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EXHIBIT 10.20
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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
NORWEST BUSINESS CREDIT, INC.
AND
NU-KOTE HOLDING, INC., NU-KOTE IMPERIAL, LTD.,
NU-KOTE INTERNATIONAL, INC., INTERNATIONAL
COMMUNICATION MATERIALS, INC., NU-KOTE IMAGING
INTERNATIONAL, INC., FUTURE GRAPHICS, INC. AND NU-KOTE
LATIN AMERICA, INC.
Dated as of: December, 14 2000
[NORWEST LOGO]
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Table of Contents
ARTICLE I DEFINITIONS............................................................................................1
Section 1.1 Definitions.......................................................................................1
Section 1.2 Cross References.................................................................................11
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY..............................................................11
Section 2.1 Revolving Advances...............................................................................11
Section 2.2 Interest; Minimum Interest Charge; Default Interest; Participations; Usury.......................11
Section 2.3 Fees.............................................................................................13
Section 2.4 Computation of Interest and Fees; When Interest Due and Payable..................................13
Section 2.5 Capital Adequacy.................................................................................13
Section 2.6 Voluntary Prepayment; Reduction of the Maximum Line; Termination of the Credit Facility by the
Borrowers....................................................................................................14
Section 2.7 Termination, Line Reduction and Prepayment Fees; Waiver of Termination, Prepayment and Line
Reduction Fees...............................................................................................14
Section 2.8 Mandatory Prepayment.............................................................................15
Section 2.9 Payment..........................................................................................15
Section 2.10 Payment on Non-Banking Days.....................................................................15
Section 2.11 Use of Proceeds.................................................................................15
Section 2.12 Liability Records...............................................................................15
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF................................................................15
Section 3.1 Grant of Security Interest.......................................................................15
Section 3.2 Notification of Account Debtors and Other Obligors...............................................16
Section 3.3 Assignment of Insurance..........................................................................16
Section 3.4 Occupancy........................................................................................16
Section 3.5 License..........................................................................................17
Section 3.6 Financing Statement..............................................................................17
Section 3.7 Setoff...........................................................................................18
ARTICLE IV CONDITIONS OF LENDING................................................................................19
Section 4.1 Conditions Precedent to the Initial Revolving Advance............................................19
Section 4.2 Conditions Precedent to All Advances.............................................................20
ARTICLE V REPRESENTATIONS AND WARRANTIES........................................................................21
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
Tax Identification Number....................................................................................21
Section 5.2 Capitalization...................................................................................22
Section 5.3 Authorization of Borrowing; No Conflict as to Law or Agreements..................................22
Section 5.4 Legal Agreements.................................................................................22
Section 5.5 Subsidiaries.....................................................................................22
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Section 5.6 Financial Condition; No Adverse Change...........................................................22
Section 5.7 Litigation.......................................................................................23
Section 5.8 Regulation U.....................................................................................23
Section 5.9 Taxes............................................................................................23
Section 5.10 Titles and Liens; Priority......................................................................23
Section 5.11 Intellectual Property Rights....................................................................23
Section 5.12 Plans...........................................................................................24
Section 5.13 Default.........................................................................................24
Section 5.14 Environmental Matters...........................................................................24
Section 5.15 Submissions to Lender...........................................................................26
Section 5.16 Financing Statements............................................................................26
Section 5.17 Rights to Payment...............................................................................26
Section 5.18 Direct and Substantial Economic Interest........................................................26
Section 5.19 Joint and Several Liability.....................................................................26
Section 5.20 Dormancy of Viro-kote, Inc......................................................................26
ARTICLE VI BORROWERS' AFFIRMATIVE COVENANTS.....................................................................27
Section 6.1 Reporting Requirements...........................................................................27
Section 6.2 Books and Records; Inspection and Examination....................................................29
Section 6.3 Account Verification.............................................................................30
Section 6.4 Compliance with Laws.............................................................................30
Section 6.5 Payment of Taxes and Other Claims................................................................30
Section 6.6 Maintenance of Properties........................................................................30
Section 6.7 Insurance........................................................................................31
Section 6.8 Preservation of Existence........................................................................31
Section 6.9 Delivery of Instruments, etc.....................................................................31
Section 6.10 Collateral Account..............................................................................31
Section 6.11 Maintenance of Debtor-in-Possession Accounts....................................................32
Section 6.12 Performance by the Lender.......................................................................32
Section 6.13 Year 2000 Compliance............................................................................33
Section 6.14 Borrowers' Financial Projections................................................................33
Section 6.15 Maximum Days in Inventory Covenant..............................................................33
Section 6.16 Minimum EBITDAR.................................................................................34
Section 6.17 Minimum Net Income..............................................................................35
Section 6.18 Subrogation.....................................................................................36
ARTICLE VII NEGATIVE COVENANTS..................................................................................36
Section 7.1 Liens............................................................................................36
Section 7.2 Indebtedness.....................................................................................37
Section 7.3 Guaranties.......................................................................................37
Section 7.4 Investments and Subsidiaries.....................................................................37
Section 7.5 Dividends........................................................................................38
Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations....................................38
Section 7.7 Intellectual Property............................................................................38
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Section 7.8 Financing Orders.................................................................................38
Section 7.9 Chapter 11 Claims................................................................................38
Section 7.10 Consolidation and Merger; Asset Acquisitions....................................................39
Section 7.11 Sale and Leaseback..............................................................................39
Section 7.12 Restrictions on Nature of Business..............................................................39
Section 7.13 Capital Expenditures............................................................................39
Section 7.14 Accounting......................................................................................39
Section 7.15 Discounts, etc..................................................................................39
Section 7.16 Defined Benefit Pension Plans...................................................................39
Section 7.17 Other Defaults..................................................................................39
Section 7.18 Place of Business; Name.........................................................................40
Section 7.19 Organizational Documents........................................................................40
Section 7.20 Salaries........................................................................................40
Section 7.21 Change in Ownership.............................................................................40
ARTICLE VIII EVENTS OF DEFAULT, RIGHTS AND REMEDIES.............................................................40
Section 8.1 Events of Default................................................................................40
Section 8.2 Rights and Remedies..............................................................................42
Section 8.3 Certain Notices..................................................................................43
ARTICLE IX MISCELLANEOUS........................................................................................44
Section 9.1 No Discharge of Claims; No Waiver by Lender......................................................44
Section 9.2 No Waiver; Cumulative Remedies...................................................................44
Section 9.3 Amendments, Etc..................................................................................44
Section 9.4 Addresses for Notices, Etc.......................................................................44
Section 9.5 Further Documents................................................................................45
Section 9.6 Collateral.......................................................................................45
Section 9.7 Costs and Expenses...............................................................................45
Section 9.8 Indemnity........................................................................................46
Section 9.9 Participants.....................................................................................47
Section 9.10 Execution in Counterparts.......................................................................47
Section 9.11 Binding Effect; Assignment; Complete Agreement; Exchanging Information..........................47
Section 9.12 Severability of Provisions......................................................................47
Section 9.13 Headings........................................................................................47
Section 9.14 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial........................................47
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CREDIT AND SECURITY AGREEMENT
Dated as of December 14, 2000
NU-KOTE HOLDING, INC., a Delaware corporation, NU-KOTE
IMPERIAL, LTD., a Delaware corporation, NU-KOTE INTERNATIONAL, INC., a Delaware
corporation, INTERNATIONAL COMMUNICATION MATERIALS, INC., a Pennsylvania
corporation, NU-KOTE IMAGING INTERNATIONAL, INC., a Delaware corporation, FUTURE
GRAPHICS, INC., a California corporation, and NU-KOTE LATIN AMERICA, INC., a
Delaware corporation (each a "Borrower" and together, the "Borrowers"), and
Norwest Business Credit, Inc., a Minnesota corporation (the "Lender"), hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrowers' accounts, as such term
is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to the
Borrowers arising out of the sale or lease of goods or rendition of
services by the Borrowers on an open account or deferred payment basis.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrowers, including
(without limitation) any Subsidiary of any of the Borrowers. For
purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Availability" means the difference of (i) the Borrowing Base
and (ii) the outstanding principal balance of the Revolving Note.
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"Bank Cartridge Liability" means the amount of the Borrowers'
liability to their customers, on a consolidated basis, for recyclable
cartridges returned to any of the Borrowers for credit.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Minneapolis, Minnesota.
"Bankruptcy Code" means 11 U.S.C. ss. 101 et seq.
"Bankruptcy Court" means the United States Bankruptcy Court
for the Middle District of Tennessee, including any judge presiding
over the Cases.
"Base Rate" means the rate of interest publicly announced from
time to time by Norwest Bank Minnesota, National Association as its
"base rate" or, if such bank ceases to announce a rate so designated,
any similar successor rate designated by the Lender.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 75% of Eligible Accounts, plus
(ii) 40% of Eligible Inventory.
"Capital Expenditures" for a period means any expenditure of
money for the lease, purchase or other acquisition of any capital
asset.
"Cases" means the Chapter 11 bankruptcy cases of the Borrowers
pending before the Bankruptcy Court entitled In re Nu-kote Holding,
Inc., case number 398-10600, In re Nu-kote Imperial, Ltd., case number
398-10601, In re Nu-kote International, Inc., case number 398-10602, In
re Nu-kote Imaging International, Inc., case number 398-10603, In re
International Communication Materials, Inc., case number 398-10604, In
re Future Graphics, Inc., case number 398-10605, and In re Nu-kote
Latin America, Inc., case number 398-10606, including any adversary
proceedings, jointly administered cases or other ancillary proceedings.
"Collateral" means all of the Borrowers' Equipment, General
Intangibles (including any rights to avoidance of transfers or
recoveries of property or money under the Bankruptcy Code), Inventory,
Real Estate Collateral, Receivables, Investment Property, all sums on
deposit in any Collateral Account, and any items in any Lockbox;
together with (i) all substitutions and replacements for and products
of any of the foregoing; (ii) proceeds of any and all of the foregoing;
(iii) in the case of all tangible goods, all accessions; (iv) all
accessories, attachments, parts, equipment
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and repairs now or hereafter attached or affixed to or used in
connection with any tangible goods; and (v) all warehouse receipts,
bills of lading and other documents of title now or hereafter covering
such goods.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement of even date herewith by and among the Borrowers, Norwest
Bank Minnesota, National Association and the Lender.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrowers' account pursuant to Article II.
"Credit Facility" means the credit facility being made
available to the Borrowers by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as of the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrowers in
writing that such Default or Event of Default has been cured or waived,
such notification not to be unreasonably withheld.
"Default Rate" means an annual rate equal to two percent (2%)
over the Floating Rate, which rate shall change when and as the
Floating Rate changes.
"EBITDAR" for a period means, the sum of (i) pretax earnings
from continuing operations, (ii) Interest Expense, and (iii)
depreciation, depletion, and amortization of tangible and intangible
assets, before (a) special extraordinary gains, (b) restructuring
charges, and (c) miscellaneous gains and losses, in each case for such
period, computed and calculated in accordance with GAAP.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
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(i) That portion of Accounts unpaid 60 days or more
after the invoice date;
(ii) That portion of Accounts with terms in excess
of 60 days;
(iii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iv) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by the Borrowers to the customer;
(v) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which the Borrowers have provided
evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such
unit of government under all applicable laws);
(vi) Accounts owed by an account debtor located
outside the United States or Canada which are not (A) backed
by a bank letter of credit naming the Lender as beneficiary or
assigned to the Lender, in the Lender's possession and
acceptable to the Lender in all respects, in its sole
discretion, (B) covered by a foreign receivables insurance
policy acceptable to the Lender in its sole discretion;
(vii) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone
out of business;
(viii) Suspense Accounts;
(ix) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of any of the Borrowers;
(x) Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject to any
lien, security interest or claim in favor of any Person other
than the Lender including without limitation any payment or
performance bond;
(xi) That portion of Accounts that has been
restructured, extended, amended or modified;
(xii) That portion of Accounts that constitutes
advertising, freight, finance charges, service charges or
sales or excise taxes;
(xiii) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 10% or more of the total
amount due under Accounts from such debtor is ineligible under
clauses (i), (iii) or (xi) above;
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(xiv) That portion of Accounts, otherwise deemed
eligible, in an amount equal to the Retention Bonus Liability,
the Bank Cartridge Liability and the Sales Allowance Accrual;
and
(xv) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion, including,
but not limited to, Receivables from Office Max, Inc.
"Eligible Inventory" means all Inventory of the Borrowers, at
the lower of cost or market value as determined in accordance with
GAAP; provided, however, that the following shall not in any event be
deemed Eligible Inventory:
(i) Inventory that is: in-transit; located at any
warehouse, job site or other premises not approved by the
Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other
document of title; on consignment from or to any Person or
subject to any bailment;
(ii) Supplies, packaging, parts or sample Inventory;
(iii) Work-in-process Inventory;
(iv) Prepaid Inventory;
(v) Inventory that is damaged, obsolete, slow moving
or not currently saleable in the normal course of the
Borrowers' operations, including Non-net-able Inventory;
(vi) Inventory that the Borrowers have returned, have
attempted to return, are in the process of returning or intend
to return to the vendor thereof;
(vii) Inventory that is perishable or live;
(viii) Inventory manufactured by the Borrowers
pursuant to a license unless the applicable licensor has
agreed in writing to permit the Lender to exercise its rights
and remedies against such Inventory;
(ix) Inventory that is subject to a security interest
in favor of any Person other than the Lender not subordinated
to the Lender pursuant to Bankruptcy Court order or documents
acceptable to the Lender; and
(x) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"Environmental Laws" has the meaning specified in Section
5.14.
"Equipment" means all of the Borrowers' equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment,
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shop equipment, office and recordkeeping equipment, parts, tools,
supplies, and including specifically (without limitation) the goods
described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrowers.
"Event of Default" has the meaning specified in Section 8.1.
"Excess Availability" means the Borrowing Base less (i) all
closing costs; and (ii) all claims and expenses which would be required
to be paid by the Borrowers if a chapter 11 plan were to be confirmed
on the Funding Date.
"Existing Banks" means Barclays Bank PLC, NationsBank of
Texas, NA, Commerzbank Aktiengesellschaft, Deutsche Bank A.G., New York
Branch or Caymen Islands Branch, First National Bank of Chicago,
Societe Generale, First American National Bank, ABN AMRO Bank, N.V. and
Credit Lyonnais.
"Existing Credit Facility" means that credit facility provided
to the Borrowers by the Existing Banks pursuant to a certain Second
Amended and Restated Credit Agreement dated as of July 31, 1997, as
amended.
"Expense Deposit" has the meaning specified in Section 9.7.
"Final Order" means the final order, in form and substance
satisfactory to Lender, entered by the Bankruptcy Court after adequate
notice to all parties entitled to be served, which, among other things,
approves the Loan Documents, authorizes the Borrowers to enter into the
Loan Documents and grants the Lender a senior lien in the Collateral
and a Superpriority Claim.
"Floating Rate" means an annual rate equal to the sum of the
Base Rate plus two percent (2%), which annual rate shall change when
and as the Base Rate changes.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.6.
"General Intangibles" means all of the Borrowers' general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all rights to
payment arising from any lawsuits now existing or hereafter arising
brought by the Borrowers against any Person, including the lawsuit
against Hewlett-Packard Company, all present and future patents, patent
applications, copyrights, trademarks, trade names, trade secrets,
customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use each of the
Borrowers' names, other than Future Graphics, Inc., and the goodwill of
the Borrowers' business as well as any rights to avoidance of transfers
or recoveries of property or money under the Bankruptcy Code.
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"Hazardous Substance" has the meaning given in Section 5.14.
"Interest Expense" means, for a fiscal year-to-date period,
the Borrowers' total gross interest expense during such period
(excluding interest income), and shall in any event include, without
limitation, (i) interest expensed (whether or not paid) on all Debt,
(ii) the amortization of debt discounts, (iii) the amortization of all
fees payable in connection with the incurrence of Debt to the extent
included in interest expense, and (iv) the portion of any capitalized
lease obligation allocable to interest expense.
"Inventory" means all of the Borrowers' inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"Investment Property" means all of the Borrowers' investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"Lienholder" means each Person, other than the Lender, holding
a lien in any of the Borrowers' assets constituting the Collateral of
any of the Borrowers, including but not limited to those financial
institutions at which the Borrowers maintain accounts (general or
special, time or demand, provisional or final).
"Lienholder Notice" means: (i) timely notice of the final
hearing scheduled for approval of this Agreement, accompanied by (ii) a
copy of Borrowers' Motion filed with the Bankruptcy Court for authority
to enter into this Agreement, and (iii) a copy of the proposed Final
Order to be entered by the Bankruptcy Court.
"Loan Documents" means this Agreement, the Note and the
Security Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreements" means the Lockbox Agreements by and among
the Borrowers, the Borrowers' existing lockbox banks and the Lender, of
even date herewith.
"Maturity Date" means the earlier of December 14, 2000 or the
confirmation of a plan of reorganization.
"Maximum Line" means $7,500,000, unless said amount is reduced
pursuant to Section 2.6, in which event it means the amount to which
said amount is reduced.
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"Minimum Interest Charge" has the meaning given in
Section 2.2(b).
"Net Income" means fiscal year-to-date after-tax net income
from continuing operations as determined in accordance with GAAP.
"Non-net-able Inventory" means Inventory returned by customers
and held by any of the Borrowers that has not been inspected.
"Note" means the Revolving Note.
"OEM Litigation" means those pending infringement claims
brought by original equipment manufacturers against the Borrowers.
"Obligations" means the Note and each and every other debt,
liability and obligation of every type and description which the
Borrowers may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrowers,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, all indebtedness of the Borrowers arising under this
Agreement, the Note or any other loan or credit agreement or guaranty
between the Borrowers and the Lender, whether now in effect or
hereafter entered into.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement of even date herewith by and between the
Borrowers and the Lender, as the same may be amended, supplemented or
restated from time to time.
"Pelikan License" means that certain Trademark License
Agreement among Pelikan Holding AG, Pelikan International
Handelsgesellschaft mbH & Co. KG, Pelikan GmbH (Hannover) and Nu-kote
Holding, Inc. dated as of ____________ respecting the non-exclusive use
of the Pelikan trademark.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrowers' employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrowers conduct
their business and have any rights of possession, including (without
limitation) the premises legally described in Exhibit C attached
hereto.
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"Real Estate Collateral" means each of the Premises, together
with all of each Borrowers' right, title and interest in (i) all of the
buildings, structures and other improvements now standing or at any
time hereafter constructed or placed upon any of the Premises; (ii) all
lighting, heating, ventilating, air-conditioning, sprinkling and
plumbing fixtures, water and power systems, engines and machinery,
boilers, furnaces, oil burners, elevators and motors, communication
systems, dynamos, transformers, electrical equipment and all other
fixtures of every description located in or on, or used, or intended to
be used in connection with any of the Premises or any building now or
hereafter located thereon; (iii) all hereditaments, easements,
appurtenances, riparian rights, rents, issues, profits, condemnation
awards, mineral rights and water rights now or hereafter belonging or
in any way pertaining to the Premises or to any building now or
hereafter located thereon and all the estates, rights and interests of
any of the Borrowers in the Premises; (iv) all building materials,
furniture, furnishings, maintenance equipment and all other personal
property now or hereafter located in, or on, or used, or intended to be
used in connection with any of the Premises or any building now or
hereafter located thereon and all replacements and additions thereto;
(v) all additions, accessions, increases, parts, fittings, accessories,
replacements, substitutions, betterments, repairs and proceeds to, of
or for any and all of the foregoing; and (vi) any and all
after-acquired interest of any of the Borrowers in any of the
foregoing, including the Premises.
"Receivables" means each and every right of the Borrowers to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrowers or by some other person who subsequently
transfers such person's interest to the Borrowers, whether such right
to payment is or is not already earned by performance, and howsoever
such right to payment may be evidenced, together with all other rights
and interests (including all liens and security interests) which the
Borrowers may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Retention Bonus Liability" means the amount of the Borrowers'
liability, on a consolidated basis, for earned credit given by any of
the Borrowers to any of their customers.
"Revolving Advance" has the meaning given in Section 2.1.
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"Revolving Note" means the Borrowers' revolving promissory
note, payable to the order of the Lender in substantially the form of
Exhibit A hereto and any note or notes issued in substitution therefor,
as the same may hereafter be amended, supplemented or restated from
time to time.
"Sales Allowance Accrual" means an amount equal to the
Borrowers' estimated outstanding rebates and allowances.
"Security Documents" means this Agreement, the Patent and
Trademark Security Agreement, the Collateral Account Agreement, the
Lockbox Agreement, and any other document delivered to the Lender from
time to time to secure the Obligations, as the same may hereafter be
amended, supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Senior Management" means Xxxxxxx X. Xxxxxx, C. Xxxxxx
Xxxxxxxx and Xxxxxxx X. Xxxxxxxx.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrowers, by the Borrowers
and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Superpriority Claim" means a claim against each of the
Borrowers in the Cases which is an administrative expense claim having
priority over any and all administrative expenses of the kind specified
in sections 503(b) and 507(b) of the Bankruptcy Code.
"Suspense Accounts" means those Accounts deemed questionable
as to collectability by any of the Borrowers.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrowers terminate the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.14 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
"Xaar License" means that certain license agreement between
Xaar Limited and Nu-kote International, Inc. respecting the use of the
Xaar trademark.
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Section 1.2 Cross References. All references in this Agreement
to Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Revolving Advances. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
Borrowers from time to time from the date all of the conditions set forth in
Section 4.1 are satisfied (the "Funding Date") to the Termination Date (the
"Revolving Advances"). The Lender shall have no obligation to make a Revolving
Advance if, after giving effect to such requested Revolving Advance, the sum of
the outstanding and unpaid Revolving Advances would exceed the Borrowing Base.
The Borrowers' obligation to pay the Revolving Advances shall be evidenced by
the Revolving Note and shall be secured by the Collateral as provided in Article
III. Within the limits set forth in this Section 2.1, the Borrowers may borrow,
prepay pursuant to Section 2.6 and reborrow. The Borrowers agree to comply with
the following procedures in requesting Revolving Advances under this Section
2.1:
(a) The Borrowers shall make each request for a Revolving
Advance to the Lender before 11:00 a.m. (Minneapolis, Minnesota time)
of the day of the requested Revolving Advance. Requests may be made in
writing or by telephone, specifying the date of the requested Revolving
Advance and the amount thereof. Each request shall be by (i) an officer
of the Borrowers; or (ii) any person designated as the Borrowers' agent
by any officer of the Borrowers in a writing delivered to the Lender;
or (iii) any person whom the Lender reasonably believes to be an
officer of the Borrowers or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the Borrowers' demand
deposit account maintained with Nations Bank of Texas, N.A. unless the
Lender and the Borrowers shall agree in writing to another manner of
disbursement. Upon the Lender's request, the Borrowers shall promptly
confirm each telephonic request for an Advance by executing and
delivering an appropriate confirmation certificate to the Lender. The
Borrowers shall repay all Advances even if the Lender does not receive
such confirmation and even if the person requesting an Advance was not
in fact authorized to do so. Any request for an Advance, whether
written or telephonic, shall be deemed to be a representation by the
Borrowers that the conditions set forth in Section 4.2 have been
satisfied as of the time of the request.
Section 2.2 Interest; Minimum Interest Charge; Default
Interest; Participations; Usury. Interest accruing on the Note shall be due and
payable in arrears on the first day of each month.
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(a) REVOLVING NOTE. Except as set forth in Sections 2.2(c),
2.2(d) and 2.2(e), the outstanding principal balance of the Revolving
Note shall bear interest at the Floating Rate.
(b) MINIMUM INTEREST CHARGE. Notwithstanding the interest
payable pursuant to Section 2.2(a), the Borrowers shall pay to the
Lender interest of not less than $50,000 per calendar quarter (the
"Minimum Interest Charge") during the term of this Agreement, and the
Borrowers shall pay any deficiency between the Minimum Interest Charge
and the amount of interest otherwise calculated under Sections 2.2(a)
and 2.2(d) on the first day of January, April, July and October.
(c) DEFAULT INTEREST RATE. The principal of the Advances
outstanding from time to time shall bear interest at the Default Rate
during any Default Period, regardless of any interim statement for
interest presented to the Borrowers or other action of the Lender. The
difference between interest at the Default Rate and interest at the
rate otherwise in effect shall be due and payable on demand.
(d) PARTICIPATIONS. If any Person shall acquire a
participation in the Advances, the Borrowers shall be obligated to the
Lender to pay the full amount of all interest calculated under this
Section 2.2, along with all other fees, charges and other amounts due
under this Agreement, regardless if such Person elects to accept
interest with respect to its participation at a lower rate than the
Floating Rate, or otherwise elects to accept less than its prorata
share of such fees, charges and other amounts due under this Agreement.
(e) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law. Notwithstanding anything to the contrary contained in
any Loan Document, all agreements which either now are or which shall
become agreements between the Borrowers and the Lender are hereby
limited so that in no contingency or event whatsoever shall the total
liability for payments in the nature of interest, additional interest
and other charges exceed the applicable limits imposed by the usury
laws of the State of Minnesota. If any payments in the nature of
interest, additional interest and other charges made under any Loan
Document are held to be in excess of the applicable limits imposed by
the usury laws of the State of Minnesota, it is agreed that any such
amount held to be in excess shall be considered payment of principal
hereunder, and the indebtedness evidenced hereby shall be reduced by
such amount so that the total liability for payments in the nature of
interest, additional interest and other charges shall not exceed the
applicable limits imposed by the usury laws of the State of Minnesota,
in compliance with the desires of the Borrowers and the Lender. This
provision shall never be superseded or waived and shall control every
other provision of the Loan Documents and all agreements between the
Borrowers and the Lender, or their successors and assigns.
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Section 2.3 Fees. The Borrowers acknowledge that the Lender
has incurred, and will incur, substantial costs and loss of economic opportunity
in connection with the negotiation, execution and performance of this Agreement,
and that the Lender has provided, or will provide, reasonably equivalent value
for the following fees:
(a) COMMITMENT FEE. The Lender acknowledges receipt of a
fully-earned and nonrefundable commitment fee in the amount of
$150,000.
(b) AUDIT FEES. The Borrowers hereby agree to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrowers' operations
or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently $62.50 per hour per auditor),
together with all actual out-of-pocket costs and expenses incurred in
conducting any such audit or inspection.
Section 2.4 Computation of Interest and Fees; When Interest
Due and Payable. Fees hereunder and interest accruing on the outstanding
principal balance of the Advances outstanding from time to time shall be
computed on the basis of actual number of days elapsed in a year of 360 days.
Interest shall be payable in arrears on the first day of each month and on the
Termination Date.
Section 2.5 Capital Adequacy.
(a) CAPITAL ADEQUACY. If any Related Lender determines at any
time that its Return has been reduced as a result of any Rule Change,
such Related Lender may require the Borrowers to pay it the amount
necessary to restore its Return to what it would have been had there
been no Rule Change. For purposes of this Section 2.5(a):
(i) "Capital Adequacy Rule" means any law, rule,
regulation, guideline, directive, requirement or request
regarding capital adequacy, or the interpretation or
administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender.
Such rules include rules requiring financial institutions to
maintain total capital in amounts based upon percentages of
outstanding loans, binding loan commitments and letters of
credit.
(ii) "Related Lender" includes (but is not limited to)
the Lender, any parent corporation of the Lender and any
assignee of any interest of the Lender hereunder and any
participant in the loans made hereunder.
(iii) "Return", for any period, means the return as
determined by a Related Lender on the Advances based upon its
total capital requirements and a reasonable attribution
formula that takes account of the Capital Adequacy Rules then
in effect and amounts received or receivable under this
Agreement or the Notes with respect to any Advance. Return may
be calculated for each
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calendar quarter and for the shorter period between the end
of a calendar quarter and the date of termination in whole of
this Agreement.
(iv) "Rule Change" means any change in any Capital
Adequacy Rule occurring after the date of this Agreement, but
the term does not include any changes in applicable
requirements that at the Closing Date are scheduled to take
place under the existing Capital Adequacy Rules or any
increases in the capital that any Related Lender is required
to maintain to the extent that the increases are required due
to a regulatory authority's assessment of the financial
condition of such Related Lender.
The Lender will promptly notify the Borrowers of any event of which it
has knowledge, occurring after the date hereof, which will entitle the
Lender to compensation pursuant to this Section 2.5. Certificates of
any Related Lender sent to the Borrowers from time to time claiming
compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional
amount or amounts to be paid to the Related Lender hereunder to restore
its Return shall be conclusive absent manifest error. In determining
such amounts, the Related Lender may use any reasonable averaging and
attribution methods.
Section 2.6 Voluntary Prepayment; Reduction of the Maximum
Line; Termination of the Credit Facility by the Borrowers. Except as otherwise
provided herein, the Borrowers may prepay the Revolving Advances in whole at any
time or from time to time in part. The Borrowers may terminate the Credit
Facility or reduce the Maximum Line at any time if they (i) give the Lender at
least 30 days' prior written notice and (ii) pay the Lender the prepayment,
termination or line reduction fees in accordance with Section 2.7. Any reduction
in the Maximum Line must be in an amount not less than $1,000,000 or an integral
multiple thereof. If the Borrowers reduce the Maximum Line to zero, all
Obligations shall be immediately due and payable. Upon termination of the Credit
Facility and payment and performance of all Obligations, the Lender shall
release or terminate the Security Interest and the Security Documents to which
the Borrowers are entitled by law.
Section 2.7 Termination, Line Reduction and Prepayment Fees;
Waiver of Termination, Prepayment and Line Reduction Fees.
(a) TERMINATION AND LINE REDUCTION FEES. If the Lender or the
Borrowers terminate the Credit Facility for any reason as of a date
other than December 14, 2000, if the Credit Facility matures due to the
confirmation of a Chapter 11 plan, or if the Borrowers reduce the
Maximum Line, the Borrowers shall pay the Lender a fee in an amount
equal to a percentage of the Maximum Line (or the reduction, as the
case may be) as follows: (i) two percent (2%) if the termination or
reduction occurs on or before October 31, 1999; and (ii) one percent
(1%) if the termination or reduction occurs thereafter.
(b) WAIVER OF TERMINATION AND LINE REDUCTION FEES. The
Borrowers will not be required to pay the termination or line reduction
fees otherwise due under this
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Section 2.7 if such termination or line reduction is made because of
refinancing by an affiliate of the Lender.
Section 2.8 Mandatory Prepayment. Without notice or demand, if
the outstanding principal balance of the Revolving Advances shall at any time
exceed the Borrowing Base, the Borrowers shall immediately prepay the Revolving
Advances to the extent necessary to eliminate such excess. Any payment received
by the Lender under this Section 2.8 or under Section 2.6 may be applied to the
Obligations, in such order and in such amounts as the Lender, in its discretion,
may from time to time determine.
Section 2.9 Payment. All payments to the Lender shall be made
in immediately available funds and shall be applied to the Obligations one (1)
Banking Day after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for three (3) additional days before
applying them to the Obligations. Notwithstanding anything in Section 2.1, the
Borrowers hereby authorize the Lender, in its discretion at any time or from
time to time without the Borrowers' request and even if the conditions set forth
in Section 4.2 would not be satisfied, to make a Revolving Advance in an amount
equal to the portion of the Obligations from time to time due and payable.
Section 2.10 Payment on Non-Banking Days. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
Section 2.11 Use of Proceeds. The Borrowers shall use the
proceeds of Advances to provide for ongoing working capital needs during the
Cases in accordance with Schedule 2.11.
Section 2.12 Liability Records. The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrowers
establish the contrary. Upon the Lender's demand, the Borrowers will admit and
certify in writing the exact principal balance of the Obligations that the
Borrowers then assert to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrowers
unless the Borrowers give the Lender specific written notice of exception within
30 days after receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 Grant of Security Interest. Each of the Borrowers
hereby pledge, assign and grant to the Lender a security interest (collectively
referred to as the "Security Interest") and lien in the Collateral, as security
for the payment and performance of the Obligations.
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Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor or other person obligated to pay the amount
due and instruct such account debtor or other person to pay any such amounts to
the Lockbox Account or the Collateral Account. During a Default Period, the
Lender may notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrowers will join
in giving such notice if the Lender so requests. At any time after the Borrowers
or the Lender give such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in any of the Borrowers' names,
provided a Default Period then exists, (a) demand, xxx for, collect or receive
any money or property at any time payable or receivable on account of, or
securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor; and (b) as the Borrowers' agent and attorney-in-fact,
notify the United States Postal Service to change the address for delivery of
the Borrowers' mail to any address designated by the Lender, otherwise intercept
the Borrowers' mail, and receive, open and dispose of the Borrowers' mail,
applying all Collateral as permitted under this Agreement and holding all other
mail for the Borrowers' account or forwarding such mail to the Borrowers' last
known address.
Section 3.3 Assignment of Insurance. As additional security
for the payment and performance of the Obligations, the Borrowers hereby assign
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrowers with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrowers
hereby direct the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in any of the Borrowers' names,
execute and deliver proof of claim, receive all such monies, endorse checks and
other instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrowers hereby irrevocably grant to the Lender the
right to take exclusive possession of the Premises at any time during a
Default Period. The Borrowers will not take any action to reject under
section 365 of the Bankruptcy Code, any unexpired lease or executory
contract relating to use or occupancy of the Premises without prior
written consent of the Lender.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are
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Collateral and for other purposes that the Lender may in good xxxxx
xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrowers shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrowers will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 License. Each of the Borrowers hereby grant to the
Lender a non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of the
Borrowers for the purpose of selling, leasing or otherwise disposing of any or
all Collateral during any Default Period. Notwithstanding the foregoing, the
Borrowers' grant to the Lender of such non-exclusive, worldwide and royalty-free
licenses shall not extend to the Xaar License or to the Pelikan License for use
outside of the Borrowers' United States operations.
Section 3.6 Financing Statement. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
any of the Borrowers is sufficient as a financing statement and may be filed as
a financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Names and addresses of Borrowers:
Nu-kote Holding, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
Nu-kote Imperial, Ltd.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
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Nu-kote International, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
International Communication Materials, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
Nu-kote Imaging International, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
Future Graphics, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
Nu-kote Latin America, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
Name and address of Secured Party:
Norwest Business Credit, Inc.
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Federal Tax Identification No. 00-0000000
Section 3.7 Setoff. The Borrowers agree that the Lender may at
any time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to the Borrowers by the
Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any Obligations
shall have the right to appropriate or setoff any deposit or other liability
then owed by such Person to the Borrowers, whether or not due, and apply the
same to the payment of said participating interest, as fully as if such Person
had lent directly to the Borrowers the amount of such participating interest.
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ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to the Initial Revolving
Advance. The Lender's obligation to make the initial Revolving Advance hereunder
shall be subject to the condition precedent that the Lender shall have received
all of the following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by each of the
Borrowers.
(b) The Note, properly executed by each of the Borrowers.
(c) A true and correct copy of any and all mortgages pursuant
to which the Borrowers have mortgaged the Premises.
(d) True and correct copies of all license agreements pursuant
to which any of the Borrowers have licensed intellectual property.
(e) The Collateral Account Agreement, properly executed by the
Borrowers and Norwest Bank Minnesota, National Association.
(f) The Lockbox Agreements, properly executed by each of the
Borrowers and each of the Borrowers' existing lockbox banks.
(g) A landlords disclaimer and consent with respect to each
lease to which any of the Borrowers are leasing the Premises.
(h) The Patent and Trademark Security Agreement, properly
executed by each of the Borrowers.
(i) An acknowledgment and waiver of liens from each warehouse
or other location in which any of the Borrowers are storing Inventory.
(j) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against any of the Borrowers, (ii) no financing statements have
been filed and remain in effect against any of the Borrowers except
those financing statements relating to Permitted Liens, and (iii) the
Lender has duly filed all financing statements necessary to perfect the
Security Interest, to the extent the Security Interest is capable of
being perfected by filing.
(k) A separate Certificate of each of the Borrowers'
secretaries or assistant secretaries certifying as to (i) the
resolutions of such Borrowers' directors and if required, shareholders,
authorizing the execution, delivery and performance of the Loan
Documents, (ii) such Borrowers' articles of incorporation and bylaws,
and (iii) the signatures of such Borrowers' officers or agents
authorized to execute and
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deliver the Loan Documents and other instruments, agreements and
certificates, including Advance requests, on the Borrowers' behalf.
(l) Current certificates issued by the Secretaries of State
where each Borrower are organized, certifying that each Borrower is in
compliance with all applicable organizational requirements of that
State.
(m) Evidence that each of the Borrowers are duly licensed or
qualified to transact business in all jurisdictions where the character
of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary.
(n) A certificate of one of the Borrowers' officers
confirming, in his personal capacity, the representations and
warranties set forth in Article V.
(o) Support agreements in favor of the Lender, properly
executed by Xxxxxxx X. Xxxxxx, C. Xxxxxx Xxxxxxxx, and Xxxxxxx X.
Xxxxxxxx in their personal capacity.
(p) Evidence satisfactory to the Lender of the legal
separation of the Borrowers' North American operations from its
European operations and that any insolvency or receivership proceedings
involving the Borrowers' European operations will be separate and
distinct from the Borrowers' Cases.
(q) An opinion of counsel to the Borrowers, addressed to the
Lender.
(r) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(s) A copy of the Lienholder Notice sent to each Lienholder.
(t) The Lender's obligation to make Revolving Advances
subsequent to the final hearing held to approve the Credit Facility
shall be subject to the Lender's receipt of the Final Order.
(u) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.3 and expenses incurred by the
Lender through such date and required to be paid by the Borrowers under
Section 9.7, including all legal expenses incurred through the date of
this Agreement.
Section 4.2 Conditions Precedent to All Advances. The Lender's
obligation to make each Advance (including the initial Advance) shall be subject
to the further conditions precedent that on such date:
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(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date;
(b) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default;
and
(c) no Bankruptcy Court order is entered (i) authorizing the
Borrowers to obtain financing or credit pursuant to section 364 of the
Bankruptcy Code from any Person other than the Lender secured by a
security interest or a Superpriority Claim unless such security
interest and administrative claim are junior to the Security Interest
and the Lender's Superpriority Claim, as the case may be or will be
paid off from the Initial Advance; or (ii) providing adequate
protection to any Person under sections 361 through 364 of the
Bankruptcy Code by granting a security interest in any of the
Collateral unless such security interest is junior to the Security
Interest save and except for the claims against Hewlett-Packard
Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief
Executive Office; Inventory and Equipment Locations; Tax Identification Number.
Nu-kote Holding, Inc., Nu-kote Imperial, Ltd., and Nu-kote Latin America, Inc.
are each corporations, duly organized, validly existing and in good standing
under the laws of the State of Delaware. International Communication Materials,
Inc. is a corporation duly organized, validly existing and in good standing
under the laws of the State of Pennsylvania. Future Graphics, Inc. is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. Each of the Borrowers is duly licensed or qualified
to transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary. No dissolution or termination of any of
the Borrowers has occurred, and no notice of dissolution or articles of
termination have been filed with respect to the Borrowers. Each of the Borrowers
has all requisite power and authority, corporate or otherwise, to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under, the Loan Documents. During its existence, each of the
Borrowers has done business solely under the names set forth in Schedule 5.1
hereto. Each Borrower's chief executive office and principal place of business
is located at the address set forth in Schedule 5.1 hereto, and each Borrower's
records relating to its business or the Collateral are kept at that location.
All Inventory and Equipment is located at that location or at one of the other
locations set forth in Schedule 5.1 hereto. The Borrowers' tax identification
numbers are correctly set forth in Section 3.6 hereto. As of the date hereof,
each Borrower is current on all postpetition lease payments which are due and
owing for such locations. No Inventory, except Inventory in
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transit in the ordinary course of business, is located any place other than as
identified on Schedule 5.1.
Section 5.2 Capitalization. Schedule 5.2 constitutes a correct
and complete list of all shareholders holding a five percent (5%) or greater
interest in any the Borrowers and rights to acquire a five percent (5%) or
greater interest in any of the Borrowers, including the amount and record holder
thereof.
Section 5.3 Authorization of Borrowing; No Conflict as to Law
or Agreements. The execution, delivery and performance by the Borrowers of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of any of the Borrowers' shareholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization required by the Bankruptcy Court and except such authorization,
consent, approval, registration, declaration, filing or notice as has been
obtained, accomplished or given prior to the date hereof; (iii) violate any
provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
any of the Borrowers or of any of the Borrowers' articles of incorporation and
bylaws; (iv) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other material agreement, lease or instrument
to which any of the Borrowers are a party or by which it or its properties may
be bound or affected (except breaches or defaults under the Existing Credit
Facility); or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by any of the
Borrowers.
Section 5.4 Legal Agreements. This Agreement constitutes and,
upon due execution by each of the Borrowers, the other Loan Documents will
constitute the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms.
Section 5.5 Subsidiaries. Except as set forth in Schedule 5.5
hereto, the Borrowers have no Subsidiaries.
Section 5.6 Financial Condition; No Adverse Change. The
Borrowers have heretofore furnished to the Lender audited financial statements
dated as of March 31, 1998, and unaudited interim financial statements dated as
of August 21, 1998 and those statements fairly present each of the Borrowers'
financial condition on the dates thereof and the results of its operations and
cash flows for the periods then ended and were prepared in accordance with
generally accepted accounting principles. Since the date of the most recent
financial
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statements, there has been no material adverse change in the Borrowers'
businesses, properties or condition (financial or otherwise) other than the
Cases.
Section 5.7 Litigation. Except as set forth in Schedule 5.7
hereto, there are no actions, suits or proceedings pending or, to any of the
Borrowers' knowledge, threatened against or affecting any of the Borrowers or
any of their Affiliates or the properties of any of the Borrowers or any of
their Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrowers or any of their Affiliates, would have a material
adverse effect on the financial condition, properties or operations of the
Borrowers or any of its Affiliates.
Section 5.8 Regulation U. The Borrowers are not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.9 Taxes. The Borrowers and their Affiliates have
paid or caused to be paid to the proper authorities when due all federal, state
and local taxes required to be withheld by each of them. The Borrowers and their
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrowers or any of their Affiliates, as the
case may be, are required to be filed, and the Borrowers and their Affiliates
have paid or caused to be paid to the respective taxing authorities all taxes as
shown on said returns or on any assessment received by any of them to the extent
such taxes have become due and are permitted to be paid under the Bankruptcy
Code.
Section 5.10 Titles and Liens; Priority. The Borrowers have
good and absolute title to all Collateral described in the collateral reports
provided to the Lender and all other Collateral, properties and assets reflected
in the latest financial statements referred to in Section 5.6 and all proceeds
thereof, free and clear of all mortgages, security interests, liens, adverse
claims and encumbrances, except for Permitted Liens. Without limiting the
generality of the foregoing, the Collateral is not subject to any claim or lien
pursuant to section 506(c) of the Bankruptcy Code. No financing statement naming
any of the Borrowers as debtor is on file in any office except to perfect only
Permitted Liens. Pursuant to the Final Order, the Security Interest shall have
priority over all other security interests in the Collateral. Upon entry of the
Final Order, pursuant to section 364(c)(1) of the Bankruptcy Code, the
Obligations shall at all times constitute allowed priority claims in the Cases
having priority over all administrative expenses of the kind specified in
sections 503(b) and 507(b) of the Bankruptcy Code.
Section 5.11 Intellectual Property Rights. The Borrowers (a)
own or have the exclusive right to use, free and clear of all material liens,
claims and restrictions, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing, used in the
conduct of its business as now conducted, provided, however, such
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right is non-exclusive as to the Pelikan License; (b) are not obligated or under
any liability whatsoever to make any payments of a material nature by way of
royalties, fees or otherwise to any owner of, licensor of, or other claimant to,
any patent, trademark, trade name, copyright or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business or
otherwise, other than royalty payments due under the Xaar License; (c) own or
have the unrestricted right to use all trade secrets, including know-how,
inventions, designs, processes, computer programs and technical data necessary
to the development, operation and sale of all products and services sold or
proposed to be sold by it, free and clear of any rights, liens or claims of
others, except as such rights are limited by the OEM Litigation; and (d) are not
using any confidential information or trade secrets of others. The Borrowers are
not, nor have they received notice with respect to, infringing upon or otherwise
acting adversely to any known right or claimed right of any person under or with
respect to any patents, trademarks, service marks, trade names, copyrights,
licenses or rights with respect to the foregoing, other than the OEM Litigation.
Section 5.12 Plans. Except for the Borrowers' disclosure to
the Lender that the Borrowers' Plan may be underfunded in the approximate amount
of $300,000, none of the Borrowers nor any of their Affiliates have received any
notice or has any knowledge to the effect that it is not in full compliance with
any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified status
exists in connection with any Plan. None of the Borrowers nor any of their
Affiliates have:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.13 Default. Each of the Borrowers is in compliance
with all provisions of all agreements, instruments, decrees and orders to which
it is a party or by which it or its property is bound or affected, a breach or
default of which could have an effect on any of the Borrowers' financial
condition, properties or operations on a consolidated basis in an aggregate
amount greater than $100,000.
Section 5.14 Environmental Matters.
(a) Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state, local or
other governmental statute, regulation, law or ordinance
dealing with the protection of human health and the
environment.
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(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrowers' best knowledge, other than as identified
on Schedule 5.14, there are not present in, on or under the Premises
any Hazardous Substances in such form or quantity as to create any
liability or obligation for any of the Borrowers or the Lender under
common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such a
way as to create any such liability.
(c) To the Borrowers' best knowledge, other than as identified
on Schedule 5.14, the Borrowers have not disposed of Hazardous
Substances in such a manner as to create any liability under any
Environmental Law.
(d) Other than as identified on Schedule 5.14, there are not
and there never have been any requests, claims, notices,
investigations, demands, administrative proceedings, hearings or
litigation, relating in any way to the Premises or any of the
Borrowers, alleging liability under, violation of, or noncompliance
with any Environmental Law or any license, permit or other
authorization issued pursuant thereto. To the Borrowers' best
knowledge, no such matter is threatened or impending other than as
identified on Schedule 5.14.
(e) To the Borrowers' best knowledge, other than as identified
on Schedule 5.14, the Borrowers' businesses are and have in the past
always been conducted in accordance with all Environmental Laws and all
licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation
of such businesses are in the Borrowers' possession and are in full
force and effect. No permit required under any Environmental Law is
scheduled to expire within 12 months and there is no threat that any
such permit will be withdrawn, terminated, limited or materially
changed, other than as identified on Schedule 5.14.
(f) To the Borrowers' best knowledge, other than as identified
on Schedule 5.14, the Premises are not and never have been listed on
the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal,
state or local list, schedule, log, inventory or database.
(g) The Borrowers have delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrowers'
businesses.
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Section 5.15 Submissions to Lender. All financial and other
information provided to the Lender by or on behalf of the Borrowers in
connection with the Borrowers' request for the credit facilities contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or proforma financial statements, present a good faith opinion as to
such projections, valuations and proforma condition and results.
Section 5.16 Financing Statements. The Borrowers have provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. The Final Order when entered, shall grant the Lender a perfected
prior Security Interest as described therein without the need for filing further
documents such as financing statements. In addition, however, if such financing
statements are filed in the offices noted therein, the Lender will also have a
valid and perfected security interest in all Collateral and all other collateral
described in the Security Documents which is capable of being perfected by
filing financing statements.
Section 5.17 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrowers' records pertaining thereto as being
obligated to pay such obligation.
Section 5.18 Direct and Substantial Economic Interest. Each
Borrower has a direct and substantial economic interest in each other Borrower
and as such, each Borrower expects to derive substantial benefits from any and
all Advances made to each Borrower and other transactions and events resulting
in the creation of any and all obligations.
Section 5.19 Joint and Several Liability. The Obligations
created by this Agreement are the joint and several obligation of the Borrowers.
The Lender shall not be required to first seek payment of the Obligations from
any one of the Borrowers, but rather may seek payment from any or all of the
Borrower as it sees fit, in its sole discretion.
Section 5.20 Dormancy of Viro-kote, Inc. Viro-kote, Inc. is a
dormant corporation and holds no assets except for that certain trademark with a
registration number of 74/663,763 (the "Viro-kote Trademark"). The Viro-kote
Trademark is no longer being used by Viro-kote, Inc. or any of the Borrowers.
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ARTICLE VI
BORROWERS' AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrowers will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrowers will
deliver, or cause to be delivered, to the Lender each of the following, which
shall be in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 120 days
after the end of each fiscal year of the Borrowers, each of the
Borrowers' audited financial statements with the opinion of independent
certified public accountants selected by the Borrowers and acceptable
to the Lender, which annual financial statements shall include each of
the Borrowers' balance sheets as at the end of such fiscal year and the
related statements of each of the Borrowers' income, retained earnings
and cash flows for the fiscal year then ended, prepared, if the Lender
so requests, on a consolidating and consolidated basis to include any
Affiliates, all in reasonable detail and prepared in accordance with
GAAP, together with (i) copies of all management letters prepared by
such accountants; (ii) a report signed by such accountants stating that
in making the investigations necessary for said opinion they obtained
no knowledge, except as specifically stated, of any Default or Event of
Default hereunder and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrowers are
in compliance with the requirements set forth in Sections 6.15, 6.16,
6.17, and 7.13; and (iii) a certificate of the Borrowers' chief
financial officers stating that such financial statements have been
prepared in accordance with GAAP, fairly represent the Borrowers'
financial position and the results of its operations, and whether or
not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder and, if so, stating in reasonable detail the
facts with respect thereto;
(b) as soon as available and in any event within 20 days after
the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of each of the Borrowers as
at the end of and for such month and for the year to date period then
ended, prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments; and accompanied by a certificate
of the Borrowers' chief financial officers, substantially in the form
of Exhibit B hereto stating (i) that such financial statements have
been prepared in accordance with GAAP, subject to year-end audit
adjustments, and fairly represent the Borrowers' financial position and
the results of their operations, (ii) whether or not such officer has
knowledge of the occurrence of
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any Default or Event of Default hereunder not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with
respect thereto, and (iii) all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrowers are
in compliance with the requirements set forth in Sections 6.15, 6.16,
6.17, and 7.13;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of each Borrower's
accounts receivable and its accounts payable, an inventory
certification report, and a calculation of the Borrowers' Accounts,
Eligible Accounts, Inventory and Eligible Inventory as at the end of
such month or shorter time period;
(d) at least 30 days before the beginning of each fiscal year
of the Borrowers, the projected balance sheets and income statements
for each month of such year, each in reasonable detail, representing
each Borrower's good faith projections and certified by such Borrower's
chief financial officer as being the most accurate projections
available and identical to the projections used by such Borrower for
internal planning purposes, together with such supporting schedules and
information as the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting any of the Borrowers of the
type described in Section 5.14 or which seek a monetary recovery
against any of the Borrowers in excess of $100,000;
(f) as promptly as practicable (but in any event not later
than five business days) after any Senior Management obtains knowledge
of the occurrence of any breach, default or event of default under any
Security Document or any event which constitutes a Default or Event of
Default hereunder, notice of such occurrence, together with a detailed
statement by a responsible officer of such Borrower of the steps being
taken by the Borrowers to cure the effect of such breach, default or
event;
(g) as soon as possible and in any event within 30 days after
any Senior Management knows or has reason to know that any Reportable
Event with respect to any Plan has occurred, the statement of the
Borrowers' chief financial officers setting forth details as to such
Reportable Event and the action which the Borrowers propose to take
with respect thereto, together with a copy of the notice of such
Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after
any of the Borrowers fail to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal Revenue
Code of 1986, as amended, the statement of such Borrower's chief
financial officer setting forth details as to such failure and the
action which the Borrowers propose to take with respect thereto,
together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
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(i) promptly upon any Senior Management's knowledge thereof,
notice of (i) any disputes or claims by any of the Borrowers' customers
exceeding $25,000 individually or $50,000 in the aggregate during any
fiscal year; (ii) any goods returned to or recovered by any of the
Borrowers; and (iii) any change in the persons constituting the
Borrowers' officers and directors;
(j) promptly upon any Senior Management's knowledge thereof,
notice of any loss of or material damage to any Collateral or other
collateral covered by the Security Documents or of any substantial
adverse change in any Collateral or such other collateral or the
prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which any of the Borrowers
shall have sent to its stockholders;
(l) promptly after the sending or filing thereof, copies of
all regular and periodic reports which any of the Borrowers shall file
with the Securities and Exchange Commission or any national securities
exchange;
(m) promptly upon receipt, or if filed by any or all of the
Borrowers, promptly upon filing, all motions, notices, reports,
applications, objections, responses or other papers filed or served in
any of the Cases;
(n) within two days of filing, copies of monthly reports filed
with the U.S. Trustee's office;
(o) promptly upon any Senior Management's knowledge thereof,
notice of any of the Borrowers' violations of any law, rule or
regulation, the non-compliance with which could materially and
adversely affect the Borrowers' business or its financial condition;
(p) on a daily basis, sales and collections reports and credit
memos; and
(q) from time to time, with reasonable promptness, any and all
receivables schedules, deposit records, equipment schedules, copies of
invoices to account debtors, shipment documents and delivery receipts
for goods sold, and such other material, reports, records or
information as the Lender may reasonably request.
Section 6.2 Books and Records; Inspection and Examination. The
Borrowers will keep accurate books of record and account pertaining to the
Collateral and pertaining to the Borrowers' businesses and their financial
condition and such other matters as the Lender may from time to time request in
which true and complete entries will be made in accordance with GAAP and, upon
the Lender's request, will permit any officer, employee, attorney or accountant
for the Lender to audit, review, make extracts from or copy any and all
corporate and financial books and records of the Borrowers at all times during
ordinary business hours, to send and discuss with account debtors and other
obligors requests for verification of
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amounts owed to the Borrowers, and to discuss the Borrowers' affairs with any of
its directors, officers, employees or agents. The Borrowers will permit the
Lender, or its employees, accountants, attorneys or agents, to examine and
inspect any Collateral, other collateral covered by the Security Documents or
any other property of the Borrowers at any time during ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time
and from time to time send or require the Borrowers to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time telephone
account debtors and other obligors to verify accounts.
Section 6.4 Compliance with Laws.
(a) The Borrowers will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrowers
specifically agree that they will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
Section 6.5 Payment of Taxes and Other Claims. The Borrowers
will pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to them (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by it, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrowers; provided, that the Borrowers
shall not be required to pay any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been made.
Section 6.6 Maintenance of Properties.
(a) The Borrowers will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent the
Borrowers from discontinuing the operation and maintenance of any of
their
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properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrowers' business and not
disadvantageous in any material respect to the Lender.
(b) The Borrowers will defend the Collateral against all
claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrowers will keep all Collateral and other
collateral covered by the Security Documents free and clear of all
security interests, liens and encumbrances except Permitted Liens.
Section 6.7 Insurance. The Borrowers will obtain and at all
times maintain insurance with insurers believed by the Borrowers to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrowers operate. Without limiting the generality of the foregoing, the
Borrowers will at all times maintain business interruption insurance including
coverage for force majeure and keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit acceptable
to the Lender. All policies of liability insurance required hereunder shall name
the Lender as an additional insured.
Section 6.8 Preservation of Existence. The Borrowers will
preserve and maintain their existence and all of their rights, privileges and
franchises necessary or desirable in the normal conduct of their business and
shall conduct their business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the
Lender, the Borrowers will promptly deliver to the Lender in pledge all
instruments, documents and chattel paper constituting Collateral, duly endorsed
or assigned by the appropriate Borrower.
Section 6.10 Collateral Account.
(a) If, notwithstanding the instructions to debtors to make
payments to the Lockbox, any of the Borrowers receives any payments on
Receivables, that Borrower shall deposit such payments into the
Collateral Account. Until so deposited, the Borrowers shall hold all
such payments in trust for and as the property of the Lender and shall
not commingle such payments with any of its other funds or property.
(b) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by any of the
Borrowers, except after full payment and discharge of all Obligations.
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(c) All deposits in the Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations. The Lender from time to time at its discretion may, after
allowing (2) Banking Days, apply deposited funds in the Collateral
Account to the payment of the Obligations, in any order or manner of
application satisfactory to the Lender, by transferring such funds to
the Lender's general account.
(d) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the
Borrowers will immediately pay the Lender, or, for items deposited in
the Collateral Account, the bank maintaining such account, the amount
of that item, or such bank at its discretion may charge any uncollected
item to the Borrowers' commercial account or other account. The
Borrowers shall be liable as an endorser on all items deposited in the
Collateral Account, whether or not in fact endorsed by the Borrowers.
Section 6.11 Maintenance of Debtor-in-Possession Accounts. The
Borrowers shall maintain all bank accounts with the Lender or institutions
acceptable to the Lender. A list identifying all of its accounts not maintained
with the Lender and the financial institutions at which such accounts are
maintained is set forth in Schedule 6.11. The Borrowers shall notify the Lender
in writing of any changes in and additions to such list as soon as any change or
addition occurs. If the Lender is required to pledge any collateral or in
another manner secure any deposit account pursuant to the provisions of section
345 of the Bankruptcy Code, the Lender shall be entitled to charge a reasonable
fee for such account which fee shall be paid by the Borrowers on demand and
which fee shall be similar to fees charged to like borrowers.
Section 6.12 Performance by the Lender. If the Borrowers at
any time fail to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days (or in the case of the agreements contained in
Sections 6.5, 6.7 and 6.10, immediately upon the occurrence of such failure,
without lapse of time), the Lender may, but need not, perform or observe such
covenant on behalf and in the name, place and stead of the Borrowers (or, at the
Lender's option, in the Lender's name) and may, but need not, take any and all
other actions which the Lender may reasonably deem necessary to cure or correct
such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens or encumbrances, the performance of
obligations owed to account debtors or other obligors, the procurement and
maintenance of insurance, the execution of assignments, security agreements and
financing statements, and the endorsement of instruments); and the Borrowers
shall thereupon pay to the Lender on demand the amount of all monies expended
and all costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by the
Lender, together with interest thereon from the date expended or incurred at the
Floating Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrowers, the Borrowers hereby irrevocably appoint the Lender,
or the Lender's delegate, acting alone, as the Borrowers' attorney in fact
(which appointment is
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coupled with an interest) with the right (but not the duty) from time to time to
create, prepare, complete, execute, deliver, endorse or file in the name and on
behalf of the Borrowers any and all instruments, documents, assignments,
security agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrowers under this Section 6.12.
Section 6.13 Year 2000 Compliance. The Borrowers agree to (1)
conduct a detailed inventory and assessment of all of their computer hardware
and software systems and imbedded chip technology ("Information Systems") and of
their business and operations that could be adversely affected by their failure
to be Year 2000 Compliant on a timely basis; (2) develop, fund, and implement a
project plan to make their Information Systems Year 2000 Compliant, and complete
implementation of the plan and the remediation and testing of its Information
Systems no later July 31, 1999; and (3) initiate a process to determine whether
their material suppliers, vendors, and customers have taken meaningful steps to
become Year 2000 Compliant on a timely basis, and develop and implement a
feasible contingency plan to ensure the uninterrupted and unimpaired operation
of its business in the event of the failure of the systems of such third parties
or of their own Information Systems no later than July 31, 1999. For purposes of
this covenant, "Year 2000 Compliant" means that the Borrowers' Information
Systems that are material to their operations and financial condition will be
able to properly process date sensitive functions before, on, and after December
31, 1999. The Borrowers will also provide to the Lender promptly upon receipt,
copies of any reports or management letters relating to their Year 2000
compliance project and contingency plans, either internally prepared or prepared
by outside consultants or their accountants, and will provide such other
information relating to their Year 2000 compliance efforts, and deliver such
certifications by their officers relating thereto as the Lender in its
discretion may deem appropriate.
Section 6.14 Borrowers' Financial Projections. The financial
projections used by the Borrowers in the Bankruptcy Court to seek approval of
the credit facility provided for herein and to use cash collateral shall be the
same financial projections delivered to the Lender on November 4, 1998.
Section 6.15 Maximum Days in Inventory Covenant. The
Borrowers, on a consolidated basis, will not exceed Maximum Days in Inventory of
155 during each Fiscal Month. Maximum Days in Inventory shall be determined by
the following formula:
Maximum Days in Inventory = 360 / R
The following definitions apply to the above formula:
R=[(COGS / Applicable Fiscal Periods) x 12] / Inventory at Cost
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"COGS" equal cost of goods sold incurred from the beginning of
then applicable Fiscal Year through the last day of the measuring Fiscal Month.
"Applicable Fiscal Periods" means the number of fiscal periods
that have occurred from the beginning of the applicable fiscal year through the
last day of the measuring fiscal month.
Section 6.16 Minimum EBITDAR. The Borrowers will maintain, on
a consolidated basis, during each period described below, EBITDAR of not less
than the amount set forth opposite such period:
Period Minimum EBITDAR
------ ---------------
April 1, 1998 through $1,560,000
November 30, 1998
April 1, 1998 through $1,365,000
December 31, 1998
April 1, 1998 through $1,393,000
January 31, 1999
April 1, 1998 through $1,332,000
February 28, 1999
Fiscal Year ending $1,280,000
March 31, 1999
April 1, 1999 through $77,000
April 30, 1999
April 1, 1999 through $151,000
May 31, 1999
April 1, 1999 through $219,000
June 30, 1999
April 1, 1999 through $265,000
July 31, 1999
April 1, 1999 through $336,000
August 31, 1999
April 1, 1999 through $574,000
September 30, 1999
April 1, 1999 through $657,000
October 31, 1999
April 1, 1999 through $824,000
November 30, 1999
April 1, 1999 through $1,061,000
December 31, 1999
April 1, 1999 through $1,314,000
January 31, 2000
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Period Minimum EBITDAR
------ ---------------
April 1, 1999 through $1,664,000
February 29, 2000
Fiscal Year ending $2,062,000
March 31, 2000
Each Fiscal Month thereafter $150,000
Section 6.17 Minimum Net Income. The Borrowers will maintain,
on a consolidated basis, during each period described below, Net Income, of not
less than the amount set forth opposite such period:
Period Minimum Net Income
------ ------------------
April 1, 1998 through $(2,833,000)
November 30, 1998
April 1, 1998 through $(4,570,000)
December 31, 1998
April 1, 1998 through $(5,737,000)
January 31, 1999
April 1, 1998 through $(6,997,000)
February 28, 1999
Fiscal Year ending $(8,362,000)
March 31, 1999
April 1, 1999 through $(873,000)
April 30, 1999
April 1, 1999 through $(1,741,000)
May 31, 1999
April 1, 1999 through $(2,729,000)
June 30, 1999
April 1, 1999 through $(3,539,000)
July 31, 1999
April 1, 1999 through $(4,332,000)
August 31, 1999
April 1, 1999 through $(5,170,000)
September 30, 1999
April 1, 1999 through $(5,953,000)
October 31, 1999
April 1, 1999 through $(6,645,000)
November 30, 1999
April 1, 1999 through $(7,471,000)
December 31, 1999
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Period Minimum Net Income
------ ------------------
April 1, 1999 through $(7,971,000)
January 31, 2000
April 1, 1999 through $(8,367,000)
February 29, 2000
Fiscal Year ending $(8,970,000)
March 31, 2000
Each Fiscal Month thereafter $1
Section 6.18 Subrogation. No Borrower will exercise or enforce
any right of contribution, reimbursement, recourse or subrogation available to
such Borrower as against any other Borrower unless and until all of the
Obligations have been fully paid and discharged.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrowers agree that, without the
Lender's prior written consent:
Section 7.1 Liens. The Borrowers will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
adverse claim, assignment or transfer upon or of any of its assets, now owned or
hereafter acquired, to secure any indebtedness; excluding, however, from the
operation of the foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrowers' property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrowers' business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto or otherwise subject and junior to the Lender's
Security Interest securing indebtedness for borrowed money permitted
under Section 7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents;
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrowers not exceeding
the lesser of cost or fair market value thereof, not exceeding $250,000
for any one purchase or $1,200,000 in
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the aggregate during any fiscal year and so long as no Default Period
is then in existence and none would exist immediately after such
acquisition; and
(e) a first priority lien in lawsuits filed by the Borrowers
in favor of Employers Insurance of Wausau and Coudert Brothers to the
extent of fees and expenses incurred in connection with pursuing such
causes of actions and a second priority lien in lawsuits filed by the
Borrowers in favor of the Existing Banks to the extent of the
diminution in value of their collateral resulting from entry of the
Final Order.
Section 7.2 Indebtedness. The Borrowers will not incur,
create, assume or permit to exist any indebtedness or liability on account of
deposits or advances or any indebtedness for borrowed money or letters of credit
issued on the Borrowers' behalf, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrowers in existence on the date
hereof and listed in Schedule 7.2 hereto or any other indebtedness
subject and junior to the Lender's Superpriority Claim; and
(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
Section 7.3 Guaranties. The Borrowers will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrowers
for deposit or collection or similar transactions in the ordinary
course of business;
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto;
(c) guaranties relating to liens permitted in accordance with
Section 7.1.
Section 7.4 Investments and Subsidiaries.
(a) The Borrowers will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) any of the Borrowers' ownership of existing
Subsidiaries;
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(ii) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit
obligations of the United States of America having a
maturity of one year or less, commercial paper issued by
U.S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by Xxxxx'x Investors Service
or certificates of deposit or bankers' acceptances having a
maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of
$100,000,000 (which certificates of deposit or bankers'
acceptances are fully insured by the Federal Deposit
Insurance Corporation);
(iii) travel advances or loans to the Borrowers'
officers and employees not exceeding at any one time an
aggregate of $20,000; and
(iv) advances in the form of progress payments, prepaid
rent not exceeding one (1) month or security deposits.
(b) The Borrowers will not create or permit to exist any
Subsidiary, other than the Subsidiaries in existence on the date hereof
and listed in Schedule 5.5.
Section 7.5 Dividends. The Borrowers will not declare or pay
any dividends (other than dividends payable solely in stock of the Borrowers) on
any class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 7.6 Sale or Transfer of Assets; Suspension of
Business Operations. The Borrowers will not sell, lease, assign, transfer or
otherwise dispose of (i) the stock of any Subsidiary (except in connection with
the sale of the Borrowers' European operations), (ii) all or a substantial part
of its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrowers will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 Intellectual Property. The Borrowers will not
sell, assign or grant licenses to use, any of its applications for patents,
patents, copyrights, trademarks, trade secrets, trade names or other
intellectual property to any other Person. Provided, however, the Borrowers may
sell, assign or grant licenses in connection with a sale of the Borrowers'
European operations, subject to the Lender's approval of any documentation in
connection therewith and provided further that the Borrowers shall in all events
maintain the right to use any such intellectual property necessary to conduct
its United States operations.
Section 7.8 Financing Orders. The Borrowers shall not violate
or seek to modify, appeal, or otherwise affect, the terms of the Final Order.
Section 7.9 Chapter 11 Claims. The Borrowers shall not incur,
create, assume, suffer to exist, or permit any claim in any of the Cases
(including, without limitation, any
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claim under section 506(c) of the Bankruptcy Code and any deficiency claim
remaining after the satisfaction of a lien that secures a claim) to be on a
parity with or senior to the claims of the Lender against the Borrowers
hereunder, or apply to the Bankruptcy Court for authority to do so.
Section 7.10 Consolidation and Merger; Asset Acquisitions. The
Borrowers will not consolidate with or merge into any Person, or permit any
other Person to merge into it, or acquire (in a transaction analogous in purpose
or effect to a consolidation or merger) all or substantially all the assets of
any other Person.
Section 7.11 Sale and Leaseback. The Borrowers will not enter
into any arrangement, directly or indirectly, with any other Person whereby the
Borrowers shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which the Borrowers intend to
use for substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.12 Restrictions on Nature of Business. The Borrowers
will not engage in any line of business materially different from that presently
engaged in by the Borrowers and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.13 Capital Expenditures. The Borrowers will not
incur or contract to incur Capital Expenditures of more than $400,000 in the
aggregate for the period November 1, 1998 through March 31, 1999 and of no more
than $300,000 during each fiscal quarter thereafter.
Section 7.14 Accounting. The Borrowers will not adopt any
material change in accounting principles other than as required by GAAP. Each
Borrower will not adopt, permit or consent to any change in its fiscal year.
Section 7.15 Discounts, etc. The Borrowers will not, after
notice from the Lender, grant any discount, credit or allowance to any customer
of the Borrowers or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the
Borrowers.
Section 7.16 Defined Benefit Pension Plans. The Borrowers will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.12.
Section 7.17 Other Defaults. The Borrowers will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrowers, except for existing breaches,
defaults or events of default under the Existing Credit Facility and any other
defaults that occurred prior to bankruptcy.
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Section 7.18 Place of Business; Name. The Borrowers will not
transfer their chief executive offices or principal place of business, or move,
relocate, close or sell any business location. The Borrowers will not permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrowers will not change
their names. Notwithstanding the foregoing, the Borrowers may change the name of
Future Graphics, Inc. upon prior written notice to the Lender and upon execution
and delivery of any and all instruments, financing statements and other
agreements and writings that the Lender requires in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents.
Section 7.19 Organizational Documents. The Borrowers will not
amend their articles of incorporation and bylaws. The Borrowers will not become
an S Corporation within the meaning of the Internal Revenue Code of 1986, as
amended.
Section 7.20 Salaries. The Borrowers will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any directors, shareholders or consultant, or any member
of their families.
Section 7.21 Change in Ownership. The Borrowers will not issue
or sell any stock of the Borrowers so as to change the percentage of voting and
non-voting stock owned by each of the Borrowers' shareholders, and the
Borrowers, excluding Nu-kote Holding, Inc., will not permit or suffer to occur
the sale, transfer, assignment, pledge or other disposition of any or all of the
issued and outstanding shares of stock of the Borrowers.
ARTICLE VIII
Events of Default, Rights and Remedies
Section 8.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) Default in the payment of the Obligations when they become
due and payable;
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrowers under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrowers contained in this Agreement;
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(d) Entry of an order of the Bankruptcy Court modifying,
amending, reversing, vacating, or staying the Final Order, or the
Borrowers shall violate the terms of the Final Order;
(e) In connection with any of the Cases: (i) the Bankruptcy
Court shall enter an order dismissing any of the Cases; (ii) any of the
Cases shall be converted to a case under chapter 7 of the Bankruptcy
Code; (iii) a motion shall be filed for, or there shall arise, any
claim (other than those of the Lender hereunder) in any of the Cases
having a priority under section 364(c)(1) of the Bankruptcy Code unless
such motion provides for the payment in full in cash of the Obligations
upon the closing of such financing, except a motion in connection with
Employers Insurance of Wausau and Coudert Brothers; (iv) a motion shall
be filed for, or there shall arise, a claim (other than those of the
Lender hereunder) in any of the Cases secured by a lien having a
priority under section 364(d) of the Bankruptcy Code unless such motion
provides for payment in full in cash of the Obligations upon the
closing of such financing except a motion in connection with Employers
Insurance of Wausau and Coudert Brothers; (v) there shall arise any
lien (other than a Permitted Lien) in the Collateral or any part
thereof save and except for a lien in favor of Employers Insurance of
Wausau and Coudert Brothers; (vi) the Bankruptcy Court shall enter an
order granting relief from the automatic stay applicable under section
362 of the Bankruptcy Code to the holder of any security interest other
than the Lender; or (vii) the Bankruptcy Court shall enter an order
approving a disclosure statement in connection with a plan of
reorganization proposed by any of the Borrowers or any other Person
which plan of reorganization is inconsistent with the Borrowers'
agreements and obligations hereunder, e.g., a plan which does not
provide for payment in full in cash of the Obligations as required by
section 1129(a)(9) of the Bankruptcy Code;
(f) Any representation or warranty made by the Borrowers in
this Agreement, or by the Borrowers (or by any of their officers) in
any agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement shall prove to have been incorrect in
any material respect when deemed to be effective;
(g) The rendering against any of the Borrowers of a final
judgment, decree or order for the payment of money in excess of
$100,000 and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 30 consecutive days without
a stay of execution;
(h) A default, other than any existing default under the
Existing Credit Facility, under any bond, debenture, note or other
evidence of indebtedness of any of the Borrowers owed to any Person
other than the Lender, or under any indenture or other instrument under
which any such evidence of indebtedness has been issued or by which it
is governed, or under any lease of any of the Premises, and the
expiration
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of the applicable period of grace, if any, specified in such evidence
of indebtedness, indenture, other instrument or lease;
(i) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
any of the Borrowers by the Lender; or a trustee shall have been
appointed by an appropriate United States District Court to administer
any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or any of the Borrowers shall have filed for a
distress termination of any Plan under Title IV of ERISA; or any of the
Borrowers shall have failed to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal Revenue
Code of 1986, as amended, which the Lender determines in good faith may
by itself, or in combination with any such failures that the Lender may
determine are likely to occur in the future, result in the imposition
of a lien on the Borrowers' assets in favor of the Plan provided
however that Borrowers may seek a voluntary termination of any Plan in
the Cases;
(j) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of the Borrowers hereunder or under any note, except for an
existing event of default under the Existing Credit Facility;
(k) Any of the Borrowers shall liquidate, dissolve, terminate
or suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(l) Any of the Borrowers shall fail to pay, withhold, collect
or remit any tax or tax deficiency when assessed or due (other than any
tax deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued;
(m) Any event or circumstance with respect to any of the
Borrowers shall occur such that the Lender shall believe in good faith
that the prospect of payment of all or any part of the Obligations or
the performance by the Borrowers under the Loan Documents is impaired
or any material adverse change in the business or financial condition
of the Borrowers shall occur; or
(n) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender.
Section 8.2 Rights and Remedies. During any Default Period,
the Lender may without further order of, or application to the Bankruptcy Court
for an order granting relief
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from the automatic stay of Section 362 of the Bankruptcy Code, exercise any or
all of the following rights and remedies:
(a) the Lender may, by notice to the Borrowers, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to the Borrowers, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrowers hereby expressly waive;
(c) the Lender may, without notice to the Borrowers and
without further action, apply any and all money owing by the Lender to
the Borrowers to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrowers hereby expressly waive) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrowers will on demand assemble the
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
The Borrowers agree and admit that the occurrence of any Event of Default is
sufficient cause for relief from the automatic stay under Section 362(d)(1) of
the Bankruptcy Code. If an Event of Default occurs, the Borrowers consent to
entry of an Order terminating the automatic stay 3 business days after the
filing of an affidavit with the Bankruptcy Court by the Lender, or one of its
attorneys, with service upon counsel for the Borrowers, setting forth the nature
of the Default; provided, however, that if a Default under Section 8.1(e)(ii)
occurs, the Lender must give notice of the Default to the trustee or examiner
and request a hearing for relief from the stay based on the Default. The
Borrowers shall have no defense, other than showing the alleged Default has not
occurred.
Section 8.3 Certain Notices. If notice to the Borrowers of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.4) at least ten
calendar days before the date of intended disposition or other action.
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ARTICLE IX
Miscellaneous
Section 9.1 No Discharge of Claims; No Waiver by Lender. The
Obligations and the Security Interest shall not be discharged by the entry of an
order confirming a plan of reorganization in any of the Cases, and by execution
hereof the Borrowers waive, pursuant to section 1141(d) of the Bankruptcy Code,
any such discharge. The Superpriority Claim granted to Lender by the Final Order
and the Security Interest granted to Lender hereunder and by the Final Order
shall not be affected in any manner by entry of an order confirming a plan of
reorganization in any of the Cases, or the entry of an order dismissing or
converting any of the Cases. The Lender does not waive, and nothing contained in
the Loan Documents shall be construed to be a waiver by the Lender, of the
Lender's rights under section 1129(a)(9)(A) of the Bankruptcy Code.
Section 9.2 No Waiver; Cumulative Remedies. No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.3 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrowers therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the
Borrowers in any case shall entitle the Borrowers to any other or further notice
or demand in similar or other circumstances.
Section 9.4 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
If to the Borrowers:
Nu-kote Holding, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Telecopier: 615/791-6100
Attention: Xxxxxxx X. Xxxxxxxx
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If to the Lender:
Norwest Business Credit, Inc.
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.5 Further Documents. The Borrowers will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that the
Borrowers execute, deliver or endorse any such item shall not affect or impair
the validity, sufficiency or enforceability of the Loan Documents and the
Security Interest, regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior occasion).
Section 9.6 Collateral. This Agreement does not contemplate a
sale of accounts, contract rights or chattel paper, and, as provided by law, the
Borrowers are entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and the Lender need not otherwise preserve, protect, insure or care for any
Collateral. The Lender shall not be obligated to preserve any rights the
Borrowers may have against prior parties, to realize on the Collateral at all or
in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
Section 9.7 Costs and Expenses. The Borrowers shall reimburse
the Lender for all reasonable out-of-pocket expenses incurred by the Lender in
connection with seeking to obtain the Bankruptcy Court's approval of the Credit
Facility, in seeking to close and maintain the Credit Facility, and any other
out-of-pocket expenses otherwise incurred in connection with the Obligations,
this Agreement, the Loan Documents, and any other document or agreement related
hereto or thereto, and the transactions contemplated hereby,
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including without limitation, reasonable attorneys' fees and expenses, closing
costs, appraisal fees, UCC search and recording fees, individual and corporate
credit reports, inventory appraisal fees and collateral auditing costs, whether
incurred prepetition or postpetition and regardless of whether the Credit
Facility is approved by the Bankruptcy Court or funded. The Lender acknowledges
receipt of a $50,000 due diligence deposit and a $50,000 expense deposit
(collectively, the "Expense Deposit") to cover the Lender's expenses associated
with obtaining court approval of this Agreement and all documentation related
thereto. Upon the approval or rejection of the Credit Facility herein, the
Deposit shall be returned to the Borrowers after deducting all out-of-pocket
expenses incurred by the Lender. The Borrowers' obligation to reimburse the
Lender for all costs and expenses shall be effective regardless of whether the
Credit Facility is approved by the Bankruptcy Court or whether the Credit
Facility is funded.
Section 9.8 Indemnity. In addition to the payment of expenses
pursuant to Section 9.7, the Borrowers agree to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or
the making of the Advances;
(ii) any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty
contained in Section 5.14 proves to be incorrect in any
respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection
with the foregoing and any other investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall
be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the
making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrowers, or counsel designated by the Borrowers and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrowers' sole cost and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrowers shall nevertheless make the
maximum contribution to the
-46-
51
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The Borrowers' obligation under this Section
9.8 shall survive the termination of this Agreement and the discharge of the
Borrowers' other obligations hereunder.
Section 9.9 Participants. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns, without further order of the Bankruptcy Court.
Section 9.10 Execution in Counterparts. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.11 Binding Effect; Assignment; Complete Agreement;
Exchanging Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrowers and the Lender and their respective successors and
assigns, except that the Borrowers shall not have the right to assign their
rights thereunder or any interest therein without the Lender's prior written
consent. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. Without limiting the Lender's right to share information regarding the
Borrowers and any of their Affiliates with the Lender's participants,
accountants, lawyers and other advisors, the Lender, Xxxxx Fargo & Company,
formerly known as Norwest Corporation, and all direct and indirect subsidiaries
of Xxxxx Fargo & Company, may exchange any and all information they may have in
their possession regarding the Borrowers and any of their Affiliates, and the
Borrowers waive any right of confidentiality they may have with respect to such
exchange of such information.
Section 9.12 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.13 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.14 Governing Law; Jurisdiction, Venue; Waiver of
Jury Trial. The Loan Documents shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of Minnesota.
The parties hereto hereby (i) consent to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrowers in connection with this Agreement or the other Loan
Documents
-47-
52
shall be venued in either the District Court of Hennepin County, Minnesota or
the United States District Court, District of Minnesota; and (iv) agree that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
[Signature Page to Follow]
-48-
53
NORWEST BUSINESS CREDIT, INC. NU-KOTE HOLDING, INC.
By _______________________________
Its ________________
By _______________________________
Its Vice President
NU-KOTE INTERNATIONAL, INC. NU-KOTE IMPERIAL, LTD.
By _______________________________ By _______________________________
Its ________________ Its ________________
INTERNATIONAL COMMUNICATION
MATERIALS, INC. FUTURE GRAPHICS, INC.
By _______________________________ By _______________________________
Its ________________ Its ________________
NU-KOTE LATIN AMERICA, INC. NU-KOTE IMAGING INTERNATIONAL,
INC.
By _______________________________ By _______________________________
Its ________________ Its ________________
-49-
54
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Form of Compliance Certificate
Exhibit C Premises
-------------------
Schedule 2.11 Sources and Uses of Funds
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.2 Capital Stock
Schedule 5.5 Subsidiaries
Schedule 5.7 Litigation
Schedule 5.14 Environmental Matters
Schedule 6.11 Debtor-in-Possession Accounts
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
55
Exhibit A to Credit and Security
Agreement
REVOLVING NOTE
$7,500,000 Minneapolis, Minnesota
________________, 2000
For value received, the undersigned, NU-KOTE HOLDING, INC., a
Delaware corporation, NU-KOTE IMPERIAL, LTD., a Delaware corporation, NU-KOTE
INTERNATIONAL, INC., a Delaware corporation, INTERNATIONAL COMMUNICATION
MATERIALS, INC., a Pennsylvania corporation, NU-KOTE IMAGING INTERNATIONAL,
INC., a Delaware corporation, FUTURE GRAPHICS, INC., a California corporation,
and NU-KOTE LATIN AMERICA, INC., a Delaware corporation (collectively, the
"Borrowers"), hereby promise to pay, jointly and severally, on the Termination
Date under the Credit Agreement (defined below), to the order of Norwest
Business Credit, Inc., a Minnesota corporation (the "Lender"), at its main
office in Minneapolis, Minnesota, or at any other place designated at any time
by the holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Seven Million Five Hundred
Thousand Dollars and No Cents ($7,500,000) or, if less, the aggregate unpaid
principal amount of all Revolving Advances made by the Lender to the Borrowers
under the Credit Agreement (defined below) together with interest on the
principal amount hereunder remaining unpaid from time to time, computed on the
basis of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect
under the Credit and Security Agreement of even date herewith (as the same may
hereafter be amended, supplemented or restated from time to time, the "Credit
Agreement") by and between the Lender and the Borrowers. The principal hereof
and interest accruing thereon shall be due and payable as provided in the Credit
Agreement. This Note may be prepaid only in accordance with the Credit
Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Revolving Note referred to in the Credit Agreement. This Note is
secured, among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one or more
other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements.
The Borrowers hereby agree to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
56
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
NU-KOTE HOLDING, INC.
By _______________________________
Its ________________
NU-KOTE INTERNATIONAL, INC
By _______________________________
Its ________________
NU-KOTE IMPERIAL, LTD.
By _______________________________
Its ________________
INTERNATIONAL COMMUNICATION MATERIALS, INC.
By _______________________________
Its ________________
FUTURE GRAPHICS, INC.
By _______________________________
Its ________________
NU-KOTE IMAGING INTERNATIONAL, INC.
By _______________________________
Its _________________
NU-KOTE LATIN AMERICA, INC.
By _______________________________
Its ________________
-2-
57
Exhibit B to Credit and Security
Agreement
COMPLIANCE CERTIFICATE
To: ____________________
Norwest Business Credit, Inc.
Date: __________________, 199___
Subject: Nu-kote Holding, Inc., Nu-kote Imperial, Ltd., Nu-kote International,
Inc., International Communication Materials, Inc., Nu-kote Imaging
International, Inc., Future Graphics, Inc. and Nu-kote Latin America,
Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as
of ______________, 2000 (the "Credit Agreement"), attached are the financial
statements of Nu-kote Holding, Inc., Nu-kote Imperial, Ltd., Nu-kote
International, Inc., International Communication Materials, Inc., Nu-kote
Imaging International, Inc., Future Graphics, Inc. and Nu-kote Latin America,
Inc. (the "Borrowers") as of and for ________________, 19___ (the "Reporting
Date") and the year-to-date period then ended (the "Current Financials"). All
terms used in this certificate have the meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrowers' financial condition and the results of its operations as of the
date thereof.
Events of Default. (Check one):
[ ] The undersigned does not have knowledge of the
occurrence of a Default or Event of Default under the Credit
Agreement.
[ ] The undersigned has knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement and
attached hereto is a statement of the facts with respect to
thereto.
I hereby certify to the Lender as follows:
[ ] The Reporting Date does not xxxx the end of one of the
Borrowers' fiscal months, hence I am completing only paragraph
__ below.
[ ] The Reporting Date marks the end of one of the
Borrowers' fiscal months, hence I am completing all paragraphs
below except paragraph __.
58
[ ] The Reporting Date marks the end of the Borrowers'
fiscal year, hence I am completing all paragraphs below.
Financial Covenants. I further hereby certify as follows:
1. Minimum EBITDAR. Pursuant to Section 6.16 of the Credit
Agreement, the Borrowers' EBITDAR for the ________ period ending on the
Reporting Date, was $____________, which [ ] satisfies [ ] does not
satisfy the requirement that such amount be not less than
$_____________ during such period as set forth in table below:
Period Minimum EBITDAR
------ ---------------
April 1, 1998 through $1,560,000
November 30, 1998
April 1, 1998 through $1,365,000
December 31, 1998
April 1, 1998 through $1,393,000
January 31, 1999
April 1, 1998 through $1,332,000
February 28, 1999
Fiscal Year ending $1,280,000
March 31, 1999
April 1, 1999 through $77,000
April 30, 1999
April 1, 1999 through $151,000
May 31, 1999
April 1, 1999 through $219,000
June 30, 1999
April 1, 1999 through $265,000
July 31, 1999
April 1, 1999 through $336,000
August 31, 1999
April 1, 1999 through $574,000
September 30, 1999
April 1, 1999 through $657,000
October 31, 1999
April 1, 1999 through $824,000
November 30, 1999
April 1, 1999 through $1,061,000
December 31, 1999
59
Period Minimum EBITDAR
------ ---------------
April 1, 1999 through $1,314,000
January 31, 2000
April 1, 1999 through $1,664,000
February 29, 2000
Fiscal Year ending $2,062,000
March 31, 2000
Each Fiscal Month $150,000
thereafter
2. Minimum Net Income. Pursuant to Section 6.17 of the Credit
Agreement, the Borrowers' Net Income for the ________ period ending
on the Reporting Date, was $____________, which [ ] satisfies [ ]
does not satisfy the requirement that such amount be not less than
$_____________ during such period as set forth in table below:
Period Minimum Net Income
------ ------------------
April 1, 1998 through $(2,833,000)
November 30, 1998
April 1, 1998 through $(4,570,000)
December 31, 1998
April 1, 1998 through $(5,737,000)
January 31, 1999
April 1, 1998 through $(6,997,000)
February 28, 1999
Fiscal Year ending $(8,362,000)
March 31, 1999
April 1, 1999 through $(873,000)
April 30, 1999
April 1, 1999 through $(1,741,000)
May 31, 1999
April 1, 1999 through $(2,729,000)
June 30, 1999
April 1, 1999 through $(3,539,000)
July 31, 1999
April 1, 1999 through $(4,332,000)
August 31, 1999
April 1, 1999 through $(5,170,000)
September 30, 1999
April 1, 1999 through $(5,953,000)
October 31, 1999
60
Period Minimum Net Income
------ ------------------
April 1, 1999 through $(6,645,000)
November 30, 1999
April 1, 1999 through $(7,471,000)
December 31, 1999
April 1, 1999 through $(7,971,000)
January 31, 2000
April 1, 1999 through $(8,367,000)
February 29, 2000
Fiscal Year ending $(8,970,000)
March 31, 2000
Each Fiscal Month thereafter $1
3. Maximum Days in Inventory. Pursuant to Section 6.15 of the
Credit Agreement, for the year-to-date period ending on the Reporting
Date, the Borrowers have maintained ___ days in inventory which [ ]
satisfies [ ] does not satisfy the requirement that the Borrowers will
not exceed 155 days in inventory.
4. Capital Expenditures. Pursuant to Section 7.13 of the
Credit Agreement, for the year-to-date period ending on the Reporting
Date, the Borrowers have expended or contracted to expend during the
_____________ year ended ______________, 199___, for Capital
Expenditures, $__________________ in the aggregate and at most
$______________ in any one transaction, which [ ] satisfies [ ]
does not satisfy the requirement that such expenditures not exceed
$__________ in the aggregate and $___________ for any one transaction
during such year.
5. Salaries. As of the Reporting Date, the Borrower [ ] is
[ ] is not in compliance with Section 7.20 of the Credit Agreement
concerning salaries.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
NU-KOTE HOLDING, INC.
By ____________________________
Its Chief Financial Officer
61
NU-KOTE IMPERIAL, LTD.
By ____________________________
Its Chief Financial Officer
NU-KOTE INTERNATIONAL, INC.
By ____________________________
Its Chief Financial Officer
INTERNATIONAL COMMUNICATION
MATERIALS, INC.
By ____________________________
Its Chief Financial Officer
NU-KOTE IMAGING INTERNATIONAL, INC.
By ____________________________
Its Chief Financial Officer
FUTURE GRAPHICS, INC.
By ____________________________
Its Chief Financial Officer
NU-KOTE LATIN AMERICA, INC.
By ____________________________
Its Chief Financial Officer
62
Exhibit C to Credit and Security
Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement
are legally described as follows:
[To be completed by Borrowers]
63
Schedule 2.11 to Credit and Security
Agreement
Sources and Uses of Funds
[to be completed by Borrowers]
64
Schedule 5.1 to Credit and Security
Agreement
Trade Names, Chief Executive Office, Principal Place of Business,
and Locations of Collateral
TRADE NAMES
CHIEF EXECUTIVE OFFICE PRINCIPAL PLACE OF BUSINESS
---------------------- ---------------------------
Nu-kote Holding, Inc. Same
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Nu-kote Imperial, Ltd. Same
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Nu-kote International, Inc. Same
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
International Communication Connellsville, PA
Materials, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Nu-kote Imaging International, Inc. Same
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Future Graphics, Inc. Chatsworth, CA
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Nu-kote Latin America, Inc. Same
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
65
OTHER INVENTORY AND EQUIPMENT LOCATIONS
Average Average
Cost of Inventory
Equipment Balances
On Hand On Hand
------- -------
Nu-kote De Mexico. Nogales, Mexico $1,200,000 $2,300,000
Nu-kote International, Inc. Nogales, Arizona $ -0- $ 000,000
Xxxxxxxxx Xxxxxxxxx Xxxxxxxxxxx, Xxxxxx $ -0- $ 500,000
Outsource Manufacturer Portland, TN $ 500,000 $ 750,000
66
Schedule 5.2 to Credit and Security
Agreement
CAPITAL STOCK OF SHAREHOLDERS WITH A 5% OR GREATER INTEREST
IN THE BORROWERS
--------------------------------------------------------------------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF CLASS
OWNED (1)
--------------------------------------------------------------------------------------------------
Ligapart AG 4,600,000 21.1%
--------------------------------------------------------------------------------------------------
Richmont Capital Partners I, L.P. 2,559,360 11.8%
--------------------------------------------------------------------------------------------------
Heartland Advisors, Inc. 1,100,000 5.1%
--------------------------------------------------------------------------------------------------
Xxxxxxxxxxx Group, Inc. 2,062,600 (2) 9.5%
--------------------------------------------------------------------------------------------------
(1) Unless otherwise indicated, such shares of the Common Stock are owned with
sole voting and investment powers.
(2) Represents the aggregate shares held by the Xxxxxxxxxxx Group, Inc. and its
subsidiaries and affiliates, including Xxxxxxxxxxx Financial Corp., Xxxxxxxxxxx
Equities Inc., Xxxxxxxxxxx Holding, Inc., Xxxxxxxxxxx & Co., Inc. and
Xxxxxxxxxxx Capital, X.X. Xxxxxxxxxxx Group, Inc. is a parent holding company
and disclaims beneficial ownership and voting and dispositive power over the
shares held by its subsidiaries and their clients.
Describe any outstanding subscriptions, options, warrants, calls, contracts,
demands, commitments, or convertible securities
See Attached.
67
Schedule 5.5 to Credit and Security
Agreement
SUBSIDIARIES
[ORGANIZATIONAL CHART]
68
Schedule 5.7 to Credit and Security
Agreement
LITIGATION
See Attached.
69
Schedule 5.14 to Credit and Security
Agreement
ENVIRONMENTAL MATTERS
See Attached.
70
Schedule 6.11 to Credit and Security
Agreement
DEBTOR-IN-POSSESSION ACCOUNTS
See Attached.
71
Schedule 7.1 to Credit and Security
Agreement
PERMITTED LIENS (each of which is subject and junior to the
Lender's Superpriority Claim)
---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION SECURED PARTY FILING NO. FILING DATE COLLATERAL OR
LIEN AMOUNT
---------------------------------------------------------------------------------------------------------------------
Nu-kote California Secretary Nationsbank of Texas 9629561315 10/16/96 Blanket
International, Inc. of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
New York Secretary Nationsbank of Texas 41900 3/1/95 Blanket
of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxx-Xxxxxx, a 200021 9/18/98 Consignment
division of Industrial interest in all
Coatings Group Inc. high density film
----------------------------------------------------------------------------------------------------------------------
Pennsylvania Dollar Bank Leasing 00000000 5/17/96 Canon Color
Secretary of State Corp Printing System
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 00000000 2/25/97 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Pitney Xxxxx Credit 28761723 4/6/98 All equipment
Corporation sold by secured
party; subject
to lease dated
11/3/97
---------------------------------------------------------------------------------------------------------------------
Colonial Pacific 29370361 9/10/98 Marklift Scissor
Leasing Lift
---------------------------------------------------------------------------------------------------------------------
Fayette County, PA Nationsbank of Texas 2391 (real 2/21/97 Blanket
NA as collateral agent estate records)
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 136-97-ST 2/21/97 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Colonial Pacific 742-98-ST 9/14/98 Specific
Leasing Equipment
---------------------------------------------------------------------------------------------------------------------
72
---------------------------------------------------------------------------------------------------------------------
Tennessee Secretary Hyster Credit Co 950453714 7/21/95 Specific
of State Equipment
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 950493011 11/20/95 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
CIT Group 972084363 10/23/97 Specific
Equipment
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx Financial 982029881 3/31/98 Specific
Services Equipment
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxx-Xxxxxx, a 982081059 9/22/98 Consignment
division of Industrial interest in all
Coatings Group Inc. high density film
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Nu-kote Holdings, California Secretary Nationsbank of Texas 9705160154 2/18/97 Blanket
Inc. of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
New York Secretary Nationsbank of Texas 205124 10/16/96 Blanket
of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Pennsylvania AT&T Credit Corporation 23580198 10/3/94 AT&T Merlin
Secretary of State Legend equipment
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 00000000 3/4/97 Exhibit A not
NA as collateral agent attached
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
International California Secretary Nationsbank of Texas 9705061082 2/18/97 Blanket
Communication of State NA as collateral agent
Materials, Inc.
---------------------------------------------------------------------------------------------------------------------
New York Secretary Nationsbank of Texas 35098 2/19/97 Blanket
of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Pennsylvania CIT Group/Equipment 20511737 2/11/92 Specific
Secretary of State Financing Inc. Equipment and
related parts
---------------------------------------------------------------------------------------------------------------------
73
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 00000000 3/10/95 All trademarks
NA as collateral agent and general
intangibles
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 00000000 3/10/95 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 00000000 3/10/95 All patents and
NA as collateral agent general
intangibles
---------------------------------------------------------------------------------------------------------------------
Xerox Corp 24971629 12/13/95 Xerox copier
---------------------------------------------------------------------------------------------------------------------
Fayette County, PA CIT Group/Equipment 3026 (real 3/13/92 Specific
Financing Inc. estate records) Equipment and
related parts
---------------------------------------------------------------------------------------------------------------------
CIT Group/Equipment 128-92-ST 3/13/92 Specific
Financing Inc. Equipment and
related parts
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 133-95-ST 3/1/95 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 134-95-ST 3/1/95 All trademarks
NA as collateral agent and general
intangibles
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 135-95-ST 3/1/95 All patents and
NA as collateral agent general
intangibles
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 142-95-ST 3/2/95 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Xerox Corp 1022-95-ST 12/15/95 Xerox copier
---------------------------------------------------------------------------------------------------------------------
PA Dept of Revenue 271-96 4/18/96 $64.48
---------------------------------------------------------------------------------------------------------------------
RSL Industrial 18926 8/31/98 $37,022.59
Contracting, Inc.
(mechanic's lien)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Future Graphics, California Secretary Nationsbank of Texas 9506660396 3/1/95 Blanket
Inc. of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
74
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 9506660432 3/1/95 All patents and
NA as collateral agent general
intangibles
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 0000000000 9/8/95 All trademarks
NA as collateral agent and general
intangibles
---------------------------------------------------------------------------------------------------------------------
Technologies 9805060160 2/11/98 Blanket
Investments, Inc.
---------------------------------------------------------------------------------------------------------------------
New York Secretary Nationsbank of Texas 35136 2/19/97 Blanket
of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
IRS - Federal Tax Lien 212339 10/25/96 $21,741.22
---------------------------------------------------------------------------------------------------------------------
Pennsylvania American Business 25070088 1/16/96 Specific
Secretary of State Leasing Inc. Equipment
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 00000000 2/26/97 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Pelikan Tennessee Secretary Yale Financial 920112678 8/12/92 All leased
of State Services Inc. equipment,
including New
Yale Forklift
---------------------------------------------------------------------------------------------------------------------
First United Leasing 930244505 10/18/93 Specific
Equipment
---------------------------------------------------------------------------------------------------------------------
Hyster Credit Company 940289068 3/14/94 Specific
Equipment
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Nu-kote Imaging New York Secretary Nationsbank of Texas 205128 10/16/96 Blanket
International, Inc. of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Pennsylvania Nationsbank of Texas 00000000 3/10/95 Blanket
Secretary of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
75
---------------------------------------------------------------------------------------------------------------------
Fayette County, PA Nationsbank of Texas 4368 (real 3/31/97 Blanket
NA as collateral agent estate records)
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 232-97-ST 3/31/97 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Tennessee Secretary Nationsbank of Texas 9504493009 11/20/95 All trademarks
of State NA as collateral agent and general
intangibles
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 9504493010 11/20/95 Blanket
NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Nationsbank of Texas 9504493012 11/20/95 All patents and
NA as collateral agent general
intangibles
---------------------------------------------------------------------------------------------------------------------
ABCC 961016445 6/12/96 Lease filing -
specific
equipment
---------------------------------------------------------------------------------------------------------------------
California Secretary Nationsbank of Texas 0000000000 10/16/96 Blanket
of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Nu-kote Imperial, New York Secretary Nationsbank of Texas 35143 2/19/97 Blanket
Ltd. of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
Pennsylvania Nationsbank of Texas 00000000 2/27/97 Blanket
Secretary of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
California Secretary Nationsbank of Texas 0000000000 2/18/97 Blanket
of State NA as collateral agent
---------------------------------------------------------------------------------------------------------------------
76
Schedule 7.2 to Credit and Security
Agreement
PERMITTED INDEBTEDNESS AND GUARANTIES
Indebtedness
Principal Maturity Monthly
Creditor Amount Date Payment Collateral
-------- ------ ---- ------- ----------
Xxxxxx X. Xxxxx $532,000 N/A N/A Escrowed Funds
Xxxx Xxxxxxxx $228,000 N/A N/A Escrowed Funds
*Above does not include Trade Vendors or other account creditors listed on
bankruptcy schedules.
Guaranties
None other than those listed as Permitted Liens.
