EX-10.19 4 a2228752zex-10_19.htm EX-10.19 Execution Version Loan and Security Agreement Borrower: Quench USA, Inc. Address: 780 5th Avenue, Suite 135 King of Prussia, PA 19406 Date: October 7, 2011
Exhibit 10.19
Execution Version
Borrower: |
Quench USA, Inc. |
Address: |
000 0xx Xxxxxx, Xxxxx 000 |
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Xxxx xx Xxxxxxx, XX 00000 |
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Date: |
October 7, 2011 |
This Loan and Security Agreement is entered into on the above date between ORIX Venture Finance LLC, a Delaware limited liability company (“ORIX”), with an address at 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 and the borrower named above (“Borrower”), whose chief executive office is located at the above address (“Borrower’s Address”). The Schedule to this Loan and Security Agreement being signed concurrently (the “Schedule”) is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 7 below.)
substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all of the above, and all Borrower’s books relating to any of the above, including without limitation the assets identified in the Representations; provided, however, that the Collateral shall not include any assets that are the subject of any Permitted Acquisition to the extent that such assets are subject to a continuing security interest in favor of or otherwise pledged to the seller of such assets in connection with any deferred purchase consideration arrangement pursuant to such Permitted Acquisition.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce ORIX to enter into this Agreement and to make the Loan, Borrower represents and warrants to ORIX as follows, and Borrower covenants that Borrower will at all times comply with all of the following covenants:
3.6 Books and Records. Borrower has maintained and will maintain at Borrower’s Address complete and
accurate books and records, and an accounting system in accordance with GAAP.
4. ADDITIONAL DUTIES OF THE BORROWER.
corporate, financial, and operating books and records, (iii) enter any of Borrower’s properties and evaluate Borrower’s assets and operations, and (iv) meet with and discuss Borrower’s financial and operational performance and future prospects with Borrower’s officers, directors, and independent accountants. The cost of one such inspection and audit per year shall be at Borrower’s expense, including but not limited to all reasonable fees and expenses associated with ORIX’s attorneys, auditors, consultants, appraisers, and other experts, plus all other reasonable documented out-of-pocket costs and expenses.
(i) merge or consolidate with another corporation or entity other than (a) mergers or consolidations of a Subsidiary into Borrower, or (b) in connection with a Permitted Acquisition;
(ii) acquire any assets, except (a) in the ordinary course of Business, and (b) in connection with a Permitted Acquisition;
(iii) enter into any other transaction outside the ordinary course of business other than in connection with a Permitted Acquisition;
(iv) sell or transfer any Collateral other than sales of Inventory in the ordinary course of business (except that, provided no Default or Event of Default has occurred and is continuing, Borrower may do the following in good faith arm’s length transactions, in the ordinary course of business: (A) enter into non-exclusive licenses with respect to its Intellectual Property; (B) trade-in or dispose of obsolete or unneeded Equipment in the ordinary course of business in an amount not in excess of $250,000 in any fiscal year); and (C) sell or dispose of other assets in an amount not in excess of $250,000 in any fiscal year;
(v) store any Inventory or other Collateral with an aggregate value in excess of $100,000 (or, until June 30, 2012, in excess of $200,000 in Borrower’s Atlanta storage facility) per location (or Inventory or other Collateral with an aggregate value in excess of $2,000,000 at all such locations), with any warehouseman or other third party unless there is in place an agreement by such warehouseman or other third party in favor of ORIX waiving any liens or other rights on such Inventory or other Collateral;
(vi) make any loans of any money or other assets to, or purchase the stock or other securities of, or make any other investment in, any other Person;
(vii) guarantee or otherwise become liable with respect to the obligations of another Person;
(viii) pay or declare any dividends on Borrower’s stock (other than dividends payable solely in shares of stock of Borrower);
(ix) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s stock, other than purchases from terminated or former employees, directors or consultants not to exceed $250,000 in any fiscal year;
(x) incur or permit to be outstanding any Indebtedness, other than Permitted Indebtedness ;
(xi) create a Subsidiary of Borrower or permit a Subsidiary of Borrower to be created, unless: (A) such Subsidiary executes and delivers to ORIX a continuing guaranty with respect to the Obligations and a Security Agreement granting ORIX a first-priority security interest in all of such Subsidiary’s assets (subject only to Permitted Liens), or such Subsidiary becomes a co-borrower hereunder; and (B) the stock or other equity interests of any such Subsidiary, are pledged to ORIX as security for the Obligations, in each case pursuant to documentation in form reasonably acceptable to ORIX; provided, however, that Borrower is only required to pledge 65% of the stock or other equity interests of any foreign Subsidiary to which this clause (xi) is applicable;
(xii) make or permit any material change in the nature of its business or commence any new type of business materially different from its business at the date of this Agreement, other than any business which is a reasonable extension, development or expansion thereof or ancillary thereto;
(xiii) reincorporate in another state;
(xiv) dissolve or elect to dissolve; or
(xv) agree to do any of the foregoing.
or other Deposit Account by Borrower or any Subsidiary, and any Material Adverse Change.
(a) Borrower shall notify ORIX in writing at least two weeks in advance of the time and place of any regularly scheduled meeting, or as soon as reasonably possible of any unscheduled meeting, of the Board of Directors of Borrower (including without limitation telephone, conference call and video meetings) (all said scheduled and unscheduled meetings being referred to herein as “Board Meetings”). Borrower shall give ORIX copies of all notices, minutes, consents and other materials the Borrower provides to its directors in connection with said Board Meetings, at the same time as provided to its directors, except that Borrower may exclude any such materials if Borrower’s Board of Directors determines in good faith that such exclusion is reasonably necessary to preserve the attorney-client privilege.
(b) ORIX shall also have the right to have a representative attend all Board Meetings, in a nonvoting-observer capacity, except to the extent that Borrower’s Board of Directors determines in good faith that the exclusion of ORIX is necessary to preserve attorney-client privilege.
(c) Any information provided to ORIX under this Section 4.10 shall be subject to the confidentiality agreement in Section 8.3 of this Agreement.
other documents as may be reasonably provided and requested by Borrower as required to terminate ORIX’s security interests in the Collateral.
6. EVENTS OF DEFAULT AND REMEDIES.
(a) Any written warranty, representation, statement, report or certificate made or delivered to ORIX by Borrower or any of its Subsidiaries or any of their respective officers, employees or agents on behalf of Borrower, now or in the future, shall be untrue or misleading in a material respect when made; or
(b) Borrower shall fail to pay (i) any principal payment on any Loan on the date due or (ii) any interest payment on any Loan within three (3) Business Days after the date due; or
(c) Borrower shall fail to pay any other monetary Obligation, within five (5) Business Days after the date due; or
(d) Borrower shall fail to comply with any of the Financial Covenants set forth in the Schedule or with any provision under Subsection 4.5 or 4.10 hereof; or
(e) Borrower shall fail to perform any non-monetary Obligation within ten (10) days after the date due (the “Grace Period”); provided, however, that such Grace Period shall be extended an additional fifteen (15) days if Borrower is taking commercially reasonable steps to perform such Obligations within the initial Grace Period and it is possible for Borrower to perform such non-monetary Obligation within the extended period; or
(f) any levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral or any asset of any Subsidiary which is not cured within 10 days after the occurrence of the same; or
(g) Borrower or any Subsidiary breaches any material contract or obligation, which has or may reasonably be expected to have a material adverse effect on Borrower’s business or financial condition; or
(h) a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of $100,000 or more shall be rendered against Borrower or any Subsidiary and shall remain unsatisfied and unstayed for a period of 30 days after the entry thereof; or
(i) dissolution, termination of existence, insolvency, business failure or temporary or permanent suspension of business of Borrower or any Subsidiary; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any Insolvency Proceeding by Borrower or any Subsidiary (or against Borrower or any Subsidiary which is not dismissed within 45 days); or
(j) revocation or termination of, or limitation or denial of liability upon, or default under, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of any Insolvency Proceeding by any such guarantor (or against any such guarantor which is not dismissed within 45 days); or
(k) revocation or termination of, or limitation or denial of liability upon, or default under, any pledge of any certificate of deposit, securities, money or other property or asset pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of any Insolvency Proceeding by any such third party (or against such third party which is not dismissed within 45 days); or
(l) a Change in Control shall occur; or
(m) Borrower or any Subsidiary shall generally not pay its debts as they become due, or Borrower or any Subsidiary shall conceal, remove, or transfer any part of its property with intent to hinder, delay, or defraud its creditors, or make or suffer any transfer of any of its property in any way that may be fraudulent under any bankruptcy, fraudulent conveyance, or similar law; or
(n) a Material Adverse Change shall occur; or
(o) Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits, attempts to limit, or repudiates any of its obligations to ORIX with respect to such subordination; or
(p) an event of default shall occur and be continuing under any other Loan Document (after giving effect to, but without duplication of, any cure or grace periods under such other Loan Document applicable thereto); or
(q) any default or event of default shall occur under any document, instrument or agreement relating to any Permitted Lien securing an amount in excess of $150,000, which is not cured within any applicable cure period; or
(r) any default or event of default shall occur under any document, instrument or agreement relating to any Indebtedness in an amount in excess of $150,000, which is not cured within any applicable cure period.
ORIX may cease making any Loans hereunder during any of the above cure periods, and thereafter if an Event of Default has occurred and is continuing.
any one or more of the following in accordance with applicable law: (a) cease making Loans or otherwise extending credit to Borrower under this Agreement or any other document or agreement, and declare all or any portion of ORIX’s commitment to make any Loan hereunder to be terminated; (b) accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (c) accelerate or extend the time of payment of, compromise, issue credits on, or bring suit on the Accounts and other Collateral (in the name of Borrower or ORIX), settle or adjust disputes or claims directly with Account Debtors for amounts and upon terms which it considers advisable, and notify Account Debtors on the Accounts and other Collateral that the Accounts and Collateral have been assigned to ORIX, and that payments in respect thereof shall be made directly to ORIX, and otherwise administer and collect the Accounts and other Collateral; (d) collect, receive, dispose of and realize upon any Investment Property, including withdrawal of any and all funds from any securities accounts; (e) take possession of any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes ORIX without judicial process to peaceably enter onto any of Borrower’s premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge by Borrower (and any other reasonable documented charges shall be payable by Borrower and be deemed part of the Obligations hereunder) for so long as ORIX deems it reasonably necessary in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should ORIX seek to take possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that ORIX retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (f) require Borrower to assemble any or all of the Collateral and make it available to ORIX at places designated by ORIX which are reasonably convenient to ORIX and Borrower, and to remove the Collateral to such locations as ORIX may deem advisable; (g) complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, ORIX shall have the right to use Borrower’s premises, vehicles, equipment and all other property without charge by Borrower (and any other reasonable documented charges shall be payable by Borrower and be deemed part of the Obligations hereunder); (h) sell, lease or otherwise dispose of any of the Collateral, in its condition at the time ORIX obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale; or (i) undertake to, or engage consultants and other experts to, analyze, evaluate and report upon Borrower’s business plan, forecasts, viability, valuation, and planned measures to address any Event of Default hereunder. ORIX shall have the right to conduct such disposition on Borrower’s premises without charge by Borrower (and any other reasonable documented charges shall be payable by Borrower and be deemed part of the Obligations hereunder) to ORIX, for such periods and at such time or times as ORIX deems reasonable, or on ORIX’s premises or elsewhere, and the Collateral need not be located at the place of disposition. ORIX may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale. All reasonable documented fees, expenses, costs, liabilities and obligations, including but not limited to reasonable documented out-of-pocket attorneys’ fees, incurred by ORIX with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of ORIX’s rights and remedies, from and after the occurrence of and during the continuance of any Event of Default, the interest rate applicable to the Obligations shall, at ORIX’s election be increased by an additional two percent per annum.
methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.
7. DEFINITIONS. As used in this Agreement, the following terms have the following meanings:
“Accounts” means all of the following, now owned and hereafter acquired by Borrower: all “accounts” as defined in Section 9-102(a)(2) of the Code in effect on the date hereof with such additions to such term as may hereafter be made (whether or not earned by performance), and all guaranties and other security therefor, and all rights of stoppage in transit and all other rights or remedies of an unpaid vendor, lienor or secured party.
“Account Debtor” means the obligor on an Account.
“Affiliate” means any Person controlling, controlled by or under common control with Borrower. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of any Person, whether through ownership of common or preferred stock or other equity
interests, by contract or otherwise. Without limiting the generality of the foregoing, each of the following shall be an Affiliate: any officer, director, employee or other agent of Borrower, any shareholder or Subsidiary of Borrower, and any other Person with whom or which Borrower has common shareholders, officers or directors.
“Agreement” and “this Agreement” means this Loan and Security Agreement and all Exhibits and Schedules hereto and all modifications and amendments to, extensions of, and replacements for this Agreement.
“Base Rate” means, during each month, the greatest of the following: (a) the highest Prime Rate in effect during such month, or (b) the highest 3-month LIBOR Rate in effect during such month, plus 2.50% per annum.
“Business Day” means any day other than a Saturday, Sunday or any other day on which commercial banks in New York are required or permitted by law to close.
“Change in Control” means: (i) a change in the record or beneficial ownership of an aggregate of more than 40% of the outstanding shares of stock of Borrower, in one or more transactions, compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof, without the prior written consent of ORIX; or (ii) a transaction in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.
“Closing Date” means the date of this Agreement.
“Code” means the Uniform Commercial Code as adopted and in effect in the State of New York on the date hereof.
“Collateral” has the meaning set forth in Section 2.1 above.
“continuing” and “during the continuance of” when used with reference to a Default or an Event of Default means that the Default or Event of Default has occurred and has not been either waived in writing by ORIX or cured within any applicable cure period.
“Default” means any event which with notice or passage of time or both, would constitute an Event of Default.
“Deposit Account” means all of the following, now owned and hereafter acquired by Borrower: all “deposit accounts” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and certificates of deposit but excluding payroll, trust and escrow accounts.
“Equipment” means all of the following, now owned and hereafter acquired by Borrower: all “equipment” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles, and any interest in any of the foregoing.
“Event of Default” means any of the events set forth in Section 6.1 of this Agreement.
“GAAP” means generally accepted accounting principles consistently applied.
“General Intangibles” means all of the following, now owned and hereafter acquired by Borrower: all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, Deposit Accounts, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, licenses, permits, domain names, claims, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“Good Faith Business Judgment” means ORIX’s business judgment, exercised honestly and in good faith and not arbitrarily. Borrower shall have the burden of proof in any claim that ORIX did not exercise Good Faith Business Judgment.
“Indebtedness” means (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, (d) obligations relating to outstanding letters of credit, (e) obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices, (f) obligations under guarantees, indemnity agreements and similar agreements .
“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other state, federal or other bankruptcy or insolvency law, now or hereafter in effect, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally
with its creditors, or proceedings seeking reorganization, arrangement, readjustment of debt, dissolution or liquidation, or other relief.
“Intellectual Property” means all of the following, now owned and hereafter acquired by Borrower: all (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, (b) trade secret rights, including all rights to unpatented inventions and know-how, and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, servicemarks, trade styles, and trade names, whether or not any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by any such trademarks; (f) computer software and computer software products; (g) designs and design rights; (h) technology; (i) all claims for damages by way of past, present and future infringement of any of the rights included above; and (j) all licenses or other rights to use any property or rights of a type described above.
“Inventory” means all of the following, now owned and hereafter acquired by Borrower: all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment Property” means all of the following, now owned and hereafter acquired by Borrower: all “investment property” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, wherever located, and all other securities of every kind, whether certificated or uncertificated.
“LIBOR Rate” means (i) the three-month London Interbank Offered Rate for deposits in U.S. dollars, as shown each day in The Wall Street Journal (Eastern Edition) under the caption ‘Money Rates - London Interbank Offered Rates (LIBOR)’; or (ii) if the Wall Street Journal does not publish such rate, the offered three-month rate for deposits in U.S. dollars which appears on the Reuters Screen LIBO Page as of 10:00 a.m., New York time, each day, provided that if at least two rates appear on the Reuters Screen LIBO Page on any day, the ‘LIBOR Rate’ for such day shall be the arithmetic mean of such rates; or (iii) if the Wall Street Journal does not publish such rate on a particular day and no such rate appears on the Reuters Screen LIBO Page on such day, the rate as comparable to the foregoing, as determined in good faith by ORIX (which determination shall be conclusive absent manifest error).
“Loan Documents” means this Loan Agreement and all other present and future documents, instruments and agreements securing or evidencing any Loan or otherwise relating hereto, including, without limitation, the Post-Closing Agreement, and all present and future guaranties of any Obligations, and all present and future documents, instruments and agreements securing or relating to any such guaranties.
“Material Adverse Change” means (i) a material adverse change in the business, operations, results of operations, assets (other than goodwill), liabilities or condition of Borrower, (ii) the impairment of Borrower’s ability to perform the Obligations, or of ORIX to enforce the Obligations or realize upon the Collateral, or (iii) a material adverse change in the value of the Collateral or the amount which ORIX would be likely to receive in the liquidation of the Collateral.
“Obligations” means all present and future Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower or any of its Subsidiaries or affiliates to ORIX or its parent or any of its subsidiaries or affiliates, whether evidenced by this Agreement or any note or other instrument or document, whether arising from an extension of credit, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by ORIX in Borrower’s indebtedness or obligations owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, reasonable documented out-of-pocket expenses, fees, attorney’s fees, expert witness fees, audit fees, consulting fees, appraisal fees, loan fees, prepayment fees, and any other sums or incurred by ORIX pursuant to the exercise of its rights hereunder and chargeable to Borrower under this Agreement or under any other present or future instrument or agreement between Borrower and ORIX.
“Other Property” means all of the following, now owned and hereafter acquired by Borrower: all of the following as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and all rights relating thereto: “documents”, “instruments”, “chattel paper”, “commercial tort claims”, “goods”, “letter-of-credit rights”, “fixtures”, “money”,
proceeds” and “supporting obligations” and all other tangible and intangible personal property and rights of any other kind which are not included in the other items of Collateral, whether or not covered by the Code.
“Permitted Acquisition” means an acquisition transaction pursuant to which the following conditions are satisfied: (i) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions; (ii) Borrower is in pro forma compliance with all financial covenants after giving effect to such transactions; (iii) such transaction does not result in a Change in Control (as applicable); (iv) Borrower is the surviving entity and the target is a U.S. entity or an entity organized under another jurisdiction within North America (including Mexico and countries located in the Caribbean) in which ORIX is able to perfect its liens in the acquired assets (as applicable); (v) the target becomes a borrower under this Agreement (as applicable); (vi) the merger or consolidation is not likely to cause a Material Adverse Change (as applicable); (vii) value of the acquired assets (inclusive of goodwill, but exclusive of any assets that are subject to a continuing security interest in favor of or otherwise pledged to the seller of such assets in connection with any deferred purchase consideration arrangement) is equal to or greater than the purchase price payment amount made at closing (exclusive of any deferred purchase price payment amounts or earn-out payments); (viii) acquired assets (other than any assets that are subject to a continuing security interest in favor of or otherwise pledged to the seller of such assets in connection with any deferred purchase consideration arrangement) become part of the Collateral, and are acquired free and clear of any other liens other than Permitted Liens; (ix) any Subordinated Debt used to finance deferred payment obligations shall not contain a cross-default to this Agreement; (x) Borrower provides ORIX copies of all final transaction documents related to such acquisition prior to closing; and (xi) not later than ten (10) Business Days prior to the proposed acquisition consummation date, Borrower provides ORIX evidence that (a) the target is in a similar line of or complementary services business as Borrower; and (b) adequate financial information with respect to the seller and the seller’s assets to be acquired by Borrower.
“Permitted Indebtedness” means: (a) Borrower’s Indebtedness to ORIX under this Agreement or any other Loan Document; (b) Indebtedness existing on the date hereof related to deferred purchase price payments in a total principal amount not in excess of $3.4 million (which shall be exclusive of Indebtedness incurred pursuant to factoring agreements entered into for the purposes of acquiring and/or financing the acquisition of cooler assets); (c) Indebtedness in connection with the financing or lease of vehicles used in the Company’s business in a total principal amount not in excess of $1 million on the date hereof and not in excess of $2 million at any time; (d) Indebtedness which is consented to in writing by ORIX in its Good Faith Business Judgment or which is Subordinated Debt; (e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business; (f) capitalized leases and purchase money Indebtedness in an aggregate amount not exceeding $500,000 at any time outstanding; (g) deferred purchase price payments in connection with Permitted Acquisitions; (h) assumed service liabilities in connection with Permitted Acquisitions; (i) assumed service liabilities outstanding as of the date hereof that were incurred pursuant to existing factoring agreements, entered into for the purposes of acquiring and/or financing the acquisition of cooler assets (for the avoidance of doubt, such aggregate amount of such service liabilities shall be reduced as Borrower’s service obligations terminate upon the maturity or termination of such applicable factoring agreements (which shall not be extended or re-factored)); (j) factored leases acquired pursuant to Permitted Acquisitions; and (k) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (c) through (f) above, provided that the principal amount thereof is not increased and the terms thereof are not modified to impose more burdensome terms upon Borrower.
“Permitted Liens” shall mean the following: (a) purchase money security interests in specific items of Equipment; (b) leases of specific items of Equipment; (c) liens for taxes, fees, assessments, or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the enforcement of such lien) for which adequate reserves in accordance with GAAP are being maintained, provided the same have no priority over any of ORIX’s security interests; (d) liens of materialmen, mechanics, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent or are being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the enforcement of such lien) for which adequate reserves in accordance with GAAP are being maintained; (e) liens of warehousemen, arising in the ordinary course of business and securing obligations which are not delinquent or are being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the enforcement of such lien) for which adequate reserves in accordance with GAAP are being maintained provided the warehouse has executed and delivered to ORIX an agreement in favor of ORIX waiving any such lien as against ORIX; (f) liens which constitute banker’s liens, rights of set-off, or similar rights as to deposit accounts or other funds maintained with a bank or other financial institution (but only to the extent such banker’s liens, rights of set-off or other rights are in respect of customary service charges relative to such deposit accounts and other funds, and not in respect of any loans or other extensions of credit by such bank or other financial institution to Borrower);
(g) cash deposits or pledges of an aggregate amount not to exceed $150,000 to secure the payment of worker’s compensation, unemployment insurance, or other social security benefits or obligations, public or statutory obligations, surety or appeal bonds, bid or performance bonds, or other obligations of a like nature incurred in the ordinary course of business; (h) liens existing on the date hereof incurred pursuant to factoring agreements entered into for the purposes of acquiring and/or financing the acquisition of cooler assets; (i) liens in favor of the seller of any assets in which a security interest has been granted or which have otherwise have been pledged to such seller of such assets in connection with a deferred purchase consideration arrangement; and (j) liens in favor of factors or lessors on acquired assets existing at the time such assets are acquired.
“Person” means any individual, sole proprietorship, partnership, joint venture, trust, limited liability company, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.
“Post-Closing Agreement” means the post-closing agreement dated as of the date hereof between Borrower and ORIX.
“Prime Rate” means the rate of interest per annum publicly announced from time to time by Citibank N.A., or, if not available, another major money center bank in New York City selected by ORIX in its sole discretion, as its prime rate in effect (said prime rate not being intended to be the lowest rate of interest charged by the referenced bank in connection with extensions of credit), or if such rate is not available, by a reasonable alternative means of determining the rate of interest selected by ORIX in its sole discretion.
“Representations” means the written Representations and Warranties previously delivered by Borrower to ORIX dated as of September 10, 2011.
“Subordinated Debt” means Indebtedness which is (i) on terms reasonably acceptable to ORIX in its Good Faith Business Judgment, and (ii) which is subordinated to the Obligations pursuant to (A) a Subordination Agreement in such form as ORIX shall reasonably specify in its Good Faith Business Judgment, or (B) the inclusion of the following provision in all agreements, notes, or documents evidencing such indebtedness:
“[Seller] hereby acknowledges and agrees that [Seller]’s rights to receive any payment of the deferred portion of the Purchase Price (the “[Seller] Debt”), are unsecured with respect to the Collateral (as defined in the Loan Agreement (as defined below)) and subordinated to the payment in full in cash by [Buyer] of its obligations to ORIX Venture Finance LLC (“ORIX”) under the Loan and Security Agreement dated as of October 7, 2011 (as the same may be further amended, restated, supplemented or replaced, the “ORIX Agreement”) by and between Quench USA, Inc. and ORIX (including the Obligations as defined in the ORIX Agreement, collectively, the “ORIX Debt”). Notwithstanding the foregoing, [Seller] may accept the regularly scheduled (non-default) payments of the deferred portion of the Purchase Price; provided that no default or event of default and no event which, with notice or passage of time or both, would constitute a default or event of default, has occurred under the ORIX Agreement, both before and after giving effect to such payments.
The [Seller] Debt shall not be cross-defaulted to the ORIX Debt. Until the ORIX Debt has been paid and performed in full in cash, [Seller] shall not (i) accelerate the maturity of the [Seller] Debt, (ii) commence or join in any action or proceeding to recover any amounts due on the [Seller] Debt other than actions or proceedings in which recourse is limited to assets in which such [Seller] was granted a security interest in or which were otherwise pledged to [Seller] by [Buyer], (iii) commence or join in any involuntary bankruptcy petition, insolvency proceeding or similar judicial proceeding against [Buyer], or (iv) initiate or prosecute any claim, action or other proceeding (a) challenging the validity, enforceability or unavoidability of any claim of ORIX with respect to any of its collateral, or (b) challenging the perfection, enforceability or unavoidability of any liens or security interests of ORIX in any collateral.
Notwithstanding any provision to the contrary contained in this Agreement, the parties hereto hereby acknowledge that ORIX is an intended third-party beneficiary of the foregoing subordination provisions and, until the ORIX Debt has been paid and performed in full in cash, the parties shall not amend or modify such provisions, without ORIX’s consent, and any purchaser, assignee or transferee of any rights, claim or interest of any kind in or to any of the [Seller] Debt, shall remain bound the foregoing as a condition to any sale, assignment or transfer.”
“Subsidiary” of Borrower means any corporation, partnership, limited liability company or other entity or organization which is directly or indirectly controlled by Borrower.
8.3 Additional Lender. ORIX, at its option, may designate another institutional lender to replace ORIX in providing all or a portion of the Loan (the “Additional Lender”), and Borrower shall cooperate with the same. In connection with the Additional Lender replacing ORIX as the lender of all or a portion of the Loan, this Agreement and the other Loan Documents shall, at the sole election of ORIX, be split or divided into two notes and two loan and security agreements, each of which shall cover all or a portion of the Collateral, as designated by ORIX. To that end, Borrower, upon written request of ORIX, shall execute, acknowledge and deliver to ORIX and/or its designee or designees substitute notes, loan agreements, security instruments and security agreements in such principal amounts, containing terms, provisions and clauses substantially identical to those contained in this Agreement, and such other documents and instruments (subject to the provisions hereof), in favor of the Additional Lender (the “Additional Lender Documents”) and appropriate amendments to this Loan Agreement and the other Loan Documents (including without limitation an intercreditor agreement between ORIX and the Additional Lender), all as may be reasonably required by ORIX. Without limiting the foregoing, the Additional Lender Documents and the amendment to this Loan Agreement, shall provide that an Event of Default under the Additional Lender Documents constitute an Event of Default under the Loan Documents, and vice versa.
any complaint to be relieved of the automatic stay in any Insolvency Proceeding; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; protect, obtain possession of, lease, dispose of, or otherwise enforce ORIX’s security interest in, the Collateral; represent ORIX in connection with any sale by ORIX of the Loan or any interest or participation in the Loan, including without limitation the preparation and negotiation of documentation relating to the same; and otherwise represent ORIX in any litigation relating to Borrower. If either ORIX or Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable documented out-of-pocket costs and attorneys’ fees, including (but not limited to) reasonable attorneys’ fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. Notwithstanding the foregoing, Borrower’s reimbursement obligations to ORIX and its Affiliates for all reasonable documented out-of-pocket expenses incurred by ORIX and its Affiliates, in connection with the preparation, negotiation and execution of this Agreement and the other Loan Documents (including ORIX’s pre-closing due diligence and reasonable attorneys’ fees), whether or not the transactions contemplated hereby or thereby shall be consummated shall be limited to $50,000 in the aggregate without Borrower’s written consent.
the effects thereof, and (iii) amortize, prorate, allocate, and spread the total amount of interest through the entire contemplated term of this Agreement in accordance with the amount outstanding from time to time thereunder and the maximum legal rate of interest from time to time in effect under applicable law in order to lawfully charge the maximum amount of interest permitted under applicable law.
8.10 [Intentionally Omitted].
8.11 Governing Law; Jurisdiction; Venue. This Agreement and all acts, transactions disputes and controversies arising hereunder or relating hereto, and all rights and obligations of ORIX and Borrower shall be governed by, and construed in accordance with the internal laws of the State of New York without regard to conflict of laws principles, provided that ORIX shall retain all rights arising under federal law. BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY ACT, TRANSACTION, DISPUTE OR CONTROVERSY ARISING HEREUNDER OR THEREUNDER OR RELATING HERETO OR THERETO, AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF ORIX TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY BORROWER AGAINST ORIX OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK. Borrower consents to service of process in any action or proceeding brought against it by ORIX, by personal delivery, or by mail addressed as set forth in this Agreement or by any other method permitted by law.
There are no oral understandings, representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith. The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of ORIX. Time is of the essence in the performance by Borrower of each and every obligation under this Agreement.
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Borrower: |
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Quench USA, Inc. |
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Name: Xxxxxxx Xxxxxxxx |
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Title: President and Chief Executive Officer |
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ORIX: |
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ORIX Venture Finance LLC |
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/s/ Xxxxxxxxxxx X. Xxxxx |
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Name: Xxxxxxxxxxx X. Xxxxx |
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Title: Manager |
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Schedule to
Borrower: |
Quench USA, Inc. |
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000 0xx Xxxxxx, Xxxxx 000 |
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Xxxx xx Xxxxxxx, XX 00000 |
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Date: |
October 7, 2011 |
This Schedule is an integral part of the Loan and Security Agreement between ORIX Venture Finance LLC, a Delaware limited liability company (“ORIX”) and the above-borrower (“Borrower”) of even date.
1. LOAN AMOUNT (Section 1.1): $12,500,000
The Loan shall be made in one disbursement upon satisfaction of the conditions set forth in this Agreement.
The entire unpaid principal balance of the Loan outstanding on October 7, 2014 shall be repaid in 24 equal principal payments of $520,833.33, commencing on November 7, 2014, and continuing on the same day of each month thereafter until the Maturity Date on which date the entire unpaid principal balance of the Loan plus any and all accrued and unpaid interest shall be paid.
(Section 1.3): The outstanding principal amount of the Loan shall bear interest each month at an interest rate per annum equal to the Base Rate in effect for such month, plus 6.0% per annum; provided that in no event shall the interest rate per annum be less than 9.50%.
Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. Base Rate has the meaning set forth in Section 7 of this Agreement.
3. FEES (Section 1.4):
Loan Fee: $125,000.00, payable concurrently herewith.
4. MATURITY DATE
(Section 5.1): October 7, 2016.
(Section 4.2): Borrower, at its expense, shall provide ORIX with the following, in form reasonably acceptable to ORIX in its Good Faith Business Judgment:
(a) Monthly financial statements within 30 days after the end of each month (which include breakouts of Minimum Recurring Revenue (defined below), credit memos, and bad debt);
(b) Quarterly financial statements within 45 days after the end of each fiscal quarter (which include breakouts of Minimum Recurring Revenue (defined below), credit memos, and bad debt);
(c) Annual, unqualified financial statements, audited by independent certified public accountants reasonably acceptable to ORIX, within 180 days after the end of each fiscal year of Borrower; and
(d) Compliance certificates showing compliance with the Minimum Cash covenant set forth in this Agreement, confirming that no Events of Default have occurred, and covering such other matters, and in such form, as ORIX shall reasonably specify from time to time, which shall be provided monthly with the financial statements pursuant to Section 5(a) above and compliance certificates showing compliance with the Minimum Recurring Revenue covenant set forth in this Agreement, which shall be provided quarterly with the financial statements pursuant to Section 5(b) above.
(Section 4.8):
Borrower shall comply with the following financial covenants. Compliance shall be measured monthly, except as may be otherwise provided below.
Minimum
For the purposes of this Schedule 6 and the attached Exhibit A, “Recurring Revenue” shall mean seventy-five percent (75%) of the Organic Net Rental Revenue (ex Acq) applicable to such period plus seventy-five percent (75%) of any Acquisition #n Organic Rental Revenue applicable to such period.
For the purposes of this Schedule 6 and the attached Exhibit A, “Organic Net Rental Revenue (ex Acq)” shall mean Borrower’s profits and loss statement line titled “Rental Revenue” minus Borrower’s profits and loss statement line titled “Credit Memos.”
For the purposes of this Schedule 6 and the attached Exhibit A, “Acquisition #n Organic Rental Revenue” shall mean the expected quarterly rental revenue derived from contracts that are held in-house at the time of the acquisition which will be added to Borrower’s profits and loss statement line titled “Rental Revenue.” For the avoidance of doubt, the expected quarterly rental revenue derived from such contracts shall be calculated based only on the portion of acquired revenue that will be added to the same profits and loss statement lines, and not the total acquired revenue.
Minimum Cash: At-all-times, Borrower shall have a minimum total available cash balance, in Deposit Accounts (excluding any restricted accounts) for which ORIX maintains control agreements sufficient to perfect ORIX’s security interest in said Deposit Accounts, of at least $1,500,000.00, until such time as Borrower generates positive trailing three-month free cash flow from operations less capital expenditures for two consecutive quarters; provided, that this financial covenant would be reinstated should the trailing three-month free cash flow
from operations less capital expenditures become negative in any fiscal quarter.
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Quench USA, Inc. |
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ORIX Venture Finance LLC | ||
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/s/ Xxxxxxx Xxxxxxxx |
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By: |
/s/ Xxxxxxxxxxx X. Xxxxx |
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Name: Xxxxxxx Xxxxxxxx |
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Name: Xxxxxxxxxxx X. Xxxxx |
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Title: President and Chief Executive Officer |
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Title: Manager |
Exhibit A
Quench USA, Inc. - Summary Covenant Schedule 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q ($000s) 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 Recurrent Rental Revenue Covenant Calculation Organic Net Rental Revenue (ex Acq) 4,086 4,394 4,747 5,113 5,442 5,788 6,133 6,474 6,733 6,995 7,255 7,521 7,775 8,026 8,302 8,582 8,853 % Cushion 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % Covenant Organic Rental Revenue 3,064 3,295 3,561 3,835 4,082 4,341 4,600 4,855 5,050 5,246 5,441 5,641 5,831 6,020 6,227 6,437 6,640 Acquisition #n Organic Rental Revenue — — — — — — — — — — — — — — — — — % Cushion 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % Covenant Acquisition #n Rental Revenue — — — — — — — — — — — — — — — — — Acquisition #n Organic Rental Revenue — — — — — — — — — — — — — — — — — % Cushion 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % Covenant Acquisition #n Rental Revenue — — — — — — — — — — — — — — — — — Acquisition #n Organic Rental Revenue — — — — — — — — — — — — — — — — — % Cushion 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % 25 % Covenant Acquisition #n Rental Revenue — — — — — — — — — — — — — — — — — Test Period (Months) 3 6 9 12 12 12 12 12 12 12 12 12 12 12 12 12 12 Covenant for Test Period 3,000 6,300 9,900 13,700 14,700 15,800 16,800 17,800 18,800 19,700 20,500 21,300 22,100 22,900 23,700 24,000 24,000 Calculated Cushion 1,086 2,180 3,327 4,640 4,996 5,291 5,676 6,037 6,328 6,635 6,957 7,204 7,446 7,677 7,925 8,687 9,764 Notes: 1. Acquisitions will be added to the covenant levels in the month following the completion of the acquisition.