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EXHIBIT 10.1
CREDIT AND SECURITY AGREEMENT
BETWEEN
LANCETTI COSMETICS CORPORATION, a Florida corporation
"BORROWER"
AND
FIRST UNION NATIONAL BANK OF FLORIDA,
a national banking association
"Bank"
DATED: SEPTEMBER ___, 1995
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TABLE OF CONTENTS
PAGE
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1. Definitions..............................................................................................1
1.1. Defined Terms...................................................................................1
1.2. Financial Terms.................................................................................6
1.3. Other Terms.....................................................................................6
2. Representations and Warranties...........................................................................6
2.1. Valid Existence and Power.......................................................................6
2.2. Authority.......................................................................................7
2.3. Financial Condition.............................................................................7
2.4. Financial Statements............................................................................7
2.5. Litigation; Government Regulation...............................................................7
2.6. Agreements, Etc.................................................................................7
2.7. Authorizations..................................................................................8
2.8. Title...........................................................................................8
2.9. Collateral......................................................................................8
2.10. Location........................................................................................8
2.11. Taxes...........................................................................................8
2.12. Withholding Taxes...............................................................................9
2.13. Labor Law Matters...............................................................................9
2.14. Accounts........................................................................................9
2.15. Use and Location of Collateral..................................................................9
2.16. Judgment Liens..................................................................................9
2.17. Intent and Effect of Transactions...............................................................9
2.18. Subsidiaries...................................................................................10
2.19. Hazardous Materials............................................................................10
2.20. ERISA..........................................................................................10
2.21. Investment Company Act.........................................................................10
3. The Loans...............................................................................................10
3.1. Discretionary Revolving Loan...................................................................10
3.2. Limitations on Advances of Revolving Loan......................................................11
3.3. Notice and Manner of Borrowing.................................................................11
3.4. Disbursement of Term Loan......................................................................12
3.5. Special Loan Account...........................................................................12
3.6. Calculation of Interest........................................................................12
3.7. Overdue Amounts................................................................................12
3.8. Sales Tax......................................................................................12
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4. Conditions Precedent to Borrowing.......................................................................12
4.1. Conditions Precedent to Initial Advance........................................................12
4.2. Conditions Precedent to EachAdvance............................................................13
5. Covenants of the Borrower...............................................................................14
5.1. Use of Loan Proceeds...........................................................................14
5.2. Maintenance of Business and Properties.........................................................14
5.3. Insurance......................................................................................15
5.4. Notice of Default..............................................................................15
5.5. Inspections/Audits.............................................................................15
5.6. Financial Information..........................................................................15
5.7. Limitation on Debt.............................................................................15
5.8. Liens..........................................................................................16
5.9. Dividends......................................................................................17
5.10. Merger, Sale, Etc..............................................................................17
5.11. Loans, Guaranties and Other Investments........................................................17
5.12. Change in Fiscal Year..........................................................................17
5.13. Certificate of Full Compliance From Accountant.................................................18
5.14. Reports and Proxies............................................................................18
5.15. Change in Business/Control.....................................................................18
5.16. Accounts.......................................................................................18
5.17. Encumbrances...................................................................................18
5.18. Transactions with Affiliates...................................................................18
5.19. Payment of Other Debt..........................................................................18
5.20. No Change in Name, Offices; Removal of Collateral..............................................18
5.21. No Sale, Leaseback.............................................................................19
5.22. Margin Stock...................................................................................19
5.23. Payment of Taxes, Etc..........................................................................19
5.24. Subordination..................................................................................19
5.25. Compliance; Hazardous Materials................................................................19
5.26. Subsidiaries...................................................................................19
5.27. Compliance with Assignment Laws................................................................19
5.28. Further Assurances.............................................................................19
5.29. Withholding Taxes..............................................................................19
5.30. Other Covenants................................................................................19
6. Default.................................................................................................20
6.1. Events of Default..............................................................................20
6.2. Remedies.......................................................................................21
6.3. Receiver.......................................................................................22
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7. Security Agreement......................................................................................22
7.1. Security Interest..............................................................................22
7.2. Remedies.......................................................................................22
7.3. Power of Attorney..............................................................................23
7.4. Entry..........................................................................................23
7.5. Deposits; Insurance............................................................................23
7.6. Other Rights...................................................................................23
7.7. Accounts.......................................................................................24
7.8. Tangible Collateral............................................................................24
7.9. Waiver of Marshalling..........................................................................24
7.10. Waiver of Automatic Stay.......................................................................24
8. Miscellaneous...........................................................................................24
8.1. No Waiver, Remedies Cumulative.................................................................24
8.2. Survival of Representations....................................................................24
8.3. Expenses.......................................................................................25
8.4. Notices........................................................................................25
8.5. Governing Law..................................................................................25
8.6. Successors and Assigns.........................................................................25
8.7. Counterparts...................................................................................26
8.8. No Usury.......................................................................................26
8.9. Powers.........................................................................................26
8.10. Approvals......................................................................................26
8.11. Jurisdiction, Service of Process...............................................................26
8.12. Multiple Borrowers.............................................................................27
8.13. Waiver of Jury Trial...........................................................................27
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CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of the _____ day of
_______________, 1995, between Lancetti Cosmetics Corporation, a Florida
corporation (the "Borrower"), and FIRST UNION NATIONAL BANK OF FLORIDA, a
national banking association (the "Bank");
W I T N E S S E T H
In consideration of the mutual covenants herein contained and to induce
the Bank to extend credit to the Borrower, the parties agree as follows:
1. DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
1.1. DEFINED TERMS.
"ACCOUNTS" shall mean all accounts, accounts receivable,
contract: rights, notes, bills, acceptances, choses in action, chattel paper,
instruments, documents, and other forms of obligations at any time owing to the
Borrower, and all "Accounts," as that term is defined in the Code, the proceeds
thereof and all of the Borrower's rights with respect to any goods represented
whereby, whether or not delivered, goods returned by customers and all rights as
an unpaid vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation,
together with all customer lists, books and records, ledger and account cards,
computer tapes, disks, printouts and records, whether now in existence or
hereafter created, relating to Accounts.
"ACCOUNT DEBTOR" shall mean any Person who is or who
may become obligated to the Borrower under, with respect to, or on account of an
Account.
"ADVANCE" shall mean an advance of proceeds of the
Revolving Loan to the Borrower pursuant to this Agreement, on any given Advance
Date.
"ADVANCE DATE" shall mean the date as of which an
Advance is made.
"ADVANCE REQUEST" shall mean the written request for
an Advance under the Revolving Loan as identified in SECTION 3.1 hereof.
"AFFILIATE" of a named Person shall mean (a) any
Person owning 5% or more of the voting stock or rights of such named Person or
of which the named Person owns 5% or more of such voting stock or rights; (b)
any Person controlling, controlled by or under common control with such named
Person; (c) any officer or director of such named Person or any Affiliates of
the named Person; and (d) an, family member of the named Person or any Affiliate
of such named Person.
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"BOND FACILITY" shall mean that certain $1,736,000.00
Bond Facility evidenced in part by that certain Indenture of Trust dated as of
May 1, 1994 by and between Broward County, Florida and First Union National Bank
of Florida as Trustee and that certain Loan Agreement dated as of May 1, 1994 by
and between Broward County, Florida and C&C General Partnership and Lancetti
Cosmetics Corporation d/b/a Prestige Cosmetics and secured in part by that
certain Mortgage and Security Agreement dated as of the lst day of May, 1994 by
and between C&C General Partnership and Florida general partnership and Broward
County, Florida, a political subdivision of the State of Florida.
"BORROWING BASE" shall have the meaning set forth in
SECTION 3.2 hereof.
"BUSINESS DAY" shall mean a weekday on which
commercial banks are open for business in Jacksonville, Florida.
"CHATTEL PAPER" shall mean all writing or writings
which evidence both a monetary obligation and a security interest in or the
lease of specific goods and in addition includes all property included in the
definition of "chattel paper" as used in the Code, together with any guaranties,
letters of credit and other security therefor.
"CODE" shall mean the Uniform Commercial Code, as in
effect in Florida from Lime to time.
"COLLATERAL" means the following property of the
Borrower, wherever located and whether now owned by Borrower or hereafter
acquired: (a) all Inventory; (b) all General Intangibles; (c) all Accounts and.
Chattel Paper and any other instrument or intangible representing payment for
goods or services; (d) all Equipment; (e) all funds on deposit with or under the
control of the Bank or its agents or correspondents; (f) any Key-Man Life
Insurance policies insuring the life of Xxxxxxx Xxxxx now or hereafter assigned
to Bank; and (g) all parts, replacements, substitutions, profits, products and
cash and non-cash proceeds of any of the foregoing (including insurance proceeds
payable by reason of loss or damage thereto) in any form and wherever located.
Collateral shall include all written or electronically recorded records relating
to any such Collateral and other rights relating thereto.
"DEBT" shall mean all liabilities of a Person as
determined under generally accepted accounting principles and all obligations
which such Person has guaranteed or endorsed or is otherwise secondarily or
jointly liable, and shall include, without limitation (a) all obligations for
borrowed money or purchased assets, (b) obligations secured by assets whether or
not any personal liability exists, (c) the capitalized amount of any capital or
finance lease obligations, (d) the unfunded portion of pension or benefit plans
or other similar liabilities, (e) obligations as a general partner, (f)
contingent obligations pursuant to guaranties, endorsements, letters of credit
and other secondary liabilities, and (g) obligations for deposits.
"DEFAULT" or "DEFAULT" shall mean any of such events,
whether or not any such requirement for the giving of time or the notice or
the laps happening of any further condition, event or act shall have been
satisfied.
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"DEFAULT RATE" shall mean the highest lawful rate of
interest per annum specified in the Note to apply after a default under the
Note.
"ELIGIBLE ACCOUNTS" shall mean all Accounts (valued
net of any sales tax included in the invoiced amount, the maximum amount of any
discounts or other reductions) of the Borrower payable not more than forty-five
(45) days after the date of invoice and as to which the Bank has a first
priority perfected Lien subject only to Permitted Liens, excluding (a)
Accounts outstanding for ninety (90) days or more from the date of invoice; (b)
all Accounts owed by an Account Debtor if more than 50% of the Accounts owed
by such Account Debtor (or any Affiliate) to the Borrower are ineligible because
they are aged beyond ninety (90) days; (c) Accounts owing from any Affiliate of
the Borrower; (d) Accounts owed by a creditor of the Borrower or which are in
dispute or subject to any counterclaim, contra-account or offset; (e) Accounts
owing by any Account debtor which is insolvent or generally unable to pay its
debts as they become due; (f) Accounts arising from a sale on a xxxx-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or similar basis
or which is subject to repurchase, return, rejection, repossession, loss or
damage; (g) Accounts owed by an Account Debtor outside the United States; (h)
Accounts as to which the goods giving rise to the Account have not been
delivered to and accepted by the Account Debtor or the service giving rise to
the Account has not been completely performed or which do not represent a final
sale; (i) Accounts owed by the United States of America unless the Borrower
shall have complied with the Federal Assignment of Claims Act; (j) Accounts
which are on a C.O.D. basis; (k) the total Accounts owed by an Account Debtor
and its Affiliates exceeds a credit limit-- established by the Bank in its
discretion (to the extent of such excess); (1) the Account is evidenced by a
note or other instrument, or Chattel Paper or reduced to judgment; (m) the total
unpaid Accounts of the Account Debtor and its Affiliates and subsidiaries at an,
of their locations exceed 10% of the total Accounts of the Borrower (to the
extent of such excess); (n) Accounts which, by contract, subrogation, mechanics'
lien laws or otherwise, are subject to claims by the Borrower's creditors or
other third parties or which are owed by Account Debtors as to whom any creditor
of the borrower (including any bonding company) has lien rights; and (o)
Accounts for which the validity, collectibility or amount of which is determined
in good faith by the Borrower or the Bank to be doubtful. No Accounts shall be
Eligible Accounts if any representation, warranties or covenants herein relating
thereto shall be in default.
"ELIGIBLE INVENTORY" shall mean Inventory consisting
of finished goods of the Borrower as to which the Bank has a first priority
perfected Lien subject only to Permitted Liens, of a kind usually and
customarily sold by the Borrower located at the Borrower's main operating
facility in Deerfield Beach, Florida and which is not, because of damage, age,
unmerchantability, obsolescence or any other condition or circumstance,
materially impaired in condition, value or marketability in the good faith
opinion of the Bank or the Borrower. No Inventory shall be Eligible Inventory if
any representation, warranty, or covenant herein relating to such Inventory is
in default.
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"EQUIPMENT" shall mean all furniture, fixtures,
equipment, motor vehicles, rolling stock and other tangible property of a Person
of every description, except Inventory, and in addition includes all property
included in the definition of "equipment" as used in the Code.
"EVENT OF DEFAULT" shall mean any event specified as
such in SECTION 6.1 hereof, provided that there shall have been satisfied any
requirement in connection with such event for the giving of notice or the lapse
of time, or both;
"GENERAL INTANGIBLES" shall mean all intangible
personal property (including things in action) except Accounts, Chattel Paper
and instruments (as defined in the Code), including all contract rights,
copyrights, trademarks, trade names, service marks, patents, patent drawings,
designs, formulas, rights to a Person's name itself, customer lists, rights to
all prepaid expenses, marketing expenses, rights to receive future contracts,
fees, commissions and orders relating in any respect to any business of a
Person, all licenses and permits, all computer programs and other software owned
by a Person, or which a Person has the right to use, and all rights for breach
of warranty or other claims for funds to which a Person may be entitled, and in
addition includes ail property included in the definition of general
intangibles" as used in the Code.
"GUARANTOR" shall mean any Person now or hereafter
guaranteeing, endorsing or otherwise becoming liable for any Indebtedness.
"GUARANTY AGREEMENT" shall mean any guaranty
instrument now or hereafter executed and delivered by any Guarantor to the Bank,
as it may be modified.
"INDEBTEDNESS" shall mean all obligations now or
hereafter owed to the Bank by the Borrower, whether related or unrelated to the
Revolving Loan, including, without limitation, amounts owed or to be owed under
the terms of the Loan Documents, or arising cut of the transactions described
therein, including, without limitation, the Revolving Loan, sums advanced to
pay overdrafts on any account maintained by the Borrower with the Bank,
reimbursement obligations for outstanding letters of credit or banker's
acceptances issued to the account of the Borrower, or its Subsidiaries, amounts
paid by the Bank under letters of credit or drafts accepted by the Bank for the
account of the Borrower or its Subsidiaries, together with all interest accruing
thereon, all fees, all costs of collection, attorneys' fees and expenses of or
advances by the Bank: which the Bank pays or incurs in discharge of obligations
of the Borrower or to repossess, protect, preserve, store or dispose of any
Collateral, whether such amounts are now due or hereafter become due, direct or
indirect and whether such amounts due are from time to time reduced or entirely
extinguished and thereafter re-incurred.
"INVENTORY" means all goods, merchandise and other
personal property of a Person which is held for sale or lease or furnished or to
be furnished under a contract for services or raw materials, and all work in
process and materials used or consumed or to be used or consumed in a Person's
business, and in addition, includes all property included in the definition of
"inventory" as used in the Code.
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"LIEN" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the UCC or comparable law of any jurisdiction).
"LOAN(S)" shall mean collectively the Revolving Loan
identified in SECTION 3.1 hereof and the Term Loan identified in SECTION 3.5
hereof.
"LOAN DOCUMENTS" shall mean this Agreement, any other
Security Agreement, any Note, any Guaranty Agreement, the Advance Requests,
UCC-1 financing statements and all other documents and instruments now or
hereafter evidencing, describing, guaranteeing or securing the Indebtedness
contemplated hereby or delivered in connection herewith, as they may be
modified.
"MAXIMUM LOAN AMOUNT" shall mean $1,700,000.00 as to
the Revolving Loan and $250,000.00 as to the Term Loan or such other amount as
the Bank may consent to in writing from time to time.
"NOTE" shall mean collectively the Revolving Note and
the Term Note, and any other promissory note now or hereafter evidencing any
Indebtedness, and all modifications, extensions and renewals thereto.
"PERMITTED DEBT" shall mean (a) the Indebtedness; (b)
Debt payable to suppliers and other trade creditors in the ordinary course of'
business on ordinary and customary trade terms and which is not past due; and
(c) Debt secured by Permitted Liens, provided that such Indebtedness never may
not be increased from the amount outstanding- as of the date hereof; and (d)
such other Debt as the Bank may consent to in writing from time to time.
"PERMITTED LIENS" shall mean (a) Liens securing the
Indebtedness, (b) Liens for taxes and other statutory Liens, landlord's Liens
and similar Liens arising out of operation of law (provided they are subordinate
to the Bank's Liens on Collateral) so long as the obligations secured thereby
are not past due or are being contested as permitted herein; (c) Liens described
on Exhibit 1.1 hereto (if any), provided, however, that no debt not now secured
by such Liens shall become secured by such Liens hereafter and such Liens shall
not encumber any other assets; and (d) such other Liens as the Bank may consent
to in writing from time to time.
"PERSON" shall mean any natural person, corporation,
unincorporated organization, trust, joint-stock company, joint venture,
association, company, limited or general partnership, any government, or any
agency or political subdivision of any government.
"REVOLVING LOAN" shall mean that certain
$1,700,000.00 revolving line of credit made by Bank to Borrower as evidenced by
the Demand Note.
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"REVOLVING NOTE" Loan shall mean that certain Demand
Revolving Promissory Note executed by Borrower of even date herewith and all
renewals and modifications thereto.
"SECURITY AGREEMENT" shall mean this Agreement as it
relates to a Lien on the Collateral, and any other mortgage, security agreement
or similar instrument now or hereafter executed by the Borrower or other Person
granting the Bank a Lien on any Collateral to secure the Indebtedness.
"SUBSIDIARY" shall mean any corporation, partnership
or other Person in which the Borrower, directly or indirectly, owns more than
fifty percent (50%) of the stock, capital or income interests, or other
beneficial interests, or which is effectively controlled by the Borrower whether
such subsidiary not exists or is hereafter created.
"TERM LOAN" shall mean that certain $250,000 term
loan made by Bank to Borrower as evidenced by the Term Note.
"TERM NOTE" shall mean that certain $250,000 Term
Promissory Note made by Bank to Borrower of even date herewith, and all
modifications and renewals thereto.
1.2. FINANCIAL TERMS. All financial terms used herein shall
have the meanings assigned to them under generally accepted accounting
principles consistently applied and maintained on a basis for the Borrower
throughout the period indicated and consistent with the prior financial practice
of the Borrower, unless another meaning shall be specified ("GAAP").
1.3. OTHER TERMS. All other terms contained in this
Agreement shall, when the context so indicates, have the meanings provided for
by the Code to the extent the same are used or defined therein.
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to
enter into this Agreement and to make the Revolving Loan provided for herein,
the Borrower makes the following representations and warranties, all of which
shall survive the execution and delivery of the Loan Documents and the making of
Advances thereunder. Unless otherwise specified, such representations and
warranties shall be deemed made as of the date hereof and as of the Advance Date
of any Advance by the Bank to the Borrower:
2.1. VALID EXISTENCE AND POWER. The Borrower and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization is duly
qualified or licensed to transact business in all places where the failure to be
so qualified would have a material adverse effect on it. The Borrower and each
other Person which is a party to any Loan Document (other than the Bank) has the
power to make and perform the Loan Documents executed by it and all such
instruments will constitute the legal, valid and binding obligations of such
Person, enforceable in accordance with their respective terms.
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2.2. AUTHORITY. The execution, delivery and performance
thereof by the Borrower and each other Person (other than the Bank) executing
any Loan Document have been duly authorized by all necessary action of such
Person, and do not and will not violate any provisions of law or regulation, or
any writ, order or decree of any court or governmental or regulatory authority
or agency or any provision of the governing instruments of such Person, and do
not and will not, with the passage of time or the giving of notice, result in a
breach of, or constitute a default or require any consent under, or result in
the creation of any Lien upon any property or assets of such Person pursuant to,
any law, regulation, instrument or agreement to which any such Person is a party
or by which any such Person or its respective properties may be subject, bound
or affected.
2.3. FINANCIAL CONDITION. Other than as disclosed in
financial statements delivered on or prior to the date hereof to the Bank,
neither the Borrower nor any Subsidiary nor (to the knowledge of the Borrower)
any Guarantor has any direct or contingent obligations or liabilities (including
any guarantees or leases) or any material unrealized or anticipated losses from
any commitments of such Person. The Borrower is not aware of any material
adverse fact (other than facts which are generally available to the public and
not particular to the Borrower, such as general economic or industry trends)
concerning the conditions or future prospects of the Borrower or any Subsidiary
or any Guarantor which has not been fully disclosed to the Bank, including any
adverse change in the operations or financial condition of such Person since the
date of the most recent financial statements delivered to the Bank.
2.4. FINANCIAL STATEMENTS. The financial statements
delivered to Bank have been prepared in accordance with GAAP, contain no
misstatement or omission, and fairly present the financial position, assets and
liabilities of the Borrower as of the respective dates thereof and the results
of operations and cash flows of the Borrower and its Subsidiaries for the
respective periods then ended.
2.5. LITIGATION; GOVERNMENT REGULATION. Except as disclosed
on EXHIBIT 2.5 (if any), there are no actions, suits or proceedings pending or,
to the knowledge of the Borrower, threatened against or affecting the Borrower
or any Guarantor at law or in equity before any court or administrative officer
or agency which might result in a material adverse change in the business or
financial condition of the Borrower or either Guarantor or impair the Borrower's
or either Guarantor's ability to perform its obligations under the Loan
Documents. Neither the Borrower nor any Guarantor is in violation of or in
default under any applicable statute, rule, order, decree, writ, injunction or
regulation of any governmental body (including any court).
2.6. AGREEMENTS, Etc. Neither the Borrower nor any
Subsidiary is a party to any agreement or instrument or subject to any court
order, governmental decree or any charter or other corporate restriction,
adversely affecting its business, properties or assets, operations or condition
(financial or otherwise) nor is any such Person in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party, or any law,
regulation, decree, order or the like.
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2.7. AUTHORIZATIONS. All authorizations, consents, approvals
and licenses required under applicable law or regulation for the ownership or
operation of the property owned or operated by the Borrower or any Subsidiary or
for the conduct of any business in which it is engaged have been duly issued and
are in full force and effect, and it: is not in default, nor has any event
occurred which with the passage of time or the giving of notice, or both, would
constitute a default, under any of the terms or provisions of any part thereof,
or under any order, decree, ruling, regulation, closing agreement. or other
decision or instrument of any governmental commission, bureau or other
administrative agency or public regulatory body having jurisdiction over such
Person, which default would have a material adverse effect on such Person.
Except as noted herein, no approval, consent or authorization of, or filing or
registration with, any governmental commission, bureau or other regulator,
authority or agency is required with respect to the execution, delivery or
performance of any Loan Document.
2.8. TITLE. The Borrower and each Subsidiary has good title
to the Collateral, free and clear of all Liens, except Permitted Liens. The
Borrower alone has full ownership rights in all Collateral.
2.9. COLLATERAL. The Liens granted to the Bank herein and
pursuant to any other Security Agreement (a) constitute and, as to subsequently
acquired property included in the Collateral covered by the Security Agreement,
will constitute, Liens under applicable law including, without limitation, the
Code entitled to all of the rights, benefits and priorities provided by
applicable law including, without limitation, the Code and (b) are, and as to
such subsequently acquired Collateral will be fully perfected, superior and
prior to the rights of all third persons, now existing or hereafter arising,
subject only to Permitted Liens. All of the Collateral is intended for use
solely in the Borrower's business.
2.10. LOCATION. The chief executive office of the Borrower
where the Borrower's business records are located is the address designated for
notices in SECTION 8.4 and the Borrower has no other places of business, except
as shown on EXHIBIT 2.10 (if any).
2.11. TAXES. The Borrower and each Subsidiary has filed all
federal and state income and other tax returns which, to the best knowledge of
the Borrower, are required to be filed, and have paid all taxes as shown on said
returns and all taxes, including AD VALOREM taxes, shown on all assessments
received by it to the extent that such taxes have become due. Neither the
Borrower nor any Subsidiary is subject to any federal, state or local tax Liens
nor has such Person received any notice of deficiency or other official notice
to pay any taxes. The Borrower and each Subsidiary has paid all sales and excise
taxes payable by it.
2.12. WITHHOLDING TAXES. The Borrower and each Subsidiary
has paid all withholding, FICA and other payments required by federal, state or
local governments with respect to any wages paid to employees.
2.13. LABOR LAW MATTERS. No goods or services have been or
will be produced by the Borrower or any Subsidiary in violation of any
applicable labor laws or regulations or any
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collective bargaining agreement or other labor agreements or in violation of any
minimum wage, wage-and-hour or other similar laws or regulations.
2.14. ACCOUNTS. Each Account, instrument, Chattel Paper and
other writing constituting any portion of the Collateral is (a) genuine and
enforceable in accordance with its terms except for such limits thereon arising
from BANKRUPTCY and similar laws relating to creditors' rights; (b) not subject
to any defense, setoff, claim or counterclaim of a material nature against the
Borrower except as to which the Borrower has notified the Bank in writing; and
(c) not subject to any other circumstances that would impair the validity,
enforceability or amount of such Collateral except as to which the Borrower has
notified the Bank in writing. Each Account included in any Advance Request,
report or other document as an Eligible Account meets all the requirements of an
Eligible Account set forth herein.
2.15. USE AND LOCATION OF COLLATERAL. The Collateral is
located only, and shall at all times be kept and maintained only, at the
Borrower's location or locations as described herein, which are owned and
operated by the Borrower, or for which Borrower has delivered to the Bank a
landlord's lien waiver, in accordance with SECTION 4.1(e) hereof. No such
Collateral is attached or affixed to any real. property so as to be classified
as a fixture unless the Bank has otherwise agreed in writing.
2.16. JUDGMENT LIENS. Neither the Borrower nor any Subsidiary,
nor any of their assets, are subject to any unpaid judgments (whether or not
stayed) or any judgment liens in any jurisdiction.
2.17. INTENT AND EFFECT OF TRANSACTIONS. This Agreement and
the transactions contemplated herein (a) are not made or incurred with intent to
hinder, delay or defraud any person to whom the Borrower has been, is now, or
may hereafter become indebted; (b) do not render the Borrower insolvent nor is
the Borrower insolvent on the date of this Agreement; (c) do not leave the
Borrower with an unreasonably small capital with which to engage in its
business or in any business or transaction in which it intends to engage; and
(d) are not entered into with the intent to incur, or with the belief that the
Borrower would incur, debts that would be beyond its ability to pay as such
debts mature.
2.18. SUBSIDIARIES. Borrower has no Subsidiaries, except as
set forth on Exhibit 2.18 (if any), attached hereto.
2.19. HAZARDOUS MATERIALS. The Borrower's property and
improvements hereon have not in the past been used, are not presently being
used, and will not in the future be used for, nor does the Borrower or any
Subsidiary engage in, the handling, storage, manufacture, disposition,
processing, transportation, use or disposal of hazardous or toxic materials, in
violation of applicable environmental laws.
2.20. ERISA. Neither the Borrower nor any subsidiary has any
pension, profit-sharing or other benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
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2.21. INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" as defined in the Investment Company Act
of 1940, as amended.
3. The LOANS.
3.1. DISCRETIONARY REVOLVING LOAN. The Bank may in its
discretion lend to the Borrower a total principal amount not to exceed
$1,700,000.00 (the "Maximum Revolving Loan Amount") for working capital to be
used in the operation of the Borrower's business. The Revolving Loan shall be
evidenced by and payable in accordance with the terms of a promissory note in
the face amount of the Revolving Note. The Revolving Note shall evidence the
outstanding principal balance of the Loan, as it may change from time to time.
ADVANCES HEREUNDER ARE DISCRETIONARY WITH THE BANK AND THE PRINCIPAL BALANCE OF
THE REVOLVING LOAN, OR SO MUCH THEREOF AS MAY BE ADVANCED, SHALL BE PAYABLE IN
FULL ON DEMAND. Advances under the Revolving Loan shall be subject to the
following terms:
(a) Advances of proceeds of the Revolving Loan shall
be limited to the face amount of the Revolving Note at any time outstanding;
(b) Should there occur any overdraft of any deposit
account maintained by the Borrower with the Bank, the Bank may, at its option,
disburse funds (whether or not in excess of the Maximum Revolving Loan Amount)
to eliminate such overdraft and such disbursement shall be deemed an Advance of
Revolving Loan proceeds hereunder entitled to all of the benefits of the Loan
Documents. Nothing herein shall be deemed an authorization of or consent to the
creation of an overdraft in any account or create any obligations on the part of
the Bank;
(c) All Advances by the Bank to or for the account of
the Borrower, whether or not in excess of the Maximum Revolving Loan Amount,
shall be considered part of the Indebtedness under the Note, shall bear interest
as provided in the Note, and shall be entitled to all rights and benefits
hereunder and under all other Loan Documents; and
(d) The Borrower shall not request and the Bank will
not be required to consider requests for Advances after the Maturity Date (as
defined in the Note); provided that the Bank may in its discretion extend such
date in writing and further provided that the repayment obligations of the
Borrower for Advances made by the Bank after such date (as it may be extended)
shall be binding on the Borrower and any Guarantor or other persons liable for
any Indebtedness to the same extent as obligations with respect to Advances made
prior to such date.
3.2. LIMITATIONS ON ADVANCES OF REVOLVING LOAN. The
outstanding balance of the Revolving Loan may increase and decrease from time to
time, and Advances thereunder may be repaid and reborrowed, but the total of
Advances outstanding at any one time under the Revolving Loan shall never exceed
the lesser of:
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(1) the maximum Revolving Loan Amount; or
(2) the "Borrowing Base," which shall be calculated
by:
(i) adding (A) a sum equal to seventy-five
(75%) percent of the total amount of Eligible Accounts to (B) a sum equal to the
lesser of $250,000.00 or (b) fifteen percent (15%) of the lesser of cost or fair
market value of Eligible Inventory of the Borrower; and
(ii) subtracting from the total obtained
under Section (2) (i) above an amount equal to the aggregate amounts described
on Exhibit 3.2 (if any) plus any foreign exchange contract exposure.
The Borrower shall immediately pay to the Bank any amount by
which the Revolving Loan exceeds the Borrowing Base or the Maximum Revolving
Loan Amount, whichever is less. The Bank may, in its discretion, make, or permit
to remain outstanding, Advances to the Borrower in excess of the Borrowing Base
and/or the Maximum Loan Amount and all such amounts shall be part of the
Revolving Loan and Indebtedness, shall bear interest as provided in the Note,
shall be payable in accordance herewith and with the Note and shall be entitled
to all rights and security provided for herein, in the Guaranty, the Security
Agreement and all other Loan Documents.
3.3. NOTICE AND MANNER OF BORROWING. Unless another
satisfactory procedure for disbursements is agreed upon in writing by the
parties, the following procedure will be used for disbursement of proceeds of
the Revolving Loan. The Borrower shall deliver a written and signed Advance
Request to the Bank not later than 12:00 noon, EST, on the Business Day of the
proposed Advance Date, in the form attached hereto as EXHIBIT 3.2, setting forth
the amount of the requested Advance, setting forth the Eligible Accounts and the
Eligible Inventory of the Borrower, and a reconciliation from the previous
Advance Request (or monthly report), specifying the date (which shall be a
Business Day), and the amount of the proposed Advance of proceeds, and providing
such other information as the Bank may require.
3.4. DISBURSEMENT OF TERM LOAN. The proceeds of the Term Loan
shall only be used by Borrower to purchase new machinery or equipment less than
one year old from (original invoice date) related to Borrower's now existing
core business. Each request for advance under the Term Loan shall be made in
writing no later than three Business Days prior to the date the disbursement is
to be made and shall be supported by an invoice containing the serial number and
description of the machinery or equipment being purchased.
3.5. SPECIAL LOAN ACCOUNT. The Borrower shall establish and
maintain with the Bank, during the term of the Loan, a demand deposit account
(the "Special Loan Account") into which the Borrower shall deposit, as received,
all proceeds from the sale of Inventory and collection of Accounts and other
Collateral in the form of checks, cash, drafts or the like, and all such
proceeds shall constitute Collateral. The Bank shall debit funds from the
Special Loan Account and apply the balance thereof against the outstanding
balance of the Revolving Note
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on or after the Business day following the Business day of deposit. The Bank
may, but shall not be required to, apply to the Loans any amounts represented by
uncleared checks, subject to collection. unless the Bank shall agree to other
arrangements, the Borrower shall direct (by instruction on invoices or
otherwise) all Account Debtors to make payment to a designated post office box
under the control of the Bank, which payments shall be deposited directly into
the special Loan Account. The Borrower shall pay the Bank's reasonable fees and
charges in connection with such lock-box arrangement.
The Bank may debit the Special Loan Account and/or make
Advances to the Borrower (whether or not in the excess of the Maximum Revolving
Loan Amount or the Borrowing Base) and apply such amounts to the payment of
interest, fees, expenses and other amounts to which the Bank may be entitled
from time to time and the Bank is hereby irrevocably authorized to do so without
consent of the Borrower. With regard hereto, the Bank shall use its best efforts
to notify the Borrower by facsimile transmission at least one (1) day prior to
debiting the Special Loan Account pursuant to the terms hereof.
3.6. CALCULATION OF INTEREST. All interest under the Note or
hereunder shall be calculated on the basis of a 360-day year for the actual
number of days elapsed in an interest period (actual/360 method), unless the
Bank shall otherwise elect.
3.7. OVERDUE AMOUNTS. Any payments not made as and when due
shall bear interest from the date due until paid at the Default Rate.
3.8. SALES TAX. The Borrower shall notify the Bank if any
Account includes any sales or other similar tax and the Bank may, but shall not
be obligated to, remit any such taxes directly to the taxing authority and make
Advances therefor. In no event shall the Bank be Liable for any such taxes.
4. CONDITIONS PRECEDENT TO BORROWING. Prior to any Advance of the
proceeds of the Loans, the following conditions shall have been satisfied, in
the sole opinion of the Bank and its counsel:
4.1. CONDITIONS PRECEDENT TO INITIAL ADVANCE. In addition to
any other requirement set forth in this Agreement, the Bank will not make the
Initial Advance under the Loans unless and until the following conditions shall
have been satisfied:
(a) LOAN DOCUMENTS. The Borrower and each other party
to any Loan Documents, as applicable, shall have executed and delivered this
Agreement, the Term Note, the Revolving Note and other required Loan Documents,
all in form and substance satisfactory to the Bank.
(b) OPINION OF COUNSEL TO THE BORROWER AND GUARANTOR.
The Bank shall have received the opinion of counsel for the Borrower and each
Guarantor as to the transactions contemplated by this Agreement, in form and
substance satisfactory to the Bank.
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(c) SUPPORTING DOCUMENTS. The Borrower shall cause to
be delivered to the Bank the following documents:
(i) A copy of the governing instruments of
the Borrower and each Subsidiary, and a good standing certificate of the
Borrower and each subsidiary, certified by the appropriate official of its state
of incorporation and the State of Florida, if different;
(ii) Bylaws of the Borrower certified by an
officer of the Borrower;
(iii) Incumbency certificate and certified
resolutions of the board of directors (or other appropriate Persons) of the
Borrower and each other Person executing any Loan Documents authorizing the
execution, delivery and performance of the Loan Documents; and
(iv) UCC-11 searches and other Lien searches
showing no existing Liens on the Collateral other than the Liens of the Bank, or
except as approved by the Bank in its sole and absolute discretion.
(d) INSURANCE. The Borrower shall have delivered to
the Bank satisfactory evidence of insurance meeting the requirements of SECTION
5.3.
(e) PERFECTION OF LIENS. UCC-1 financing statements
and, if applicable, certificates of title covering the Collateral executed by
the Borrower shall duly have been recorded or filed in the manner and places
required by law to establish, preserve, protect and perfect the interests and
rights created or intended to be created by this Agreement and any other
Security Agreement; and all taxes, fees and other charges in connection with the
execution, delivery and filing of this Agreement, the Security Agreement and the
financing statements shall duly have been paid.
(f) SUBORDINATIONS. The Bank shall have received, in
form and content satisfactory to Bank (i) waiver from all lessors that might
have landlord's Liens on any Collateral and (ii) subordinations from all
Guarantors and Affiliates as required by SECTION 5.24.
(g) ADDITIONAL DOCUMENTS. The Borrower shall have
delivered to the Bank all additional opinions, documents, certificates and other
assurances that the Bank or its counsel may require.
4.2. CONDITIONS PRECEDENT TO EACH ADVANCE. The following
conditions, in addition to any other requirements set forth in this Agreement,
shall have been met or performed by the Advance Date with respect to any Advance
Request:
(a) PRIOR CONDITIONS. The Borrower shall have
satisfied (i) all conditions precedent for the making of the initial Advance, as
set forth in SECTION 4.1 above, and
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(ii) all conditions precedent set forth elsewhere in this Agreement and in any
other Loan Document.
(b) ADVANCE REQUEST. The Borrower shall have
delivered to the bank an Advance Request and other information, as required in
SECTION 3.1.
(c) NO DEFAULT. No Default shall have occurred and be
continuing or will occur upon the making of the Advance in question and the
Borrower shall have delivered to the Bank an officer's certificate to such
effect, which may he incorporated in the Advance Request.
(d) CORRECTNESS OF REPRESENTATIONS. All
representations and warranties made by the Borrower and any Guarantor herein or
otherwise in writing in connection herewith shall he true and correct with the
same effect as though the representations and warranties had been made on and as
of the proposed Advance Date, and the Borrower shall have delivered to the Bank
an officer's certificate to such effect, which may be incorporated in the
Advance Request.
(e) NO ADVERSE CHANGE. There shall have been no
material adverse change in the condition, financial or otherwise, of the
Borrower, any Subsidiary or any Guarantor from such condition as it existed on
the date of the most recent financial statements of such Person delivered prior
to date hereof.
(f) PERIODIC REPORT. The Bank shall have received a
current Accounts Receivable Report and a current Inventory Report (as required
by SECTION 5.6) sufficient in form and substance to calculate and verify the
Borrowing Base.
(g) FURTHER ASSURANCES. The Borrower shall have
delivered such further documentation or assurances as the Bank may reasonably
require.
5. COVENANTS OF THE BORROWER. The Borrower covenants and agrees that
from the date hereof and until payment in full of the Indebtedness and the
formal termination of this Agreement, unless the Bank shall otherwise consent in
writing, the Borrower and each Subsidiary:
5.1. USE OF LOAN PROCEEDS. Shall use the proceeds of the
Revolving Loan only for the commercial purposes permitted herein or otherwise
permitted by the Bank and furnish the Bank all evidence that it may reasonably
require with respect to such use.
5.2. MAINTENANCE OF BUSINESS AND PROPERTIES. Shall at all
times maintain, preserve and protect all Collateral and all the remainder of
its material property used or useful in the conduct of its business, and keep
the same in good repair, working order and condition, and from time to time
make, or cause to he made, all material needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be conducted properly and in accordance with
standards generally
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accepted in businesses of a similar type and size at all times, and maintain and
keep in full force and effect all licenses and permits necessary to the proper
conduct of its business.
5.3. INSURANCE. Shall maintain such liability insurance,
workers' compensation insurance, business interruption insurance and casualty
insurance as may be required by law, customary and usual for prudent businesses
in its industry or as may be reasonably required by the Bank and shall insure
and keep insured all Collateral and other properties in good and responsible
insurance companies satisfactory to the Bank. All hazard insurance covering
Collateral shall be in amounts and shall contain co-insurance and deductible
provisions approved by the Bank, shall name and directly insure the Bank as
secured party and loss payee under a long-form New York standard loss payee
clause, or its equivalent, and shall not be terminable except upon 30 days'
written notice to the Bank.
5.4. NOTICE OF DEFAULT. Shall provide to the Bank immediate
notice of (a) the occurrence of a Default, (b) any material litigation or
material changes in existing litigation or any judgment against it or its
assets, (c) any material damage or loss to property, (d) any notice from taxing
authorities as to claimed deficiencies or any tax lien or any notice relating to
alleged ERISA violations, (e) any Reportable Event, as defined in ERISA, (f) any
rejection, return, offset, dispute, loss or other circumstance having a material
adverse effect on any Collateral, and (g) any loss or threatened loss of
material licenses or permits.
5.5. INSPECTIONS/AUDITS. Shall permit inspections of the
Collateral and the records of such Person pertaining thereto, at such times and
in such manner as may be reasonably required by the Bank and shall further
permit such inspection, review and audits of its other records and its
properties (with such reasonable frequency and at such reasonable times as the
Bank may desire) by the Bank as the Bank may deem necessary or desirable from
time to time. The cost of such audits, reviews and inspections shall be borne by
the Borrower.
5.6. FINANCIAL INFORMATION. Shall maintain books and records
in accordance with GAAP and shall furnish to the Bank the following periodic
financial information:
(a) PERIODIC BORROWING BASE REPORTS. Within five (5)
Business Days of the 15th and 30th of each month (or more frequently if required
by the Bank), (i) a report listing Accounts and all Eligible Accounts of the
Borrower as of the last Business Day of such month (the "Accounts Receivable
Report") which shall include the amount and age of each Account, the name and
mailing address of each Account Debtor, which shall delineate Eligible Accounts
from Accounts which are ineligible under this Agreement and such other
information as the Bank may require in order to verify the Eligible Accounts,
all in reasonable detail and in form acceptable to the Bank (ii) a report
listing all Inventory and all Eligible Inventory of the Borrower as of the last
Business Day of such month which shall distinguish between raw materials,
components and finished goods, and shall reflect the cost thereof, and shall
have such other information as the Bank may require relating thereto, all in
form acceptable to the Bank (the "Inventory Report") and (iii) an accounts
payable agings report in a form satisfactory to Bank;
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(b) MONTHLY REPORTS. Within 30 days after the end of each
calendar month, an income statement, a balance sheet and statement of cash
flows, all with supporting schedules, prepared in accordance with GAAP, as of
the end of and for such month and year-to-date, each certified by the chief
financial officer or president of the Borrower as being true and accurate;
(c) ANNUAL REPORTS. Within 90 days after the end of each
calendar year, an income statement and a reconciliation of surplus statement of
the Borrower and its Subsidiaries for such year, a balance sheet as of the end
of such year, and statement of cash flows, all with supporting schedules,
prepared in accordance with GAAP, audited and prepared on an unqualified-basis
by an independent certified public accountant of recognized standing selected by
the Borrower and satisfactory to the Bank together with a copy of Borrower's
projections for its next fiscal year as well as a copy of Borrower's management
letter prepared by its certified public accountant (if any); and
(d) NO DEFAULT CERTIFICATES. On a quarterly and an annual
basis with the reports required under subsections (b) and (c) above, a
certificate of its president or chief financial officer that no Default or Event
of Default then exists and Borrower is in full compliance with each of the
financial covenants listed on EXHIBIT 5.26 hereto or if a Default or Event of
Default _______________ _______________ nature and duration thereof and the
Borrower's _______________ _______________ with respect thereto, and in
addition, shall cause the _______________ _______________ independent auditors
(if applicable) to submit to the Bank, together with its audit report, a
statement that, in the course of such audit, it discovered no circumstances
which it believes would result in a Default or Event of Default or if it
discovered any such circumstances, the mature and duration thereof; and shall
also cause each Guarantor to submit a signed personal financial statement not
less frequently than annually, in a form reasonably satisfactory to the Bank. If
the Borrower has Subsidiaries, the financial statements required above shall be
in consolidated and, if required by the Bank, consolidating form for the
Borrower and all Subsidiaries required by GAAP, to be consolidated for financial
reporting purposes. In addition to the financial statements required herein, the
Bank reserves the right to require other or additional financial or other
information concerning the Borrower, its Subsidiaries, the Guarantors and/or the
Collateral.
(e) TAX RETURNS. Simultaneously with filing thereof with
any governmental authority, Borrower and Guarantor shall deliver to Bank copies
of their federal, state and local income tax returns, as applicable.
5.7. LIMITATION ON DEBT. Borrower, any Guarantor or any
subsidiary of any Guarantor shall not, directly or indirectly, create, incur,
assume or become liable, contingently or otherwise, for any debt if, upon giving
effect to such incurrence on a pro forma basis, the aggregate amount of debt
incurred by Borrower, any Guarantor or any Subsidiaries of any Guarantor shall
exceed $50,000.00.
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5.8. LIENS. Shall not create or permit to Exist any Liens on
any of the Collateral, except Permitted Liens.
5.9. DIVIDENDS. Shall not pay or declare any dividends (other
than stock dividends) or other distribution or purchase, redeem or otherwise
acquire any stock or other equity interests or pay or acquire any debt
subordinate to the Indebtedness; provided, however, that any Subsidiary may pay
dividends to the Borrower or another Subsidiary wholly-owned by the Borrower and
the Borrower may issue dividends not exceeding fifty percent (50%) of its Net
Income in any fiscal year.
5.10. MERGER, SALE, Etc. Shall maintain its corporate
existence, good standing and necessary qualifications to do business, and shall
not, without the prior written consent of Bank, do or permit: any other Person
to (i) merge or consolidate with any Person or acquire all or substantially all
of the assets of, or 50% or more of any class of equity interest of, any Person,
(ii) transfer, directly or indirectly, in the aggregate 10% or more of the
issued and. outstanding stock in Borrower as of the date hereof, (iii) issue any
additional stock of Borrower, after the date hereof, or (iv) sell, lease, assign
or otherwise dispose of any Collateral or substantial portion of its other
assets (other than sales of obsolete or worn-out equipment and sales of
Inventory in the ordinary course of business) or sell or otherwise dispose of
stock of any Subsidiary; provided however, that the foregoing shall not operate
to prevent: (A) mergers or consolidations of any subsidiary into Borrower or a
sale, transfer or lease of assets by any subsidiary to Borrower; or (3) a merger
of any corporation or entity into Borrower. For any merger or consolidation
transaction contemplated above, Borrower shall be the surviving or continuing
corporation or entity and, after giving effect to such transaction: (1) Borrower
shall be in full compliance with the terms of this Agreement, and (2) the
management of Borrower shall be substantially unchanged.
Any transfer described above shall be deemed to have occurred
where such purported transfer shall be (i) a direct transfer, sale, or
conveyance by a stockholder, (ii) the result of an encumbrance or pledge of such
stock, or (iii) the result of action by any Person against such stockholder.
5.11. LOANS, GUARANTIES AND OTHER INVESTMENTS. Shall not make
or permit to exist any advances or loans to, or guarantee or become contingently
liable, directly or indirectly, in connection with the obligations, leases,
stock or dividends of, or own, purchase or make any commitment to purchase any
stock, bonds, notes, debentures or other securities of, or any interest in, or
make any capital contributions to (all of which are sometimes collectively
referred to herein as "Investments") any Person except for (a) purchases of
direct obligations of the federal government, (b) deposits in commercial banks
having a TIER 1 capital ratio of not less than 6i and then in an amount not
exceeding 10% of the issuing loan's unimpaired capital and surplus, (d) existing
investments in subsidiaries, (e) endorsement of negotiable instruments for
collection in the ordinary course of business, or (f) loans which do not exceed
$50,000.00 in the aggregate.
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5.12. CHANGE IN FISCAL YEAR. Borrower nor any Guarantor nor
any Subsidiary or Guarantor shall not change its fiscal year without the prior
written consent of Bank.
5.13. CERTIFICATE OF FULL COMPLIANCE FROM ACCOUNTANT.
Borrower shall deliver to Bank, with the annual financial statements required
above, a certification by Borrower's independent certified public accountant
that Borrower is in full compliance with this Agreement.
5.14. REPORTS AND PROXIES. Borrower shall deliver to Bank,
promptly a copy of ail financial statements, reports, and proxy statements, sent
by Borrower, any of its _______________, to stockholders, and all regular or
periodic reports _______________ be filed by Borrower with any governmental
agency or authority.
5.15. CHANGE IN BUSINESS/CONTROL. Shall not enter into any
business which is substantially different from the business or businesses in
which it is presently engaged or allow a change it its management whereby
Xxxxxxx Xxxxx would no longer have management control over Borrower.
5.16. ACCOUNTS. (a) shall not sell, assign or discount any
of its Accounts, Chattel Paper or any promissory notes held by it other than the
discount of such notes in the ordinary course of business for collection; and
(b) shall notify the Bank promptly in writing with any discount, offset or other
deductions not shown on the face of an Account invoice and any dispute over an
Account, and any information relating to an adverse change in any Account
Debtor's financial condition or ability to pay its obligations.
5.17. ENCUMBRANCES. Shall not crate, assume, or permit to
exist any mortgage, security deed, deed of trust, pledge, lien, charge or other
encumbrance on any of its assets, whether now owned or hereafter acquired, other
than: (i) security interests required by Bank in related security instruments;
(ii) liens for taxes contested in good faith; or (iii) liens accruing by law for
employee benefits.
5.18. TRANSACTIONS WITH AFFILIATES. Shall not directly or
indirectly purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course of
business or otherwise, any Affiliate (other than a Subsidiary); provided,
however, that any acts or transactions prohibited by this Section may be
performed or engaged in, after written notice to the Bank, if upon terms not
less favorable to the Borrower or such Subsidiary than if no such relationship
existed. Any such Affiliate may be a director, officer, employee of the Borrower
or any Subsidiary, subject to the limitations on compensation contained in this
section and elsewhere in this Agreement.
5.19. PAYMENT OF OTHER DEBT. Shall not retire any long-term
debt entered into prior to the date of this Agreement at a date in advance of
its legal obligation to do so.
5.20. NO CHANGE IN NAME, OFFICES; REMOVAL OF COLLATERAL.
Shall not, unless it shall have given 60 days' advance written notice thereof to
the Bank, (a) change its name or the location of its chief executive office or
other office where books or records are kept or (b) permit
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any Inventory or other tangible Collateral to be located at any location other
than as specified in SECTION 2.10.
5.21. NO SALE, LEASEBACK. Shall not enter into any
sale-and-leaseback, or similar transaction.
5.22. MARGIN STOCK. Shall not use any proceeds of the Loans
or otherwise purchase, or carry any margin stock (within the meaning of
Regulation U of the Board of Governors of Federal Reserve System) or extend
credit to others for the purpose of purchasing or carrying any margin stock.
5.23. PAYMENT OF TAXES, Etc. Shall pay before delinquent
all of its debts and taxes except that the Bank shall not unreasonably withhold
its consent to nonpayment of taxes being actively contested in accordance with
law (provided that the Bank may require bonding or other assurances).
5.24. SUBORDINATION. Shall cause all Debt and other
obligations now or hereafter owed to any Guarantor or Affiliate to be
subordinated in right of payment and security to the indebtedness in accordance
with subordination agreements satisfactory to the Bank.
5.25. COMPLIANCE; HAZARDOUS MATERIALS. Shall strictly
comply with all laws, regulations, ordinances and other legal requirements,
specifically including, without limitation, ERISA, all securities laws and all
laws relating to hazardous materials and the environment. Unless approved in
writing by the Bank, neither the Borrower nor any Subsidiary shall engage in the
storage, manufacture, disposition, processing, handling, use or transportation
of any hazardous or toxic materials, whether or not in compliance with
applicable laws and regulations.
5.26. SUBSIDIARIES. Shall not acquire, form or dispose of any
Subsidiaries or permit any Subsidiary to issue capital stock except to its
parent.
5.27. COMPLIANCE WITH ASSIGNMENT LAWS. Shall if required by
the Bank comply with the Federal Assignment of Claims Act and any other
applicable law relating to assignment of government contracts, and Accounts
arising from the performance thereof.
5.28. FURTHER ASSURANCES. Shall take such further action and
provide to the Bank such further assurances as may be reasonably requested to
ensure compliance with the intent of this Agreement and the other Loan
Documents.
5.29. WITHHOLDING TAXES. Pay as and when due all employee
withholding, FICA and other payments required by federal, state and local
governments with respect to wages paid to employees.
5.30. OTHER COVENANTS. Shall comply with such additional
covenants as may be set forth in EXHIBIT 5.26 hereto.
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6. DEFAULT.
6.1. EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default:
(a) Any representation or warranty made by the
Borrower or any other party to any Loan Document (other than the Bank) herein or
therein or in any certificate or report furnished in connection herewith or
therewith shall prove to have been untrue or incorrect in any material respect
when made; or
(b) There shall occur any default by the Borrower in
the payment, when due, of any principal of or interest on the Note, any amounts:
due hereunder or any other Loan Document or any other Indebtedness or under the
Bond Facility (not cured within any grace period provided in such Note or in the
document or instrument evidencing such Indebtedness); or
(c) There shall occur any default by the Borrower or
any other party to any Loan Document (other than the Bank) in the performance of
any agreement, covenant or obligation contained in this Agreement or such Loan
Document not provided for elsewhere in this Section and such default is not
cured within any grace period provided in this Agreement or such other Loan
Document; or
(d) Any other obligation now or hereafter owed by the
Borrower or any Subsidiary or Guarantor to the Bank shall be in default and not
cured within any period of grace provided therein or any such Person shall be in
default under any obligation in excess of $10,000 owed to any other obligee,
which default entitles the obligee to accelerate any such obligations or
exercise other remedies with respect thereto; or
(e) The Borrower or any Subsidiary or Guarantor shall
(i) voluntarily liquidate or terminate operations or apply for or consent to,
the appointment of, or the taking of possession BY, a receiver, custodian,
trustee or liquidator of such Person or of all or of a substantial part of its
assets, (ii) admit in writing its inability, or be generally unable, to pay its
debts as the debts become due, (iii) make a general assignment for the benefit
of its creditors, (iv) commence a voluntary case under the federal BANKRUPTCY
Code (as now or hereafter in effect), (v) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, (vi) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the BANKRUPTCY Code, or (vii) take any
corporate action for the purpose of effecting any of the foregoing; or
(f) Without its application, approval or consent, a
proceeding shall be commenced, in any court of competent jurisdiction, seeking
in respect of such Person any remedy under the federal BANKRUPTCY Code, the
liquidation, reorganization, dissolution, winding-up, or composition or
readjustment of debt, the appointment of a trustee, receiver, liquidator or the
like of such Person, or of all or any substantial part of the assets of such
Person, or other like
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relief under any law relating to BANKRUPTCY, insolvency, reorganization,
winding-up, or composition or adjustment of debts; or
(g) Any Lien of the Bank hereunder or under any other
Security Agreement shall not constitute a perfected first priority Lien in the
Collateral thereby encumbered, subject only to Permitted Liens; or
(h) There shall occur any material loss, theft,
damage or destruction of any of the Collateral, which loss is not fully insured;
or
(i) A judgment in excess of $10,000 shall be rendered
against the Borrower or any Subsidiary or Guarantor and shall remain
undischarged, undisclosed and unstayed for more than ten days (except judgments
validly covered by insurance with a deductible of not more than $10,000) or
there shall occur any levy upon, or attachment, garnishment or other seizure of,
any material portion of the Collateral or other assets of the Borrower, any
Subsidiary or any Guarantor by reason of the issuance of any tax levy, judicial
attachment or garnishment or levy of execution; or
(j) The Borrower, any Subsidiary or any Guarantor
shall fail to pay, on demand, any returned or dishonored draft, check, or other
item which has been presented to the Bank and for which the Borrower has
received provisional credit; or
(k) Any Guarantor shall repudiate or revoke any
Guaranty Agreement; or
(l) The Bank, in good faith, shall deem itself
insecure.
THE FOREGOING EVENTS OF DEFAULT NOTWITHSTANDING, NOTHING HEREIN SHALL BE DEEMED
TO LIMIT, RESTRICT, IMPAIR OR DIMINISH THE ABSOLUTE RIGHT OF THE BANK TO DEMAND
REPAYMENT OF THE LOANS IN FULL, AT ANY TIME, WITHOUT CAUSE.
6.2. REMEDIES. If any Default shall occur, the Bank may,
without notice to the Borrower, at its option, withhold further Advances to the
Borrower of proceeds of the Loans. should (a) any Event of Default under SECTION
6 occur and not be cured within ten (10) days following delivery of written
notice thereof by the Bank to the Borrower (which notice shall be complete upon
hand or overnight delivery, or upon facsimile delivery or mailing by certified
mail, return receipt requested) or (b) any other Event of Default occur, the
Bank may declare any or all Indebtedness to be immediately due and payable,
bring suit against the Borrower to collect the Indebtedness, exercise any remedy
available to the Bank hereunder and take any action or exercise any remedy
provided herein or in any other Loan Document or under applicable law. No remedy
shall be exclusive of other remedies or impair the right of the Bank to exercise
any other remedies.
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6.3. RECEIVER. In addition to any other remedy available to
it, the Bank shall have the absolute right, upon the occurrence of an Event of
Default, to seek and obtain the appointment of a receiver to take possession of
and operate and/or dispose of the business and assets of the Borrower and any
costs and expenses incurred by the Bank in connection with such receivership
shall bear interest at the Default Rate and shall be secured by all collateral.
7. SECURITY AGREEMENT.
7.1. SECURITY INTEREST.
(a) As security for the payment and performance of
any and all of the Indebtedness and the performance of all other obligations and
covenants of the Borrower hereunder and under the other Loan Documents, certain
or contingent, now existing or hereafter arising, which are now, or may at any
time or times hereafter be owing by the Borrower to the Bank, the Borrower
hereby pledges to the Bank and gives the Bank a continuing and general Lien upon
and right of set-off against, all right, title and interest of the Borrower in
and to the Collateral, whether now owned or hereafter acquired by the Borrower.
(b) Except as herein or by applicable law otherwise
expressly provided, the Bank shall not be obligated to exercise any degree of
care in connection with any Collateral in its possession, to take any steps
necessary to preserve any rights in any of the Collateral or to preserve any
rights therein against prior parties, and the Borrower agrees to take such
steps. In any case the Bank shall be deemed to have exercised reasonable care if
it shall have taken such steps for the care and preservation of the Collateral
or rights therein as the Borrower may have reasonably requested the Bank to take
and the Bank's omission to take any action not requested by the Borrower shall
not be deemed a failure to exercise reasonable care. No segregation or specific
allocation by the Bank of specified items of collateral against any liability of
the Borrower shall waive or affect any Lien against other items of Collateral or
any of the Bank's options, powers or rights under this Agreement or otherwise
arising.
(c) The Bank may at any time and from time to time,
with or without notice to the Borrower, (i) transfer into the name of the Bank
or the name of the Bank's nominee any of the Collateral, (ii) notify any Account
Debtor or other obligor of any Collateral to make payment thereon direct to the
Bank of any amounts due or to become due thereon and (iii) receive and after a
default direct the disposition of any proceeds of any Collateral.
7.2. REMEDIES.
(a) If an Event of Default shall have occurred,
without waiving any of its other rights hereunder or under any other Loan
Documents, the Bank shall have all rights and remedies of a secured party under
the Code (and the Uniform Commercial Code of any other applicable jurisdiction)
and such other rights and remedies as may be available hereunder, under other
applicable law or pursuant to Contract. If requested by the Bank, the Borrower
will promptly assemble the Collateral and make it available to the Bank at a
place to be designated by the Bank. The Borrower agrees that any notice by the
Bank of the sale or disposition of the
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Collateral or any other intended action hereunder, whether required by the Code
or otherwise, shall constitute reasonable notice to the Borrower if the notice
is mailed to the Borrower by regular or certified mail, postage prepaid, at
least five days before the action to be taken. The Borrower shall be liable for
any deficiencies in the event the proceeds of the disposition of the Collateral
do not satisfy the Indebtedness in full.
(b) If an Event of Default shall have occurred, the
Bank may demand, collect and xxx for all amounts owed pursuant to Accounts,
General Intangibles, Chattel Paper or for proceeds of any Collateral (either in
the Borrower's name or the Bank's name at the latter's option), with the right
to enforce compromise, settle or discharge any such amounts. The Borrower
appoints the Bank as the Borrower's attorney-in-fact to endorse the Borrower's
name on all checks, commercial paper and other instruments pertaining to
Collateral or proceeds.
7.3. POWER OF ATTORNEY. The Borrower authorizes the Bank at
the Borrower's expense to file any financing statements relating to the
Collateral (without the Borrower's signature thereon) which the Bank deems
appropriate and the Borrower irrevocably appoints the Bank as its
attorney-in-fact to execute any such financing statements in the Borrower's name
and to perform all other acts which the Bank deems appropriate to perfect and to
continue perfection of the Liens of the Bank. The Borrower hereby appoints the
Bank as the Borrower's attorney-in-fact to endorse, present and collect on
behalf of the Borrower and in the Borrower's name any draft, checks or other
documents necessary or desirable to collect any amounts which the Borrower may
be owed.
7.4. ENTRY. The Borrower hereby irrevocably consents to any
act by the Bank or its agents in entering upon any premises for the purposes of
either (i) inspecting the Collateral or (ii) taking possession of the Collateral
and the Borrower hereby waives its right to assert against the Bank or its
agents any claim based upon trespass or any similar cause of action for entering
upon any premises where the Collateral may be located.
7.5. DEPOSITS; INSURANCE. Upon the occurrence of an Event of
Default, the Borrower authorizes the Bank to collect and apply against the
Indebtedness when due any cash or deposit accounts in its possession, and any
refund of insurance premiums or any insurance proceeds payable on account of the
loss or damage to any of the Collateral and irrevocably appoints the Bank as its
attorney-in-fact to endorse any check or draft or take other action necessary to
obtain such funds.
7.6. OTHER RIGHTS. The Borrower authorizes the Bank without
affecting the Borrower's obligations hereunder or under any other Loan Document
from time to time (i) to take from any party and hold additional Collateral or
guaranties for the payment of the Indebtedness or any part thereof, and to
exchange, enforce or release such collateral or guaranty of payment of the
Indebtedness or any part thereof and to release or substitute any endorser or
guarantor or any party who has given any Lien on any collateral as security or
the payment of the Indebtedness or any part thereof or any party in any way
obligated to pay the Indebtedness or any part thereof; and (ii) upon the
occurrence of any Event of Default to direct the manner of the
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disposition of the Collateral and the enforcement of any endorsements,
guaranties, letters of credit or other security relating to the Indebtedness or
any part thereof as the Bank in its sole discretion may determine.
7.7. ACCOUNTS. Before or after any Event of Default, the
Bank may notify any Account Debtor of the Bank's Lien and may direct such
Account Debtor to make payment directly to the Bank for application against the
Indebtedness. Any such payments received by or on behalf of the Borrower at any
time, whether before or after default, shall be the property of the Bank, shall
be held in trust for the Bank and not commingled with any other assets of any
Person (except to the extent they may be commingled with other assets of the
Borrower in an account with the Bank) and shall be immediately delivered to the
Bank in the form received. The Bank shall have the right to apply any proceeds
of Collateral to such of the Indebtedness as it may determine.
7.8. TANGIBLE COLLATERAL. Except as otherwise provided
herein or agreed to in writing by the Bank, no Inventory or other tangible
collateral shall be commingled with, or become an accession to or part of, any
property of any other Person so long as such property is Collateral. Upon the
occurrence of any Event of Default, the Borrower shall, upon the request of the
Bank, promptly assemble all tangible Collateral for delivery to the Bank or its
agents. No tangible Collateral shall be allowed to become a fixture unless the
Bank shall have given its prior written authorization.
7.9. WAIVER OF MARSHALLING. The Borrower hereby waives any
right it may have to require marshalling of its assets.
7.10. WAIVER OF AUTOMATIC STAY. The Borrower hereby waives
the application of the automatic stay of enforcement provided in Xxxxxxx 000 xx
xxx Xxxxxx Xxxxxx BANKRUPTCY Code and agrees that the Bank may proceed with
enforcement and collection notwithstanding the filing of a petition in
BANKRUPTCY.
8. MISCELLANEOUS.
8.1. NO WAIVER, REMEDIES CUMULATIVE. No failure on the part
of the Bank to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and are in addition to any other remedies provided by
law, any Loan Document or otherwise.
8.2. SURVIVAL OF REPRESENTATIONS. All representations and
warranties made herein shall survive the making of the Revolving Loan hereunder
and the delivery of the Notes, and shall continue in full force and effect so
long as any Indebtedness is outstanding, there exists any commitment by the Bank
to the Borrower, and until this Agreement is formally terminated in writing.
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8.3. EXPENSES. Whether or not the Revolving Loan herein
provided for shall be made, the Borrower shall pay all reasonable costs and
expenses in connection with the preparation, execution, delivery, amendment: and
enforcement of this Agreement and any Loan Document, including the reasonable
fees and disbursements of counsel for the Bank in connection therewith, whether
suit be brought or not and whether incurred at trial or on appeal, and all costs
of repossession, storage, disposition, protection and collection of Collateral.
If the Borrower should fail to pay any tax or other amount required by this
Agreement to be paid or which may be reasonably necessary to protect or preserve
any Collateral or the Borrower's or Bank's interests therein, the Bank may make
such payment and the amount thereof shall be payable on demand, shall bear
interest at the Default Rate from the date of demand until paid and shall be
deemed to be Indebtedness entitled to the benefit and security of the Loan
Documents. In addition, the Borrower agrees to pay and save the Bank harmless
against any liability for payment of any state documentary stamp taxes,
intangible taxes or similar taxes (including interest or penalties, if any)
which may now or hereafter be determined to be payable in respect to the
execution, delivery or recording of any Loan Document or the making of any
Advance, whether originally thought to be due or not, and regardless of any
mistake of fact or law on the part of the Bank or the Borrower with respect to
the applicability of such tax. The provisions of this section shall survive
payment in full of the Revolving Loan and termination of this Agreement.
8.4. NOTICES. Any notice or other communication hereunder to
any party hereto shall be by hand delivery, overnight delivery, facsimile,
telegram, telex or registered or certified mail and unless otherwise provided
herein shall be deemed to have been given or made when delivered, telegraphed,
telexed, faxed or deposited in the mails, postage prepaid, addressed to the
party at its address specified below (or at any other address that the party may
hereafter specify to the other parties in writing):
The Bank: First Union National Bank of Florida
000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxx
The Borrower: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, Xxxxxxx 00000
8.5. GOVERNING LAW. This Agreement and the Loan Documents
shall be deemed contracts made under the laws of the State of Florida and shall
be governed by and construed in accordance with the laws of said state except
insofar as the laws of another jurisdiction may govern the perfection, priority
and enforcement of Liens on Collateral located in another jurisdiction.
8.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the Borrower and the Bank, and their
respective successors and assigns;
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provided, that the Borrower may not assign any of its rights hereunder without
the prior written consent of the Bank, and any such assignment made without such
consent will be void.
8.7. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original and all
of which when taken together shall constitute but one and the same instrument.
8.8. NO USURY. Notwithstanding anything contained in this
Agreement, the Note, or in any other Loan Document to the contrary, in no event
will interest or other charges deemed to be interest be chargeable against the
Borrower if such amount (combined with any other amounts considered to be in the
nature of interest) would exceed the maximum amount permitted by law from time
to time while any of the Indebtedness is outstanding, and in the event any
amount in excess of the lawful maximum is charged or collected by the Bank or
paid by the Borrower, the Borrower shall be entitled to the reimbursement of
such excess together with interest thereon at the highest lawful rate at the
time of such overcharge.
8.9. POWERS. All powers of attorney granted to the Bank are
coupled with an interest and are irrevocable.
8.10. APPROVALS. If this Agreement calls for the approval or
consent of the Bank, such approval or consent may be given or withheld in the
discretion of the Bank unless otherwise specified herein.
8.11. JURISDICTION, SERVICE OF PROCESS.
(a) Any suit, action or proceeding against the
Borrower with respect to this Agreement, the Collateral or any Loan Document or
any judgment entered by any court in respect thereof may be brought in the
courts of Dade County, Florida or in the U.S. District court for the Southern
District of Florida as the Bank (in its sole discretion) may elect, and the
Borrower hereby accepts the nonexclusive jurisdiction of those courts for the
purpose of any suit, action or proceeding. Service of process in any such case
may be had against the Borrower by delivery in accordance with the notice
provisions herein or as otherwise permitted by law, and the Borrower agrees that
such service shall be valid an a respects for establishing personal jurisdiction
over it.
(b) In addition, the Borrower hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, the Loan Documents, the Collateral
or any judgment entered by any court in respect thereof brought in Dade County,
Florida or the U.S. District Court for the Southern District of Florida, as
selected by the Bank, and hereby further irrevocably waives any claim that any
suit, action or proceedings brought in Dade County, Florida or in such District
Court has been brought in an inconvenient forum.
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8.12. MULTIPLE BORROWERS. If more than one Person is named
herein as the Borrower, all obligations, representations and covenants herein
and in other Loan Documents to which the Borrower is a party shall be joint and
several.
8.13. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER OF THEM
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED UPON THIS
AGREEMENT OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY
OTHER LOAN DOCUMENT AND ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LANCETTI COSMETICS CORPORATION, a
Florida corporation
By:
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: President
FIRST UNION NATIONAL BANK OF
FLORIDA, a national banking association
By:
-----------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice President
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SCHEDULE OF EXHIBITS
(IF ANY EXHIBIT IS OMITTED, THE INFORMATION CALLED FOR THEREIN
SHALL BE CONSIDERED "NONE" OR "NOT APPLICABLE")
Exhibit 1.1 Permitted Liens
Exhibit 2.5 Pending Litigation
Exhibit 2.10 Borrower's Location
Exhibit 2.18 Borrower's Subsidiaries
Exhibit 3.2 Reductions to Borrowing Base
Exhibit 3.2 Form of Advance Request
Exhibit 5.26 Other Additional Covenants
33
EXHIBIT 1.1
PERMITTED LIENS
[None]
34
EXHIBIT 2.5
PENDING LITIGATION
[To be completed by Borrower, None if blank]
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EXHIBIT 2.10
BORROWER'S LOCATION
[To be completed by Borrower, None if blank]
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EXHIBIT 2.18
BORROWER'S SUBSIDIARIES
[To be completed by Borrower, None if blank]
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37
EXHIBIT 3.2
FORM OF ADVANCE REQUEST
FIRST UNION NATIONAL BANK
ADVANCE REQUEST FORM
Borrower Name:___________________________ Exhibit Number___________________
Invoice Number(s):_________________ through ____________________________________
Credit Memo Numbers(s):____________ through ____________________________________
In consideration of your continuing to make available to the undersigned certain
credit accommodations, we certify that the following figures accurately the
entire amount of accounts receivable owing to the undersigned and inventory of
the under-signed; and that such amounts continue to be pledged to u as
collateral security to all loans owing by this company to you under agreement
dated __________________, 19___, free and clear of all liens and encumbrances
except in your favor.
Previous Request as of:_________________________ This Request as of:____________
CERTIFIED ACCOUNTS RECEIVABLE:
Balance of A/R from previous request (line 1f) $___________________
Plus new A/R +_____________________
Less collections -_____________________
Less non cash cr to A/R (cr memo) -_____________________
Other (Inter-company, etc.) -_____________________
Total certified A/R (1a+1b-1c-1d-1e) ___________________
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NET A/R ELIGIBILITY:
Past due and marginal -_____________________
Net eligible accounts receivable (1f-2a-2b) ___________________
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EXHIBIT 3.2 (CONTINUED)
-----------------------------------------------------------------------------------------------------------
CERTIFIED INVENTORY:
Inventory Balance from previous request (line 3e) $________________
Plus purchases +_________________
Less COGS -_________________
Other Adjustments -_________________
Total certified Inventory (3a+3b-3c-3d) _________________
------------------------------------------------------ ---------------------------------- ---------------------------
NET INVENTORY ELIGIBILITY:
Ineligible Inventory -_________________
Net eligible Inventory (3f-4a) _________________
------------------------------------------------------ ---------------------------------- ---------------------------
BORROWING BASE:
_______% of eligible A/R (2c) +_________________
_______% of eligible Inventory (4b) +_________________
Minus Foreign Exchange Exposure -_________________
Total Borrowing Base (5a+5b-5c) _________________
Loan Limit _________________
------------------------------------------------------ ---------------------------------- ---------------------------
TRANSACTION SUMMARY:
Loan balance from previous report (line 6d) _________________
Less collections on account -_________________
Plus amount of new advance +_________________
New outstanding loan balance (6a-6b+6c) _________________
Additional advance available lesser of (5d or 5e)-6d _________________
Authorized by:____________________ Title:_________________ Date:_________
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EXHIBIT 5.26
OTHER COVENANTS
1. FINANCIAL COVENANTS. At all times, the Borrower shall be in
compliance with the following financial covenants:
(a) Beginning on September 30, 1995 and continuing until
September 29, 1996, Borrower shall maintain a Tangible Net Worth (as hereinafter
defined) of not less than $1,300,000.00. Borrower's Tangible Net Worth as of
September 30, 1996 and thereafter shall not be less than $1,500,000.00.
AS USED HEREIN, TANGIBLE NET WORTH SHALL MEAN THE AGGREGATE AMOUNT
OF ASSETS SHOWN ON THE BALANCE SHEET OF BORROWER AT ANY PARTICULAR DATE
INCLUDING SUBORDINATED SHAREHOLDER DEBT (AS HEREINAFTER DEFINED) (BUT EXCLUDING
FROM SUCH ASSETS CAPITALIZED, ORGANIZATION AND DEVELOPMENT COSTS, CAPITALIZED
INTEREST, DEBT DISCOUNT AND EXPENSE, GOODWILL, PATENTS, TRADEMARKS, COPYRIGHTS,
FRANCHISES, LICENSES, AMOUNTS DUE FROM OFFICERS, EMPLOYEES, DIRECTORS,
STOCKHOLDERS AND AFFILIATES, AND SUCH OTHER ASSETS AS ARE PROPERLY CLASSIFIED
"INTANGIBLE ASSETS" UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) LESS
LIABILITIES AT SUCH DATE, ALL COMPUTED IN ACCORDANCE WITH GAAP. SUBORDINATED
SHAREHOLDER DEBT SHALL MEAN ALL DEBT OWED BY THE BORROWER TO ANY SHAREHOLDER,
OFFICER, OR DIRECTOR OF THE BORROWER WHICH HAS BEEN FULLY AND PROPERLY
SUBORDINATED TO THE LOAN IN FORM AND CONTENT SATISFACTORY TO THE BANK.
(b) At any and all times throughout the term of the Loans,
Borrower shall not permit the ratio of Total Liabilities to Tangible Net Worth
(as hereinafter defined) to be more than the ratios shown below during the
period corresponding thereto:
PERIOD RATIO
------ -----
September 30, 1995 - September 29, 1996 2.5 to 1.0
September 30, 1996 and thereafter 3.5 to 1.0
"Total Liabilities" shall mean all liabilities which would be
shown on the liability side of a Borrower's balance sheet prepared in accordance
with GAAP MINUS Subordinated Shareholder Debt.
(c) The Borrower shall not permit Subordinated Shareholder
Debt at any time during the term of the Loans to be less than $500,000.00.
(d) The Borrower shall not issue dividends in any fiscal year
in excess of fifty percent (50%) of its Net Income.
(e) Borrower shall maintain, throughout the term of the Loans
a consolidated Current Ratio (as herein defined) equal to or greater than 1.10
to 1. This ratio shall be tested quarterly in accordance with GAAP. The term
Current Ratio shall mean the quotient of current assets (not including amounts
due from affiliates, employees and shareholders) divided by
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current liabilities (which shall include all amounts due to affiliates,
employees or shareholders unless subordinated to Bank).
(f) Borrower shall maintain throughout the term of the Loans
a Minimum Debt Service Coverage Ratio (as herein defined) of 1.0 to 1.
THE NUMERATOR OF THE DEBT SERVICE COVERAGE RATIO IS TO BE
CALCULATED AS FOLLOWS: NET INCOME PLUS DEPRECIATION MINUS UNFINANCED CAPITAL
EXPENDITURES PLUS DIVIDENDS. UNFINANCED CAPITAL EXPENDITURES SHALL BE DETERMINED
BY TAKING ACTUAL CAPITAL EXPENDITURES FOR THE PERIOD BEING MEASURED MINUS THE
INCREASE IN LONG-TERM DEBT FOR THE PERIOD BEING MEASURED.
THE DENOMINATOR OF THE DEBT SERVICE COVERAGE RATIO IS TO BE
CALCULATED AS FOLLOWS: INTEREST EXPENSE PLUS CURRENT MATURITIES OF LONG TERM
DEBT. CURRENT MATURITIES OF LONG TERM DEBT WILL BE PRORATED FOR THE QUARTER
BEING TESTED (E.G., WHEN TESTING AT JUNE 30 USE 75% OF CURRENT MATURITIES OF
LONG TERM DEBT). EACH QUARTERLY TEST WILL BE BASED ON FISCAL YEAR-TO-DATE
RESULTS (NOT QUARTERLY RESULTS).
(g) Each of the financial covenants (a) through (f) above
shall be tested at the end of each fiscal quarter based upon the most recent
financial statements provided to Bank.
2. BANK ACCOUNTS: Borrower shall, during the term of the Revolving
Loan, maintain with Bank all of its operating accounts.
3. CHANGE IN MANAGEMENT OF BORROWER; Borrower shall not cause or
permit any material change in the presents management or control of Borrower,
without the prior written consent of the Bank, which consent may be withheld in
the sole and absolute discretion of the Bank.
2
