LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of June 1, 1998 between
BUSINESS ALLIANCE CAPITAL CORP., a Delaware corporation (BACC), with its chief
executive office located at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 and
WINDSWEPT ENVIRONMENTAL GROUP, INC., TRADE-WINDS ENVIRONMENTAL RESTORATION,
INC., NORTH ATLANTIC LABORATORIES, INC. and NEW YORK TESTING LABORATORIES, INC.
(individually and collectively "Borrower"), each with its chief executive office
located at 000 Xxxxxxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx 00000.
The parties agree as follows
1. DEFINITIONS AND CONSTRUCTION
1.1 Terms. As used in this Agreement, the following terms shall have the
following meanings:
Accounts, means in addition to the definition of accounts in the Code, all
presently existing and hereafter arising accounts receivable, contract rights,
and all other forms of obligations owing to Borrower arising out of the sale or
lease of goods or the rendition of services by Borrower, whether or not earned
by performance, all credit insurance, guaranties, and other security therefor,
as well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing.
Advances means all loans, advances and other financial accommodations by
BACC to or on account of the Borrower under Section 2 hereof.
Agreement means collectively this Loan and Security Agreement, any
concurrent or subsequent rider to this Loan and Security Agreement, and any
extensions, supplements, amendments, addenda or modifications to or in
connection with this Loan and Security Agreement or any such rider.
Authorized Officer means any officer or other representative of Borrower
authorized in a writing delivered to BACC to transact business with BACC.
BACC means Business Alliance Capital Corp., its successors and assigns.
BACC Expenses means all of the following: costs and expenses (whether
taxes, assessments, insurance premiums or otherwise) required to be paid by
Borrower under any of the Loan Documents which are paid or advanced by BACC;
filing, recording, publication, appraisal and search fees paid or incurred by
BACC in connection with BACC's transactions with Borrower; costs and expenses
incurred by BACC in the disbursement or collection of funds to or from Borrower;
charges resulting from the dishonor of checks; costs and expenses incurred by
BACC to correct any default or enforce any provision of the Loan Documents, or
in gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated; and costs and
expenses incurred by BACC in enforcing or defending the Loan Documents,
including, but not limited to, costs and expenses incurred in connection with
any proceeding, suit, enforcement of judgment, or appeal; and BACC's reasonable
attorneys' fees and expenses incurred in advising, structuring, drafting,
reviewing, administering, amending, terminating, enforcing, defending, or
otherwise representing BACC concerning the Loan Documents or the Obligations.
Borrower's Books means all of Borrower's books and records including all of
the following: ledgers; records indicating, summarizing, or evidencing
Borrower's assets or liabilities, or the Collateral; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information, and the facilities containing such information.
Business Day means any day which is not a Saturday, Sunday, or other day on
which banks in the
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State of New Jersey are authorized or required to close.
Chattel Paper shall have the same meaning ascribed to such term in the
Code.
Code means the New Jersey Uniform Commercial Code, as amended from time to
time.
Collateral means all of the following: the Accounts; the Equipment; the
General Intangibles; the Chattel Paper; the Inventory; the Negotiable
Collateral; any money, deposit accounts or assets of Borrower which hereafter
come into the possession, custody, or control of BACC; all proceeds and
products, whether tangible or intangible, of any of the foregoing, including
proceeds of insurance covering any or all of the foregoing, and any and all
tangible or intangible property resulting from the sale or other disposition of
the foregoing, or any portion thereof or interest therein, and all proceeds
thereof, and any other assets of Borrower which may be subject to a lien in
favor of BACC.
Daily Balance means the amount of the Obligations owed at the end of a
given day.
Eligible Accounts means those Accounts created by Borrower in the ordinary
course of business, which are and at all times shall continue to be acceptable
to BACC in all respects; provided, however, that standards of eligibility may be
fixed and revised from time to time by BACC in BACC's exclusive judgment. In
determining such acceptability and standards of eligibility, BACC may, but need
not, rely on agings, reports and schedules of Accounts furnished by Borrower,
but reliance by BACC thereon from time to time shall not be deemed to limit
BACC's right to revise standards of eligibility at any time as to both
Borrower's present and future Accounts. In general, an Account shall not be
deemed eligible unless: (a) the Account debtor on such Account is and at all
times continues to be acceptable to BACC, and (b) such Account complies in all
respects with the representations, covenants and warranties hereinafter set
forth. Except in BACC's sole discretion, Eligible Accounts shall not include any
of the following (a) Accounts which the Account debtor has failed to pay within
Ninety (90) days of invoice date, and all Accounts owed by any Account debtor
that has failed to pay twenty-five percent (25%) or more of its Accounts owed to
Borrower within Ninety (90) days of invoice date; (b) Accounts with respect to
which goods are placed on consignment or for a guaranteed sale, or which contain
other terms by reason of which payment by the Account debtor may be conditional;
(c) Accounts with respect to which the Account debtor is not a resident of the
United States unless the Account is supported by foreign credit insurance or a
letter of credit, in both instances satisfactory to and assigned to BACC; (d)
Accounts with respect to which the Account debtor is the United States or any
department, agency or instrumentality of the United States, any State of the
United States or any city, town, municipality or division thereof unless all
filings have been made under the Federal Assignment of Claims Act or comparable
state or other statute; (e) Accounts with respect to which the Account debtor is
an officer, employee or agent of, or subsidiary of, related to, affiliated with
or has common shareholders, officers or directors with Borrower; (f) Accounts
with respect to which Borrower is or may become liable to the Account debtor for
goods sold or services rendered by the Account debtor to Borrower; (g) Accounts
with respect to an Account debtor whose total obligations to Borrower exceed
Twenty-five percent (25%) of all Accounts; (h) Accounts with respect to which
the Account debtor disputes liability or makes any claim with respect thereto,
or is subject to any insolvency proceeding, or becomes insolvent, fails or goes
out of business; (i) the Account arises out of a contract or purchase order for
which a surety bond was issued on behalf of Borrower; (j) Accounts in which BACC
does not have first priority and exclusive perfected security interest; or (k)
Accounts where the Account Debtor is in a jurisdiction for which Borrower is
required to file a notice of business activities or similar report and Borrower
has not filed such report within the time period required by applicable law.
Equipment means all of Borrower's present and hereafter acquired equipment,
machinery, machine tools, motors, furniture, furnishings, fixtures, motor
vehicles, rolling stock, processors, tools, pans, dies, jigs, goods (other than
consumer goods or farm products) and any interest in any of the foregoing, and
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever located.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the
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regulations thereunder.
ERISA Affiliate means each trade or business (whether or not incorporated
and whether or not foreign) which is or may hereafter become a member of a group
of which Borrower is a member and which is treated as a single employer under
XXXXX Xxxxxxx 0000(x)( 0), xx XXX Section 414.
Event of Default means the events specified in Section 8, below.
General Intangibles means all of Borrower's present and future general
intangibles and other personal property (including choses or things in action,
goodwill, patents, trade names; trademarks, service marks, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, infringement claims, computer programs, computer discs, computer
tapes, Borrower's Books, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims) other than goods
and Accounts.
Guarantor means each person or entity which guarantees the Obligations.
Insolvency Proceeding means any proceeding commenced by or against any
person or entity under any provision of the federal Bankruptcy Code, as amended,
or under any other state or federal insolvency law, including assignments for
the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with its creditors.
Inventory means all present and future inventory in which Borrower has any
interest, including goods held for sale or lease or to be furnished under a
contract of service, Borrower's present and future raw materials, work in
process, finished goods, tangible property, stock in trade, wares, and materials
used in or consumed in Borrower's business, goods which have been returned to,
repossessed by, or stopped in transit by Borrower, packing and shipping
materials, wherever located, any documents of title representing any of the
above, and Borrower's Books relating to any of the foregoing.
IRC means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
Loan Documents means, collectively, this Agreement, any Note or Notes, any
security agreements, pledge agreements, mortgages, deeds of trust or other
encumbrances or agreements which secure the Obligations, and any other agreement
entered into between Borrower and BACC or by Borrower or a Guarantor in favor of
BACC relating to or in connection with this Agreement or the Obligations.
Multiemployer Plan means a multiemployer plan as defined in ERISA Sections
3(37) or 4001(a)(3) or IRC Section 414(f).
Negotiable Collateral means all of Borrower's present and future letters of
credit, notes, drafts, instruments, documents, leases, and Chattel Paper.
Note means any promissory note made by Borrower to the order of BACC
concurrently herewith or at any time hereafter.
Obligations means all loans, advances, debts, liabilities (including all
interest and amounts charged to the Obligations pursuant to any agreement
authorizing BACC to charge the Obligations), obligations, lease payments,
guaranties, covenants, and duties owing by Borrower to BACC of any kind and
description (whether pursuant to or evidenced by the Loan Documents or by any
other agreement between BACC and Borrower, and irrespective of whether for the
payment of money), whether made or incurred prior to, on, or after the
Termination Date, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including any debt, liability or
obligation owing from Borrower to others which BACC may obtain by assignment or
otherwise, and all interest thereon and all BACC Expenses.
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Plan means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
Prime Rate means that rate designated by CoreStates Bank, or any successor
thereof, from time to time as its prime rate, which shall not necessarily
constitute its lowest available rate.
Term means the period from the date of the execution and delivery by BACC
of this Agreement through and including the later of (a) the Termination Date
and (b) the payment and performance in full of the Obligations.
Termination Date means (a) June 1, 2000, (the period through such date the
"Initial Term"), unless such date is extended pursuant to section 3.1 hereof,
and if so extended on one or more occasions the last date of the last such
extension, or (b) if earlier terminated by BACC pursuant to sections 2.1 or 9.1
hereof, the date of such termination.
1.2 Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and to the singular
include the plural. The words hereof, herein, hereby, hereunder, and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Section, subsection, clause and exhibit
references are to this Agreement unless otherwise specified. Words importing a
particular gender mean and include every other gender.
1.3 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
(GAAP) as in effect from time to time. When used herein, the term financial
statements shall include the notes and schedules thereto.
1.4 Exhibits. All of the exhibits, addenda or riders attached to this
Agreement shall be deemed incorporated herein by reference.
1.5 Code. Any terms used in this Agreement which are defined in the Code
shall be construed and defined as set forth in the Code, unless otherwise
defined herein.
2. ADVANCES AND TERMS OF PAYMENT
2.1 Revolving Advances; Advance Limit. (A) Upon the request of Borrower,
made at any time or from time to time during the Term and so long as no Event of
Default has occurred and is continuing, BACC may, in its sole and absolute
discretion, make Advances in an amount up to eighty percent (80%) of the
aggregate outstanding amount of Eligible Accounts; provided, however, that in no
event shall the aggregate amount of the outstanding Advances be greater than, at
any time, the amount of One Million Eight Hundred Fifty Thousand and 00/100
Dollars ($1,850,000.00) (the Advance Limit); (B) Borrower has advised BACC that
Borrower currently factors its Accounts Receivable with Prestige Factors and
which factoring facility has a term through approximately July 1, 1998.
Accordingly Borrower may not obtain Advances under the revolving credit facility
provided for in this Section 2.1 until it furnishes to BACC (i) evidence of
termination of the factoring facility with Prestige Factors, (ii) evidence
satisfactory to BACC that upon the initial Advance under this Section 2.1 the
interest of Prestige Factors in the Accounts Receivable of Borrower will
terminate and that Prestige Factors will deliver UCC-3 Statements of Termination
and (ii) written authorization for BACC to wire transfer or otherwise remit to
Prestige Factors out of the initial Advances under this Section 2.1 an amount
necessary to satisfy in full Prestige Factors interest in all Accounts
Receivable and other assets of Borrower. If Borrower has not satisfied the
aforesaid conditions by July 10, 1998 and has not otherwise obtained Advances
under this Section 2.1 by July 10, 1998, BACC may in its sole discretion
immediately accelerate the Termination Date.
2.2 Term Loan. Contemporaneous with the execution hereof BACC shall lend to
Borrower the
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principal sum of Five Hundred Ninety-Five Thousand and no/100 ($595,000.00)
which sum, together with interest at the rate set forth below shall be paid in
twenty-three (23) equal consecutive monthly installments of principal of Nine
Thousand Nine Hundred Sixteen and 67/100 ($9,916.67) each beginning on July 1,
1998 and continuing on the same day of each month thereafter through May 1,
2000, followed by a final installment of the entire unpaid principal balance of
said term loan on June 1, 2000. Interest shall be paid contemporaneous with the
payments of principal. Notwithstanding the foregoing, the entire unpaid
principal balance and all accrued and unpaid interest shall be due and payable
in full on the Termination Date. In addition, if Borrower has not by July 10,
1998 satisfied the conditions set forth in Section 2.1(B) hereof and obtained
the initial Advances thereunder, BACC may accelerate the maturity date of the
unpaid principal balance of the term loan and Borrower shall pay to BACC, in
addition to all unpaid principal and interest, a termination fee of $29,750.00.
2.3 Overadvances. All Advances shall be added to and be deemed part of the
Obligations when made. If, at any time and for any reason, the aggregate amount
of the outstanding Advances exceeds the dollar or percentage limitations
contained in Section 2.1 (an Overadvance) then Borrower shall, upon demand by
BACC, immediately pay to BACC, in cash, the amount of such Overadvance. Without
affecting Borrower's obligation to immediately repay to BACC the amount of each
Overadvance, Borrower shall pay BACC a fee (the Overadvance Fee) in an amount
equal to Three percent (3%) per annum on the Overadvance amount for each day any
Overadvance exists. All such fees shall be computed on the basis of a three
hundred and sixty (360) day year for the actual number of days elapsed.
2.4 Authorization to Make Advances. BACC is hereby authorized to make the
Advances based upon telephonic or other instructions received from anyone
purporting to be an Authorized Officer, or, at the discretion of BACC, if such
Advances are necessary to satisfy any Obligations. All requests for Advances
shall specify the date on which such Advance is to be made (which day shall be a
Business Day) and the amount of such Advance. Requests received after 12:00 p.m.
Eastern time on any day shall be deemed to have been made as of the opening of
business on the immediately following Business Day. All Advances made under this
Agreement shall be conclusively presumed to have been made to, at the request
of, and for the benefit of Borrower when deposited to the credit of Borrower or
otherwise disbursed in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement. Unless otherwise
requested by Borrower, all Advances shall be made by a wire transfer to the
deposit account of Borrower designated on schedule 2.4 annexed hereto, or such
other account as Borrower shall notify BACC in writing. Borrower shall pay to
BACC a funds transfer fee of $25.00 for each Advance. Said fees shall be payable
on the first day of each month of the Term for all Advances made during the
preceding month.
2.5 Interest.
A. Except where specified to the contrary in the Loan Documents, the
aggregate outstanding balances of the Obligations shall accrue interest at the
per annum rate of Three percentage points (3%) above the Prime Rate. The
Obligations shall bear interest from and after written notice by BACC to
Borrower of the occurrence of an Event of Default, and without constituting a
waiver of any such Event of Default, at the per annum rate of Eight percentage
points (8%) above the Prime Rate. All interest payable under the Loan Documents
shall be computed on the basis of a three hundred sixty (360) day year for the
actual number of days elapsed on the Daily Balance. Interest as provided for
herein shall continue to accrue until the Obligations are paid in full.
B. The interest rate payable by Borrower under the terms of this Agreement
shall be adjusted in accordance with any change in the Prime Rate from time to
time on the date of any such change. All interest payable by Borrower shall be
due and payable on the first day of each calendar month during the Term. BACC
may, at its option, add such interest and all BACC Expenses to the Obligations,
and such amount shall thereafter accrue interest at the rate then applicable
under this Agreement. Notwithstanding anything to the contrary contained in the
Loan Documents, the minimum interest payable by Borrower on the Advances shall,
from July 10, 1998 be calculated on a minimum daily average loan balance of
$750,000.00.
(c) In no event shall interest on the Obligations exceed the highest lawful
rate in effect from time to time. It is not the intention of the parties hereto
to make an agreement which violates any applicable state or federal
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usury laws. In no event shall Borrower pay or BACC accept or charge any interest
which, together with any other charges upon the principal or any portion
thereof, exceeds the maximum lawful rate of interest allowable under any
applicable state or federal usury laws. Should any provision of this Agreement
or any existing or future Notes or Loan Documents between the parties be
construed to require the payment of interest or any other fees or charges which
could be construed as interest which, together with any other charges upon the
principal or any portion thereof and any other fees or charges which could be
construed as interest, exceeds the maximum lawful rate of interest, then any
such excess shall be applied to the remaining principal balance of the
Obligations, if any, and the remainder refunded to Borrower.
2.6 Collection of Accounts. BACC or a BACC designee may, at any time, with
or without notice to Borrower, notify customers or Account debtors that the
Accounts have been assigned to BACC, and that BACC has a security interest in
them and collect the Accounts directly, and add the reasonable collection costs
and expenses to the Obligations, but, unless and until BACC does so or gives
Borrower other written instructions, Borrower shall notify all Account debtors
to remit payments on Accounts to a lockbox to be designated by BACC. All such
payments remitted to the lockbox shall be credited to a deposit account of BACC
and into which account remittances from account debtors of other clients of BACC
may be credited. If notwithstanding said notice Borrower obtains payment on any
Account, Borrower shall receive all payments on Accounts and other proceeds,
including cash, of Collateral in trust for BACC and immediately deliver said
payments to BACC in their original form as received from the Account debtor,
together with any necessary endorsements.
2.7 Crediting Payments. The receipt of any item of payment by BACC shall,
subject to final payment of such item, be provisionally applied to reduce
Obligations on the date of receipt of such item by BACC, but the receipt of such
an item of payment shall for the purpose of calculation of interest on the
Obligations not be deemed to have been paid to BACC until four (4) Business Days
after the date of BACC's actual receipt of such item of payment. Notwithstanding
anything to the contrary contained herein, payments received by BACC after 11:00
a.m. Eastern time shall be deemed to have been received by BACC as of the
opening of business on the immediately following Business Day.
2.8 Origination Fee. In consideration of BACC entering into this Agreement,
Borrower shall pay BACC an origination fee of Eighteen Thousand Five Hundred
Dollars ($18,500.00), $1,541.67 of which shall be paid on execution hereof and
the balance in eleven monthly installments of $1,541.67 commencing on July 1,
1998 and on the same day of each month thereafter until paid in full ), and
thereafter an origination fee of Eighteen Thousand Five Hundred Dollars
($18,500.00) on each annual anniversary of the date hereof.
2.9 Servicing Fee. Borrower shall pay BACC a servicing fee in an amount
equal to one half of one percent (.5%) of the daily average outstanding balance
of the Advances during each month on or before the first (1st) day of each
calendar month in respect of BACC's services for the preceding calendar month,
during the Term, including each Renewal Term, or so long as the Obligations are
outstanding. The servicing fee will be reduced to three-tenths of one percent
(.3%) if (i) no Event of Default exists and (ii) BACC determines, in its good
faith discretion, following an updated examination of the books and records of
the Borrower, that Borrower has, in the ordinary course of business satisfactory
evidence that services giving rise to Accounts were actually rendered.
2.10 Field Examination Fee. Borrower shall pay BACC a fee in an amount
equal to Six Hundred Dollars ($600.00) per day per examiner, plus out-of-pocket
expenses for each examination of Borrower's Books or the other Collateral
performed by BACC or its designee provided that so long as no Event of Default
exists the Borrower shall not be responsible to pay such examination fees in
excess of $9,000.00 per loan year.
2.11 Late Reporting Fee. Borrower shall pay to BACC a fee in an amount
equal to Fifty Dollars ($50.00) per document per day for each Business Day any
report, financial statement or schedule required by this Agreement to be
delivered to BACC is past due.
2.12 Monthly Statements. BACC shall render monthly statements to Borrower
of all
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Obligations, including statements of all principal, interest and BACC Expenses,
and Borrower shall have fully and irrevocably waived all objections to such
statements and the contents thereof unless, within thirty (30) days after
receipt, Borrower shall deliver to BACC, by registered, certified or overnight
mail as set forth in Section 12 hereof, written objection to such statement
specifying the error or errors, if any, contained therein.
3. TERM
3.1 Term and Renewal Date. This Agreement shall become effective upon
execution by BACC and continue in full force through the Initial Term and from
year to year thereafter (a "Renewal Term") if BACC, at its option, in writing
agrees to extend the Term for one (1) year from the then Termination Date,
provided that Borrower has not exercised its termination right in accordance
with this Section 3.1. Borrower may terminate the Term on the then Termination
Date by giving BACC at least sixty (60) days prior written notice by registered
or certified mail, return receipt requested. In addition, BACC shall have the
right to terminate this Agreement immediately at any time upon the occurrence of
an Event of Default. No such termination shall relieve or discharge Borrower of
its duties, Obligations and covenants hereunder until all Obligations have been
paid and performed in full, and BACC's continuing security interest in the
Collateral shall remain in effect until the Obligations have been fully and
irrevocably paid and satisfied in cash or cash equivalent. On the Termination
Date of this Agreement, the Obligations shall be immediately due and payable in
full.
3.2 Early Termination Fee. If the Term is terminated by BACC upon the
occurrence of an Event of Default, or is terminated by Borrower except as
provided in Section 3.1, in view of the impracticability and extreme difficulty
of ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of BACC's lost profits as a result thereof, Borrower
shall pay BACC upon the effective date of such termination a fee in an amount
equal to: (a) five percent (5.0%) of the Advance Limit if such termination
occurs on or prior to the first (1st) anniversary of the commencement date of
the Initial Term; (b) four percent (4.0%) of the Advance Limit if such
termination occurs after the first (1st) anniversary of the commencement date of
the Initial Term but prior to the second (2nd) anniversary of the commencement
date of the Initial Term; or (c) two percent (2.0%) of the Advance Limit if such
termination occurs during any Renewal Term. Such fee shall be presumed to be the
amount of damages sustained by BACC as the result of an early termination and
Borrower acknowledges that it is reasonable under the circumstances currently
existing. The fee provided for in this Section 3.2 shall be deemed included in
the Obligations.
4. CREATION OF CONTINUING SECURITY INTEREST
4.1 Grant of Continuing Security Interest. Borrower hereby grants to BACC a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of the Obligations and in
order to secure prompt performance by Borrower of each and all of its covenants
and Obligations under the Loan Documents and otherwise. BACC's continuing
security interest in the Collateral shall attach to all Collateral without
further act on the part of BACC or Borrower.
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower shall
notify BACC and upon the request of BACC, immediately endorse and assign such
Negotiable Collateral to BACC and deliver physical possession of such Negotiable
Collateral to BACC.
4.3 Delivery of Additional Documentation Required. Borrower shall execute
and deliver to BACC concurrently with Borrower's execution and delivery of this
Agreement and at any time thereafter at the request of BACC, all financing
statements, continuation financing statements, fixture filings, security
agreements, ship mortgages, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that BACC may request, in form satisfactory to BACC, to perfect and
maintain perfected BACC's continuing security interests in the Collateral and in
order to fully consummate all of the transactions contemplated under the Loan
Documents.
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4.4 Power of Attorney. Borrower hereby irrevocably makes, constitutes and
appoints BACC (and any person designated by BACC) as Borrower's true and lawful
attorney-in-fact with power to sign the name of Borrower on any of the above
described documents or on any other similar documents to be executed, recorded
or filed in order to perfect or continue perfected BACC's continuing security
interest in the Collateral. In addition, Borrower hereby appoints BACC (and any
person designated by BACC) as Borrower's attorney-in-fact with power to: (a)
sign Borrower's name on verifications of Accounts, and on notices to Account
debtors; (b) send requests for verification of Accounts; (c) endorse Borrower's
name on any checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come into BACC's possession; (d) notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by BACC, to receive and open all mail addressed to Borrower,
and to retain all mail relating to the Collateral and forward all other mail to
Borrower; (e) make, settle and adjust all claims under Borrower's policies of
insurance, endorse the name of Borrower on any check, draft, instrument or other
item of payment for the proceeds of such policies of insurance and make all
determinations and decisions with respect to such policies of insurance. The
appointment of BACC as Borrower's attorney-in-fact and each and every one of
BACC's rights and powers, being coupled with an interest, is irrevocable so long
as any Accounts in which BACC has a continuing security interest remain unpaid
and until all of the Obligations have been fully repaid and performed. BACC
shall have no obligation to protect any rights of Borrower against any person
obligated on any Collateral.
4.5 Right To Inspect. BACC shall have the right at any time or times
hereafter during Borrower's usual business hours, or during the usual business
hours of any third party having control over Borrower's Books to inspect
Borrower's Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral or Borrower's financial condition. BACC also
shall have the right at any time or times hereafter during Borrower's usual
business hours to inspect and examine the Inventory and the Equipment and to
check and test the same as to quality, quantity, value and condition.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to BACC the following and acknowledges:
5.1 No Prior Encumbrances; Security Interests. Borrower has good and
marketable title to the Collateral, free and clear of liens, claims, security
interests or encumbrances, except for the security interests to be satisfied
from the proceeds of the first Advances hereunder, the continuing security
interests granted to BACC by Borrower, and those disclosed on Schedule 5.1
annexed hereto. Other than those expressly permitted by this Agreement, Borrower
will not create or permit to be created any security interest, lien, pledge,
mortgage or encumbrance on any Collateral or any of its other assets.
5.2 Bona Fide Accounts. All Accounts represent bona fide sales or leases of
goods and/or services for which Borrower has an unconditional right to payment.
None of the Accounts are subject to any rights of offset, counterclaim,
cancellation or contractual rights of return.
5.3 Merchantable Inventory. All Inventory is now and at all times hereafter
shall be of good and merchantable quality, free from defects.
5.4 Location of Inventory and Equipment. The Inventory and Equipment is not
now and shall not at any time or times hereafter be stored with a bailee,
warehouseman, processor, or similar party. Borrower shall keep the Inventory and
Equipment only at the following locations: 000 Xxxxxxxxxxx Xxxxxx, Xxx Xxxxx,
Xxx Xxxx 00000.
5.5 Inventory Records. Borrower now keeps and hereafter at all times shall
keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of the Inventory and Borrower's cost of said items.
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5.6 Retail Accounts. No Accounts arise from the sale of goods for personal,
family or household purposes.
5.7 Relocation of Chief Executive Office. The chief executive office of
Borrower is at the address indicated on the first page of this Agreement and
Borrower will not, without thirty (30) days' prior written notice to BACC,
relocate such office.
5.8 Due Incorporation and Qualification. Borrower is and shall at all times
hereafter be a corporation duly organized and existing under the laws of the
state of its incorporation and is qualified and licensed to do business and is
in good standing in any state in which the conduct of its business or its
ownership of assets requires that it be so qualified.
5.9 Fictitious Name. Borrower is conducting its business under the
following trade or fictitious name(s) and no others: [none]. Borrower has
complied with the fictitious name laws of all jurisdictions in which compliance
is required in connection with its use of such name(s).
5.10 Permits and Licenses. Borrower holds all licenses, permits,
franchises, approvals and consents required for the conduct of its business and
the ownership and operation of its assets.
5.11 Due Authorization. Borrower has the right and power and is duly
authorized to enter into the Loan Documents to which it is a party.
5.12 Compliance with Articles; Bylaws. The execution by Borrower of the
Loan Documents to which it is a party does not constitute a breach of any
provision contained in Borrower's Certificate or Articles of Incorporation or
its Bylaws, nor does it constitute an event of default under any material
agreement to which Borrower is now or may hereafter become a party.
5.13 Litigation. There are no actions, proceedings or claims pending by or
against Borrower before any court or administrative agency in excess of
$10,000.00 which are not reported in Borrowers 10-Q for the period ending
January 31, 1998 and Borrower has no knowledge or notice of any pending,
threatened or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving Borrower, except for ongoing
collection matters in which Borrower is the plaintiff. If any such actions,
proceedings or claims arise during the Term, Borrower shall promptly notify BACC
in writing.
5.14 No Material Adverse Change in Financial Statements. All financial
statements relating to Borrower which have been or may hereafter be delivered to
BACC (I) have been prepared in accordance with GAAP; (ii) fairly present
Borrower's financial condition as of the date thereof and Borrower's results of
operations for the period then ended; and (iii) disclose all contingent
obligations of Borrower. In addition no material adverse change in the financial
condition of Borrower has occurred since the date of the most recent of such
financial statements.
5.15 Solvency. Borrower is now, and shall be at all times through the Term,
solvent and able to pay its debts (including trade debts) as they mature.
5.16 ERISA. Neither Borrower or any ERISA Affiliate, nor any Plan is or has
been in violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a), or any of the published interpretations
thereof. No lien upon the assets of Borrower has arisen with respect to any
Plan. No prohibited transaction within the meaning of ERISA Section 406 or IRC
Section 4975(c) has occurred with respect to any Plan. Neither Borrower nor any
ERISA Affiliate has incurred any withdrawal liability with respect to any
Multiemployer Plan. Borrower and each ERISA Affiliate have made all
contributions required to be made by them to any Plan or Multiemployer Plan when
due. There is no accumulated funding deficiency in any Plan, whether or not
waived.
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5.17 Environmental Laws and Hazardous Materials. Borrower has complied, and
at all times through the Term will comply, with all Environmental Laws. Borrower
has not and will not cause or permit any Hazardous Materials to be located,
incorporated, generated, stored, manufactured, transported to or from, released,
disposed of, or used at, upon, under, or within any premises at which Borrower
conducts its business, or in connection with Borrower's business except in
compliance with all Environmental Laws. To the best of Borrower's knowledge, no
prior owner or operator of any premises at which Borrower conducts its business
has caused or permitted any of the above to occur at, upon, under, or within any
of the premises. Borrower will not permit any lien to be filed against the
Collateral or any part thereof under any Environmental Law, and will promptly
notify BACC of any proceeding, inquiry or claim relating to any alleged
violation of any Environmental Law, or any alleged loss, damage or injury
resulting from any Hazardous Material. BACC shall have the right to join and
participate in, as a party if it so elects, any legal or administrative
proceeding initiated with respect to any Hazardous Material or in connection
with any Environmental Law. "Hazardous Material" includes without limitation any
substance, material, emission, or waste which is or hereafter becomes regulated
or classified as a hazardous substance, hazardous material, toxic substance or
solid waste under any Environmental Law, asbestos, petroleum products, urea
formaldehyde, polychlorinated biphenyls (PCBs), radon, and any other hazardous
or toxic substance, material, emission or waste. Environmental Law means the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, the Resource Conservation and Recovery Act of 1976, the Hazardous
Materials Transportation Act, the Toxic Substances Control Act, the regulations
pertaining to such statutes, and any other safety, health or environmental
statutes, laws, regulations or ordinances of the United States or of any state,
county or municipality in which Borrower conducts its business or the Collateral
is located.
5.18 Tax Compliance. Borrower has filed all tax returns required to be
filed by it, except for those which are under appropriate extensions, and upon
disbursement of the first Advance hereunder will have paid all taxes due and
payable on said returns and on any assessment made against it or its assets.
5.19 Reliance by BACC; Cumulative. Each warranty, representation and
agreement contained in this Agreement shall be automatically deemed repeated by
Borrower with each request for an Advance and shall be conclusively presumed to
have been relied on by BACC regardless of any investigation made or information
possessed by BACC. The warranties, representations and agreements set forth
herein shall be cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall now or hereafter give, or
cause to be given, to BACC.
6. AFFIRMATIVE COVENANTS
Borrower covenants and acknowledges that during the Term Borrower shall
comply with all of the following:
6.1 Collateral and Other Reports. Borrower shall on each Business Day
report to BACC all Accounts arising since its most recent report to BACC and
shall execute and deliver to BACC, no later than the fifteenth (15th) day of
each month during the Term, a detailed aging of the Accounts, a reconciliation
statement and a summary aging, by vendor, of all accounts payable of Borrower
and any book overdraft. Borrower shall deliver to BACC, as BACC may from time to
time require, collection reports, sales journals, invoices, original delivery
receipts, customers' purchase orders, shipping instructions, bills of lading and
other documentation respecting shipment arrangements. Absent such a request by
BACC, copies of all such documentation shall be held by Borrower as custodian
for BACC.
6.2 Returns. Returns and allowances, if any, as between Borrower and any
Account debtors, shall be permitted on the same basis and in accordance with the
usual customary practices of Borrower as they exist at the date of the execution
and delivery of this Agreement. If at any time prior to the occurrence of an
Event of Default any Account debtor returns any Inventory to Borrower, Borrower
shall promptly determine the reason for such return and, if Borrower accepts
such return, issue a credit memorandum (with a copy to be sent to BACC) in the
appropriate amount to such Account debtor. Borrower shall promptly notify BACC
of all returns and
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recoveries and of all disputes and claims.
6.3 Designation of Inventory. Borrower shall contemporaneous with the
execution hereof and from time to time hereafter, but not less frequently than
monthly, execute and deliver to BACC a designation of Inventory specifying the
cost and the wholesale market value of Borrower's Inventory, and further
specifying such other information as BACC may reasonably request.
6.4 Financial Statements, Reports, Certificates. Borrower shall deliver to
BACC: (a) as soon as available, but in any event within thirty (30) days after
the end of each month during the Term, a balance sheet and profit and loss
statement prepared by Borrower covering Borrower's operations during such
period; and (b) as soon as available, but in any event within one hundred twenty
(120) days after the end of each of Borrower's fiscal years, financial
statements of Borrower for each such fiscal period, audited by independent
certified public accountants acceptable to BACC. Such financial statements shall
include a balance sheet and profit and loss statement, and the accountants'
management letter. Borrower shall also deliver Borrower's Form 10-Qs,, 10-Ks or
8-Ks, if any, as soon as the same become available, and any other report
reasonably requested by BACC relating to the Collateral and the financial
condition of Borrower and together with the above, a certificate signed by its
chief financial officer to the effect that all reports, statements or computer
prepared information of any kind or nature delivered or caused to be delivered
to BACC under this Section 6.4 fairly present its financial condition and that
there exists on the date of delivery of such certificate to BACC no condition or
event which constitutes an Event of Default.
6.5 Tax Returns, Receipts. Borrower shall deliver to BACC copies of each of
its future federal income tax returns, and any amendments thereto, within thirty
(30) days of the filing thereof. Borrower further shall promptly deliver to
BACC, upon request, satisfactory evidence of Borrower's payment of all
withholding and other taxes required to be paid by it.
6.6 Guarantor Reports. Borrower agrees to cause each Guarantor to deliver
its annual financial statements and copies of all federal income tax returns as
soon as the same are available and in any event no later than thirty (30) days
after the same are required to be filed by law.
6.7 Title to Equipment. Upon BACC's request, Borrower shall immediately
deliver to BACC, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.
6.8 Maintenance of Equipment. Borrower shall keep and maintain the
Equipment in good operating condition and repair, and shall make all necessary
replacements thereto so that its value and operating efficiency shall at all
times be maintained and preserved. Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and the Equipment is now and shall at all times remain Borrower's personal
property.
6.9 Taxes. All Federal, state and local assessments and taxes, whether
real, personal or otherwise, due or payable by, or imposed, levied or assessed
against Borrower or any of its assets or in connection with Borrower's business
shall hereafter be paid in full, before they become delinquent or before the
expiration of any extension period or otherwise in accordance with payment
program agreed to by the taxing authority. Borrower shall make due and timely
payment or deposit of all federal, state and local taxes, assessments or
contributions required of it by law, and will execute and deliver to BACC, on
demand, appropriate certificates attesting to the payment or deposit thereof.
6.10 Insurance. Borrower, at its expense, shall keep and maintain the
Collateral insured against all risk of loss or damage from fire, theft,
vandalism, malicious mischief, explosion, sprinklers, and all other hazards and
risks of physical damage included within the meaning of the term "extended
coverage" in such amounts
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as are ordinarily insured against by similar businesses. Borrower shall also
keep and maintain comprehensive general public liability insurance and property
damage insurance, and insurance against loss from business interruption,
insuring against all risks relating to or arising from Borrower's ownership and
use of the Collateral and its other assets and the operation of its business.
All such policies shall be in such form, with such companies and in such amounts
as may be satisfactory to BACC. Borrower shall deliver to BACC certified copies
of such policies and evidence of the payments of all premiums therefor. All such
policies (except those of public liability and liability property damage) shall
contain a Lender's Loss Payable endorsement in a form satisfactory to BACC,
naming BACC as sole loss payee thereof, and containing a waiver of warranties.
All proceeds payable under such policies shall be payable to BACC and applied to
the Obligations.
6.11 BACC Expenses. Borrower shall immediately and without demand reimburse
BACC for all BACC Expenses as set forth herein and in the other Loan Documents
and Borrower hereby authorizes the payment of such BACC Expenses.
6.12 Compliance With Law. Borrower shall comply, in all material respects,
with the requirements of all applicable laws, rules, regulations and orders of
governmental authorities relating to Borrower and the conduct of its business.
6.13 Accounting System. Borrower at all times hereafter shall maintain a
standard and modern system of accounting in accordance with GAAP with ledger and
account cards or computer tapes, disks, printouts and records pertaining to the
Collateral containing such information as may from time to time be requested by
BACC.
6.14 Life Insurance. Borrower shall assign to BACC prior to the First
Advance under the revolving credit facility provided for in paragraph 2.1 hereof
a life insurance policy on the life of Xxxxxxx X'Xxxxxx in the amount of
$250,000.00 with BACC appearing as an irrevocable beneficiary in said policy.
Borrower is to keep said policy in full force and effect, and pay all premiums
as they fall due and furnish to BACC upon request proof of payment of said
premiums. If Borrower shall fail to do so, BACC may, in its discretion, pay any
premiums due on said policy which shall constitute BACC Expenses. It shall be
the obligation of Borrower to notify BACC of its failure to pay any premiums
when they become due.
6.15 Borrower shall promptly, but in no event later than two days after it
has knowledge thereof, notify BACC of its receipt of notice of Default by
Borrower under its lease for any premises operated by Borrower.
7. NEGATIVE COVENANT
Borrower covenants and acknowledges that during the Term Borrower shall not
undertake any of the following:
7.1 Extraordinary Transactions and Disposal of Assets. Without the prior
written consent of BACC which shall not be unreasonably withheld enter into any
transaction not in the ordinary and usual course of its business as conducted on
the date hereof, including but not limited to the sale, lease, disposal,
movement, relocation or transfer, whether by sale or otherwise, of any its
assets other than sales of Inventory in the ordinary and usual course of its
business as presently conducted; incur any indebtedness for borrowed money or
other indebtedness outside the ordinary and usual course of its business as
conducted on the date hereof, including the existing 10% and 12% convertible
notes of Borrower, except for renewals or extensions of existing debts permitted
by BACC; or make any advance or loan.
7.2 Change Name. Change its name, business structure or identify or add any
new fictitious name except upon not less than thirty (30) days prior written
notice to BACC.
7.3 Merge, Acquire. Merge, acquire, or consolidate with or into any other
business
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organization without the prior written consent of BACC which shall not be
unreasonably withheld.
7.4 Guaranty. Guaranty or otherwise become in any way liable with respect
to the obligations of any third party, except by endorsement of instruments or
items of payment for deposit to the account of Borrower for negotiation and
delivery to BACC.
7.5 Restructure. Make any change in its financial structure or business
operations without the prior written consent of BACC which shall not be
unreasonably withheld.
7.6 Prepayments. Prepay any existing indebtedness owing to any third party
other than trade payables without the prior written consent of BACC which shall
not be unreasonably withheld.
7.7 Change of Management. Cause, permit or suffer any material change in
the senior management of Borrower.
7.8 Loans and Advances. Make any loans, advances or extensions of credit to
any officer, director, executive employee or shareholder of Borrower (or any
relative of any of the foregoing), or to any entity which is a subsidiary of,
related to, affiliated with or has common shareholders, officers or directors
with Borrower in excess of the aggregate outstanding sum of $10,000.00.
7.9 Distributions. Make any distribution or declare or pay any dividends
(in cash or in stock) on, or purchase, acquire, redeem or retire any of its
capital stock, of any class, whether now or hereafter outstanding, other than
dividends (currently 6%) on the existing redeemable convertible preferred stock
of Borrower, without the prior written consent of BACC which shall not be
unreasonably withheld.
7.10 Accounting Methods. Modify or change its method of accounting or enter
into, modify or terminate any agreement presently existing or at any time
hereafter entered into with any third party for the preparation or storage of
Borrower's records of Accounts and financial condition without said party
agreeing to provide BACC with information regarding the Collateral or Borrower's
financial condition. Borrower waives the right to assert a confidential
relationship, if any, it may have with any such third party in connection with
any information requested by BACC hereunder, and agrees that BACC may contact
any such party directly in order to obtain such information.
7.11 Business Suspension. Suspend or go out of business.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute
an Event of Default by Borrower hereunder:
8.1 Failure to Pay. Borrower's failure to pay when due and payable, or when
declared due and payable, any portion of the Obligations (whether principal,
interest, taxes, BACC Expenses, or otherwise);
8.2 Failure to Perform. Borrower's or a Guarantor's failure to perform,
keep or observe any term, provision, condition, representation, warranty,
covenant or agreement contained in this Agreement, in any of the Loan Documents
or in any other present or future agreement between Borrower, and/or a Guarantor
and BACC;
8.3 Misrepresentation. Any misstatement or misrepresentation now or
hereafter exists in any warranty, representation, statement, aging or report
made to BACC by, Borrower and/or a Guarantor or any officer, employee, agent or
director thereof, or if any such warranty, representation, statement, aging or
report is withdrawn by such person;
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8.4 Material Adverse Change. There is a material adverse change in
Borrower's, or a Guarantor's, business or financial condition;
8.5 Material Impairment. There is a material impairment of the prospect of
repayment of the Obligations or a material impairment of BACC's continuing
security interests in the Collateral;
8.6 Levy or Attachment. Any portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant or is levied upon, or comes into
the possession of any judicial officer or assignee;
8.7 Insolvency by Borrower or Guarantor. An Insolvency Proceeding is
commenced by Borrower or a Guarantor;
8.8 Insolvency Against Borrower. An Insolvency Proceeding is commenced
against Borrower or a Guarantor;
8.9 Injunction Against Borrower. Borrower is enjoined, restrained or in any
way prevented by court order from continuing to conduct all or any material part
of its business;
8.10 Government Lien. A notice of lien, levy or assessment is filed of
record with respect to any of Borrower's or a Guarantor's assets by the United
States Government, or any department, agency or instrumentality thereof, or by
any state, county, municipal or other governmental agency, or any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a lien,
whether xxxxxx or otherwise, upon any of Borrower's or a Guarantor's assets and
the same is not paid on the payment date thereof;
8.11 Judgment. A judgment is entered against Borrower or a Guarantor;
8.12 Default to Third Party. There is a default in any material agreement
to which Borrower or a Guarantor is a party or by which Borrower or a Guarantor
or any of their assets are bound;
8.13 Subordinated Debt Payments. Borrower makes any payment on account of
indebtedness which has now or hereafter been subordinated to the Obligations,
except to the extent such payment is allowed under any subordination agreement
entered into with BACC;
8.14 Termination of Guarantor. A Guarantor dies or terminates its guaranty;
or
8.15 ERISA Violation. A prohibited transaction within the meaning of ERISA
Section 406 or IRC Section 1975(c) shall occur with respect to a Plan which
could have a material adverse effect on the financial condition of Borrower; any
lien upon the assets of Borrower in connection with any Plan shall arise;
Borrower or any ERISA Affiliate shall completely or partially withdraw from a
Multiemployer Plan and such withdrawal could, in the opinion of BACC, have a
material adverse effect on the financial condition of Borrower. Borrower or any
of its ERISA Affiliates shall fail to make full payment when due of all amounts
which Borrower or any of its ERISA Affiliates may be required to pay to any Plan
or any Multiemployer Plan as one or more contributions thereto; Borrower or any
of its ERISA Affiliates creates or permits the creation of any accumulated
funding deficiency, whether or not waived; the voluntary or involuntary
termination of any Plan which termination could, in the opinion of BACC, have a
material adverse effect on the financial condition of Borrower or Borrower shall
fail to notify BACC promptly and in any event within ten (l0) days of the
occurrence of an event which constitutes an Event of Default under this clause
or would constitute an Event of Default upon the exercise of BACC's judgment.
Notwithstanding anything contained in this Section 8 to the contrary, BACC
shall refrain from exercising its rights and remedies and an Event of Default
shall not be deemed to have occurred by reason of the
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occurrence of any of the events set forth in Sections 8.8, 8.10 or 8.11 hereof
if, within ten (10) days, or in the case of an event under Section 8.6 if within
thirty (30) days, from the date thereof, the same is released, discharged,
dismissed, bonded against or satisfied; provided, however, BACC shall not be
obligated to make Advances to Borrower during such period.
9. BACC'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event of Default, BACC
may, at its election, without notice of such election and without demand, do any
one or more of the following:
(a) Declare all Obligations, whether evidenced by the Loan Documents or
otherwise, immediately due and payable in full:
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under the Loan Documents or under any other agreement between Borrower
and BACC;
(c) Terminate this Agreement as to any future liability or obligation of
BACC, but without affecting BACC's rights and security interest in the
Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account debtors for
amounts and upon terms which BACC considers advisable and, in such cases, BACC
will credit the Obligations with the net amounts received by BACC in payment of
such disputed Accounts, after deducting all BACC Expenses;
(e) Cause Borrower to hold all returned Inventory in trust for BACC,
segregate all returned Inventory from all other property of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of BACC;
(f) Without notice to or demand upon Borrower or a Guarantor, make such
payments and do such acts as BACC considers necessary or reasonable to protect
its security interest in the Collateral. Borrower shall assemble the Collateral
if BACC so requires and deliver or make the Collateral available to BACC at a
place designated by BACC. Borrower authorizes BACC to enter any premises where
the Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest or compromise any encumbrance,
charge or lien which in BACC's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith;
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale and sell (in the manner provided for herein) the
Collateral. BACC is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
asset of a similar nature, pertaining to the Collateral, in completing the
production of, advertising for sale and sale of the Collateral. Borrower's
rights under all licenses and all franchise agreements shall inure to BACC's
benefit;
(h) Sell the Collateral at either a public or private sale, or both, by way
of one or more contracts or transactions, for cash or on terms, in such manner
and at such places (including Borrower's premises) as BACC determines is
commercially reasonable. It is not necessary that the Collateral be present at
any such sale;
(i) BACC shall give notice of the disposition of the Collateral as follows:
(1) To the Borrower and each holder of a security interest in the
Collateral who has filed with BACC a written request for notice, a notice
in writing of the time and place of public sale or, if the sale is a
private sale or some other disposition other than a public sale is to be
made, then the time on or after which the private sale or other disposition
is to be made;
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(2) The notice hereunder shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12 hereof, at least
five (5) calendar days before the date fixed for the sale, or at least five
(5) calendar days before the date on or after which the private sale or
other disposition is to be made, unless the Collateral is perishable or
threatens to decline speedily in value. Notice to persons other than
Borrower claiming an interest in the Collateral shall be sent to such
addresses as they have furnished to BACC;
(j) BACC may credit bid and purchase at any public sale:
(k) Any deficiency which exists after disposition of the Collateral as
provided herein shall be immediately paid by Borrower. Any excess will be
remitted without interest by BACC to the party or parties legally entitled to
such excess; and
(l) In addition to the foregoing, BACC shall have all rights and remedies
provided by law (including those set forth in the Code) and any rights and
remedies contained in any Loan Documents and all such rights and remedies shall
be cumulative.
9.2 No Waiver. No delay on the part of BACC in exercising any right, power
or privilege under any Loan Document shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege under such Loan
Documents or otherwise, preclude other or further exercise of any such right,
power or privilege.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums or otherwise) due to third persons or entities, or fails to make any
deposits or furnish any required proof of payment or deposit, or fails to
perform any of Borrower's other covenants under any of the Loan Documents, then
in its discretion and without prior notice to Borrower, BACC may do any or all
of the following: (a) make any payment which Borrower has failed to pay or any
part thereof; (b) set up such reserves in Borrower's loan account as BACC deems
necessary to protect BACC from the exposure created by such failure; (c) obtain
and maintain insurance policies of the type described in Section 6.10 hereof and
take any action with respect to such policies as BACC deems prudent; or (d) take
any other action deemed necessary to preserve and protect its interests and
rights under the Loan Documents. Any payments made by BACC shall not constitute:
(a) an agreement by BACC to make similar payments in the future or (b) a waiver
by BACC of any Event of Default. BACC need not inquire as to, or contest the
validity of, any such expense, tax, security interest, encumbrance or lien and
the receipt of notice for the payment thereof shall be conclusive evidence that
the same was validly due and owing.
11. WAIVERS
11.1 Demand, Protest. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, and notice of nonpayment at maturity and acknowledges that BACC may
compromise, settle or release, without notice to Borrower, any Collateral and/or
guaranties at any time held by BACC. Borrower hereby consents to any extensions
of time of payment or partial payment at, before or after the Termination Date.
11.2 No Marshaling. Borrower, on its own behalf and on behalf of its
successors and assigns hereby expressly waives all rights, if any, to require a
marshaling of assets by BACC or to require that BACC first resort to some
portion(s) of the Collateral before foreclosing upon, selling or otherwise
realizing on any other portion thereof.
11.3 BACC's Non-Liability for Inventory or Equipment. So long as BACC
complies with its obligations, if any, under Section 9-207 of the Code, BACC
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Inventory or Equipment; (b) any loss or damage thereto occurring or
- 16 -
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever. All risk of loss, damage or
destruction of the Inventory or Equipment shall be borne by Borrower.
12. NOTICES
Unless otherwise provided herein, all consents, waivers, notices or demands
by any party relating to the Loan Documents shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be telecopied (followed up by a
mailing), personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by receipted overnight delivery service to
Borrower or to BACC, as the case may be, at their addresses set forth below
If to Borrower: Windswept Environmental Group, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X'Xxxxxx
Fax # (000) 000-0000
If to BACC: Business Alliance Capital Corp.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
Fax # (000)000-0000
Any party may change the address at it is to receive notices hereunder by
notice in writing in the foregoing manner given to the other. All notices or
demands sent in accordance with this Section 12 shall be deemed received on the
earlier of the date of actual receipt or five (5) calendar days after the
deposit thereof in the mail or on the date telecommunicated if telecopied.
13. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings or other papers delivered to
BACC may be destroyed or otherwise disposed of by BACC four (4) months after
they are delivered to or received by BACC, unless Borrower requests, in writing,
the return of the said documents, schedules. invoices or other papers and makes
arrangements, at Borrower's expense, for their return.
14. GENERAL PROVISIONS
14.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by Borrower and executed and delivered by BACC.
14.2 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights
hereunder and any prohibited assignment shall be absolutely void. No consent to
an assignment by BACC shall release Borrower from its Obligations. Without
notice to or the consent of Borrower, BACC may assign this Agreement and its
rights and duties hereunder and BACC reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in BACC's rights and benefits hereunder. In connection therewith, BACC
may disclose all documents and information which BACC now or hereafter may have
relating to Borrower or Borrower's business. Borrower and BACC do not intend any
of the benefits of the Loan Documents to inure to any third party, and no third
party shall be a third party beneficiary hereof or thereof.
14.3 Section Headings. Headings and numbers have been set forth herein for
convenience
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only.
14.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against BACC or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by each party and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of the parties hereto.
14.5 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of such provision.
14.6 Amendments in Writing. This Agreement cannot be changed or terminated
orally. This Agreement is the entire agreement between the parties with respect
to the matters contained herein. This Agreement supersedes all prior agreements,
understandings and negotiations, if any, all of which are merged into this
Agreement.
14.7 Counterparts. This Agreement may be executed in any number of
counterparts each of which, when executed and delivered, shall be deemed to be
an original and all of which, when taken together, shall constitute but one and
the same Agreement.
14.8 Indemnification. Borrower hereby indemnifies, protects, defends and
saves harmless BACC and any member, officer, director, official, agent, employee
and attorney of BACC, and their respective heirs, successors and assigns
(collectively, the "Indemnified Parties"), from and against any and all losses,
damages, expenses or liabilities of any kind or nature and from any suits,
claims or demands, including reasonable counsel fees incurred in investigating
or defending such claim, suffered by any of them and caused by, relating to,
arising out of, resulting from, or in any way connected with the Loan Documents
and the transactions contemplated therein or the Collateral (unless caused by
the gross negligence or willful misconduct of the Indemnified Parties)
including, without limitation: (a) losses, damages, expenses or liabilities
sustained by BACC in connection with any environmental cleanup or other remedy
required or mandated by any Environmental Law; (b) any untrue statement of a
material fact contained in information submitted to BACC by Borrower or a
Guarantor or the omission of any material fact necessary to be stated therein in
order to make such statement not misleading or incomplete; (c) the failure of
Borrower or a Guarantor to perform any obligations required to be performed by
Borrower or a Guarantor under the Loan Documents; and (d) the ownership,
construction, occupancy, operations, use and maintenance of any of Borrower's or
a Guarantor's assets. The provisions of this paragraph 14.8 shall survive
termination of this Agreement and the other Loan Documents.
15. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
THE VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS
SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE COUNTY OF
XXXXXX, STATE OF NEW JERSEY, THE FEDERAL COURTS WHOSE VENUE INCLUDES THE STATE
OF NEW JERSEY, OR AT THE SOLE OPTION OF BACC, IN ANY OTHER COURT IN WHICH BACC
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER AND BACC EACH WAIVES, TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY IN ANY
PROCEEDING UNDER THE LOAN DOCUMENTS OR RELATING TO THE DEALINGS OF BORROWER AND
BACC AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON
CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 15.
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Borrower and BACC have executed this Agreement at BACC's place of business
in Princeton, New Jersey as of the date first above written.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
a Delaware corporation
Signed by: /s/Xxxxxxx X'Xxxxxx
--------------------------
Print Name: Xxxxxxx X'Xxxxxx
Title/Capacity: Chairman, CFO
TRADE-WINDS ENVIRONMENTAL
RESTORATION, INC.
a New York corporation
Signed by: /s/Xxxxxxx X'Xxxxxx
--------------------------
Print Name: Xxxxxxx X'Xxxxxx
Title/Capacity: President
NORTH ATLANTIC LABORATORIES, INC.
a New York corporation
Signed by: /s/Xxxxxxx X'Xxxxxx
--------------------------
Print Name: Xxxxxxx X'Xxxxxx
Title/Capacity: Vice President
NEW YORK TESTING LABORATORIES, INC.
a Delaware corporation
Signed by: /s/Xxxxxxx X'Xxxxxx
--------------------------
Print Name: Xxxxxxx X'Xxxxxx
Title/Capacity: Vice President
BUSINESS ALLIANCE CAPITAL CORP.
a Delaware corporation
Signed by: /s/Xxxxxxx X. Seinbold
--------------------------
Print Name: Xxxxxxx X. Seinbold
Title/Capacity: Senior Vice President
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Schedule 2.4
Deposit Account of Borrower for Advances
Trade-Winds Environmental Restoration, Inc.
Account # 842500736765
----------------------
Bank Name and Wire Transfer Instructions:
Chase Manhattan Bank
--------------------
ABA # 000000000
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Schedule 5.1
EXISTING LIENS WHICH ARE TO CONTINUE
Interest of Prestige Factors in the Accounts Receivable of Borrower which shall
terminate upon the initial Advance under Section 2.1 hereof.
Liens on specific items of equipment as set forth on Exhibit 5.1 annexed hereto.
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