each
Borrowing Base Certificate or other certification delivered by Borrower to
Lender pursuant to this Agreement will be, as of the date so certified, an
Eligible Account Receivable unless Lender shall in its sole discretion determine
such Receivable to be ineligible.
Section 4.19 Eligible Inventory. All Inventory that Borrower represents or
------------------
warrants to Lender to be Eligible Inventory in each Borrowing Base Certificate
or other certification delivered by Borrower to Lender pursuant to this
Agreement will be, as of the date so certified, Eligible Inventory unless Lender
shall in its sole discretion determine such Inventory to be ineligible.
24
Section 4.20 Environmental Compliance. The Borrower represents and warrants
------------------------
that except as set forth in the Environmental Report:
(a) the Property and the current and anticipated use thereof materially
comply with all Environmental Laws and all other laws, ordinances or regulations
pertaining to the use and operation of such premises;
(b) no Release of any Contaminants has occurred or is now occurring upon
the Property; and
(c) neither Borrower nor the Property has been, are now or are threatened
to be the subject of any Enforcement Action.
Section 4.21 Compliance with Laws. Borrower is not in violation of any
--------------------
laws, ordinances, rules or regulations applicable to it, of all federal, state
or municipal governmental authorities, instrumentalities or agencies including,
without limitation, ERISA, the United States Occupational Safety and Health Act
of 1970, as amended, all federal, state, county and municipal laws, ordinances,
rules and regulations relating to the environment, as such may be amended.
Section 4.22 Events of Default. No Default or Event of Default has
-----------------
occurred and is continuing.
Section 4.23 Labor Disputes and Acts of God. The business and properties of
------------------------------
Borrower have not been affected by any fire, explosion, accident, strike,
lockout, or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy, or other casualty (whether or not covered by
insurance).
Section 4.24 ERISA. Borrower is in compliance in all material respects with
-----
all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan; no notice
of intent to terminate a Plan has been filed, nor has any plan been terminated;
no circumstances exist which constitute grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administrate, a Plan, nor has the PBGC instituted any such proceedings;
neither Borrower nor any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; Borrower and
each ERISA Affiliate have met their minimum funding requirements under ERISA
with respect to all of its Plans and the present fair market value of all Plan
assets exceeds the present value of all vested benefits under each Plan, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA and the regulations thereunder for calculating the
potential liability of Borrower or any ERISA Affiliate to the PBGC or the Plan
under Title IV of ERISA; and neither Borrower, nor any ERISA Affiliate has
incurred any liability to the PBGC under ERISA.
25
ARTICLE 5
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that until the Commitment is irrevocably
terminated and payment is made in full of the Loans and all of its other
obligations hereunder are fully performed, Borrower shall, and shall cause its
Subsidiaries to:
Section 5.1 Maintenance of Existence. Preserve and maintain its existence
------------------------
in its current form of organization and good standing in the jurisdiction of its
organization, and qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required.
Section 5.2 Maintenance of Records. Keep adequate records and books of
----------------------
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all of its financial transactions.
Section 5.3 Maintenance of Properties. Maintain, keep, and preserve all of
-------------------------
its properties necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted.
Section 5.4 Conduct of Business. Continue to engage in a business of the
-------------------
same general type as conducted and proposed to be conducted by it on the date of
this Agreement.
Section 5.5 Maintenance of Insurance.
------------------------
(a) Keep its properties, including without limitation its Inventory, and
the Property insured against fire, theft and other hazards (so-called "All Risk"
coverage) in amounts and with companies satisfactory to Lender to the same
extent in covering such risks as is customary in the same or a similar business,
but in no event in an amount less than the lesser of (i) the total indebtedness
or (ii) the amount necessary to avoid any co-insurance penalty, which policy
shall name Lender as loss payee as its interest may appear, (b) maintain public
liability coverage against claims for personal injuries, death or property
damage in an amount deemed reasonable by Lender, which policy shall name Lender
as an additional insured, and (c) maintain all worker's compensation, employment
or similar insurance as may be required by applicable law. Such All Risk
property insurance coverage shall provide for a minimum of thirty (30) days'
written cancellation notice to Lender. Borrower agrees to deliver copies of all
of the aforesaid insurance policies to Lender. In the event of any loss or
damage to the Collateral, Borrower shall give prompt written notice to Lender
and to its insurers of such loss or damage and shall properly file its proofs of
loss with said insurers.
Section 5.6 Compliance With Laws. Comply in all material respects with all
--------------------
applicable laws, rules, regulations, and orders of Governmental Authorities,
such compliance to include,
26
without limitation, paying before the same become delinquent all taxes,
assessments, and governmental charges imposed upon it or upon its property.
Section 5.7 Right of Inspection. At any reasonable time and from time to
-------------------
time, permit Lender or any agent or representative of Lender to examine and make
copies of and abstracts from the records, including without limitation computer
records, and books of account of, and visit the properties of, Borrower and to
discuss the affairs, finances, and accounts of Borrower with any of its or their
officers and directors and its independent accountants (who, by this reference,
are authorized by Borrower to discuss such matters with Lender or any agent or
representative of Lender).
Section 5.8 Reporting Requirements. Furnish or cause to be furnished to
----------------------
Lender:
(a) As soon as available and in any event within ninety (90) days after the
end of each fiscal year, a consolidated and consolidating balance sheet of
Borrower and its consolidated subsidiaries as of the end of such year and the
related statements of income, operations, sources and uses of funds, retained
earnings and cash flows with accompanying footnotes of Borrower and its
consolidated subsidiaries for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by an unqualified audited report thereon by an
independent certified public accountant acceptable to Lender, which shall state
that such financial statement presents fairly the financial condition as at the
end of such fiscal year, and the combined results of operations and changes in
financial position for such fiscal year, of Borrower and its consolidated
subsidiaries in accordance with GAAP.
(b) Within thirty (30) days after the end of each month internally prepared
consolidated and consolidating financial statements of Borrower and its
consolidated subsidiaries for the period in question and fiscal year to date
together with a balance sheet, income statement and sources and uses of funds.
(c) Within thirty (30) days after the end of each fiscal quarter and each
fiscal year, a financial covenant compliance certificate in form and substance
satisfactory to Lender, containing sufficient detail to verify Borrower's
compliance with the financial covenants contained in Section 7 of this Agreement
and stating either that no Default or Event of Default has occurred and is
continuing or that a Default or Event of Default exists and describing the steps
which have been or are being taken by Borrower to cure such Default or Event of
Default.
(d) On each Business Day, a borrowing base certificate on Lender's then
current form, in each case with supporting verification.
(e) On a monthly basis, (i) a detailed aging of Receivables, (ii) a
detailed aging of accounts payable, and (iii) a detailed inventory report, in
each case in form and substance satisfactory to Lender.
27
(f) Promptly upon receipt thereof, and in any event simultaneously with the
delivery of the financial statements required by subparagraph 5.8(a) hereof,
copies of any reports and management letters submitted to Borrower by
independent certified public accountants in connection with the examination of
financial statements.
(g) Within fifteen (15) days subsequent to filing with the Internal Revenue
Service and applicable state taxing authorities, copies of federal and state
income tax returns of (i) Borrower and (ii) Guarantors.
(h) Promptly after the commencement thereof, notice of all actions, suits,
and proceedings before any Governmental Authority affecting Borrower, and such
additional information regarding such actions, suits, and proceedings as Lender
may request from time to time.
(i) Immediately upon the occurrence of each Default or Event of Default, a
written notice setting forth the details of such Default or Event of Default and
the action which is being taken or proposed to be taken by Borrower with respect
thereto.
(j) Upon request of Lender, copies of all reports (including annual
reports) and notices which Borrower files with or receives from the PBGC or the
U.S. Department of Labor under ERISA; and as soon as possible but not later than
ten (10) days after Borrower knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to any Plan or that
the PBGC or Borrower has instituted or will institute proceedings under Title IV
of ERISA to terminate any Plan, Borrower will deliver to Lender a certificate of
the chief financial officer of Borrower setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination and the action
Borrower proposes to take with respect thereto.
(k) Promptly after the furnishing thereof, copies of any material statement
or report furnished to any other party pursuant to the terms of any indenture,
loan, credit, or similar agreement and not otherwise required to be furnished
to Lender pursuant to any other clause of this Section.
(l) Not more than thirty (30) days following the end of each fiscal year,
financial projections for the next fiscal year, including consolidated balance
sheets, income statements, sources and uses of funds and other supporting
schedules.
(m) Such other information respecting the condition or operations,
financial or otherwise, of Borrower as Lender may from time to time reasonably
request.
The reports described above shall be in form and detail as shall be satisfactory
to Lender and in the case of the reports described in subparagraphs (b), (c),
(d), (e), (g), (i) and (1), shall be certified on behalf of Borrower by
Borrower's chief financial officer as being true, complete and correct.
Section 5.9 Eligible Accounts Receivable; Eligible Inventory. Promptly
-------------------------------------------------
after receiving notice or otherwise becoming aware thereof, notify Lender in
writing that (i) a Receivable that
28
Borrower has represented or warranted to Lender to be an Eligible Account
Receivable has ceased to be an Eligible Account Receivable for any reason other
than payment thereof in the ordinary course of business or (ii) any Inventory
that Borrower has represented or warranted to Lender to be Eligible Inventory
has ceased to be Eligible Inventory for any reason.
Section 5.10 Collateral. (a) Preserve the Collateral in good condition and
----------
order and not permit it to be abused or misused, (b) not allow any of the
Collateral to be affixed to real estate unless such real estate is subject to a
Lien in favor of Lender, (c) upon request of Lender, prepare to deliver all
proceeds of the Collateral to Lender immediately upon receipt in the identical
form received without commingling with other property, (d) if a Default or an
Event of Default has occurred and is continuing, if required by Lender, notify
Account Debtors and obligors that their accounts, instruments, documents,
contracts and all of Borrower's rights to receive payments have been assigned to
Lender and shall be paid directly to Lender, (e) take necessary steps to
preserve the liability of Account Debtors, obligors, and secondary parties whose
liabilities are part of the Collateral, (f) take any action required by Lender
with reference to the Federal Assignment of Claims Act, (g) allow Lender to
inspect the Collateral and to inspect and copy all records relating to the
Collateral, (h) immediately upon request by Lender: (A) transfer possession or
permit Lender to take possession of all Collateral; and (B) assign and/or allow
Lender to immediately take possession of all instruments, and documents which
are part of the Collateral, or as to those hereafter acquired, immediately
following acquisition, and (i) notify Lender of any change of location or
material adverse change in the condition of any of the Collateral, or of any
material adverse change in any fact or circumstance warranted or represented by
Borrower herein or furnished to Lender, or if any Event of Default occurs.
Section 5.11 Defend Collateral. Defend the Collateral against all claims
-----------------
and demands of all persons at any time claiming the same or any interest therein
and, in the event Lender's security interest in the Collateral, or any part
thereof, would be impaired by an adverse decision, allow Lender to contest or
defend any such claim or demand in Borrower's name and pay, upon demand,
Lender's reasonable costs, charges and expenses, including, without limitation
reasonable attorneys' fees in connection therewith.
Section 5.12 Environmental Covenants. Provide at the expense of Borrower a
-----------------------
Phase I environmental site assessment of the Property if an Event of Default
shall have occurred and be continuing or Lender shall have reasonable cause to
believe that an actual or threatened violation of an Environmental Law has
occurred, is occurring or is about to occur, in each case prepared by an
independent environmental consulting or engineering firm acceptable to Lender in
its sole discretion and in each case stating conclusions satisfactory to Lender
in its sole discretion, together with such additional environmental studies,
audits, site assessments or remedial or corrective actions as shall be
reasonably required by Lender or recommended by any such Phase I site
assessment. Should Borrower fail to commence any such environmental site
assessment, study, audit or remedial or corrective action within thirty (30)
days of Lender's written request, Lender shall have the right but not the
obligation to retain an environmental consultant to perform the same, at
Borrower's expense,
29
and all costs and expenses incurred by Lender in connection therewith shall be
payable by Borrower upon demand.
Section 5.13 Operating Accounts. Maintain at all times all of its
------------------
operating accounts, including without limitation its checking accounts, and, if
required by Lender, a blocked account into which proceeds of the Lockbox Account
would be deposited, with Lender.
ARTICLE 6
NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, without the prior written consent of
Lender, until the Commitment is irrevocably terminated and payment is made in
full of the Loan and all its obligations hereunder are fully performed, Borrower
shall not, and shall cause its Subsidiaries not to:
Section 6.1 Liens. Create, incur, assume, or suffer to exist any Lien upon
-----
or with respect to any of its properties, now owned or hereafter acquired,
except:
(a) Liens in favor of the Lender;
(b) Liens for taxes or assessments or other government charges or levies
not yet due and payable or, if due and payable, Liens for taxes being contested
in good faith by appropriate proceedings and for which appropriate reserves in
accordance with GAAP are maintained; and
(c) Liens imposed by law, such as mechanics, materialmen's, landlords',
warehousemen's, and carriers' Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which do not exceed in
the aggregate $50,000.00 and which are not past due for more than thirty (30)
days, unless such Liens are being contested in good faith by appropriate
proceedings and appropriate cash reserves have been established therefor.
Section 6.2 Debt. Create, incur, assume, or suffer to exist any recourse or
----
nonrecourse Debt, except:
(a) Debt of the Borrower under this Agreement;
(b) Debt (if any) described in Schedule 4.4, but no increases, renewals,
-------------
extensions, or refinancings thereof; and
(c) Accounts payable to trade creditors for goods or services and current
operating liabilities (other than for borrowed money), in each case incurred in
the ordinary course of business and paid within the required time, unless
contested by the Borrower in good faith and by appropriate proceedings.
30
Section 6.3 Mergers, Etc. Merge or consolidate with, or sell, assign,
------------
lease, or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of the
assets or the business of any Person.
Section 6.4 Leases. Create, incur, assume, or suffer to exist any
-------
obligation as lessee for the rental or hire of any real or personal property,
except leases existing on the date of this Agreement as set forth in Schedule
--------
6.4 and any extensions or renewals thereof provided however, Borrower may enter
----
into Leases in the ordinary course of business, so long as the sum of its annual
lease payments does not exceed $175,000.00 in any fiscal year.
Section 6.5 Sale and Leaseback. Sell, transfer, or otherwise dispose of any
------------------
real or personal property to any Person and thereafter directly or indirectly
lease back the same or similar property.
Section 6.6 Restricted Payments. Pay, make or declare any Restricted
---------------------
Payment.
Section 6.7 Sale of Assets. Sell, lease, assign, transfer, or otherwise
---------------
dispose of any of its now owned or hereafter acquired assets except: (a) for
Inventory disposed of in the ordinary course of business; and (b) the sale or
other disposition of assets no longer used or useful in the conduct of its
business.
Section 6.8 Investments. Make any loan or advance to any Person, or
------------
purchase or otherwise acquire any capital stock, assets, obligations, or other
securities of, make any capital contribution to, or otherwise invest in or
acquire any interest in any Person except: (a) direct obligations of the United
States or any agency thereof with maturities of one year or less from the date
of acquisition; (b) commercial paper of a domestic issuer rated at least "A-1"
by Standard & Poor's Corporation or "P-1" by Xxxxx'x Investors Service, Inc.;
(c) certificates of deposit with maturities of one year or less from the date of
acquisition issued by Lender; (d) for stock, obligations, or securities received
in settlement of debts (created in the ordinary course of business) owing to
Borrower; (e) investments in money market funds of which substantially all the
assets are comprised of securities of the types described in clauses (a) through
(c) above and (f) fully collateralized repurchase agreements with a term of not
more than twelve months for securities described in clause (a) above and entered
into with any federally insured lender or primary dealers in U.S. Government
securities.
Section 6.9 Guaranties, Etc. Assume, guaranty, endorse, or otherwise be or
---------------
become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock, assets, goods, or
services, or to supply or advance any funds, assets, goods, or services, or to
maintain or cause such Person to maintain a minimum working capital or net
worth, or otherwise to assure the creditors of any Person against loss) for
obligations of any Person, except (i) guaranties by endorsement of negotiable
instruments for deposit or collection or similar
31
transactions in the ordinary course of business, and (ii) a guaranty of the
obligations of its wholly-owned subsidiary, RC Manufacturing, Inc. to
NationsBank in an amount not in excess of $225,000.
Section 6.10 Transactions With Affiliates. Enter into any transaction,
---------------------------
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate.
Section 6.11 Subsidiaries. Create or otherwise acquire an interest in any
------------
Subsidiary.
Section 6.12 Fiscal Year. Change its fiscal year.
-----------
Section 6.13 Accounting Methods. Make or consent to a material change (a)
------------------
in the stock ownership or structure of Borrower or in the manner in which
business of the Borrower is conducted or (b) in its method of accounting unless
such change is within the permissible standards of GAAP.
Section 6.14 Inventory Locations. Move Inventory to or otherwise maintain
-------------------
Inventory at a location with respect to which Borrower has not delivered to
Lender, applicable, (1) a lessor's consent and agreement from the lessor thereof
and (2) a subordination and attornment agreement from each mortgagee thereof,
together with such other documents or instruments as Lender shall deem necessary
in its sole discretion in order to create or maintain a first priority perfected
security interest in such Inventory in favor of Lender, in each case in form and
substance satisfactory to Lender in its sole discretion.
Section 6.15 Fixed Asset Expenditures. Incur expenditures with respect to
------------------------
fixed assets in any fiscal year in an amount in excess of the depreciation of
such fixed asset during such fiscal year.
Section 6.16 Account Balances. Maintain a balance in First Union National
----------------
Bank Account No. 2000025014862 or establish any other account in connection with
Borrower's Mortgage with First Union National Bank, in excess of 125% of the
monthly principal and interest payment due on the Borrower's Mortgage with First
Union National Bank.
ARTICLE 7
FINANCIAL COVENANTS
-------------------
Borrower covenants and agrees that until the Commitment is irrevocably
terminated and payment is made in full of the Loan and all its obligations
hereunder are fully performed, Borrower shall (as to Borrower and any of its
Subsidiaries) and on a consolidated basis:
Section 7.1 Current Ratio. Maintain at all times a ratio of (i) Current
-------------
Assets to (ii) Current Liabilities of not less than 1.2:1.0.
32
Section 7.2 Leverage Ratio. Maintain as of the end of each fiscal quarter
---------------
of the Borrower, a ratio of (i) Total Liabilities to (ii) Tangible Net Worth of
not greater than 2.0:1.0 at the end of each fiscal quarter.
Section 7.3 Tangible Net Worth. Maintain at all times a Tangible Net Worth
-------------------
of not less than $2,500,000.
Section 7.4 Debt Service Coverage Ratio. Maintain on a rolling four quarter
----------------------------
basis as of the end of each fiscal quarter of the Borrower a ratio of (i) EBITDA
to (ii) Current Maturities of Long Term Debt plus Interest Expense of not less
----
than 1.2:1.0.
Section 7.5 Certain Financial Terms. For purposes of this Article 7, the
------------------------
following terms shall have the following meanings:
(a) "Current Assets" means the aggregate amount of assets which in
accordance with GAAP may be properly classified as current assets, after
deducting all costs and estimated earnings in excess of amounts billed and all
indebtedness from Affiliates.
(b) "Current Liabilities" means (i) all Debt due on demand or within one
year from the date of determination thereof (including without limitation all
Debt owed to Lender) and (ii) all other items which, in accordance with GAAP,
may be properly classified as current liabilities.
(c) "Current Maturities of Long-Term Debt" means, with respect to all Debt
which, in accordance with GAAP, may be properly classified as long-term debt,
the portion of such Debt which is due within one (1) year from the date of
determination thereof.
(d) "EBITDA" means earnings (or losses) from operations for any period,
after all expenses and other proper charges but before payment or provision for
any depreciation, amortization, income taxes and increased by interest expense
(including non-cash interest expense) and pension expense and option or warrant
related expenses for such period.
(e) "Interest Expense" means, for any period, the aggregate amount of
interest required to be paid or accrued during such period on all Debt
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of capital leases and including
commitment fees, agency fees, facility fees, balance deficiency fees and similar
fees or expenses in connection with the borrowing of money.
(f) "Tangible Net Worth" means as at any date of determination thereof, (a)
the amount at which common stockholders' equity and preferred stock would be
shown on a balance sheet at such date, minus (b) amounts at which good will and
any other intangibles and amounts owed by and/or invested in Affiliates would be
shown on such balance sheet.
33
(g) "Total Liabilities" means all Debt and other liabilities which in
accordance with GAAP may be properly classified as liabilities and all other
liabilities, indebtedness or obligation whether or not so classified.
ARTICLE 8
SECURITY
--------
The Loans are secured by and pursuant to the Security Documents and
guaranteed by and pursuant to the Guarantees.
ARTICLE 9
EVENTS OF DEFAULT
-----------------
Section 9.1 Events of Default.
-----------------
(a) Any one or more of the following events (whether voluntary or
involuntary or effected by operation of law or otherwise) shall be an Event of
Default:
(1) Borrower shall fail to pay as and when due the principal of,
premium, if any, or interest on the Notes, or any amount of any fee, or any
other liability or indebtedness owing by Borrower to Lender;
(2) Any representation or warranty made or deemed made by Borrower in
any of the Loan Documents, or which is contained in any certificate,
document, opinion, report, or financial or other statement furnished at any
time under or in connection with any Loan Document, shall have been
incorrect in any material respect on or as of the date made or deemed made;
(3) Borrower shall fail to comply with any of the covenants contained
in Articles 6 and 7 or in Section 5.3, 5.7, 5.8, 5.9, 5.10, 5.12 and 5.13;
(4) Borrower shall fail to perform or observe any term, covenant or
agreement contained herein or in any of the other Loan Documents (other
than those specified elsewhere in this Section 9.1) for thirty (30) days
after written notice of such failure shall have been given to Borrower by
Lender;
(5) Borrower shall (A) fail to pay any indebtedness for borrowed money
(other than the Note), including any interest or premium thereon, when due
(including any applicable grace periods) (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise), (B) fail to
perform or observe any term, covenant, or condition on its part to be
performed or observed under any agreement or instrument relating to any
such
34
indebtedness, when required to be performed or observed (including any
applicable grace periods), if the effect of such failure to perform or observe
is to accelerate, or to permit the acceleration after the giving of notice or
passage of time, or both, of the maturity of such indebtedness, whether or not
such failure to perform or observe shall be waived by the holder of such
indebtedness; or any such indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof, or (C) be in default under
any other indebtedness of Borrower to Lender;
(6) Borrower (A) shall generally not, or shall be unable to, or shall admit
in writing its inability to pay its debts as such debts become due; or (B) shall
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver, or trustee for it or a
substantial part of its assets; or (C) shall commence any proceeding under any
bankruptcy, reorganization, arrangements, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (D) shall have any such petition or application filed or any such
proceeding commenced against it in which an order for relief is entered or
adjudication or appointment is made and which remains undismissed for a period
of sixty (60) days or more; or (E) by any act or omission shall indicate its
consent to, approval of, or acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties; or (F) shall suffer
any such custodianship, receivership, or trusteeship to continue undischarged
for a period of sixty (60) days or more;
(7) One or more judgments, decrees, or orders for the payment of money
which in the aggregate exceeds $25,000.00 shall be rendered against Borrower and
such judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of thirty (30) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal;
(8) Any Security Document shall at any time after its execution and
delivery and for any reason cease to create a valid and perfected first priority
security interest (or such lesser priority security interest as may be
specifically set forth therein) in and to the property purported to be subject
to such Security Document or otherwise to be in full force and effect, or any
Security Document shall be declared null and void, or the validity or
enforceability thereof shall be contested by Borrower, or Borrower shall deny it
has any further liability or obligation under any Security Document, or Borrower
shall fail to perform any of its obligations under any Security Document subject
to any notice and cure provisions contained in any Security Document;
(9) Any event shall occur or exist with respect to Borrower which could in
the opinion of Lender subject Borrower to any tax, penalty, or other liability
under or in connection with ERISA;
35
(10) There shall occur any material uninsured damage to or loss,
theft, or destruction of any of the Collateral;
(11) Borrower ceases to conduct its business as currently conducted or
is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs;
(12) There shall occur any material adverse change in the condition
(financial or otherwise), operations, properties or business of Borrower,
any Affiliate, or any Subsidiary;
(13) The occurrence of any of the following: (i) the sale or other
transfer of all or substantially all of the assets of the Borrower, and
(ii) any change in the ownership of the capital stock of the Borrower;
(14) A default by Corporate Guarantor or RC Manufacturing, Inc. of any
of its obligations;
(15) Any other failure of Borrower to perform under this Agreement
subject to applicable notice and cure periods; or
(16) Any material adverse change in the financial condition of the
Borrower or the collateral securing the Loans.
(b) Upon and after the occurrence of an Event of Default, Lender may (1)
declare the Commitment to be terminated, whereupon the same shall forthwith
terminate and/or (2) declare all the outstanding indebtedness evidenced by the
Note and all other amounts payable under this Agreement (including, without
limitation, any prepayment fee that Borrower would have been obligated to pay
had it then elected to prepay the Note and terminate the Commitment), to be
forthwith due and payable, whereupon the Commitment shall be terminated and the
Note, all such interest, and all such other amounts shall become and be
forthwith due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by Borrower;
provided, however, that upon the occurrence of any event described in Section
-------- -------
9.1(a)(6), the Commitment shall terminate and the outstanding Note, all interest
thereon, and all such other amounts payable under this Agreement shall become
automatically due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by Borrower.
(c) The occurrence of an Event of Default under the documents evidencing,
securing or relating to the Loan shall be an Event of Default under this
Agreement.
36
ARTICLE 10
GENERAL PROVISIONS
------------------
Section 10.1 Amendments, Etc. No amendment, modification, termination, or
----------------
waiver of any provision of any of the Loan Documents to which Borrower is a
party, or consent to any departure by Borrower from any terms of any of the Loan
Documents to which it is a party, shall in any event be effective unless the
same shall be in writing and signed by Lender, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
Section 10.2 Notices, Etc. All notices, demands, requests, and other
-------------
communications given under this Agreement shall only be effective if they are
(i) in writing, (ii) actually received by the addressee, and (iii) sent by hand
delivery, by facsimile transmission, by reputable express delivery service, or
by first-class mail, postage prepaid:
(a) If to the Lender, to it at:
People's Bank
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxx, Vice President
With a copy to:
Pepe & Hazard LLP
Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
(b) If to Borrower, to it at:
Star Struck, Inc.
0 Xxxxxxx X. Xxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxx, President
37
With a copy to:
Xxxxxx, Xxxxxxx & Xxxxxxx LLP
00 Xxxxx Xxxxx, #000
Xxxxxxxxx, XX 00000
Attn: Xxxxxxxxx Xxxxxxx, Esq.
or to such other address (and/or facsimile transmission number) as Borrower or
Lender, as the case may be, shall have specified in a notice sent to the other
in accordance with this Section.
Section 10.3 No Waiver; Remedies. No failure on the part of Lender to
--------------------
exercise, and no delay in exercising, any right, power, or remedy under any of
the Loan Documents shall operate as a waiver of such right, power, or remedy,
nor shall any single or partial exercise of any right, power, or remedy under
any of the Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, power, or remedy. The remedies provided in the Loan
Documents are cumulative and not exclusive of any remedies provided by law.
Section 10.4 Successors and Assigns/Participants. This Agreement shall be
--------------------------------
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns; provided, however, that Borrower shall not
-----------------
(by agreement, operation of law, or otherwise) assign any of their respective
rights, or delegate any of their respective obligations, under any of the Loan
Documents to which Borrower is a party without the prior written consent of
Lender, and any such assignment or delegation made without such consent shall be
null and void. Lender shall have the unrestricted right at any time or from time
to time, and without Borrower's or Guarantor's consent, to assign all or any
portion of its rights and obligations hereunder to one or more banks or other
financial institutions (each, an "Assignee"), and Borrower and Guarantors agree
that they shall execute, or cause to be executed, such documents, including
without limitation, amendments to this Agreement and to any other documents,
instruments and agreements executed in connection herewith as Lender shall deem
necessary to effect the foregoing. In addition, at the request of Lender and any
such Assignee, Borrower shall issue one or more new promissory notes, as
applicable, to any such Assignee and, if Lender has retained any of its rights
and obligations hereunder following such assignment, to Lender, which new
promissory notes shall be issued in replacement of, but not in discharge of, the
liability evidenced by the promissory note held by Lender prior to such
assignment and shall reflect the amount of the respective commitments and loans
held by such Assignee and Lender after giving effect to such assignment. Upon
the execution and delivery of appropriate assignment documentation, amendments
and any other documentation required by Lender in connection with such
assignment, and the payment by Assignee of the purchase price agreed to by
Lender and such Assignee, such Assignee shall be a party to this Agreement and
shall have all of the rights and obligations of Lender hereunder (and under any
and all other guaranties, documents, instruments and agreements executed in
connection herewith) to the extent that such rights and obligations have been
assigned by Lender pursuant to this assignment documentation between Lender and
such Assignee, and Lender shall be released from its obligations hereunder and
thereunder to a corresponding extent. Lender shall have the unrestricted right
at any time and from
38
time to time, and without the consent of or notice to Borrower or Guarantor, to
grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in Lender's obligations to lend hereunder
and/or any or all of the loans held by Lender hereunder. In the event of any
such grant by Lender of a participating interest to a Participant, whether or
not upon notice to Borrower, Lender shall remain responsible for the performance
of its obligations hereunder and Borrower shall continue to deal solely and
directly with Lender in connection with Lender's rights and obligations
hereunder. Lender may furnish any information concerning Borrower in its
possession from time to time to prospective Assignees and Participants, provided
that Lender shall require any such prospective Assignee or Participant to agree
in writing to maintain the confidentiality of such information.
Section 10.5 Costs, Expenses, and Taxes; Indemnification.
-------------------------------------------
(a) Borrower agrees to pay on demand all reasonable costs and expenses in
connection with the preparation, execution, delivery, filing, recording, and
administration of any of the Loan Documents, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for Lender with respect
thereto and with respect to advising the Lender as to its rights and
responsibilities under any of the Loan Documents including without limitation,
ongoing advice following the effectiveness of this Agreement and all costs and
expenses, if any, in connection with the protection, collection and/or other
enforcement of this Agreement or any of the Loan Documents. In addition,
Borrower shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing, and
recording of any of the Loan Documents and the other documents to be delivered
under any of the Loan Documents, and agrees to hold and save the Lender harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or failure to pay such taxes and fees.
(b) To the fullest extent permitted by applicable law, Borrower agrees to
defend, indemnify and hold harmless the Lender, any other holder of the Notes
and each of the present and future shareholders, partners, directors, officers,
employees, agents, counsel and successors and assigns of each of them
(collectively with Lender the "Lender Parties") from and against any and all
loss, cost, expense, claim, liability (including strict liability) or asserted
liability incurred from or out of the Loans, the execution, delivery or
performance of this Agreement, or any of the documents or instruments to be
executed and delivered hereunder, or otherwise arising out of the
debtor/creditor relationship between them, Lender or Lender Parties relating to
the Loans, the exercise of any of Lender's rights under the Loans, any
litigation or proceeding instituted or conducted by any Governmental Authority,
any act or omission of Borrower or otherwise, except to the extent (and only to
the extent) that the same arises from the gross negligence or willful misconduct
of Lender.
(c) Without limiting the generality of the preceding subparagraph (b),
Borrower agrees to defend, protect, indemnify and hold harmless Lender Parties
from and against, and to reimburse the Lender Parties on demand with respect to,
any and all matters of any and every kind or character, known or unknown, fixed
or contingent, asserted against or incurred by Lender Parties at any time and
from time to time by reason of or arising out of any violation of any
Environmental Laws, the
39
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Contaminant or any action, suit, proceeding
or investigation brought or threatened with respect to any Contaminant
(including, but not limited to, claims with respect to wrongful death, personal
injury or damage to property), in each case, including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs of internal
counsel incurred in connection with any such investigation, litigation or other
proceeding.
(d) The obligations of Borrower described in this Section 10.5 shall
survive the closing of the transactions described in this Agreement, including
the making of any and all Loans and the payment and satisfaction of the Notes.
Section 10.6 Right of Setoff. Borrower hereby grants to Lender a lien,
---------------
security interest and right of setoff as security for all liabilities and
obligations to Lender, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Lender or any entity under the
control of Fleet Financial Group, Inc., or in transit to any of them. At any
time, without demand or notice, Lender may set off the same or any part thereof
and apply the same to any liability or obligation of Borrower even though
unmatured and regardless of the adequacy of any other collateral securing the
Loan. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
THE BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
Section 10.7 Governing Law; Jurisdiction.
---------------------------
(a) This Agreement, the Notes and the other Loan Documents shall be
construed in accordance with and governed by the laws of the State of
Connecticut without regard to its conflict of laws rules.
(b) Borrower hereby irrevocably submits to the jurisdiction of any
Connecticut State or United States Federal court sitting in Connecticut over any
action or proceeding arising out of or relating to this Agreement, the Notes or
the other Loan Documents, and Borrower hereby irrevocably agrees that all claims
in respect to such action or proceeding may be heard and determined in such
Connecticut State or Federal court. Borrower irrevocably consents to the service
of any and all process in any such action or proceeding by the mailing of copies
of such process to Borrower at its address specified in Section 10.2. Borrower
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Borrower further waives any objection to
venue in such state and any objection to an action or proceeding in such State
on the basis of forum non convenience. Borrower further agrees that any action
or proceeding brought against Lender shall be brought only in Connecticut State
or United States Federal courts sitting in Connecticut.
40
(c) Nothing in this Section 10.7 shall affect the right of Lender to serve
legal process in any other manner permitted by law or affect the right of Lender
to bring any action or proceeding against Borrower or their property in the
courts of any other jurisdiction.
(d) To the extent that Borrower has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether from service
or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to themselves or their property, such
Person hereby irrevocably waives such immunity in respect of its obligations
under this Agreement, the Notes and the other Loan Documents.
(e) BORROWER ACKNOWLEDGES AND AGREES THAT THE TRANSACTION OF WHICH THIS
AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION AND NOT A CONSUMER TRANSACTION
AND WAIVE ANY RIGHT TO A NOTICE AND HEARING UNDER CHAPTER 903a OF THE
CONNECTICUT GENERAL STATUTES, AS AMENDED, OR OTHER STATUTE OR STATUTES AFFECTING
PREJUDGMENT REMEDIES AND AUTHORIZE THE LENDER'S ATTORNEY TO ISSUE A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL SET FORTH A
COPY OF THIS WAIVER. FURTHER, TO THE EXTENT ALLOWED UNDER APPLICABLE LAW,
BORROWER HEREBY WAIVES DEMAND, PRESENTMENT FOR PAYMENT, PROTEST, NOTICE OF
PROTEST, NOTICE OF DISHONOR, DILIGENCE IN COLLECTION, NOTICE OF NONPAYMENT OF
THE NOTES AND ANY AND ALL NOTICES OF A LIKE NATURE.
Section 10.8 Entire Agreement; Severability of Provisions.
--------------------------------------------
(a) This Agreement and the other Loan Documents collectively constitute the
entire agreement and understanding between the parties hereto relating to the
transactions contemplated by this Agreement and supersede any and all
contemporaneous and prior agreements, representations, arrangements and
understandings (written or oral, express or implied) relating to the subject
matter hereof.
(b) If any term or provision of any of the Loan Documents or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction only to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions thereof or the application of such term or provision to
circumstances other than those as to which it is held invalid or unenforceable.
Section 10.9 Estoppel Certificates. Within fifteen (15) days after
---------------------
Lender requests B Borrower to do so, Borrower shall cause its chief financial
officer to duly execute and deliver to Lender a statement certifying (a) that
this Agreement, the Notes, and the other Loan Documents to which Borrower is a
party are in full force and effect and have not been modified except as
described in said statement, (b) the date to which interest on the Notes have
been paid, (c) the unpaid principal
41
balance of the Notes, (d) whether to Borrower's knowledge an Event of Default
has occurred and is continuing, and if so, describing in reasonable detail each
such Event of Default of which it has knowledge, (e) whether to its knowledge
Borrower has any defense, setoff, or counterclaim to the payment or performance
of any of its obligations in accordance with the respective terms of this
Agreement, the Notes, and the other Loan Documents, as the case may be, and, if
so, describing each defense, setoff, or counterclaim of which it has knowledge
in reasonable detail (including where applicable the amount thereof), and (f) as
to any other matter reasonably requested by Lender.
Section 10.10 Waiver of Jury Trial and Consequential Damages.
-----------------------------------------------
(a) BORROWER AND LENDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THE NOTES OR ANY OTHER LOAN
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO ACCEPT
THE NOTES AND MAKE THE LOANS.
(b) NONE OF LENDER, BORROWER, OR ANY AGENT OR ATTORNEY OF EITHER OF THEM
SHALL BE LIABLE TO ANY OF THE OTHERS FOR CONSEQUENTIAL DAMAGES ARISING FROM ANY
BREACH OF CONTRACT, TORT, OR OTHER WRONG RELATING TO THE ESTABLISHMENT,
ADMINISTRATION, OR COLLECTION OF THE OBLIGATIONS RELATING IN ANY WAY TO THIS
AGREEMENT, THE NOTES, OR ANY OF THE OTHER LOAN DOCUMENTS, OR THE ACTION OR
INACTION OF ANY OF SUCH PERSONS UNDER ANY ONE OR MORE HEREOF OR THEREOF.
(c) IN THE EVENT LENDER SEEKS TO TAKE POSSESSION OF ANY OR ALL OF THE
COLLATERAL BY COURT PROCESS OR OTHER METHOD AVAILABLE UNDER THE LAW, BORROWER
IRREVOCABLY WAIVES ANY BOND AND ANY SURETY OR SECURITY RELATING THERETO REQUIRED
BY ANY STATUTE, COURT RULE OR OTHERWISE AS AN INCIDENT TO SUCH POSSESSION, AND
WAIVES ANY DEMAND FOR POSSESSION PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION
TO RECOVER WITH RESPECT THERETO. BORROWER FURTHER WAIVES THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS.
Section 10.11 Replacement of the Notes. Upon receipt by Borrower of an
------------------------
affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of the Notes or any other Security Document, and (a) in the case of
loss, theft, or destruction of the Notes or Security Agreement, Borrower will
execute and deliver in lieu thereof replacement Notes or Security Documents or
mutilation of the Notes or any other Security Document of like tenor, or (b) in
the case of mutilation, upon surrender and cancellation thereof, Borrower will
execute and deliver in lieu thereof replacement Notes or Security Documents of
like tenor.
42
Section 10.12 Survival of Representations and Warranties. All
------------------------------------------
representations, warranties, and covenants made by Borrower in this Agreement or
any of the other Loan Documents or in any certificate or other writing delivered
by it or on its behalf thereunder shall be considered to have been relied upon
by Lender and shall survive the delivery of this Agreement and the other Loan
Documents. All statements in any such certificate or other writing shall
constitute representations and warranties of Borrower hereunder.
Section 10.13 Further Assurances. Borrower from time to time shall execute
------------------
and deliver to Lender such additional documents and will provide such additional
information as Lender may reasonably require to carry out the terms of this
Agreement and to keep Lender informed of the status and affairs of Borrower.
Section 10.14 Construction. Each covenant contained in this Agreement
------------
shall be construed (absent an express contrary provision therein) as being
independent of each other covenant contained herein, and compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant.
Section 10.15 Captions. Article and Section titles in the Loan Documents
--------
are included for convenience only and do not define, limit, or describe the
scope of the provisions thereof.
Section 10.16 Opinion Letter. The obligation of Lender to make the Loans is
--------------
subject to receipt by it of an opinion of counsel to Borrower dated as of the
closing date as to certain matters specified in this Agreement. Borrower having
consulted with their legal counsel acknowledges that the delivery of the opinion
may create an attorney/client relationship between counsel to Borrower and
Lender and Borrower knowingly waives any resulting conflict of interest, present
or future, arising out of the delivery of the opinion.
Section 10.17 Examination of Records. Lender will have the right to
----------------------
conduct field audits or otherwise make periodic examinations of the books,
records and operations of Borrower and review and verify the Receivables of
Borrower. All costs arising in connection with any exercise of Lender's rights
under this Section 10.17 shall be at the rate of $500 per man day plus out-of-
pocket expenses and shall be for the account of Borrower up to a maximum of
$7,500 per annum unless an Event of Default shall have occurred, in which event
such maximum shall be inapplicable and all such costs shall be for the account
of Borrower.
Section 10.18 Releases. Borrower hereby acknowledges that it has been
--------
represented by competent counsel in connection with this transaction and has
been fully advised by such counsel of the full range of rights and obligations
possessed by them and undertaken or received pursuant to the terms of this
Agreement and, specifically, the provisions of this section of the Agreement.
Borrower hereby knowingly and, after consultation with counsel, freely
acknowledges and agrees that it does not now have nor know of any basis for any
claim in tort, contract or otherwise against the Lender Parties for breach of
any of the terms of the documents evidencing or securing the Loans or which may
have arisen out of the relationship between them and any of Lender Parties
relating
43
to the Loans up to and through the date of this Agreement. Borrower acknowledges
and agrees that this Agreement was negotiated, executed and delivered freely and
with full and informed knowledge of the consequences of this Agreement and that
it has executed this Agreement without duress and that Lender has proceeded in a
commercially reasonable manner in light of all the facts and circumstances
surrounding the transaction which are the subject of this Agreement.
Section 10.19 Counterparts. This Agreement may be executed and delivered in
any number of counterparts. Each counterpart shall constitute an original, but
all counterparts together shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers or partners thereunto duly authorized, as of the
date first above written.
BORROWER:
STAR STRUCK, INC.
By /s/ Xxxxxxx Xxxxxx
---------------------------------
Xxxxxxx Xxxxxx
Its President
Duly Authorized
LENDER:
PEOPLE'S BANK
By /s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx
Its Vice President
Duly Authorized
44
SCHEDULE 4.4
------------
Outstanding debt to First Union National Bank in the approximate amount of
$670,000.00.
SCHEDULE 4.5
------------
Lease by and between ESAB, LLC, as Lessor, and Star Struck, as Lessee,
dated June 1, 1997, relating to premises located at 23 Xxxxxxx X. Xxxxxx
Circle, Bethel, Connecticut.
Schedule 4.6
------------
[DURANT, NICHOLS, XXXXXXX, XXXXXXXX & XXXXXXX, PC. LETTERHEAD]
October 23, 1998
People's Bank
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Re: Star Struck Inc.
----------------
Ladies and Gentlemen:
Xxxx Xxxxxxx, Attorney for Star Struck Inc. (the "Company"), has
asked us to furnish you with information concerning pending litigation in
which we are defending the Company.
A claim has been filed by a former employee of the Company, Xxxxx
Xxxxxxx, in U.S. District Court charging that she was sexually harassed and
then terminated from employment because of her sex. A motion for summary
judgment challenging the timeliness of her claims and their factual support
is pending.
The information set forth herein is as of the date hereof, except as
otherwise noted, and we disclaim any undertaking to advise you of changes
which may be brought to our attention hereafter.
The information provided herein is solely for your use in connection
with the proposed financing for the Company, and our statements herein are
not to be quoted in whole or in part, summarized, or otherwise referred
to, nor is this letter to be filed with or delivered to any governmental
agency or other person, without our prior written consent.
If you wish to have any further information with respect to the
matter referred to herein, we will be pleased to confer with you and the
Company's representative at a mutually convenient time and place.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxx-Xxxxx
Xxxxxxx X. Xxxxxxx-Xxxxx
cc: Xxxx Xxxxxxx
Xxxxxxxx Xxxxxxxxxx
Schedule 6.4
------------
Lease dated June 1, 1997 by and between ESAB, LLC and Star Struck, Inc. for
Xxxxx 0X, 0X and 4B at 23 Xxxxxxx X. Xxxxxx Circle, Bethel, Connecticut.
