EXHIBIT 10.19
COMMERCIAL LOAN AGREEMENT
This Commercial Loan Agreement ("Agreement") is made as of
February 27, 1998 by and among THE SUMITOMO BANK OF CALIFORNIA, a California
banking corporation ("Sumitomo"), MANUFACTURERS BANK, a California banking
corporation ("Manufacturers"), AB PLASTICS CORPORATION, a California corporation
("AB Plastics"), M.O.S. PLASTICS, INC., a California corporation ("MOS
Plastics"), COMPASS PLASTICS & TECHNOLOGIES, INC., a Delaware corporation
("Guarantor"), and Sumitomo in its capacity as agent for Sumitomo and
Manufacturers (the "Agent"). Manufacturers and Sumitomo are sometimes
collectively referred to herein as the "Banks." AB Plastics and MOS Plastics are
each sometimes referred to herein as a "Borrower" and collectively and severally
as "Borrowers."
RECITALS
A. AB Plastics and Sumitomo entered into that certain
Commercial Loan Agreement dated September 27, 1996 (the "Existing Agreement").
B. Borrowers, Guarantor, Banks and Agent are entering into
this Agreement in order to replace and supersede the Existing Agreement in its
entirety, and to set forth the terms and conditions of the new credit
arrangements between the Banks and the Borrowers.
NOW, THEREFORE, in consideration of the foregoing Recitals,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
1. CREDIT FACILITIES, AMOUNT AND TERMS.
Banks agree to make available to Borrowers the following line(s) of
credit and/or credit accommodations on the following terms, covenants and
conditions:
1.1 Revolving Line of Credit
(a) Revolving Line of Credit. During the Availability
Period, Banks will provide a line of credit (the "Revolving Line of
Credit") to Borrowers. The maximum amount of the Revolving Line of
Credit including the subline facility for letters of credit (the "Total
Revolver Commitment") is Six Million Dollars ($6,000,000). Of the Total
Revolver Commitment, Sumitomo's Commitment is Three Million Dollars
($3,000,000) and Manufacturer's Commitment is Three Million Dollars
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($3,000,000). Upon execution of this Agreement, the respective
Commitments of the Banks shall be as set forth above. Under no
circumstances shall any Bank be obligated to advance more than its
particular Commitment. Each advance will be credited to the Banks'
respective Commitments in proportion to their respective Pro Rata
Shares. As used in this Agreement, "Pro Rata Share" means, as to any
Bank at any time, the percentage equivalent (expressed as a decimal,
rounded to the ninth decimal place) at such time of such Bank's
Commitment divided by the Total Revolver Commitment of all Banks.
Sumitomo's Pro Rata Share is 0.50 and Manufacturers' Pro Rata Share is
0.50. Borrowers' obligations to repay the Revolving Line of Credit are
evidenced by two promissory notes (one in favor of Sumitomo and one in
favor of Manufacturers) substantially in the forms of Exhibits A-1 and
A-2 attached hereto (collectively, the "Revolving Line Notes"). Banks'
obligations to make advances under the Revolving Line of Credit are
subject to the additional borrowing base limitations set forth in
subparagraph (b) below, as well as the other applicable terms and
conditions of this Agreement.
(b) Borrowing Base Limitations on Revolving Line of
Credit. During the Availability Period, the Banks will, on a revolving
basis, make advances to Borrowers, which may not at any time exceed, in
the aggregate outstanding, the lesser of the Total Revolver Commitment
or the Borrowing Base. As a further limitation on the Banks'
obligations, in no event shall the Banks be obligated (i) to make
advances to AB Plastics under the Revolving Line of Credit which would
cause the amounts outstanding to AB Plastics thereunder to exceed the
AB Plastics Borrowing Base, or (ii) to make advances to MOS Plastics
under the Revolving Line of Credit which would cause the amounts
outstanding to MOS Plastics thereunder to exceed the MOS Plastics
Borrowing Base.
(i) "Borrowing Base" means, collectively,
the AB Plastics Borrowing Base and the MOS Plastics Borrowing
Base.
(ii) "AB Plastics Borrowing Base" shall mean
the sum of eighty-five percent (85%) of the net face amount of
Eligible Accounts generated and owned by AB Plastics, after
deduction of such reserves as Banks deem necessary and proper
in their reasonable judgment, plus fifty percent (50%) of
Eligible Inventory owned by AB Plastics, after deduction of
such reserves as Agent deems necessary and proper in its
reasonable judgment (provided, however, that the amount which
may be borrowed against such Eligible Inventory may never
exceed the amount which may be borrowed against such Eligible
Accounts, based on the foregoing formulas).
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(iii) "MOS Plastics Borrowing Base" shall
mean the sum of eighty-five percent (85%) of the net face
amount of Eligible Accounts owned and generated by MOS
Plastics, after deduction of such reserves as Banks deem
necessary and proper in their reasonable judgment, plus, fifty
percent (50%) of the Eligible Inventory owned by MOS Plastics,
after deduction of such reserves as Agent deems necessary and
proper in its reasonable judgment (provided, however, that the
amount which may be borrowed against such Eligible Inventory
may never exceed the amount which may be borrowed against such
Eligible Accounts, based on the foregoing formulas),
(iv) "Accounts Receivable" shall mean open
accounts arising in the ordinary course of Borrowers' business
from services performed or goods sold by Borrowers.
(v) "Account Debtor" shall mean the obligor
on any Accounts Receivable.
(vi) "Eligible Accounts" shall mean Accounts
Receivable, excluding the following (which exclusions shall be
calculated without duplication, to the greatest extent
possible):
(A) Accounts Receivable which remain
uncollected more than 90 days from the date they are
first invoiced.
(B) Accounts Receivable due from an
Account Debtor which suspends business, suffers a
business failure or the termination of its existence,
or makes an assignment for the benefit of creditors,
or as to which a dissolution, insolvency or
bankruptcy proceeding has been commenced, or as to
whose property a trustee, receiver or conservator has
been appointed.
(C) Accounts Receivable due from an
Account Debtor affiliated with Borrowers, such as a
stockholder, owner, parent, subsidiary, officer,
director, agent or employee of Borrowers, or due from
Account Debtors having common officers or directors
with Borrowers or Guarantor.
(D) Accounts Receivable with respect
to which payment is or may be contingent or
conditional.
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(E) Accounts Receivable due from an
Account Debtor who is not a resident or citizen of,
located in, or subject to service of process in the
United States of America.
(F) Accounts Receivable against
which is asserted a defense, counterclaim, discount
or setoff.
(G) Accounts Receivable due from an
Account Debtor which is any national, federal, state,
county or municipal government, including, without
limitation, any instrumentality, division, agency,
body or department thereof.
(H) Accounts Receivable commonly
known as "xxxx and hold" or subject to any repurchase
or return agreement, or which relate to goods on
consignment or on approval or any similar
arrangement.
(I) Accounts Receivable relating to
an Account Debtor with respect to which twenty-five
percent (25%) or more of the total Accounts
Receivable owing by such Account Debtor are over 90
days delinquent.
(J) Accounts Receivable due from an
Account Debtor of either Borrower which, in the
aggregate, exceed twenty-five percent (25%) of the
aggregate amount of all Eligible Accounts for such
Borrower (with the exception of Accounts Receivable
from Sony Corporation, which may be Eligible Accounts
to the extent that they do not exceed sixty percent
(60%), in the aggregate, of all Eligible Accounts for
such Borrower; and with the exception of Accounts
Receivable from Hewlett-Packard, which may be
Eligible Accounts to the extent that they do not
exceed thirty percent (30%), in the aggregate, of all
Eligible Accounts for such Borrower).
(K) Accounts Receivable as to which
Borrowers are or may become liable to an Account
Debtor for services rendered or sales made or for any
other reason, except to the extent that such Accounts
Receivable exceed the amount of such liability.
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(L) Accounts Receivable which are
not owned by Borrowers or are not free of all liens,
encumbrances, charges, rights or interests of any
kind, except in favor of Agent or as otherwise
permitted under this Agreement.
(M) Accounts Receivable which are
evidenced by chattel paper or an instrument of any
kind.
(N) Accounts Receivable which are
not evidenced by an invoice or other documentation in
form acceptable to Agent.
(O) Accounts Receivables arising as
a result of progress xxxxxxxx.
(P) "COD" Accounts Receivable and
accounts paid by post-dated check.
(Q) Accounts Receivable relating to
inventory not yet shipped or services not yet
rendered.
(R) Accounts Receivable which are
otherwise unacceptable to Agent in its reasonable
judgment.
(vii) "Eligible Inventory" shall mean those
items of Inventory located in the United States of America
consisting of raw materials, and finished goods which are in
good condition and currently saleable in the ordinary course
of Borrowers' business and are not otherwise unacceptable to
Agent in its reasonable judgment. Such Inventory shall not be
subject to any other lien or claim (except as otherwise
permitted under this Agreement), shall not have been consigned
or sold to any person (nor have been purchased by Borrowers)
as part of any bulk sale unless there was compliance with all
applicable bulk sale or transfer laws. Such Inventory shall be
located at such locations as are acceptable to Agent and
shall, at all times, be subject to and covered by, Agent's
perfected security interest.
(viii) "Inventory" shall mean all inventory
(as that term is defined in the Commercial Code of the State
of California) wherever located, which is or may at any time
be held for sale or lease, furnished under any contract of
service or held as raw materials, work in process, supplies or
materials used or consumed in Borrowers' business or which are
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or might be used in connection with the manufacturing,
shipping, advertising or selling or finishing of such goods,
merchandise and other personal property and all documents of
title or documents representing the same, and all such
property, the sale or other disposition of which has given
rise to Accounts Receivable and which has been returned to or
repossessed or stopped in transit by Borrowers.
(c) Collection of Accounts Receivable. Borrowers
shall have the privilege, subject to revocation at the sole discretion
of Agent during the continuance of an Event of Default, to collect, at
Borrowers' expense, the payments due on Accounts Receivable upon the
express condition that all such collections shall be received by
Borrowers in trust for Banks. Upon demand by Agent, whether before or
after an Event of Default, Borrowers shall promptly deliver to Agent,
at the location specified in this Agreement, in kind, all remittances
received by Borrowers on Accounts Receivable, or if sales are made for
cash, the identical checks, cash, or other form of payment. The receipt
of any check or other item of payment by Agent shall not be considered
a payment in reduction of the sums owing to Banks until such check or
other item of payment is honored and finally paid. At any time during
the continuance of an Event of Default, Agent in its sole discretion
may, but is not obligated to, notify any Account Debtor to make payment
directly to Agent, and exercise any and all of Borrowers' rights
regarding the Account Receivable or the Account Debtor.
(d) Revolving Nature of Line of Credit. During the
Availability Period, Borrowers may repay principal amounts and reborrow
them under the Revolving Line of Credit.
(e) Subline Facility for Letters of Credit. The
Revolving Line of Credit includes a subline facility for letters of
credit. The subline facility for letters of credit is not to exceed
Five Hundred Thousand Dollars ($500,000).
(f) Maximum Revolving Line Balance. Borrowers agree
not to permit the outstanding principal balance of the Revolving Line
of Credit plus the amounts of any outstanding letters of credit under
the subline facility, including amounts drawn on letters of credit and
not yet reimbursed (such sum being referred to herein as the "Revolving
Line Balance"), to at any time exceed the lesser of the Total Revolver
Commitment or the Borrowing Base. Furthermore, Borrowers agree not to
permit the outstanding principal balance of the amounts advanced under
the Revolving Credit Line (i) to AB Plastics to at any time exceed the
AB Plastics Borrowing Base, and (ii) to MOS Plastics to at any time
exceed the MOS Plastics Borrowing Base. Borrowers agree to immediately
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pay down all amounts outstanding under the Revolving Line of Credit
which exceed any of the limitations specified herein, or in any other
applicable provisions of this Agreement.
(g) Minimum Advance. Each advance must be for at
least fifty thousand dollars ($50,000.00), or for the amount of the
remaining available Revolving Line of Credit, if less.
(h) Availability Period. The period during which
Borrowers may draw on the Revolving Line of Credit ("Availability
Period") is between the date of this Agreement and January 2, 2003 (the
"Maturity Date"), unless there exists an Event of Default, or event
which with the giving of notice or passage of time would constitute an
Event of Default, in which event Banks need not make any advances.
1.2 Repayment Terms of Revolving Line of Credit.
(a) Except as otherwise provided in Section 1.6(c)
hereof, Borrowers will pay in arrears on the first day of each calendar
month all interest accrued on amounts outstanding under the Revolving
Line of Credit (including, without limitation, all unreimbursed amounts
drawn under letters of credit).
(b) Except as otherwise provided in Section 1.3(f)
hereof with respect to letters of credit having terms extending beyond
the Maturity Date, Borrowers will repay in full all principal, interest
and other charges outstanding under the Revolving Line of Credit no
later than the Maturity Date.
(c) Any amount bearing interest at an Optional
Interest Rate may be repaid at the end of the applicable interest
period.
(d) Subject to provisions contained elsewhere herein,
Borrowers may prepay the Revolving Line of Credit in full or in part at
any time. The prepayment will be applied first to interest and charges
and then to the principal outstanding under the Revolving Line of
Credit.
(e) All payments of principal, interest, fees or
other amounts to be made by Borrowers under this Agreement shall be
made to Agent at its office located at 000 Xxxx Xxxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx, or at such other place as Agent may designate by
written notice to Borrowers and Banks (herein, the "Agent's Office").
1.3 Letter of Credit Subline Facility. The Revolving Line of
Credit may be used for financing: (i) commercial letters of credit (which will
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require drafts payable at sight), or (ii) standby letters of credit, in either
case with maturities not to extend beyond the earlier of (A) 365 days from
issuance, or (b) the Maturity Date. Each letter of credit will be issued by
Sumitomo pursuant to a completed request for letter of credit in the form of
Exhibit D hereto (each a "Request for Letter of Credit") delivered by Borrowers
to the Agent.
(a) Each Request for Letter of Credit shall be
submitted to the Agent not later than 11:00 a.m., Los Angeles time, at
least two (2) Banking Days prior to the date upon which the requested
letter of credit is to be issued. Upon issuance of a letter of credit,
the Agent promptly shall notify the Banks of the amount and terms
thereof.
(b) Upon the issuance of a letter of credit, each
Bank shall be deemed to have purchased a participation therein from
Sumitomo in an amount equal to that Bank's Pro Rata Share of the face
amount of the letter of credit. Without limiting the scope and nature
of each Bank's participation in any letter of credit, to the extent
that Sumitomo has not been reimbursed by Borrowers for any payment
required to be made by Sumitomo under any letter of credit, each Bank
shall, according to its Pro Rata Share, reimburse Sumitomo immediately
upon demand for the amount of such payment. The obligation of each Bank
to so reimburse Sumitomo shall be absolute and unconditional and shall
not be affected by the occurrence of any Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of Borrowers to reimburse Sumitomo for
the amount of any payment made by Sumitomo under any letter of credit
together with interest in accordance with this Agreement.
(c) The amount of outstanding letters of credit,
including amounts drawn on letters of credit and not yet reimbursed,
may not exceed at any one time Five Hundred Thousand Dollars ($500,000)
in the aggregate.
(d) Standby letters of credit issued in favor of
governmental agencies in lieu of worker's compensation insurance
premiums shall not exceed Two Hundred Thousand Dollars ($200,000) in
the aggregate outstanding at any one time.
(e) Any sum drawn under a letter of credit shall be
added to the principal amount outstanding under the Revolving Line of
Credit. The amount will bear interest and be due and payable by
Borrowers in the same manner as other advances under the Revolving Line
of Credit, except as provided in Section 1.3(f), below.
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(f) In the event any subline facility letters of
credit are outstanding on the Maturity Date, or if an Event of Default
occurs, Borrowers shall immediately deposit with Agent, as cash
collateral for the reimbursement obligations of Borrowers with respect
to such letters of credit and the Borrowers' repayment obligations
under the Notes (and Borrowers hereby grant to Agent, for the ratable
benefit of Banks, a security interest in such cash collateral to secure
such obligations), an amount equal to the entire face amount of all
outstanding letters of credit, to be applied to repay draws under
letters of credit as and when made.
(g) The issuance of any letter of credit or any
amendment to a letter of credit is subject to Agent's written approval
and must be in form and content reasonably satisfactory to Agent.
(h) Borrowers will sign Sumitomo's form Application
and Security Agreement for Commercial Letter of Credit or Application
and Agreement for Standby Letter of Credit, as applicable.
(i) Borrowers agree that Agent may automatically
charge their checking account for applicable fees, discounts, and other
customary charges relating to any letters of credit.
(j) Borrowers will pay to Agent, for the ratable
benefit of Banks, a non-refundable fee equal to the Applicable Spread
(for Offshore Rate advances) per annum times the undrawn face amount of
each standby letter of credit issued hereunder, payable quarterly in
arrears beginning on the first day of the month which is three (3)
months following the date of issuance of the Letter of Credit.
Borrowers will pay to Agent, for the ratable benefit of Banks,
Sumitomo's standard fees in effect from time to time, as determined by
Sumitomo, for commercial letters of credit issued under this Agreement.
(k) Borrowers will pay to Agent, for the benefit of
Sumitomo, any issuance and/or other fees that Agent notifies Borrowers
will be charged for issuing and processing letters of credit for
Borrowers (other than for the fees specified in (j) above, which shall
be for the ratable benefit of the Banks).
1.4 Term Loan Facility. The Banks will, on the Closing Date
and the satisfaction of all conditions to disbursement specified herein, make a
term loan (the "Term Loan") to Borrowers in the original principal amount of
$14,000,000; provided, however, that each Bank shall not be obligated to advance
more than its Pro-Rata Share ($7,000,000) of such amount. Borrowers' obligation
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to repay the Term Loan is evidenced by two Promissory Notes (one in favor of
Sumitomo and one in favor of Manufacturers) substantially in the forms of
Exhibits A-3 and A-4 attached hereto (collectively, the "Term Loan Notes"; and,
together with the Revolving Line Notes, the "Notes"). Any portion of the Term
Loan that is repaid may not be reborrowed.
1.5 Repayment Terms of Term Loan.
(a) Except as otherwise provided in Section 1.6(c)
hereof, Borrowers will pay in arrears on the first day of each calendar
month all interest accrued on amounts outstanding under the Term Loan.
(b) Borrowers shall pay to the Agent for application
to the outstanding principal amount of the Term Loan the following
amounts on the following dates:
(i) $600,000 on each of July 1, 1998 and
October 1, 1998;
(ii) $750,000 on each of January 1, 1999,
April 1, 1999, July 1, 1999 and October 1, 1999;
(iii) $800,000 per calendar quarter
commencing January 1, 2000 and continuing on the first day of
each calendar quarter thereafter (i.e., on the first day of
each April, July, October, and January) until the Maturity
Date, at which time any remaining outstanding principal of the
Term Loan (as well as all other indebtedness and obligations
owing under this Agreement and the Notes referenced herein)
shall be due and payable in full.
(c) In addition to the scheduled principal
amortization payments specified in Section 1.5 (b) above, Borrowers
shall promptly pay to Agent, for application to the outstanding
principal balance of the Term Loan, the following amounts:
(i) an amount equal to 100% of the net
proceeds generated from the sale of Borrowers' assets (except
to the extent such proceeds are used within 60 days to replace
the asset sold), other than the sale of inventory in the
ordinary course of business, in excess of $100,000 as to any
individual asset sale or $250,000 in aggregate as to all such
asset sales;
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(ii) an amount equal to 100% of the net
proceeds of all loans and borrowings received by Borrowers
subsequent to the date hereof, other than purchase money
financings of capital assets and other than refinancings of
then existing indebtedness;
(iii) an amount equal to 100% of all net
insurance proceeds received by Borrowers which are not applied
toward the repair, replacement or remediation of the insured
casualty within 60 days of receipt by Borrowers;
(iv) an amount equal to 75% (or 50% from and
after the date the Term Loan is reduced to $7,000,000 or less)
of the net cash proceeds (expressly excluding any cashless
exercise of any options or warrants) received by Borrowers
from any offering of stock or other securities, or other
issuance of equity; and
(v) an amount equal to 60% of the Excess
Cash Flow (as defined below) until such time as (1) the Term
Loan has been reduced to $7,000,000, and (2) the ratio of
Senior Funded Debt (as defined below) to EBITDA (as defined
below) has been maintained at or below 1.5 to 1 for the third
and fourth fiscal quarters of Borrowers. Excess Cash Flow
shall be calculated by Agent annually for the period
coinciding with Borrowers' fiscal year for each year beginning
with the fiscal year ending about October 26, 1998, based upon
audited fiscal year end financial statements. Such prepayment
must be paid to Agent by Borrowers by no later than one
hundred twenty (120) days following Borrowers' fiscal year
end. For purposes of this provision, the ratio of Senior
Funded Debt to EBITDA shall be measured quarterly, as of the
last day of each fiscal quarter, with Senior Funded Debt to be
determined as the amount thereof outstanding as of the day of
measurement (i.e., the last day of each fiscal quarter); and
EBITDA will be computed for the four quarters concluding with
each measuring date.
The payments specified above in this Section 1.5(c) shall be
applied to the principal payments owing under Section 1.5(b) in the inverse
order of maturity.
As used herein the following definitions have the following
meanings:
"Senior Funded Debt" means (without duplication) the
outstanding principal amount of, and all due and payable interest on, all
Indebtedness of Guarantor, Borrowers and their subsidiaries on a consolidated
basis (excluding debt subordinated in a manner acceptable to the Banks), plus
the value of payments that the Guarantor, Borrowers and their subsidiaries are
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obligated to make in the future under any covenant not to compete, "earn up" or
"earn out" agreements and other deferred payment obligations, whether accrued in
accordance with GAAP or based upon the achievement of, or the occurrence of, any
criteria specified in any agreement, determined on a consolidated basis in
accordance with GAAP.
"Indebtedness" of Guarantor, Borrowers and their subsidiaries
means, on a consolidated basis, without duplication, (a) all indebtedness of all
such entities for borrowed money, including overdrafts; (b) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course of
business on terms normal to the industry); (c) all non-contingent reimbursement
or payment obligations with respect to Surety Instruments; (d) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by any such entities
(even though the rights and remedies of the seller or bank under such agreement
in the event of default are limited to repossession or sale of such property);
(f) all obligations with respect to capital leases; (g) all indebtedness
referred to in clauses (a) through (f) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any lien upon or in property (including accounts and contracts
rights) owned by Guarantor, Borrowers or their subsidiaries, even though such
entities have not assumed or become liable for the payment of such Indebtedness;
and (h) all Guaranty Obligations in respect of indebtedness or obligations of
others of the kind referred to in clauses (a) through (g) above.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
"Guaranty Obligation" means, with respect to any Indebtedness,
lease, dividend, letter of credit, or other obligation, to assume or hold
harmless the holder of any such obligation against loss in respect thereof.
"EBITDA" means (without duplication), with respect to
Guarantor, Borrowers and their subsidiaries on a consolidated basis, and with
respect to any period, net income (or net loss) for such period, plus income tax
expense for such period, plus gross interest expense for such period, plus
depreciation, amortization, deferred financing costs and other non-cash expense
for such period, plus losses on sales of fixed assets during such period, minus
gains on sales of fixed assets during such period, minus any extraordinary
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income or gain and non-operating income or gain for such period plus any
non-cash extraordinary losses for such period, all determined in accordance with
GAAP. For purposes of this definition, non-cash extraordinary losses means
non-cash extraordinary losses attributable to the write-down in the book value
of any fixed asset and all other non-cash extraordinary losses that the Banks
approve in writing for purposes of adding back to net income.
"Excess Cash Flow" means, for the Borrowers on a consolidated
basis determined in accordance with GAAP and for any fiscal year of the
Borrowers, the sum, without duplication, of net income for such period, plus
current and deferred income tax expense accrued during such period, plus gross
interest expense accrued during such period, plus depreciation and amortization
expense and other non-cash charges accrued during such period, minus non-cash
extraordinary income or gains for such period, plus non-cash extraordinary
expenses or losses for such period, minus gains on sales of fixed assets during
such period, plus losses on sales of fixed assets during such period, plus net
proceeds from the sales of fixed assets during such period (net of the cost of
replacement assets acquired during such period) other than sale of assets that
are subject to the mandatory prepayment requirements of Section 1.5(c) hereof,
minus income taxes paid in cash during such period, minus interest paid in cash
during such period, minus capital expenditures for such period (other than
capital leases and net of the net proceeds of purchase money financings), minus
scheduled principal payments during such period on Indebtedness described in
clauses (a), (b), (c), (d), (e), (f) and (g) of the definition of Indebtedness,
minus cash payments during such period in respect of covenants not to compete,
"earn up" and "earn out" agreements, and minus any voluntary prepayments under
the Term Loan.
1.6 Interest Rates.
(a) Interest Rate Absent Optional Interest Rate
Election. Unless Borrowers elect an Optional Interest Rate as described
below, the "Interest Rate" for sums outstanding under both the
Revolving Line of Credit and the Term Loan (collectively, the "Loans")
shall be Sumitomo's Prime Rate in effect from time to time, plus the
Applicable Spread (defined below).
(b) Definition of Prime Rate. The "Prime Rate" equals
the rate of interest set from time to time by Sumitomo at its head
office in San Francisco, California as its Prime Rate. The Prime Rate
is determined by Sumitomo as a means of pricing credit extensions to
some customers and is neither tied to any external rate of interest or
index nor is it necessarily the lowest rate of interest charged by
Sumitomo at any given time for any particular class of customers or
credit extensions. Any changes in the interest rate resulting from a
change in the Prime Rate shall take effect without notice on the date
specified at the time the Prime Rate is set.
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(c) Optional Interest Rate. Instead of the interest
rate based on Sumitomo's Prime Rate, Borrowers may elect to have all or
portions of the Loans bear interest at the Offshore Rate plus the
Applicable Spread (as defined below) (the "Optional Interest Rate"),
during an interest period agreed to by Agent and Borrowers. Each
interest rate is a rate per annum. Interest will be paid on the last
day of each interest period and, if the interest period is longer than
30 days, then on the first day of each month during the interest
period. At the end of any interest period, the interest rate will
revert to the rate based on the Prime Rate, unless Borrowers have
designated another Optional Interest Rate for that portion. In offering
Optional Interest Rates, neither Bank shall be obligated to match fund.
Designation of an Offshore Rate portion is subject to the
following requirements:
(i) The interest period during which the
Offshore Rate will be in effect will be 30 days, 60 days, 90
days or 180 days as selected by Borrowers. The last day of the
interest period will be determined by Agent using the
practices of the offshore dollar inter-bank market.
(ii) Each Offshore Rate portion will be for
an amount not less than one million dollars ($1,000,000) and
increments of two hundred fifty thousand dollars ($250,000)
above the minimum.
(iii) At any given time, Borrowers may have
no more than three portions of the principal balance of the
Loans bearing interest based on the Offshore Rate.
(iv) The "Offshore Rate" means the interest
rate determined by the following formula, rounded upward to
the nearest 1/100th of one percent. (All amounts in the
calculation will be determined by Agent as of the first day of
the interest period.)
Offshore Rate = Eurodollar Rate
(1.00 - Reserve Percentage)
Where,
(A) "Eurodollar Rate" means the
interest rate (rounded upward to the nearest 1/16th
of one percent) at which Agent's Nassau Branch,
Nassau, Bahamas, would offer U.S. dollar deposits for
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the applicable interest period to other major banks
in the offshore dollar inter-bank market.
(B) "Reserve Percentage" means the
total of the maximum reserve percentages for
determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in the Federal Reserve Board
Regulation D, rounded upward to the nearest 1/100th
of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to,
marginal, emergency, supplemental, special, and other
reserve percentages.
(v) Borrowers may not elect an Offshore Rate
with respect to any portion of the principal balance of the
Loans which is scheduled to be repaid before the last day of
the applicable interest period.
(vi) No portion of the principal balance of
the Loans already bearing interest at the Offshore Rate may be
converted to a different rate during its interest period.
(vii) Each prepayment of an Offshore Rate
portion, whether voluntary, by reason of acceleration or
otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid, and a prepayment fee equal to
the positive amount (if any) by which:
(A) the additional interest which
would have been payable on the amount prepaid had it
not been paid until the last day of the interest
period, exceeds
(B) the interest which would have
been recoverable by Banks by placing the amount
prepaid on deposit in the offshore dollar market for
a period starting on the date on which it was prepaid
and ending on the last day of the interest period for
such portion.
(viii) Agent will have no obligation to
accept an election of an Offshore Rate portion if any of the
following described events has occurred and is continuing:
(A) Dollar deposits in the principal
amount, and for periods equal to the interest period,
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of an Offshore Rate portion are not available in the
offshore Dollar interbank market; or
(B) the Offshore Rate does not
accurately reflect the cost of an Offshore Rate
portion.
(ix) As used herein, "Applicable Spread"
means the additional component of interest, expressed as a
percentage per annum, to be added to the Prime Rate or the
Offshore Rate, as applicable, in determining the applicable
interest rate for amounts outstanding under the Loans. The
Applicable Spread shall be based on the ratio of the Senior
Funded Debt (on a consolidated basis) to EBITDA (on a
consolidated basis) in accordance with the following pricing
grid:
-------------------------------------------------------------------------------------------
Ratio of Senior Funded Applicable Spread for Applicable Spread for
Debt to EBITDA Offshore Rate Borrowings Prime Rate Borrowings
-------------------------------------------------------------------------------------------
Greater than or equal to 3 to 1 3.00% 0.75%
-------------------------------------------------------------------------------------------
Greater than or equal to 2.75% 0.50%
2.50 to 1 but less than 3 to 1
-------------------------------------------------------------------------------------------
Greater than or equal to 2.50% 0.25%
2 to 1 but less than 2.50 to 1
-------------------------------------------------------------------------------------------
Less than 2 to 1 2.25% 0.00%
-------------------------------------------------------------------------------------------
The ratio of Senior Funded Debt to EBITDA (as those terms are
defined in Section 1.5(c) above) shall be determined by Agent
as of the last day of each fiscal quarter based on financial
information supplied by the Borrowers and Guarantor hereunder
(with such adjustments thereto as Agent shall reasonably
determine). EBITDA will be computed for the four fiscal
quarters ending with the measuring date. On or prior to April
1, 1998, Agent shall calculate the ratio of Senior Funded Debt
to EBITDA as of the last day of the fiscal quarter ending
about January 26, 1998. Subject to the minimum Applicable
Spreads which shall be in effect through March 31, 1999 as
specified below, the Applicable Spread shall change (if at
all) in accordance with the foregoing pricing grid effective
as of April 1, 1998. Thereafter, the Applicable Spread shall
change (if at all) on the first day of each calendar quarter
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based on Agent's calculation of the ratio of Senior Funded
Debt to EBITDA in existence as of the last day of the prior
fiscal quarter. (For example, and without limitation, if Agent
shall calculate that the ratio of Senior Funded Debt to EBITDA
as of the last day of the fiscal quarter ending about January
26, 1999 was 2.6 to 1, the Applicable Spread for Offshore Rate
borrowings for the calendar quarter beginning April 1, 1999
would be 2.75%; which Applicable Spread would change as of
July 1, 1999 to 2.5%, if the ratio of Senior Funded Debt to
EBITDA as of the last day of the fiscal quarter ending about
April 26, 1999 were determined to be 2.2 to 1.) The ratios
shall be computed based on receipt of financial statements as
specified in Section 6.2. Notwithstanding the foregoing or
anything else contained herein which may be construed to the
contrary, in no event shall the Applicable Spread with respect
to Offshore Rate borrowings be less than 2.75%, or the
Applicable Spread for Prime Rate borrowings be less than
0.50%, through and including March 31, 1999; provided,
however, that the Applicable Spread for Prime Rate borrowings
and Offshore Rate borrowings may be greater than such
indicated spreads during such time period in accordance with
the foregoing pricing grid and terms indicated above.
2. FEES, EXPENSES AND DEPOSITS.
2.1 Fees.
(a) Facility Fee. Borrowers agree to pay a Two
Hundred Thousand Dollar ($200,000) facility fee to Agent, for the
ratable benefit of Banks, upon execution of this Agreement.
(b) Unused Commitment Fee. Borrowers agree to pay to
Agent, for the ratable benefit of Banks, a fee on any difference
between the Total Revolver Commitment and the amount of credit
Borrowers actually use, determined by the weighted daily average
Revolving Line Balance maintained during the specified period. This fee
will be calculated at the "Applicable UCF Spread" per year, and is due
quarterly in arrears within ten (10) days of the last day of each
calendar quarter. For purposes of calculating the foregoing fee, the
entire face amount of all issued and outstanding letters of credit
shall be counted as credit being "actually used." The Applicable UCF
Spread will be based on the ratio of Senior Funded Debt to EBITDA
pursuant to the following pricing grid (which ratio shall be computed
as described in 1.6(c)(ix) above):
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------------------------------------------------------------
Ratio of Senior Funded
Debt/EBITDA Applicable UCF Spread
------------------------------------------------------------
Greater than or equal to 3 to 1 0.75%
------------------------------------------------------------
Greater than or equal to 2.50 to 1 0.50%
but less than 3 to 1
------------------------------------------------------------
Greater than or equal to 2 to 1 0.375%
but less than 2.50 to 1
------------------------------------------------------------
Less than 2 to 1 0.25%
------------------------------------------------------------
Notwithstanding the foregoing, in no event shall the
Applicable UCF Spread from closing through March 31, 1999 be less than 0.50%;
provided, however, that the Applicable UCF Spread may be greater during such
period in accordance with the foregoing provisions.
(c) Agency Fee. Borrowers agree to pay to Agent (for
its own benefit and not for the benefit of the Banks) an agency fee in
the amount specified in a side letter agreement between the parties.
(d) Early Termination Fees. In the event that the
Borrowers refinance with another lender or lenders all or substantially
all of the Loans within two (2) years following the closing of the
Loans, Borrower shall pay to Agent, for the ratable benefit of the
Banks, a fee equal to (i) 0.75%, for the first year following the
closing of the Loans, and (ii) 0.50%, for the second year following the
closing of the Loans, of all principal amounts of the Term Loan which
are so refinanced.
2.2 Expenses.
(a) Borrowers agree to repay Agent and Banks,
immediately upon demand by Agent, for Agent's and Banks' reasonable
expenses incurred in connection with this Agreement, which may include,
without limitation, filing, recording and search fees, documentation
fees, appraisal fees and audit fees.
(b) Borrowers agree to reimburse Agent and Banks,
immediately upon demand by Agent, for any reasonable expenses incurred
by Agent and Banks in the negotiation and preparation of this Agreement
and any agreement or instrument required by this Agreement. Expenses
include, but are not limited to, reasonable attorneys' fees and
disbursements, including the reasonable fees and disbursements of
outside counsel and any allocated costs of Agent's and Banks' in-house
counsel.
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3. DISBURSEMENTS, PAYMENTS AND COSTS.
3.1 Requests for Credit. As used herein, any extension of
credit (whether under the Revolving Line of Credit or the Term Loan) which bears
interest based upon the Prime Rate is referred to as a "Prime Rate Credit" and
any extension of credit which bears interest based upon the Offshore Rate is
referred to as an "Offshore Rate Credit". Borrowers shall make each request for
an extension of credit under the Revolving Line of Credit (other than requests
for issuance of letters of credit under the subline facility) by delivering to
Agent an irrevocable written request in the form of Exhibit B, appropriately
completed (a "Request for Credit"), which specifies, among other things:
(i) The principal amount of the requested
extension of credit;
(ii) Whether the requested extension of
credit will initially be a Prime Rate Credit or an Offshore
Rate Credit;
(iii) If the requested extension of credit
is to initially be an Offshore Rate Credit, the interest
period selected by Borrowers for such extension of credit in
accordance with Section 1.6(d)(i); and
(iv) The date of the requested extension of
credit, which shall be a Banking Day.
Borrowers shall deliver to Agent, at the Agent's Office, a properly completed
Request for Credit (i) at least three (3) Banking Days before the date of the
requested extension of credit in case of an Offshore Rate Credit, and (ii) not
later than 10:00 a.m., Los Angeles time, on the date of the requested extension
of credit in the case of a Prime Rate Credit. The Agent may, in its sole and
absolute discretion, permit any request for extension of credit to be made by
telephone, in which case Borrowers shall confirm the same by mailing or faxing a
written Request for Credit to the Agent within 24 hours following the telephonic
request. If Borrowers fail to deliver to the Agent a written Request for Credit,
Borrowers hereby waive the right to dispute the amount, interest rate or term of
any extension of credit made pursuant to Borrowers' telephonic request. Promptly
following receipt of a Request for Credit, the Agent shall notify each Bank by
telephone, telecopier or Telex of the date and amount of the requested credit,
the applicable interest period (in the case of an Offshore Rate Credit), and
that Bank's Pro Rata Share of the requested credit. Not later than 1:00 p.m.,
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Los Angeles time, on the date specified for any extension of credit, each Bank
shall make its Pro Rata Share of the requested credit in immediately available
funds available to the Agent at the Agent's Office, and Agent shall make such
funds available to Borrowers (subject to the terms and conditions hereof).
3.2 Conversion of Interest Rate on Extensions of Credit.
Borrowers may convert outstanding Prime Rate Credits into Offshore Rate Credits,
or existing Offshore Rate Credits into other Offshore Rate Credits, in
accordance with this Section 3.2. Borrowers shall request any such conversion by
delivering to Agent an irrevocable written request in the form of Exhibit C,
appropriately completed (a "Request for Conversion"). Each Request for
Conversion shall specify, among other things:
(i) The total dollar amount of Prime Rate
Credits which are to be converted to an Offshore Rate Credit;
(ii) The total dollar amount and interest
period expiration dates of any existing Offshore Rate Credits
which are to be converted to other Offshore Rate Credits;
(iii) The interest period selected by
Borrowers for any newly converted Offshore Rate Credits in
accordance with Section 1.6(d)(i); and
(iv) The date of the requested conversion,
which shall be a Banking Day.
Borrowers shall deliver to Agent, at the Agent's office, a properly completed
Request for Conversion not later than 10:00 a.m., Los Angeles time, at least
three (3) Banking Days prior to the first day of the applicable interest period
as set forth in the Request for Conversion. The Agent may, in its sole and
absolute discretion, permit a Request for Conversion to be made by telephone, in
which case Borrowers shall confirm the same by mailing or faxing a written
Request for Conversion to the Agent within 24 hours following the telephonic
request. If Borrowers fail to make a written Request for Conversion, Borrowers
hereby waive the right to dispute the amount, interest rate or term of any such
Offshore Rate Credit. Unless Borrowers have timely delivered to Agent a Request
for Conversion in accordance with this Section 3.2 with respect to any existing
Offshore Rate Credit, such Offshore Rate Credit shall automatically become a
Prime Rate Credit on the day immediately following the last day of the
applicable interest period for such Offshore Rate Credit. With respect to any
conversion pursuant to this Section 3.2, at or about 1:00 p.m., Los Angeles
time, three (3) Banking Days before the first day of the requested interest
period, the Agent shall determine the applicable Offshore Rate (which
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determination shall be conclusive in the absence of manifest error) and promptly
shall give notice of the same to Borrowers and the Banks by telephone,
telecopier or Telex. Upon fulfillment of the conditions set forth in this
Section 3.2, the conversion shall become effective on the first day of the
requested interest period.
3.3 Agent's Right to Assume Funds Available for Extensions of
Credit. Unless the Agent shall have been notified by any Bank at least two hours
prior to the funding by the Agent of any extension of credit that such Bank does
not intend to make available to the Agent such Bank's Pro Rata Share of the
total amount of such extension of credit, the Agent may assume that such Bank
has made such amount available to the Agent on the date of the extension of
credit and the Agent may, in reliance upon such assumption, make available to
Borrowers a corresponding amount. If such corresponding amount is not in fact
made available to the Agent by such Bank, the Agent shall be entitled to recover
such corresponding amount on demand from such Bank, which demand shall be made
in a reasonably prompt manner. If such Bank does not pay such corresponding
amount immediately upon the Agent's demand therefor, the Agent promptly shall
notify Borrowers and Borrowers shall pay such corresponding amount to the Agent
within five (5) Banking Days after demand. In the event no Event of Default has
occurred and is continuing and a Bank does not fund its Pro Rata Share of an
extension of credit, the other Banks shall increase the amount of their funding
to cover the Request for Credit, provided that such increased funding does not
cause any Bank's Pro Rata Share of the Total Revolver Commitment to be exceeded.
The Agent also shall be entitled to recover from such Bank or Borrowers, as the
case may be (but without duplication, in the case of Borrowers, of the interest
otherwise payable hereunder), interest on such corresponding amount for each day
from the date such corresponding amount was made available by the Agent to
Borrowers to the date such corresponding amount is recovered by the Agent, at a
rate per annum equal to the Prime Rate plus the Applicable Spread or the
Offshore Rate plus the Applicable Spread, depending upon whether the extension
of credit is a Prime Rate Credit or an Offshore Rate Credit. Nothing herein
shall be deemed to relieve any Bank from its obligation to fulfill its Pro Rata
Share of the Total Revolver Commitment or to prejudice any rights which the
Agent and/or Borrowers may have against any Bank as a result of any default by
such Bank hereunder.
3.4 Payments by Borrowers. Each payment by Borrowers will be:
(a) made at Agent's Office (or such other location as
may be selected by Agent from time to time by written notice to
Borrowers),
(b) made for the account of Agent's Office or such
other office as may be selected by Agent from time to time,
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(c) made in immediately available funds, or such
other type of funds reasonably selected by Agent, and
(d) evidenced by records kept by Agent.
3.5 Telephone Authorization.
(a) Subject to Section 1.3, Section 3.1 or Section
3.2, as applicable, Agent may, in its sole and absolute discretion,
honor telephonic requests for extensions of credit, requests for
conversion and requests for issuance of subline facility letters of
credit made by any officer of Borrowers or by any person or persons so
authorized by any authorized officer of Borrowers, promptly followed up
with a completed Request for Letter of Credit as provided in Section
1.3, a completed Request for Credit as provided in Section 3.1 or a
completed Request for Conversion as provided in Section 3.2, as
applicable.
(b) Proceeds of extensions of credit will be
deposited in, and repayments will be withdrawn from, AB Plastics'
account number 058-00000000 with Agent, and MOS Plastics' account
number 058-15145970 with Agent (each an "Account" and collectively, the
"Accounts") or such other accounts with Agent as may be designated in
writing by Borrowers.
(c) Agent will provide written confirmation to
Borrowers and Banks of transactions made based on telephone
instructions. Borrowers agree to notify Agent promptly of any
discrepancy between the written confirmation and telephone
instructions. If there is a discrepancy and Agent has already acted on
the telephone instructions, the telephone instructions will prevail
over the written confirmation.
(d) Borrowers will indemnify and hold harmless Agent
and Banks (including their officers, employees, and agents) from all
liability, loss, and costs in connection with any act resulting from
telephone instructions it reasonably believes are made by an officer of
Borrowers or a person authorized by an officer of Borrowers. This
indemnity and agreement to hold harmless will survive this Agreement's
termination.
3.6 Direct Debit.
(a) Borrowers agree that interest and principal
payments and any fees will be deducted automatically on the due date
from the Accounts. For administrative purposes only, and without in any
way limiting the liability of each Borrower under this Agreement and
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the other Loan Documents (which liability shall at all times be joint
and several), Agent will maintain a record of the outstanding principal
sums allocable to AB Plastics uses and those allocable to MOS Plastics
uses. On the date any payment of principal, interest or fees is due,
Agent will debit from each Borrower's Account the portion of such
payment allocable to such Borrower (based upon such Borrower's
allocation of the outstanding principal, as reflected on the Agent's
books).
(b) Agent will debit the Accounts on the dates the
payments become due. If a due date does not fall on a Banking Day (as
hereafter defined), Agent will debit the Accounts on the first Banking
Day following the due date.
(c) Borrowers will maintain sufficient funds in the
Accounts on the dates Agent enters debits authorized by this Agreement.
If there are insufficient funds in the Accounts on the date Agent
enters any debit authorized by this Agreement, Borrowers shall
immediately pay such shortfall to Agent. In addition, to the extent
either Borrower's Account contains insufficient funds to pay its
allocation of any payment then due, Agent shall be entitled to deduct
the full amount of any debit authorized by this Agreement (or such
portion thereof which Agent deems necessary) from the Account of the
other Borrower.
3.7 Banking Days. Unless otherwise provided in this Agreement,
a "Banking Day" is a day other than a Saturday or a Sunday on which Agent is
open for business in California. For Offshore Rate Credits (if any), a Banking
Day is a day other than a Saturday or a Sunday on which Agent is open for
business in California and dealing in offshore dollars. All payments and
disbursements which would be due on a day which is not a Banking Day will be due
on the next Banking Day. All payments received on a day which is not a Banking
Day will be applied on the next Banking Day.
3.8 Taxes. Borrowers will not deduct any taxes from any
payments made to Agent or Banks hereunder. If any government authority imposes
any taxes or charges (other than taxes based on Agent's or Banks' income) on any
payments made by Borrowers, Borrowers will pay such taxes or charges. Upon
request by Agent, Borrowers will confirm that they have paid the taxes by giving
Agent official tax receipts (or notarized copies) within 30 days after the due
date.
3.9 Additional Costs. Borrowers will pay Agent, on demand by
Agent, for Banks' costs or losses relating to this Agreement arising from any
statute or regulation adopted or amended after the date hereof, or any request
or requirement of a regulatory agency which is hereafter adopted or amended and
applicable to Banks. The costs include the following:
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(a) any reserve or deposit requirements; and
(b) any capital requirements relating to any Bank's
assets and commitments for credit.
3.10 Interest Calculation. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the basis of a
360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used.
3.11 Interest on Late Payments. At Agent's sole option in each
instance, any amount not paid when due under this Agreement (including
interest), other than amounts which have become due solely by reason of
acceleration hereunder, shall bear interest from the due date at Sumitomo's
Prime Rate plus the Applicable Spread plus two percent (2.0%). This may result
in compounding of interest.
3.12 Default Rate. Upon the occurrence and during the
continuance of any Event of Default, at Agent's sole option, Borrowers shall pay
interest on the outstanding principal of the Loans at the rate of interest
otherwise provided under this Agreement plus two percent (2.0%) (the "Default
Rate"). This will not constitute a waiver of any Event of Default.
3.13 Overdrafts. Subject to the other terms and conditions of
this Agreement, Agent may, in its sole and absolute discretion, make advances
under the Revolving Line of Credit to prevent or cover an overdraft on any
account of Borrowers with Sumitomo. Each such advance will accrue interest from
the date of the advance or the date on which the account is overdrawn, whichever
occurs first, in accordance with this Agreement. Each Bank agrees to fund any
such advance (and Borrowers agree to repay any such advance) at the same times
and in the same manner as required for any other advances under the Revolving
Line of Credit pursuant to this Agreement.
3.14 Use of Advances. Borrowers shall use the proceeds of the
Term Loan solely (a) to repay certain existing debt of MOS Plastics (as approved
by Banks), including notes payable to Comerica Bank - California and a note
payable to Xx. Xxxxx Xxxxxx, and all indebtedness owing by AB Plastics to
Sumitomo in connection with the Existing Agreement (and Borrowers irrevocably
authorize and direct Agent and the Banks to cause sufficient proceeds of the
Term Loan to be so applied to the sums owing to Sumitomo under the Existing
Agreement concurrently with the disbursement of the Term Loan), and (b) to
upstream funds to Guarantor to finance a portion of the acquisition costs to be
incurred by Guarantor in connection with the purchase of 100% of the common
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stock of MOS Plastics by Guarantor. Borrowers agree to use the proceeds of the
Revolving Line of Credit for working capital and general corporate purposes;
provided that on the Closing Date some amounts may be borrowed under the
Revolving Line Credit to fund a portion of the acquisition costs of the common
stock of MOS by Guarantor and/or to pay off the existing indebtedness owing to
Sumitomo under the Existing Agreement; provided, however, that Borrowers agree
that they shall at all times during the first 30 days following the Closing Date
retain at least $1,500,000 in unused availability under the Revolving Line of
Credit (it being understood that for purposes of this provision "unused
availability" means the lesser of the amounts available under the Revolving Line
of Credit with reference to the Total Revolver Commitment or the Borrowing
Base).
4. CONDITIONS.
4.1 Initial Extension of Credit. Agent must have received the
following items, in form and content acceptable to Agent and Banks, before Banks
are required to extend any credit (with respect to either the Term Loan or the
Revolving Line of Credit) to Borrowers under this Agreement:
(a) Authorizations. Evidence that the execution,
delivery and performance by Borrowers and each guarantor or
subordinating creditor of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
(b) Notes. The fully executed Revolving Line Notes
and Term Loan Notes.
(c) Security Agreements. Signed original AB Plastics
Security Agreement and MOS Plastics Security Agreement (as more fully
described in Section 7 below) and such other security agreements and
financing statements which Agent reasonably requires. Borrowers shall
also have delivered to Agent all such collateral in which Agent
requires a possessory security interest.
(d) Evidence of Priority. Evidence that security
interests and liens in favor of Agent are valid, enforceable and prior
to all other rights and interests, except those Agent consents to in
writing.
(e) Landlord's/Mortgagee Waivers. For any personal
property collateral located on real property which is subject to a
mortgage or deed of trust or which is not owned by the Borrowers, a
Landlord's and/or Mortgagee's Waiver from the owner/lessor of the real
property and the holder of any mortgage or deed of trust.
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(f) Insurance. Evidence of insurance coverage, as
required in the "Covenants" section of this Agreement.
(g) Guaranty, Stock Pledge Agreement and Security
Agreement of Guarantor. The Guaranty, the Stock Pledge Agreement, and
the Guarantor Security Agreement executed by Guarantor (as more fully
described in Section 7 below).
(h) Subordination Agreement. Subordination Agreement
("Subordination Agreement") of even date herewith in favor of Banks
signed by Sirrom Capital Corporation, a Tennessee corporation, d/b/a/
Tandem Capital, and Pinecreek Capital Partners, L.P., a California
limited partnership (collectively "Tandem"). The Subordination
Agreement pertains to the obligations of Borrowers to Tandem (the
"Subordinate Debt Obligations") arising under certain Debenture
Purchase Agreements and the other "Loan Documents" described therein
(collectively, the "Subordinate Debt Documents").
(i) Legal Opinion. A written opinion from Borrowers'
legal counsel, covering such matters as Agent may reasonably require.
The legal counsel and the terms of the opinion must be reasonably
acceptable to Banks.
(j) Good Standing. Certificates of good standing for
Borrowers and Guarantor from their state of incorporation and from any
other state in which Borrowers and Guarantor are required to qualify to
conduct their business.
(k) Accounts. The Accounts shall have been opened,
and Borrowers shall have established with Sumitomo (and Manufacturers,
if so desired) all of Borrowers' primary operating and business
accounts.
(l) Solvency Certificate. Solvency Certificates, in
form and substance satisfactory to Agent, signed by each Borrower's
chief financial officer and chief executive officer, and confirmed by
each of the Borrowers.
(m) Consummation of Acquisition. The final Stock
Purchase Agreement dated as of January 28, 1998 by and between the
prior stockholders of MOS Plastics, as seller, and Guarantor, as buyer,
and all other instruments, documents and agreements to be executed in
connection therewith (collectively, the "Purchase Documents"), shall
have been reviewed and approved by Agent; and all such Purchase
Documents shall have been fully executed and delivered, and all
-26-
conditions to the consummation of the transactions contemplated thereby
necessary to complete such transaction (other than funding under this
Agreement) shall have been satisfied or waived with Agent's consent;
and Agent shall have received such other evidence satisfactory to Agent
that on or prior to the first advance hereunder, Guarantor shall own
100% of the stock of MOS Plastics.
(n) Sources and Uses of Funds Certificate. A
certificate executed by the chief executive officer and chief financial
officer of Borrowers, and confirmed by each of the Borrowers, setting
forth in reasonable detail the sources and uses of funds for the
transactions contemplated herein and in the Subordinate Debt Documents,
including without limitation consummation of the transactions
contemplated by the Purchase Documents.
(o) Pay Proceeds Letter. A letter executed by
Borrowers directing Agent to disburse amounts approved by Agent under
the Loans directly to creditors approved by Agent, to repay certain
existing indebtedness of Borrowers.
(p) Stock Certificates. The stock certificate(s)
evidencing the shares of MOS Plastics' stock and AB Plastics' stock
pledged to Agent pursuant to the Stock Pledge Agreement, together with
a duly endorsed stock power for each such certificate (endorsed in
blank).
(q) Due Diligence Report. A Due Diligence Report
prepared by Xxxxxx & Kleigman, LLP.
(r) Audit and Appraisal. A detailed audit of the
books and records of MOS Plastics and AB Plastics performed by Banks,
and an inventory appraisal of MOS Plastics performed by an appraiser
satisfactory to Banks.
(s) Five-Year Projections. Five year projections,
prepared by quarter for the first year and annually thereafter, for
Borrowers, in accordance with GAAP consistently applied.
(t) Financial Statements and Pro Forma Balance
Sheets. (A) consolidated financial statements for Guarantor, audited by
Xxxxxx & Kleigman LLP, the independent accountants regularly engaged by
Guarantor, for the 12 months ending October 26, 1997; and company
prepared consolidating financial statements for Guarantor and its
subsidiaries for the 12 months ending October 26, 1997; (B) copies of
the monthly financial statements of MOS Plastics for fiscal year 1997
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and fiscal year 1998 through the Closing Date; (C) copies of monthly
consolidating and consolidated financial statements of Guarantor for
fiscal year 1998 through the month ending about January 26, 1998; and
(D) proforma post-closing balance sheets of AB Plastics, MOS Plastics
and Guarantor.
(u) Solvency Opinion. Solvency opinions from a firm
acceptable to Agent opining as to the solvency of each of the
Borrowers, their ability to pay their debts as they mature, and such
other matters as Agent and Banks shall reasonably require. Also, a
reliance letter in form and substance satisfactory to the Agent and the
Banks, from the firm providing the solvency opinions, stating that the
Agent and the Banks may rely on the solvency opinions as if they had
been addressed to them.
(v) Intercreditor Agreement. An Intercreditor
Agreement between Banks and General Electric Capital Corporation.
(w) Subordinated Debt. Evidence that Guarantor has
raised at least $9,000,000 in Subordinated Debt Obligations, on terms
and conditions acceptable to Agent and the Banks.
(x) Payment of Existing Debt. Evidence that all
existing indebtedness of MOS Plastics has been paid in full in
accordance with the terms and conditions thereof; with the exception of
trade debt incurred in the ordinary course of business, indebtedness
incurred for acquiring fixed assets during 1997 in an amount not to
exceed $275,000, and except for certain other existing indebtedness of
MOS Plastics identified on Schedule 4.1(x) attached hereto, which does
not exceed $1,450,000 in the aggregate.
(y) Repayment of All Indebtedness Owing to Sumitomo.
All indebtedness owing by Borrowers and their affiliates to Sumitomo
under the Existing Agreement, and any other agreements (with the
exception of real estate secured construction debt), shall have been
repaid in full, or shall be paid in full concurrently with the first
disbursement under this Agreement.
(z) Interest Rate Protection. Borrowers shall have
obtained interest rate protection in a minimum amount of $8,400,000 for
a minimum tenor of 3 years, in form and substance satisfactory to the
Banks.
(aa) No Adverse Change. No material adverse change
shall have occurred in Borrowers' or Guarantor's operating performance,
financial condition, or business prospects since the date of the last
financial statements analyzed by the Agent and Banks in underwriting
this transaction.
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(bb) Other Required Documentation. Such other
documents, instruments and agreements as Banks may reasonable require,
including the UCC-1 and UCC-2 financing statements.
(cc) Certificate. A Certificate signed on behalf of
Guarantor and its subsidiaries, by the Chief Executive Officer of
Guarantor, stating that:
(i) the representations and warranties
contained in Section 5 are true and correct in all material
respects on and as of such date, and
(ii) no default or Event of Default exists
or will result upon the consummation of the transactions
contemplated herein.
(dd) Capital Structure and Ownership. The capital
structure and ownership of Guarantor and Borrowers, after giving effect
to the transaction contemplated hereby, shall be satisfactory to the
Agent and the Banks.
The date on which all of the foregoing conditions have been
satisfied or waived by Agent in its sole discretion is the "Closing Date." As
used in this Agreement, "Loan Documents" shall mean, collectively, this
Agreement, the Notes, the AB Plastics Security Agreement, the MOS Plastics
Security Agreement, the Guaranty, the Stock Pledge Agreement, the Guarantor
Security Agreement, the Subordination Agreement and any other certificates,
documents or agreements of any type or nature heretofore or hereafter executed
or delivered by Borrowers, Guarantor, and/or any other party to Banks in any way
relating to or in the furtherance of this Agreement, in each case either as
originally executed or as the same may from time to time be supplemented,
modified, amended, restated or extended.
4.2 Conditions to Each Advance. Before each extension of
credit, including the first:
(a) With respect to advances under the Revolving Line
of Credit, a current Borrowing Base Certificate signed by Borrowers and
delivered to Agent as required under Section 6.2(c).
(b) Agent's most recent audit of Borrowers' records
must be satisfactory to Agent in its reasonable discretion.
(c) The Representations and Warranties hereunder must
be true and correct in all material respects.
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(d) No Event of Default, or event that with the
giving of notice and/or the passage of time would become an Event of
Default, shall have occurred and be continuing.
5. REPRESENTATIONS AND WARRANTIES.
When Borrowers and Guarantor sign this Agreement, and until
Banks are repaid all obligations hereunder in full, Borrowers and Guarantor make
the following representations and warranties. Each Request for Credit, Request
for Conversion and Request for Letter of Credit executed by Borrowers shall
constitute a renewed representation and warranty by Borrowers.
5.1 Organization of Borrowers and Guarantor. Borrowers and
Guarantor are corporations duly formed and validly existing under the laws of
their respective states of incorporation.
5.2 Authorization. This Agreement, those Loan Documents to
which either Borrower or the Guarantor is a party and any other instrument or
agreement required to be executed by either Borrower or the Guarantor hereunder
or thereunder, are within Borrowers' and Guarantor's powers, have been duly
authorized, and do not conflict with any of Borrowers' or Guarantor's
certificate or articles of incorporation or bylaws.
5.3 Enforceable Agreement. The Loan Documents are legal, valid
and binding agreements of Borrowers and Guarantor, enforceable against Borrowers
and Guarantor in accordance with their terms, and any instrument or agreement
required hereunder or thereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.
5.4 Good Standing. Each Borrower and Guarantor is properly
licensed, in good standing, and, where required, in compliance with fictitious
name statutes in each state in which such Borrower and Guarantor does business,
except where the failure to comply would not have a material adverse effect on
Guarantor and Borrowers as a consolidated whole.
5.5 No Conflicts. This Agreement does not conflict with any
law, material agreement, or material obligation by which either Borrower or the
Guarantor is bound.
5.6 Financial Information. All financial statements,
information and other data which may have been or which may be hereafter
submitted by either Borrower or the Guarantor to Agent or any Bank have been or
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will be prepared in accordance with generally accepted accounting principles
consistently applied (subject, in the case of unaudited statements, to
non-material audit adjustments and the absence of footnote disclosures) and
accurately represent in all material respects the financial condition, or, as
applicable, the other information disclosed therein.
Since the date of MOS Plastics financial statements dated
December 31, 1997 and Guarantor's and AB Plastics audited financial statements
dated October 26, 1997, there has been no material adverse change in the assets,
operations, business prospects or financial condition of either of the Borrowers
or the Guarantor.
5.7 Lawsuits. Except as set forth in Schedule 5.7 hereto,
there are no actions, suits, or proceedings pending or, to the knowledge of the
Borrowers or Guarantor, threatened against or affecting the Borrowers or the
Guarantor or the Borrowers' or the Guarantor's properties before any court or
administrative agency which, if determined adversely to the Borrowers or
Guarantor, would have a material adverse effect on the Borrowers' or the
Guarantor's financial condition or operations.
5.8 Permits, Franchises. Borrowers possess all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary to
enable them to conduct the business in which they are now engaged and where the
absence of which would cause a material adverse effect on the Borrowers'
financial condition or operations.
5.9 Other Obligations. Neither Borrowers nor Guarantor are in
default on any obligation for borrowed money, any purchase money obligation or
any other material lease, commitment, contract, instrument or obligation, except
as disclosed in Schedule 5.9 hereto.
5.10 Income Tax Returns. Borrowers and Guarantor have filed
all required tax returns and have no knowledge of any material pending
assessments or adjustments of its income tax for any year.
5.11 No Event of Default. No event has occurred which is, or
with notice or lapse of time or both would be, an Event of Default under this
Agreement or any of the Loan Documents.
5.12 ERISA Plans.
(a) Each of Borrowers and Guarantor has fulfilled its
obligations, if any, under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material
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respects with the presently applicable provisions of ERISA and the
Code, and has not incurred any liability with respect to any Plan under
Title IV of ERISA.
(b) No reportable event has occurred in respect of
any Plan under Section 4043(b) of ERISA for which the PBGC requires 30
day notice.
(c) As of the date of this Agreement, no action by
Borrowers or Guarantor to terminate or withdraw from any Plan has been
taken and no notice of intent to terminate a Plan has been filed under
Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to
a Plan under Section 4042 of ERISA, and no event has occurred or
condition exists which might constitute grounds for the commencement of
such a proceeding.
(e) The following terms have the meanings indicated
for purposes of this Agreement:
(i) "Code" means the Internal Revenue Code
of 1986, as amended from time to time.
(ii) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time.
(iii) "PBGC" means the Pension Benefit
Guaranty Corporation established pursuant to Subtitle A of
Title IV of ERISA.
(iv) "Plan" means any employee pension
benefit plan maintained or contributed to by Borrowers and
insured by the Pension Benefit Guaranty Corporation under
Title IV of ERISA.
5.13 Collateral. All collateral required in this Agreement is
owned by the grantor of the security interest, free of any title defects or any
liens or interests of others except as disclosed on Schedule 5.13 attached
hereto (collectively, the "Permitted Encumbrances").
5.14 Environmental Condition. None of Borrowers' properties or
assets have been used by Borrowers or, to the best of Borrowers' knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance, in
violation of applicable law. To Borrowers' knowledge, none of Borrowers'
properties or assets have been designated or identified in any manner pursuant
to any environmental protection statute as a hazardous waste or hazardous
substance disposal site, or a candidate for closure pursuant to any air quality,
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water quality or other environmental protection statue. No lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned by Borrowers. Borrowers have not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
Borrowers resulting in the release or discharge of hazardous waste or hazardous
substances into the environment.
5.15 Location of Inventory. Schedule 5.15 hereto accurately
sets forth all places where all inventory and equipment currently owned by
Borrowers, Guarantor and AB Mexico are located.
6. COVENANTS.
Borrowers and Guarantor agree, so long as credit is available
under this Agreement and until Banks are repaid all obligations hereunder in
full:
6.1 Use of Proceeds. To use the proceeds of the Loans only as
specified in Section 3.14 above.
6.2 Financial Information. To provide the following financial
information and statements and such additional information as reasonably
requested by Agent from time to time, in form and detail reasonably satisfactory
to Agent:
(a) Within 100 days after Guarantor's fiscal year
end, audited consolidated and consolidating financial statements of
Guarantor and its subsidiaries. These financial statements must be
audited (with an unqualified opinion or an opinion acceptable to Agent)
by a Certified Public Accountant ("CPA") reasonably acceptable to
Agent. Guarantor shall also provide to Agent a compliance certificate
(in the form of Exhibit E hereto) within 100 days of Guarantor's fiscal
year end, certified on behalf of Guarantor by the Chief Financial
Officer or Chief Executive Officer of Guarantor.
(b) Within 45 days after the period's end,
consolidated and consolidating monthly financial statements (including
a balance sheet, income statement and statement of cash flows) for
Guarantor, Borrowers and AB Plastics de Mexico S.A. de C.V. ("AB
Mexico") and any other subsidiaries. These financial statements may be
internally prepared. The statements shall be prepared on a consolidated
and consolidating basis, and shall reflect the results for the month
just ended as well as the results from the beginning of the current
fiscal year through the month just ended, along with a comparison to
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budget. Borrowers shall also provide to Agent quarterly compliance
certificates (in the form of Exhibit E hereto) within 45 days of each
quarter end.
(c) Within 15 days after period end, a monthly
detailed aging of each Borrower's accounts receivable and accounts
payable, a detailed analysis of each Borrower's Inventory and a
Borrowing Base Certificate (all of which shall be provided more often
than monthly at Agent's request).
(d) Within 15 days after the end of each fiscal
quarter, a schedule listing the book value of all fixed assets of
Borrowers or any subsidiaries in Mexico.
(e) Within 30 days after each fiscal year end, a
2-year operating plan covering the current fiscal year and the next
fiscal year. Such plan will detail, on a monthly basis for the then
current fiscal year and quarterly for the subsequent fiscal year,
Borrowers' and Guarantor's best estimate of revenues, expenses and
balance sheet categories, and will be presented in the customary form
of balance sheets and income statements, prepared in a manner
consistent with the Borrower's historical financial statements.
(f) Within 100 days after each fiscal year end,
annual CPA management letters for each of the Borrowers.
(g) Within 30 days after the Closing Date, a pro
forma post-closing balance sheet for each of the Borrowers and
Guarantor.
(h) All SEC filings made by Guarantor or Borrowers
within 10 days after filing.
(i) Any other information that Banks may reasonably
require.
6.3 Quick Ratio. To maintain on a consolidated basis as of the
last day of each fiscal quarter of Guarantor, a ratio of Quick Assets to the sum
of current liabilities plus outstandings under the Revolving Line of Credit of
at least 0.45 to 1, provided, however, that the ratio shall increase to 0.50 to
1 effective with the fiscal quarter ending about April 26, 1998. Unless
otherwise specified, (a) as used in this Agreement, "consolidated basis" means
consolidated as to Guarantor, Borrowers, AB Mexico, and any other subsidiaries
of Guarantor; and (b) each of the following covenants apply to Guarantor and its
subsidiaries on a consolidated basis. All the financial covenants are set based
upon the presumption that the purchase method of accounting is employed for the
recording of the acquisition of MOS Plastics.
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"Quick Assets" means cash, short-term cash investments, net
trade receivables and marketable securities not classified as long-term
investments.
6.4 Tangible Net Worth. To maintain on a consolidated basis as
of the last day of each fiscal quarter of Guarantor, Tangible Net Worth equal to
at least the sum of the following:
(a) $5,300,000;
(b) 80% of the cumulative net income after income
taxes determined on a quarterly basis (with no deduction for losses
determined on a quarterly basis) earned after January 25, 1998;
(c) the net proceeds from any equity securities
issued after the date of this Agreement; and
(d) any increase in stockholders' equity resulting
from the conversion of debt securities to equity securities after the
date of this Agreement.
"Tangible Net Worth" means the gross book value of Guarantor's
and Borrowers' assets (excluding goodwill, patents, trademarks, trade names,
organization expense, treasury stock, officer/employee and stockholder
receivables, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles),
plus debt subordinated to Banks in a manner acceptable to Banks, less total
liabilities, including, without limitation, accrued and deferred income taxes,
and any reserves against assets.
6.5 Maximum Senior Funded Debt to EBITDA. To maintain on a
consolidated basis a ratio of Senior Funded Debt to EBITDA (as those terms are
defined in Section 1.5 above) of not to exceed (a) 3.25 to 1 at all times prior
to the fiscal year ending about October 26, 1998; (b) 2.5 to 1 effective with
the fiscal year ending about October 26, 1998 through one day prior to fiscal
year ending about October 26, 1999, and (c) 2.25 to 1 effective with the fiscal
year ending about October 26, 1999 and thereafter. For purposes of this
covenant, EBITDA will be computed for the four quarters ending on the measuring
date, and this covenant shall be tested as of the last day of each fiscal
quarter. Senior Funded Debt will be determined as the amount thereof as of the
date of measurement. The trailing twelve month EBITDA for AB Plastics for the
fiscal month ending January 25, 1998, and for MOS Plastics for the fiscal month
ending January 31, 1998, is as computed on Schedule 6.5. This EBITDA shall be
used for computing the covenant at closing.
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6.6 Fixed Charge Coverage Ratio. To maintain on a consolidated
basis as of the last day of each fiscal quarter of Guarantor a ratio of Cash
Flow to Fixed Charges of at least the amounts indicated for each period
specified below:
From closing through one day
prior to fiscal year ending about
October 26, 1999: 1.15 : 1.00
Effective with the fiscal year
ending about October 26, 1999
and thereafter: 1.20 : 1.00
"Cash Flow" means the sum of trailing twelve month EBITDA for
the Guarantor and its subsidiaries (on a consolidated basis) (plus MOS Plastics
prior to acquisition), less the sum of amounts spent on capital expenditures
(net of purchase money financing) by the Guarantor and its subsidiaries (on a
consolidated basis) (plus MOS Plastics prior to acquisition).
"Fixed Charges" means, for any period, the annualized (from
the beginning of Guarantor's fiscal year through the date of measurement, on a
consolidated basis for Guarantor and its subsidiaries) sum of gross interest
expense (payable in cash for the period), plus scheduled principal payments
under all indebtedness during the period, plus taxes payable for such period,
plus payments made under any seller notes or "earn-out" agreements entered into
in connection with the acquisition of MOS Plastics or any other arrangements,
plus cash dividends/ distributions.
The ratio of Cash Flow to Fixed Charges will be calculated
quarterly beginning with the quarter ending about April 26, 1998.
6.7 Profitability. To maintain, on a consolidated basis for
Guarantor, and, as to each of the Borrowers on an unconsolidated basis, a
positive net income before taxes and extraordinary items and a positive net
income after taxes and extraordinary items as of the end of each Borrower's
fiscal year. In addition, Borrowers shall not experience, on a consolidated
basis, a negative net income (either before or after taxes and extraordinary
items) in each of any two (2) consecutive fiscal quarters.
6.8 Other Debts. Not to have outstanding or incur any direct
or contingent debts or lease obligations (other than those to Banks), or become
liable for the debts of others (other than guarantees by Guarantor or Borrowers
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of obligations of either of Borrowers) without Banks' written consent.
As to Borrowers only, this does not prohibit:
(a) Acquiring goods, supplies, or merchandise, (or
financing insurance premiums) on normal trade credit.
(b) Endorsing negotiable instruments received in the
usual course of business.
(c) Debts in existence on the date of this Agreement
disclosed in writing to Banks prior to the date of this Agreement in
MOS Plastics' financial statements dated December 31, 1997, and audited
consolidated financial statements of Guarantor and its subsidiaries
dated October 26, 1997.
(d) Additional debts and lease obligations for the
acquisition of fixed or capital assets, to the extent permitted
elsewhere in this Agreement.
(e) Subject to the terms of the Subordination
Agreement, the Subordinate Debt Obligations.
6.9 Other Liens. Not to create, assume, or allow any security
interest or lien (including judicial liens) on property Borrowers, Guarantor or
AB Mexico now or later own, except:
(a) Liens or security interests in favor of Agent or
Banks.
(b) Liens for taxes not yet due, or which are being
contested in good faith by appropriate proceedings (so long as
Borrowers and Guarantor have established and maintain adequate reserves
for the payment of the same and by reason of which nonpayment and
contest no material item or portion of Borrowers' or Guarantor's
property is in jeopardy of being seized, levied upon or forfeited).
(c) The Permitted Encumbrances outstanding on the
date of this Agreement.
(d) Additional purchase money security interests in
fixed assets acquired after the date of this Agreement.
(e) Liens or security interests granted to Tandem to
secure the Subordinate Debt Obligations, which liens or security
interests (and the Subordinate Debt Obligations) shall be subordinate
to the liens and security interest in favor of Agent and/or Banks and
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to Borrowers' obligations to Banks, all in accordance with the terms of
the Subordination Agreement.
6.10 Leases. Not to permit the aggregate payments due in any
fiscal year under all leases (including capital and operating leases for real or
personal property) to exceed two million dollars ($2,000,000).
6.11 Dividends/Distributions. Not to (except for payments to
Xxxxx Xxxxxx out of the initial funding of the Loans) purchase, redeem or
otherwise acquire for value any of its shares, or create any sinking fund in
relation thereto. Guarantor shall not pay any dividends or distributions on any
of its shares.
6.12 Loans to Officers. Not to make any loans, advances or
other extensions of credit to any of Borrowers', Guarantor's or AB Mexico's
executives, officers, directors, shareholders or employees (or any relatives of
any of the foregoing) which, together with all other such loans, advances and
other extensions of credit, exceed $100,000 at any time outstanding (exclusive
of notes receivable related to issuance of common stock so long as there is no
cash outflow).
6.13 Change of Ownership. Not to cause, permit, or suffer any
change, direct or indirect, in Borrowers' or AB Mexico's ownership.
6.14 Notices to Agent. To promptly notify Agent in writing of:
(a) any lawsuit over five hundred thousand dollars
($500,000) against Borrowers, Guarantor or AB Mexico;
(b) any substantial dispute between Borrowers,
Guarantor or AB Mexico and any government authority;
(c) any failure to comply with this Agreement;
(d) any material adverse change in Borrowers',
Guarantor's or AB Mexico's financial condition or operations;
(e) any change in Borrowers', Guarantor's or AB
Mexico's name, address, or legal structure; and
(f) the occurrence of any Event of Default.
6.15 Books and Records. To maintain adequate books and records
which contain information that will be made available from time to time upon
Agent's request.
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6.16 Audits. To allow Agent and its agents to inspect
Borrowers', Guarantor's and AB Mexico's properties and examine, audit and make
copies of books and records at any reasonable time upon reasonable prior notice.
If any of Borrowers', Guarantor's and AB Mexico's properties, books or records
are in the possession of a third party, Borrowers and Guarantor (on behalf of
itself and AB Mexico) authorize that third party to permit Agent or its agents
to have access to perform inspections or audits and to respond to Agent's
requests for information concerning such properties, books and records.
6.17 Compliance with Laws. To comply in all material respects
with the laws, regulations, and orders of any government body with authority
over Borrowers', Guarantor's or AB Mexico's business (including any fictitious
name statute and all statutes regarding the processing, manufacture, storage,
transportation, sale or use of hazardous or toxic materials).
6.18 Preservation of Rights. To maintain and preserve all
rights, privileges, and franchises Borrowers, Guarantor and AB Mexico now have
which are necessary to carry on their business.
6.19 Maintenance of Properties. To make any repairs, renewals,
or replacements to keep Borrowers', Guarantor's and AB Mexico's properties in
good working condition (reasonable wear and tear excepted).
6.20 Perfection of Liens. To help Agent and Banks perfect and
protect their security interests and liens, and reimburse the Agent and Banks
for related costs incurred to protect its security interests and liens.
6.21 Cooperation. To take any action reasonably requested by
Agent and Banks to carry out the intent of this Agreement.
6.22 Insurance.
(a) Insurance Covering Collateral. To maintain all
risk property damage insurance policies covering the tangible property
comprising the Collateral (as defined in Section 7 below) and all other
insurable assets of Borrowers, Guarantor, and AB Mexico. Each insurance
policy must be for the full replacement cost of the Collateral and
other assets and include a replacement cost endorsement. The insurance
must be issued by an insurance company reasonably acceptable to Agent
and must include a lender's loss payable endorsement in favor of Agent
in a form reasonably acceptable to Agent.
(b) General Business Insurance. To maintain insurance
as is usual for the business they are in.
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(c) Evidence of Insurance. Upon the request of Agent,
to deliver to Banks a copy of each insurance policy, or, if permitted
by Agent, a certificate of insurance listing all insurance in force.
6.23 Operating/Business Accounts. Establish and maintain with
Banks all of Borrowers' and Guarantor's operating and business accounts and all
other banking services associated with the operation of Borrowers' and
Guarantor's business, including without limitation any demand deposit accounts.
6.24 Additional Negative Covenants. Not to, without Banks'
prior written consent:
(a) engage in any business activities substantially
different from Borrowers', Guarantor's, or AB Mexico's, respectively,
present businesses.
(b) liquidate or dissolve Borrowers', Guarantor's, or
AB Mexico's, respectively, businesses.
(c) enter into any consolidation, merger, pool, joint
venture, syndicate or other combination, or make any loans (other than
as provided in Section 6.12) or investments (other than intercompany
investments), or make any commitment with respect thereto.
(d) sell, lease or dispose of all or (in Banks'
reasonable opinion) a substantial part of Borrowers', Guarantor's, or
AB Mexico's, respectively, business, or Borrower', Guarantor's, or AB
Mexico's, respectively, assets.
(e) acquire or purchase a business or its assets
(provided that Banks will not unreasonably withhold or delay their
consents to any such transaction).
(f) sell or otherwise dispose of any assets for less
than fair market value, or enter into any sale and leaseback agreement
covering any of their fixed or capital assets in excess of $250,000 in
the aggregate in any twelve (12) month period.
(g) voluntarily suspend any of their respective
businesses for more than five business days in any ten day period,
other than a routine shutdown, not to exceed fourteen (14) consecutive
days, consistent with past practice.
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(h) enter into any transaction with any affiliate of
Borrowers on terms less favorable than those available to Borrowers
from other persons or entities in the ordinary course of such persons'
and entities' business.
(i) transfer any fixed assets, exceeding $50,000 in
aggregate book value in any twelve (12) month period, to outside the
United States of America, without the prior written approval of Agent.
(j) make or incur any capital expenditures, including
capital leases, which in the aggregate exceed $6,500,000 for the
Borrowers' fiscal year 1998, or $2,500,000 for any fiscal year
thereafter.
(k) change the Chairman of the Board, Chief Executive
Officer, or Chief Financial Officer of either of the Borrowers, or
Guarantor or AB Mexico, and fail to secure the services of a successor
satisfactory to the Banks within 90 days.
(l) move any inventory or equipment to, or otherwise
store, hold or possess any inventory or equipment at, any other
locations or premises other than those identified in Schedule 5.15
hereto, except upon 30 days prior written notice to Agent and upon
execution and delivery of any financing statements required by Agent
(and any other documents needed to perfect the Banks' liens in such
jurisdiction).
(m) change in any material respect of their existing
policies or practices with respect to returns and allowances on
inventory sold.
(n) change the name of either of the Borrowers,
Guarantor or AB Mexico, except upon 30 days prior written notice to
Agent and upon execution and delivery of any financing statements
required by Agent (and any other documents needed to perfect the Banks'
liens in such jurisdiction).
(o) prepay any indebtedness (other than trade
payables in the ordinary course of business) owed to any third parties
prior to the scheduled maturity date of such indebtedness (except that
repayment of the Subordinated Debt Obligations will be subject to the
provisions of the Subordination Agreement), provided that the cashless
exercise of options or warrants shall not be deemed a prohibited
prepayment hereunder.
(p) place any inventory on consignment.
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6.25 No Consumer Purpose. Not to use any loans or advances
hereunder for personal, family or household purposes.
6.26 ERISA Plans. To give prompt written notice to Agent of:
(a) The occurrence of any reportable event in respect
of any Plan under Section 4043(b) of ERISA for which the PBGC requires
30 day notice.
(b) Any action by Borrowers, Guarantor or AB Mexico
to terminate or withdraw from a Plan or the filing of any notice of
intent to terminate a Plan under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect to
a Plan under Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect
to a Plan under Section 4042 of ERISA.
6.27 Limit on AB Mexico and Foreign Assets. Not at any time to
permit the net book value of all assets owned by AB Mexico plus (without
duplication) all assets owned by Guarantor and its subsidiaries which are
located outside of the United States of America, to exceed 30% of the net book
value of the total tangible assets owned by Guarantor and its subsidiaries
(wherever located).
6.28 Payment of Taxes. Pay all taxes owing by Guarantor,
Borrowers (and all other subsidiaries) when due, other than those being
contested in good faith by appropriate proceedings.
6.29 Appointment of Agent as Attorney in Fact. Until all the
obligations of Borrowers to Banks have been paid in full, Borrowers irrevocably
appoint Agent as their attorney in fact and authorize and empower it to:
(a) Endorse and affix Borrowers' name to or upon any
check, draft, note, instrument or other writing relating to the
collection of Accounts Receivable, or relating to any other Collateral,
or upon any check or other instrument given in payment thereof, or upon
any omitted assignment, notification of assignment, demand or auditor's
verification relating to Collateral and upon all other instruments and
writings required to assert and protect Banks' rights in the
Collateral.
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(b) Upon the occurrence and during the continuance of
an Event of Default, receive, open and dispose of all mail addressed to
Borrowers and notify the Post Office authorities to change the address
for the delivery of mail addressed to Borrowers to such address as
Banks may designate. These powers, being coupled with an interest, are
irrevocable while Borrowers' obligations to Banks remain unpaid.
7. SECURITY DOCUMENTS.
7.1 Security Documents Executed by Borrowers. In order to
secure the obligations of Borrowers under this Agreement, the Notes, and other
Loan Documents, (a) AB Plastics will execute a security agreement of even date
herewith in favor of Agent, for the benefit of the Banks, covering all of AB
Plastics' Accounts Receivable, Inventory, equipment, general intangibles, and
all other property described therein (the "AB Plastics Security Agreement"), and
(b) MOS Plastics will execute a security agreement of even date herewith in
favor of Agent, for the benefit of the Banks, covering all of MOS Plastics'
Accounts Receivable, Inventory, equipment, general intangibles, and all other
property described therein (the "MOS Plastics Security Agreement").
7.2 Security Documents Executed by Guarantor. Borrowers'
obligations under the Notes and other Loan Documents shall be guaranteed by
Guarantor, pursuant to the terms of a guaranty (the "Guaranty") of even date
herewith executed by Guarantor in favor Agent, for the benefit of the Banks. In
order to secure the obligations of Guarantor under the Guaranty, Guarantor will
execute in favor of Agent, for the benefit of the Banks, (a) a stock pledge
agreement of even date herewith covering 100% of the capital stock of each of
the Borrowers (the "Stock Pledge Agreement"), and (b) a general security
agreement of even date herewith covering all Accounts Receivable, Inventory,
equipment, general intangibles and all other property of Guarantor described
therein (the "Guarantor Security Agreement").
7.3 Definition of Security Documents and Collateral. As used
in this Agreement, "Security Documents" means and includes (i) the various
documents referenced in Sections 7.1 and 7.2, above, (ii) any other security
agreement which may now or hereafter be executed by either Borrower, Guarantor,
any other entity in favor of Agent, for the benefit of Banks, to secure
performance of Borrowers' or Guarantor's obligations under the Loan Documents or
Guaranty, and (iii) any modifications or amendments to any of the foregoing
documents. Borrowers and Guarantor intend that each Security Document (as the
same may be modified or amended from time to time) shall grant to Agent, for the
ratable benefit of Banks, a security interest in the items of collateral
referenced in such Security Document. As used herein, the term "Collateral"
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means all Accounts Receivable, Inventory, equipment, general intangibles, and
all other property and collateral described in or covered by each and all of the
Security Documents.
8. DEFAULT.
8.1 Events of Default. The occurrence of any one or more of
the following events shall constitute an "Event of Default":
(a) Failure to Pay. Borrowers fail to make any
payment under this Agreement, any Note, or any other Loan Document when
due.
(b) Non-Compliance. Borrowers, Guarantor, or any
other party (other than Banks) fails to meet the conditions of, or
fails to perform any obligation under:
(i) this Agreement,
(ii) any other Loan Document, or
(iii) any other agreement either Borrower or
Guarantor has with (x) Sumitomo or any affiliate of Sumitomo,
or (y) Manufacturers or any affiliate of Manufacturers.
which in any case is not cured within ten (10) days after the
occurrence thereof (or such longer grace period, if any, as may be
provided as to such default in any document or agreement referenced in
subparagraph (ii) or (iii) above), provided that if such failure cannot
be cured within ten days but Borrowers have commenced within such
10-day period to cure such failure and are otherwise diligently
pursuing such cure, then Borrowers shall have such additional time as
is reasonably necessary to effect such cure, but in no event more than
twenty (20) days beyond the initial 10-day cure period. The foregoing
notwithstanding, in the event any other Loan Document specifically sets
forth events which constitute a "Default" or "Event of Default"
thereunder, then the occurrence of any such "Default" or "Event of
Default" shall constitute an Event of Default hereunder and the
foregoing cure period shall not apply thereto. The foregoing cure
period is also not applicable to monetary defaults, as to which there
is no cure period, as specified in subparagraph (a) immediately above.
(c) Other Defaults. Any default occurs under the
Subordinate Debt Documents or any other agreement in connection with
any credit either of the Borrowers or Guarantor has obtained from any
other creditor(s) or which either of the Borrowers or Guarantor has
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guaranteed if the default consists of failing to make a payment when
due or gives the other creditor(s) the right to accelerate any
obligations in an aggregate amount in excess of five hundred thousand
dollars ($500,000).
(d) Lien Priority. Banks fail to have an enforceable
first lien (except for any liens to which Banks have consented in
writing) on or security interest in any Collateral (other than
"Emission Rights," as defined in the AB Plastics Security Agreement).
(e) False Information. Any representation or warranty
under this Agreement or any agreement, instrument or certificate
executed pursuant to this Agreement or in connection with any
transaction contemplated hereby shall prove to have been false or
misleading in any material respect when made or when deemed to have
been made.
(f) Bankruptcy. Either of the Borrowers or Guarantor
files a bankruptcy petition, a bankruptcy petition is filed against
either of the Borrowers or Guarantor or either of the Borrowers or
Guarantor makes a general assignment for the benefit of creditors. The
default will be deemed cured if any bankruptcy petition filed against
Borrowers or Guarantor is dismissed within a period of sixty (60) days
after the filing; provided, however, that Banks will not be obligated
to extend any additional credit to Borrowers during any bankruptcy
period.
(g) Receivers. Either of the Borrowers' or
Guarantor's business is terminated, or a receiver or similar official
is appointed for either of the Borrowers' or Guarantor's business and,
in the event such appointment is the result of an involuntary action or
proceeding, such appointment is not terminated, dismissed or discharged
within sixty (60) days.
(h) Lawsuits. Any lawsuit or lawsuits are filed on
behalf of one or more trade creditors against Borrowers or Guarantor in
an aggregate amount of five hundred thousand dollars ($500,000) or more
in excess of any insurance coverage, and such lawsuit or lawsuits are
not dismissed or fully bonded within ten (10) calendar days after
service of process upon either Borrower or Guarantor (as applicable).
(i) Judgments. Any judgments or arbitration awards in
an aggregate amount in excess of five hundred thousand dollars
($500,000) are entered against Borrowers or Guarantor and, absent
procurement of a stay of execution, such judgment or award remains
unbonded or unsatisfied for ten (10) calendar days after the date of
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entry; or Borrowers or Guarantor enters into any settlement agreement
with respect to any litigation or arbitration, in an aggregate amount
of five hundred thousand dollars ($500,000) or more in excess of any
insurance coverage.
(j) Government Action. Any government authority takes
action that Agent reasonably believes materially adversely affects
either of the Borrowers' or Guarantor's financial condition or ability
to repay.
(k) Revocation. The Guaranty, the Stock Pledge
Agreement, the Guarantor Security Agreement, the Subordination
Agreement, or any other Security Document, deed of trust, or other
document required by this Agreement is revoked or no longer in effect.
(l) Material Adverse Change. A material adverse
change occurs in either of the Borrowers' or Guarantor's financial
condition, properties or prospects, or ability to repay the obligations
hereunder.
(m) ERISA Plans. The occurrence of a reportable event
with respect to a Plan which is, in the reasonable judgment of Agent,
likely to result in the termination of such Plan for purposes of Title
IV of ERISA, or could reasonably be expected, in the reasonable
judgment of Agent, to subject either of the Borrowers or Guarantor to
any tax, penalty or liability (or any combination of the foregoing)
which, in the aggregate, would exceed $500,000.
8.2 Remedies. Upon the occurrence and during the continuance
of an Event of Default, Banks, acting through Agent, shall have all of the
following rights and remedies:
(a) All obligations and indebtedness hereunder may,
at the option of Agent and without demand, notice, or legal process of
any kind, be declared, and immediately shall become, due and payable;
(b) The Loans shall bear interest at the Default
Rate;
(c) All of the rights and remedies of a secured party
under the California Commercial Code or other applicable law, all of
which rights and remedies shall be cumulative, and not exclusive, to
the extent permitted by law, in addition to any other rights and
remedies contained in this Agreement or in any of the documents or
agreements executed in connection herewith or which Agent and Banks may
otherwise have under any applicable law or in equity;
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(d) The right to (i) peacefully enter upon the
premises of Borrowers or Guarantor or any other place or places where
the Collateral is located, without any obligation to pay rent to
Borrowers, Guarantor or any other person, through self-help and without
judicial process or first obtaining a final judgment or giving
Borrowers or Guarantor notice and opportunity for a hearing on the
validity of Agents' or Banks' claim, and remove the Collateral from
such premises and places to the premises of Agent or any agent of
Agent, for such time as Agent, may require to collect or liquidate the
Collateral, and/or (ii) require Borrowers and Guarantor to assemble and
deliver the Collateral to Agent at a place to be designated by Agent;
(e) The right to (i) open Borrowers' and Guarantor's
mail and collect any and all amounts due from Account Debtors or direct
that Borrowers' and Guarantor's mail be diverted to a post office box
or other location as determined by Agent, (ii) notify Account Debtors
that the Accounts Receivable have been assigned to Agent and that Agent
has a security interest therein and (iii) direct such Account Debtors
to make all payments due from them upon the Accounts Receivable,
directly to Agent or to a lock box designated by Agent. Agent shall
promptly furnish Borrowers with a copy of any such notice sent and
Borrowers hereby agree that any such notice in Agent's sole discretion,
may be sent on Agent's stationery, in which event, Borrowers shall,
upon demand, co-sign such notice with Agent; and
(f) The right to sell, lease or to otherwise dispose
of all or any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or
sales, in lots or in bulk, for cash or on credit, all as Agent, in its
sole discretion, may deem advisable. At any such sale or sales of the
Collateral, the Collateral need not be in view of those present and
attending the sale, nor at the same location at which the sale is being
conducted. Agent shall have the right to conduct such sales on
Borrowers' or Guarantor's premises or elsewhere and shall have the
right to use Borrowers' or Guarantor's premises without charge for such
sales for such time or times as Agent may see fit. Agent is hereby
granted a license or other right to use, without charge, Borrowers' and
Guarantor's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrowers' and
Guarantor's rights under all licenses and all franchise agreements
shall inure to Agent's benefit but Agent shall have no obligations
thereunder. Agent may purchase all or any part of the Collateral at
public or, if permitted by law, private sale and, in lieu of actual
payment of such purchase price, may setoff the amount of such price
against amounts due under this Agreement. The proceeds realized from
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the sale of any Collateral shall be applied first to the costs and
expenses, including reasonable attorneys' fees, incurred by Agent and
Banks for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second to
interest due upon the Loans; and third to the principal of the Loans.
Agent shall account to Borrowers for any surplus. If any deficiency
shall arise, Borrowers and Guarantor shall remain liable to Agent and
Banks therefor.
8.3 Costs and Expenses. Agent and Banks shall be entitled to
recover all costs, expenses, and reasonable attorneys' fees (including any
allocated costs of in-house counsel) in connection with the administering or
enforcing of this Agreement following the occurrence and during the continuance
of any Event of Default, whether or not an action is filed.
9. PARTICIPATIONS; AGENCY; AMENDMENT, CONSENTS AND WAIVERS; OTHER
EXTENSIONS OF CREDIT.
9.1 Participations.
(a) As used herein, an "Institutional Lender" means
any bank or other financial institution having (or whose parent has)
capital and surplus of not less than $100,000,000 and which makes
commercial loans on an ongoing basis in the ordinary course of its
business. Each Bank may, with the prior written consent of Agent (which
consent shall not be unreasonably withheld), at any time sell to one or
more banks or other entities ("Participants") participating interests
in all or any portion of its Commitments and advances or any other
interest of such Bank hereunder and under the Loan Documents (in
respect of any Bank, its "Credit Exposure"). If the proposed
Participant is not an Institutional Lender, Agent may withhold its
consent in its sole discretion. In the event of any such sale by a Bank
of participating interests to a Participant, such Bank's obligations
under this Agreement shall remain unchanged, such Bank shall remain
solely responsible for the performance thereof, such Bank's Credit
Exposure shall not decrease, and Borrowers and Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement. Each Bank shall from time
to time upon request of Borrowers notify Borrowers of the identity of
any Participants with respect to its Credit Exposure hereunder;
provided, however, that failure to provide such notice will not affect
the validity of such participation. Borrowers agree that if amounts
outstanding under this Agreement are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an
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Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement,
provided that such right of set-off shall be subject to the obligation
of such Participant to share with the Banks, and the Banks agree to
share with such Participant, as provided in Section 9.4. Each Bank
agrees that any agreement between such Bank and any Participant in
respect of such participating interest shall not restrict such Bank's
right to approve or agree to any amendment, restatement, supplement or
other modification to, waiver of, or consent under, this Agreement
except to extend the Maturity Date, reduce the rate of interest or
fees, extend the time of payment of interest thereon, reduce the
principal amount thereof, or release all or substantially all of any
Collateral. Notwithstanding the foregoing, or anything else contained
herein which may be construed to the contrary, Sumitomo, so long as it
is Agent, and Manufacturers, if it should ever become agent, shall at
all times retain (and not participate out) the lesser of (i) 25% of the
total indebtedness owing under the Notes, or (ii) the amount retained
by the other Bank that is a party to this Agreement.
(b) Notwithstanding any other provision contained in
this Agreement or any of the Loan Documents to the contrary, any Bank
may, upon written notice to Agent, Borrowers and the other Banks,
pledge all or any portion of its Notes to any Federal Reserve Bank or
the United States Treasury as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System
and any Operating Circular issued by such Federal Reserve Bank,
provided that any payment in respect of such pledged Notes made by
Borrowers to or for the account of the pledging Bank in accordance with
the terms of this Agreement shall satisfy Borrowers' obligations
hereunder in respect to such pledged Notes to the extent of such
payment. No such pledge shall release the pledging Bank from its
obligations hereunder.
(c) Borrowers and Guarantor authorize each Bank to
disclose to any Participant any and all financial information in such
Bank's possession concerning Borrowers and Guarantor and any subsidiary
of Borrowers and Guarantor which has been delivered to such Bank by
Borrowers or Agent pursuant to this Agreement or which has been
delivered to such Bank by Borrowers or Agent in connection with such
Bank's credit evaluation of Borrowers prior to entering into this
Agreement.
9.2 Agent.
(a) Appointment. Each Bank hereby designates and
appoints Sumitomo as its agent under this Agreement and the Loan
Documents, and each Bank hereby irrevocably authorizes Agent to take
such action or to refrain from taking such action on its behalf under
the provisions of this Agreement and the Loan Documents and to exercise
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such powers as are set forth herein or therein, together with such
other powers as are reasonably incidental thereto. Agent agrees to act
as such on the express conditions contained in this Section 9.2. The
provisions of this Section 9.2 are solely for the benefit of Agent and
Banks, and neither Borrowers nor Guarantor shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing
its functions and duties under this Agreement, Agent shall act solely
as agent of the Banks and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust
with or for Borrowers or Guarantor. Agent may perform any of its duties
hereunder, or under the Loan Documents, by or through its agents or
employees.
(b) Nature of Duties as Agent. Agent shall have no
duties or responsibilities except those expressly set forth in this
Agreement. The duties of Agent shall be mechanical and administrative
in nature. Agent shall not have by reason of this Agreement a fiduciary
relationship with any Bank. Nothing in this Agreement, the Loan
Documents or any other agreements, express or implied, is intended to
or shall be construed to impose upon Agent any obligations in respect
of this Agreement, the Loan Documents or any other agreement except as
expressly set forth herein or therein. Each Bank shall make its own
independent investigation of the financial condition and affairs of
Borrowers, Guarantor and their subsidiaries in connection with the
extensions of credit hereunder and shall make its own appraisal of the
creditworthiness of Borrowers, Guarantor and their subsidiaries, and
Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other
information with respect thereto (other than financial information
received by it in accordance herewith), whether coming into its
possession before the date hereof or at any time or times hereafter. If
Agent seeks the consent or approval of any Bank to the taking or
refraining from taking any action hereunder, then Agent shall send
notice thereof to each Bank. Notwithstanding the foregoing, Agent shall
notify the Banks with reasonable promptness of any Event of Default of
which Agent has actual knowledge.
(c) Neither Agent nor any of its officers, directors,
employees or agents shall be liable to any Bank for any action taken or
omitted by it hereunder or under any other agreement, or in connection
herewith or therewith, except that Agent shall be liable with respect
to its own gross negligence or willful misconduct. Agent shall not be
liable for any apportionment or distribution of payments made by it in
good faith and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse of
any Bank to whom payment was due but not made shall be to recover from
the other Banks any payment in excess of the amount to which it is
determined to be entitled (and such other Banks hereby agree to return
to such Bank any such erroneous payments received by them). In
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performing its functions and duties hereunder, Agent shall exercise the
same care which it would in dealing with loans for its own account, but
Agent shall not be responsible to any Bank for any recitals,
statements, representations or warranties herein or for the execution
(other than by Agent), effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any
other Loan Documents or any other agreement, or the transactions
contemplated hereby or thereby, or for the financial condition of
Borrowers or Guarantor or any of their subsidiaries or affiliates.
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions
of this Agreement or any agreement or the financial condition of
Borrowers, or Guarantor or any of their subsidiaries or affiliates, or
the existence or possible existence of any Event of Default or any
event which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default. Agent may at any time request
instructions from Banks with respect to any actions or approvals which
by the terms of this Agreement or of any agreement Agent is permitted
or required to take or to grant, and if such instructions are promptly
requested, Agent shall be absolutely entitled to refrain from taking
any action or to withhold any approval and shall not be under any
liability whatsoever to any person or entity for refraining from any
action or withholding any approval under this Agreement or any other
agreement until it shall have received such instructions from all
Banks. Without limiting the foregoing, no Bank shall have any right of
action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement, any of the Loan Documents
or any other agreement in accordance with the instructions of all
Banks.
(d) Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any
telephone message or other communication (including any writing, telex,
telecopy or telegram) believed by it in good faith to be genuine and
correct and to have been signed, sent or made by the proper person or
entity, and with respect to all matters pertaining to this Agreement,
the Loan Documents or any other agreement and its duties hereunder or
thereunder, upon advice of counsel selected by it. Agent shall be
entitled to rely upon the advice of legal counsel, independent
accountants and other experts selected by Agent in its sole discretion.
(e) Banks will reimburse and indemnify Agent for and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, advances or
disbursements of any kind or nature whatsoever which may be imposed on,
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incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement, the Loan Documents or any other
agreement or any action taken or omitted by Agent under this Agreement,
the Loan Documents or any other agreement, in proportion to each Bank's
Pro Rata Share; provided, however, that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements
resulting from Agent's gross negligence or willful misconduct; and
provided further, however, that Agent shall distribute to each of the
Banks in accordance with their Pro Rata Share all net payments and
recoveries (after deduction of expenses) received by Agent from
Borrowers and Guarantor. The obligations of the Banks under this
Section 9.2 shall survive the payment in full of all extensions of
credit hereunder and the termination of this Agreement.
(f) With respect to the extensions of credit made by
it, Agent shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Bank. The term "Banks" or
any similar terms shall, unless the context clearly otherwise
indicates, include Agent in its individual capacity as a Bank. Agent
may lend money to, and generally engage in any kind of banking, trust
or other business with Borrowers as if it were not acting as Agent
pursuant hereto.
(g) Agent may resign from the performance of all its
functions and duties hereunder at any time by giving at least thirty
(30) Banking Days' prior written notice to Borrowers and Banks. Such
resignation shall take effect upon the acceptance by a successor Agent
of appointment pursuant to clause (h) below or as otherwise provided
below.
(h) Upon any such notice of resignation pursuant to
clause (g) above, the Banks shall appoint a successor Agent. If a
successor Agent shall not have been so appointed within said thirty
(30) Banking Day period, the retiring Agent, upon notice to Borrowers,
shall then appoint a successor Agent who shall serve as Agent until
such time, if any, as Banks appoint a successor Agent as provided
above.
(i) Upon the acceptance by a successor Agent of any
appointment as an Agent under this Agreement and the Loan Documents,
such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's
resignation as Agent under this Agreement, the provisions of this
Section 9.2 shall inure to its benefit as to any actions taken or
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omitted to be taken by it while it was Agent under this Agreement.
Notwithstanding anything contained herein which may be construed to the
contrary, if Sumitomo is acquired by or merged into another financial
institution which does not have at least $100,000,000 in
capitalization, Manufacturers may, at its option, within 45 days of
such acquisition or merger, elect to become Agent hereunder by sending
written notice to Sumitomo's successor and to Borrowers that
Manufacturers has elected to become the Agent hereunder pursuant to the
provisions of this section, and Manufacturers will, after the sending
of such notice, be the Agent hereunder and shall have all the rights
and responsibilities of the Agent hereunder.
(j) Banks hereby irrevocably authorize Agent, at its
option and in its discretion, to release any lien granted to or held by
Agent upon any property covered by this Agreement or the Security
Documents (A) upon termination of Bank's obligations hereunder and
payment and satisfaction of all liabilities of Borrowers under the
Notes; or (B) constituting property being sold or disposed of if
Borrowers certify to Agent that the sale or disposition is made in
compliance with the provisions of this Agreement (and Agent may rely in
good faith conclusively on any such certificate, without further
inquiry); or (C) constituting property leased to Borrowers under a
lease which has expired or been terminated in a transaction permitted
under this Agreement or is about to expire and which has not been, and
is not intended by such Borrower to be, renewed or extended. Upon
request by Agent at any time, any Bank will confirm in writing the
Agent's authority to release particular types or items of property
covered by this Agreement or the Loan Documents pursuant to this
Section 9.2(j) or Section 9.3.
(x) Without in any manner limiting Agent's
authority to act without any specific or further authorization
or consent by the Banks (as set forth in Section 9.2(j), each
Bank agrees to confirm in writing, upon request by Borrowers,
the authority to release any property covered by this
Agreement and the Security Documents conferred upon Agent
under clauses (A) through (C) of Section 9.2(j) and under
Section 9.3. So long as no Event of Default is then
continuing, upon receipt by Agent of confirmation from the
Banks of their authority to release any particular item or
types of property covered by this Agreement or the Loan
Documents, and upon at least five (5) Banking Days' prior
written request by Borrowers, Agent shall (and is hereby
irrevocably authorized by the Banks to) execute such documents
as may be necessary to evidence the release of the liens
granted to Agent for the benefit of the Banks herein or
pursuant hereto upon such collateral; provided, however, that
(A) Agent shall not be required to execute any such document
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on terms which, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence
other than the release of such liens without recourse or
warranty, and (B) such release shall not in any manner
discharge, affect or impair the obligations of Borrowers
hereunder.
(y) Agent shall have no obligation
whatsoever to any Bank or any other person or entity to assure
that the property covered by this Agreement or any of the
Security Documents exists or is owned by Borrowers, or is
cared for, protected or insured or has been encumbered or that
the liens granted to Agent pursuant to the Security Documents
have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this
Section 9.2 or elsewhere in this Agreement or in any of the
Security Documents, it being understood and agreed that in
respect of the property covered by any of the Security
Documents or any act, omission or event related thereto, Agent
may act in any manner Agent deems appropriate, in its sole
discretion, given Agent's own interest in property covered by
any of the Security Documents as one of the Banks and that
Agent shall have no duty or liability whatsoever to any of the
other Banks; provided, that Agent shall exercise the same care
which it would exercise in dealing with loans for its own
account.
(k) Each Bank hereby appoints each other Bank as
agent for the purpose of perfecting security interests in assets which,
in accordance with Article 9 of the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession. Should
any Bank (other than Agent) obtain possession of any such collateral,
such Bank shall notify Agent thereof and, promptly upon Agent's request
therefor, shall deliver such collateral to Agent or in accordance with
Agent's instructions. Each Bank agrees that it will not have any right
individually to enforce or seek to enforce any right or remedy under
this Agreement or any of the Security Documents or to realize upon any
collateral securing any extensions of credit hereunder, it being
understood and agreed that such rights and remedies may be exercised
only by Agent.
9.3 Amendments; Consents and Waivers for Certain Actions. No
amendment, modification, termination or waiver of any provision of this
Agreement or consent to any departure by Borrowers therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Borrowers and
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by the Banks holding at least two-thirds (66 2/3%) of the outstanding amounts of
the Loans; provided, that no amendment, modification, termination or waiver
shall, unless in writing and signed by all Banks or, in the case of subsection
(a) below, the affected Bank, do any of the following:
(a) increase the Commitment of any Bank;
(b) reduce the principal of, rate of interest on or
fees payable with respect to any extensions of credit hereunder;
(c) postpone the Maturity Date or any date fixed for
any payment with respect to any amount of principal, interest or fees
with respect to any extensions of credit hereunder;
(d) amend or waive any of the covenants contained in
Article 6 hereof, or this Section 9.3;
(e) consent to the assignment or other transfer by
Borrowers of any of their rights and obligations under this Agreement
or any of the Loan Documents;
(f) except as specified in section 9.2(j) above,
release any material portion of the Collateral; or
(g) waive any material condition precedent to any
borrowing hereunder.
Each amendment, modification, termination or waiver shall be effective only in
the specific instance and for the specific purpose for which it was given. No
amendment, modification, termination or waiver shall be required for Agent to
accept from the Borrowers additional collateral. No notice to or demand on
Borrowers not required by the terms hereof in any case shall entitle Borrowers
to any other or further notice or demand in similar or other circumstances.
9.4 Set Off and Sharing of Payments. In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any Event of
Default, each Bank is hereby authorized by Borrowers at any time or from time to
time, with reasonably prompt subsequent notice to Borrowers (any prior or
contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (a) balances (including, without
limitation, all account balances, whether provisional or final and whether or
-55-
not collected or available, but expressly excluding any trust funds) held by
such Bank at any of its offices for the account of Borrowers (regardless of
whether such balances are then due to Borrowers) and (b) other property held or
owing by such Bank to or for the credit or for the account of Borrowers, against
and on account of any amounts owed by Borrowers hereunder which are not paid
when due; provided, however, that at any time that there exists any real
property collateral for the Loans or any other obligations of Borrowers or
Guarantor under the Loan Documents, no Bank shall exercise any right of setoff
without the prior written consent of each other Bank.
10. MISCELLANEOUS.
10.1 GAAP. Except as otherwise stated in this Agreement, all
financial information provided to Agent and all financial covenants will be made
under generally accepted accounting principles consistently applied.
10.2 California Law. This Agreement is governed by California
law without reference to its conflict of laws principles.
10.3 Successors and Assigns. This Agreement is binding on
Borrowers', Guarantor's, Agent's and Banks' successors and assignees. Borrowers
agree that they may not assign this Agreement without the prior written consent
of Agent and Banks. As used herein, including for purposes of obtaining interest
rate quotes or making interest rate determinations, the term "Sumitomo", "Agent"
or "Manufacturers" shall mean and include Sumitomo's, Agent's and
Manufacturers', respectively, successors, including without limitation
successors by merger or acquisition.
10.4 Severability; Waivers; Interpretation. If any part of
this Agreement is not enforceable, the rest of the Agreement may be enforced. No
failure on the part of Agent to exercise, and no delay in exercising, any right,
power, or remedy under this Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise of any right under this Agreement preclude
any other or further exercise thereof or the exercise of any other right. Any
consent or waiver under this Agreement must be in writing. If Agent waives a
default, it may enforce a later default. Wherever the context so requires, all
words used in the singular will be construed to have been used in the plural,
and vice versa. The word "include(s)" means "include(s), without limitation,"
and the word "including" means "including, but not limited to." No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Agreement. Time is of the essence in the performance of
this Agreement by Borrowers and Guarantor. The exhibits to this Agreement are
hereby incorporated in this Agreement. The language of this Agreement shall be
construed as a whole according to its fair meaning, and not strictly for or
-56-
against any party (and the parties hereto acknowledge that they participated in
the negotiation and drafting of this Agreement, and that any ambiguity shall not
be construed against any party).
10.5 Costs and Expenses. In addition to the recovery of costs
and expenses upon an occurrence of an Event of Default, if Agent or Banks incur
expenses in connection with the preparation, administering or enforcing of this
Agreement, Borrowers shall pay Agent and Banks all such costs and reasonable
attorneys' fees, including any allocated costs of in-house counsel.
10.6 Entire Agreement. This Agreement and the Loan Documents,
collectively:
(a) represent the sum of the understandings and
agreements between Agent, Banks and Borrowers concerning this credit;
and
(b) replace any prior oral or written agreements
between Agent, Banks and Borrowers concerning this credit; and
(c) are intended by Agent, Banks and Borrowers as the
final, complete and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any
other agreements required by this Agreement, this Agreement will prevail.
10.7 Notices. Except as otherwise expressly provided elsewhere
in this Agreement or in the Loan Documents: (a) all notices, requests, demands,
directions and other communications provided for hereunder or under any of the
Loan Documents must be in writing and must be mailed, telecopied or personally
delivered to the appropriate party at the address set forth on the signature
pages of this Agreement or, as to any party, at any other address as may be
designated by it in a written notice sent to all other parties in accordance
with this Section 10.7; and (b) any notice, request, demand, direction or other
communication given by telecopier, must be confirmed within 48 hours by letter
mailed or delivered to the appropriate party at its respective address. Except
as otherwise expressly provided elsewhere herein or in any Loan Document, if any
notice, request, demand, direction or other communication required or permitted
hereunder or under any Loan Document is given by mail it will be effective on
the earlier of receipt or the third calendar day after deposit in the United
States mail with first class or airmail postage prepaid; if given by telecopier,
upon electronic confirmation of receipt, and if given after 4:00 p.m., Los
Angeles time, effective on the next Banking Day; or if given by personal
delivery, when delivered.
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10.8 Headings. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement.
10.9 Counterparts. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
10.10 Further Assurances. Borrowers shall, at their expense
and without expense to Agent, do, execute and deliver such further acts and
documents as Agent from time to time reasonably requires to assure Agent the
rights created or intended to be created by this Agreement, and for carrying out
the intention or facilitating the performance of the terms of this Agreement or
any document executed in connection with this Agreement.
10.11 Hazardous Waste Indemnification. Borrowers will
indemnify and hold harmless Agent and Banks from any loss or liability directly
or indirectly arising out of the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal or presence of a
hazardous substance by Borrowers or at Borrowers' premises or on Borrowers'
behalf. This indemnity will apply whether the hazardous substance is on, under
or about Borrowers' property or operations or property leased to Borrowers. The
indemnity includes but is not limited to reasonable attorneys' fees (including
the reasonable estimate of the allocated cost of in-house counsel and staff).
The indemnity extends to Agent, each Bank, their parents and subsidiaries and
all of their directors, officers, employees, agents, successors, attorneys and
assigns. For these purposes, the term "hazardous substances" means any substance
which is or becomes designated as "hazardous" or "toxic" under any federal,
state or local law. This indemnity will survive repayment of Borrowers'
obligations hereunder.
Upon demand by Agent, Borrowers will defend any investigation,
action or proceeding alleging the presence of any hazardous substance in any
such location, which affects any of Borrowers' property or operations or
property leased to Borrowers or which is brought or commenced against Agent in
respect of Borrowers, whether alone or together with Borrowers or any other
person, all at Borrowers' own cost and by counsel to be approved by Agent in the
exercise of its reasonable judgment. If Borrowers fail to so defend the
investigation, action, or proceeding, then Agent may elect to conduct its own
defense at the expense of Borrowers.
10.12 Waiver of Jury Trial. The parties to this Agreement
acknowledge that jury trials often entail additional expenses and delays not
occasioned by nonjury trials. The parties to this Agreement further agree and
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stipulate that a fair trial may be had before a state or federal judge by means
of a bench trial without a jury. In view of the foregoing, and as a specifically
negotiated provision of this Agreement, each party to this Agreement hereby
expressly waives any right to trial by jury of any claim, demand, action or
cause of action (1) arising under this Agreement or any other instrument,
document or agreement executed or delivered in connection herewith, or (2) in
any way connected with or related or incidental to the dealings of the parties
hereto or any of them with respect to this Agreement or any other instrument,
document or agreement executed or delivered in connection herewith, or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether sounding in contract or tort or otherwise; and
each party hereby agrees and consents that any such claim, demand, action or
cause of action shall be decided by court trial without a jury, and that any
party to this Agreement may file an original counterpart or a copy of this
section with any court as written evidence of the consent of the parties hereto
to the waiver of their right to trial by jury.
10.13 Joint Borrower Provisions. Each Borrower acknowledges
and agrees that it shall be jointly and severally liable for the Revolving Line
of Credit, the Term Loan and all other indebtedness and obligations arising
under this Agreement, the Notes, and all of the other Loan Documents
(collectively, the "Obligations"). In furtherance thereof, each Borrower
acknowledges and agrees as follows:
(a) For the purpose of implementing the joint
borrower provisions of the Loan Documents, each Borrower hereby
irrevocably appoints the other as its agent and attorney-in-fact for
all purposes of the Loan Documents, including the giving and receiving
of notices and other communications.
(b) To induce the Banks to provide the Borrowers with
the Revolving Line of Credit and the Term Loan, and in consideration
thereof, each Borrower hereby agrees to indemnify the Agent and the
Banks against, and hold the Agent and Banks harmless from, any and all
liabilities, expenses, losses, damages and/or claims of damage or
injury asserted against the Agent and/or Banks by either Borrower or by
any other individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture or governmental authority (collectively, a
"Person") arising from or incurred by reason of (i) reliance by the
Agent or Banks on any requests or instructions from either Borrower, or
(ii) any other action taken by the Agent or Banks in good faith with
respect to this Agreement or the other Loan Documents.
(c) Each Borrower acknowledges that the liens and
security interests created or granted herein and by the other Loan
Documents will secure Obligations of both Borrowers under the Loan
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Documents and, in full recognition of that fact, each Borrower consents
and agrees that the Agent and Banks may, at any time and from time to
time, without notice or demand, and without affecting the
enforceability or security hereof or of any other Loan Document:
(i) agree with the Borrowers to supplement,
modify, amend, extend, renew, accelerate, or otherwise change
the time for payment or the terms of the Obligations or any
part thereof, including any increase or decrease of the
rate(s) of interest thereon;
(ii) agree with the Borrowers to supplement,
modify, amend or waive, or enter into or give any agreement,
approval or consent with respect to, the Obligations or any
part thereof or any of the Loan Documents or any additional
security or guaranties, or any condition, covenant, default,
remedy, right, representation or term thereof or thereunder;
(iii) accept new or additional instruments,
documents or agreements in exchange for or relative to any of
the Loan Documents or the Obligations or any part thereof;
(iv) accept partial payments on the
Obligations;
(v) receive and hold additional security or
guaranties for the Obligations or any part thereof;
(vi) release, reconvey, terminate, waive,
abandon, subordinate, exchange, substitute, transfer and
enforce any security for or guaranties of the Obligations, and
apply any security and direct the order or manner of sale
thereof as Agent, in its sole and absolute discretion may
determine;
(vii) release any Person or entity or any
guarantor from any personal liability with respect to the
Obligations or any part thereof;
(viii) settle, release on terms satisfactory
to the Agent or Banks or by operation of applicable laws or
otherwise liquidate or enforce any Obligations and any
security therefor or guaranty thereof in any manner, consent
to the transfer of any such security and bid and purchase at
any sale; and
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(ix) consent to the merger, change or any
other restructuring or termination of the corporate existence
of either Borrower or any other Person, and correspondingly
restructure the obligations of such Borrower or other Person,
and any such merger, change, restructuring or termination
shall not affect the liability of either Borrower or the
continuing existence of any lien or security interest
hereunder, under any other Loan Document to which either
Borrower is a party or the enforceability hereof or thereof
with respect to all or any part of the Obligations.
(d) Upon the occurrence of and during the continuance
of any Event of Default, the Agent or Banks may enforce this Agreement
and the other Loan Documents independently as to each Borrower and
independently of any other remedy or security the Agent or Banks at any
time may have or hold in connection with the Obligations, and in
collecting on the Obligations it shall not be necessary for the Agent
or Banks to marshal assets in favor of either Borrower or any other
Person or to proceed upon or against and/or exhaust any other security
or remedy before proceeding to enforce this Agreement and the other
Loan Documents. Each Borrower expressly waives any right to require the
Agent or Banks, in connection with the Agent's or Bank's efforts to
obtain repayment of the Obligations, to marshal assets in favor of
either Borrower or any other Person or to proceed against any other
Person or any collateral provided by any other Person, and agrees that
the Agent and Banks may proceed against any Persons and/or collateral
in such order as they shall determine in their sole and absolute
discretion in connection with the Bank's efforts to obtain repayment of
the Obligations. Agent and Banks may file a separate action or actions
against each Borrower to enforce the Obligations, whether action is
brought or prosecuted with respect to any other security or against any
other Person, or whether any other Person is joined in any such action
or actions. Each Borrower agrees that Agents and Banks, each Borrower
and/or any other Person may deal with each other in connection with the
Obligations or otherwise, or alter any contracts or agreements now or
hereafter existing between any of them, in any manner whatsoever, all
without in any way altering or affecting the security of this Agreement
or the other Loan Documents. The rights of the Agent and Banks
hereunder and under the other Loan Documents shall be reinstated and
revived, and the enforceability of this Agreement and the other Loan
Documents shall continue, with respect to any amount at any time paid
on account of the Obligations which thereafter shall be required to be
restored or returned by the Agent or Banks as a result of the
bankruptcy, insolvency or reorganization of either Borrower or any
other Person, or otherwise, all as though such amount had not been
paid. The enforceability of this Agreement and the other Loan Documents
at all times shall remain effective even though any or all Obligations,
-61-
or any other security or guaranty therefor, may be or hereafter may
become invalid or otherwise unenforceable as against either Borrower or
any other Person and whether or not either Borrower or any other Person
shall have any personal liability with respect thereto. Each Borrower
expressly waives any and all defenses to the enforcement of its
obligations under the Loan Documents now or hereafter arising or
asserted by reason of (i) any disability or other defense of either
Borrower or any other Person with respect to the Obligations, (ii) the
unenforceability or invalidity of any security or guaranty for the
Obligations or the lack of perfection or continuing perfection or
failure of priority of any security for the Obligations, (iii) the
cessation for any cause whatsoever of the liability of either Borrower
or any other Person (other than by reason of the full and final payment
and performance of all Obligations), (iv) any failure of the Agent or
Banks to marshal assets in favor of either of the Borrowers or any
other Person, (v) any failure of the Agent or Banks to give notice of
sale or other disposition of any Collateral for the Obligations to
either Borrower or to any other Person or any defect in any notice that
may be given in connection with any such sale or disposition, (vi) any
failure of the Agent or Banks to comply in any non-material respect
with applicable laws in connection with the sale or other disposition
of any Collateral or other security for any Obligation, (vii) any act
or omission of the Agent or Banks or others that directly or indirectly
results in or aids the discharge or release of either Borrower or of
any other Person or of any of the Obligations or any other security or
guaranty therefor by operation of law or otherwise, (viii) any law
which provides that the obligation of a surety or guarantor must
neither be larger in amount nor in other respects more burdensome than
that of the principal or which reduces a surety's or guarantor's
obligation in proportion to the principal obligation, (ix) any failure
of the Agent or Banks to file or enforce a claim in any bankruptcy or
other proceeding with respect to any Person, (x) the election by the
Agent or Banks, in any bankruptcy proceeding of any Person, of the
application or non-application of Section 1111(b)(2) of the United
States Bankruptcy Code, (xi) any extension of credit or the grant of
any lien under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code except
to extent otherwise provided in this Agreement, (xii) any use of cash
collateral under Section 363 of the United States Bankruptcy Code,
(xiii) any agreement or stipulation with respect to the provision of
adequate protection in any bankruptcy proceeding of any Person, (xiv)
the avoidance of any lien or security interest in favor of the Agent or
Banks securing the Obligations for any reason, or (xv) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
liquidation or dissolution proceeding commenced by or against any
Person, including any discharge of, or bar or stay against collecting,
all or any of the Obligations (or any interest thereon) in or as a
result of any such proceeding.
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(e) The Borrowers represent and warrant to the Agent
and the Banks that they have established adequate means of obtaining
from each other, on a continuing basis, financial and other information
pertaining to their respective businesses, operations and condition
(financial and otherwise) and their respective properties, and each now
is and hereafter will be completely familiar with the businesses,
operations and condition (financial and otherwise) of the other and
their respective properties. Each Borrower hereby expressly waives and
relinquishes any duty on the part of Agent and the Banks to disclose to
such Borrower any matter, fact or thing related to the businesses,
operations or condition (financial or otherwise) of the other Borrower
or the other Borrower's properties, whether now known or hereafter
known by the Agent or Banks during the life of this Agreement. With
respect to any of the Obligations, the Agent or Banks need not inquire
into the powers of either Borrower or the officers, employees or other
persons acting or purporting to act on such Borrower's behalf.
(f) Notwithstanding anything to the contrary
elsewhere contained herein or in any other Loan Document to which
either Borrower is a party, with respect to the Obligations, each
Borrower hereby waives with respect to the other Borrower and its
successors and assigns (including any surety) and any other Person any
and all rights at law or in equity, to subrogation, to reimbursement,
to exoneration, to contribution, to setoff, to any other rights and
defenses available to it by reason of California Civil Code Sections
2787 and 2855, inclusive, or to any other rights that could accrue to a
surety against a principal, to a guarantor against a maker or obligor,
to an accommodation party against the party accommodated, or to a
holder or transferee against a maker and which each of them may have or
hereafter acquire against the other or any other Person in connection
with or as a result of such Borrower's execution, delivery and/or
performance of this Agreement or any other Loan Document to which it is
a party until the Obligations are paid and performed in full. Each
Borrower agrees that it shall not have or assert any such rights
against the other Borrower or the other Borrower's successors and
assigns or any other Person (including any surety), either directly or
as an attempted setoff to any action commenced against such Borrower by
the other Borrower (as borrower or in any other capacity) or any other
Person until all the Obligations are paid and performed in full. Each
Borrower hereby acknowledges and agrees that this waiver is intended to
benefit the Bank and shall not limit or otherwise affect either
Borrower's liability under this Agreement or any other Loan Document to
which it is a party, or the enforceability hereof or thereof.
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(g) Each Borrower warrants and agrees that each of
the waivers and consents set forth herein is made with full knowledge
of its significance and consequences, with the understanding that
events giving rise to any defense waived may diminish, destroy or
otherwise adversely affect rights which each otherwise may have against
the other, against the Agent or the Banks or others, or against any
Collateral. If any of the waivers or consents herein are determined to
be contrary to any applicable law or public policy, such waivers and
consents shall be effective to the maximum extent permitted by law.
10.14 Existing Agreement. If not sooner terminated in
accordance with the terms thereof, any and all obligations of Sumitomo to
advance funds under the Existing Agreement, and any other obligations of
Sumitomo under the Existing Agreement and the documents executed in connection
therewith, shall terminate concurrently with the first advance made under this
Agreement (provided that all of Sumitomo's rights thereunder shall remain intact
until it has been repaid in full in connection therewith).
10.15 Inter-Affiliate Indebtedness. Borrowers and Guarantor
agree that all indebtedness and obligations owing between the Borrowers and/or
between either of the Borrowers and Guarantor, or owing by any subsidiaries to
Guarantor, shall at all times be subject and subordinate to all indebtedness and
obligations owing by Borrowers and Guarantor to the Banks hereunder, and under
the Notes and other Loan Documents.
This Agreement is executed as of the date stated at the top
of the first page.
"Borrowers"
AB PLASTICS CORPORATION, a California corporation
By: ___________________________________
___________________________________
[Printed Name and Title]
By: ___________________________________
___________________________________
[Printed Name and Title]
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M.O.S. PLASTICS, INC., a California
corporation
By: ___________________________________
___________________________________
[Printed Name and Title]
By: ___________________________________
___________________________________
[Printed Name and Title]
Address where notices to Borrowers are to be
sent:
00000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
-00-
"Xxxxxxxxx"
XXXXXXX PLASTICS & TECHNOLOGIES, INC.,
a Delaware corporation
By: ___________________________________
___________________________________
[Printed Name and Title]
By: ___________________________________
___________________________________
[Printed Name and Title]
Address where notices to Guarantor
are to be sent:
00000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
"Banks"
THE SUMITOMO BANK OF CALIFORNIA,
a California banking corporation, in its
individual capacity
By: ____________________________________
Xxxxxx Xxxxxx, Vice President
Address where notices to Sumitomo
are to be sent:
The Sumitomo Bank of California
00000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Manager
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
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MANUFACTURERS BANK, a California
banking corporation
By: ___________________________________
___________________________________
[Printed Name and Title]
Address where notices to
Manufacturers are to be sent:
Manufacturers Bank
000 Xxxxx Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
"Agent"
THE SUMITOMO BANK OF CALIFORNIA, a
California banking corporation, as
Agent for itself and Manufacturers
Bank
By: ___________________________________
Xxxxxx Xxxxxx, Vice President
Address where notices to Agent are
to be sent:
The Sumitomo Bank of California
00000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn.: Manager
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
-00-
XXXXXXX X-0
REVOLVING LINE NOTE
(Sumitomo)
$3,000,000.00 _____________, 1998
_________________, California
FOR VALUE RECEIVED, the undersigned jointly and severally
promise to pay to the order of The Sumitomo Bank of California, a California
banking corporation (the "Bank"), the principal amount of THREE MILLION AND
NO/100 DOLLARS ($3,000,000.00) or such lesser aggregate amount of advances under
the Revolving Line of Credit as may be made by the Bank pursuant to the Loan
Agreement referred to below, together with interest on the principal amount of
each advance by Bank under the Revolving Line of Credit remaining unpaid from
time to time from and including the date of each such advance by Bank under the
Revolving Line of Credit until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Commercial Loan Agreement dated as of
even date herewith, by and among the undersigned, as Borrowers, the Bank and
Manufacturers Bank, collectively as the "Banks", and the Bank as the "Agent"
(the "Loan Agreement"). Terms defined in the Loan Agreement and not otherwise
defined herein are used herein with the meanings defined for those terms in the
Loan Agreement. This is one of the Revolving Line Notes referred to in the Loan
Agreement, and any holder hereof is entitled to all of the rights, remedies,
benefits and privileges provided for in the Loan Agreement as originally
executed or as it may from time to time be supplemented, modified or amended.
The Loan Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events upon the terms
and conditions therein specified.
The principal indebtedness evidenced by this Revolving Line
Note shall be payable as provided in the Loan Agreement and in any event on
January 2, 2003.
Interest shall be payable on the outstanding daily unpaid
principal amount of advances by the Bank under the Revolving Line of Credit from
and including the date of each advance until payment in full and shall accrue
and be payable at the rates and on the dates set forth in the Loan Agreement
both before and after default and before and after maturity and judgment, with
interest on overdue principal and interest to bear interest at the rate set
forth in Section 3.11 of the Loan Agreement, to the fullest extent permitted by
applicable law.
EXHIBIT A-1
Each payment hereunder shall be made to the Agent on behalf of
the Bank in immediately available funds not later than 1:00 p.m. (Los Angeles
time) on the day of payment (which must be a Banking Day). All payments received
after 1:00 p.m. (Los Angeles time) on any particular Banking Day shall be deemed
received on the next succeeding Banking Day. All payments shall be made in
lawful money of the United States of America.
The Bank shall use its best efforts to keep a record of
advances under the Revolving Line of Credit made by it and payments received by
it with respect to this Revolving Line Note, and, absent manifest error, such
record shall be presumptive evidence of the amounts owing under this Revolving
Line Note.
The undersigned hereby promise to pay all costs and expenses
of any rightful holder hereof incurred in collecting the undersigned's
obligations hereunder or in enforcing or attempting to enforce any of such
holder's rights hereunder, including reasonable attorneys' fees and
disbursements (including the allocated costs of in-house counsel), whether or
not an action is filed in connection therewith.
Each of the undersigned acknowledges and agrees that it shall
be jointly and severally liable for the indebtedness and obligations evidenced
by this Revolving Line Note. The joint borrower provisions contained in Section
10.13 of the Loan Agreement are hereby incorporated herein by this reference in
their entirety.
Subject to the provisions of the Loan Agreement, the
undersigned hereby waives presentment, demand for payment, dishonor, notice of
dishonor, protest, notice of protest and any other notice or formality, to the
fullest extent permitted by applicable law.
EXHIBIT A-1
This Revolving Line Note shall be delivered to and accepted by
the Bank in the State of California, and shall be governed by, and construed and
enforced in accordance with, the local laws thereof.
AB PLASTICS CORPORATION, M.O.S. PLASTICS, INC.,
a California corporation a California corporation
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
EXHIBIT X-0
XXXXXXX X-0
REVOLVING LINE NOTE
(Manufacturers)
$3,000,000.00 _____________, 1998
_______________, California
FOR VALUE RECEIVED, the undersigned jointly and severally
promise to pay to the order of Manufacturers Bank, a California banking
corporation (the "Bank"), the principal amount of THREE MILLION AND NO/100
DOLLARS ($3,000,000.00) or such lesser aggregate amount of advances under the
Revolving Line of Credit as may be made by the Bank pursuant to the Loan
Agreement referred to below, together with interest on the principal amount of
each advance by Bank under the Revolving Line of Credit remaining unpaid from
time to time from and including the date of each such advance by Bank under the
Revolving Line of Credit until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Commercial Loan Agreement dated as of
even date herewith, by and between the undersigned, as Borrowers, the Bank and
The Sumitomo Bank of California, collectively as the "Banks", and The Sumitomo
Bank of California as the "Agent" (the "Loan Agreement"). Terms defined in the
Loan Agreement and not otherwise defined herein are used herein with the
meanings defined for those terms in the Loan Agreement. This is one of the
Revolving Line Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for in
the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified or amended. The Loan Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events upon the terms and conditions therein specified.
The principal indebtedness evidenced by this Revolving Line
Note shall be payable as provided in the Loan Agreement and in any event on
January 2, 2003.
Interest shall be payable on the outstanding daily unpaid
principal amount of advances by the Bank under the Revolving Line of Credit from
and including the date of each advance until payment in full and shall accrue
and be payable at the rates and on the dates set forth in the Loan Agreement
both before and after default and before and after maturity and judgment, with
EXHIBIT A-2
interest on overdue principal and interest to bear interest at the rate set
forth in Section 3.11 of the Loan Agreement, to the fullest extent permitted by
applicable law.
Each payment hereunder shall be made to the Agent on behalf of
the Bank in immediately available funds not later than 1:00 p.m. (Los Angeles
time) on the day of payment (which must be a Banking Day). All payments received
after 1:00 p.m. (Los Angeles time) on any particular Banking Day shall be deemed
received on the next succeeding Banking Day. All payments shall be made in
lawful money of the United States of America.
The Bank shall use its best efforts to keep a record of
advances made by it under the Revolving Line of Credit made by it and payments
received by it with respect to this Revolving Line Note, and, absent manifest
error, such record shall be presumptive evidence of the amounts owing under this
Revolving Line Note.
The undersigned hereby promise to pay all costs and expenses
of any rightful holder hereof incurred in collecting the undersigned's
obligations hereunder or in enforcing or attempting to enforce any of such
holder's rights hereunder, including reasonable attorneys' fees and
disbursements (including the allocated costs of in-house counsel), whether or
not an action is filed in connection therewith.
Each of the undersigned acknowledges and agrees that it shall
be jointly and severally liable for the indebtedness and obligations evidenced
by this Revolving Line Note. The joint borrower provisions contained in Section
10.13 of the Loan Agreement are hereby incorporated herein by this reference in
their entirety.
Subject to the provisions of the Loan Agreement, the
undersigned hereby waives presentment, demand for payment, dishonor, notice of
dishonor, protest, notice of protest and any other notice or formality, to the
fullest extent permitted by applicable law.
EXHIBIT A-2
This Revolving Line Note shall be delivered to and accepted by
the Bank in the State of California, and shall be governed by, and construed and
enforced in accordance with, the local laws thereof.
AB PLASTICS CORPORATION, M.O.S. PLASTICS, INC.,
a California corporation a California corporation
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
EXHIBIT X-0
XXXXXXX X-0
XXXX LOAN NOTE
(Sumitomo)
$7,000,000.00 ___________, 1998
______________, California
FOR VALUE RECEIVED, the undersigned jointly and severally
promise to pay to the order of The Sumitomo Bank of California, a California
banking corporation (the "Bank"), the principal amount of SEVEN MILLION AND
NO/100 DOLLARS ($7,000,000.00) together with interest on the principal amount of
the Term Loan remaining unpaid from time to time from the date the Term Loan is
made until the date of payment in full, payable as hereinafter set forth.
Reference is made to the Commercial Loan Agreement dated as of
even date herewith, by and among the undersigned, as Borrowers, and the Bank and
Manufacturers Bank, collectively as the "Banks," and the Bank as the "Agent"
(the "Loan Agreement"). Terms defined in the Loan Agreement and not otherwise
defined herein are used herein with the meanings defined for those terms in the
Loan Agreement. This is one of the Term Loan Notes referred to in the Loan
Agreement, and any holder hereof is entitled to all of the rights, remedies,
benefits and privileges provided for in the Loan Agreement as originally
executed or as it may from time to time be supplemented, modified or amended.
The Loan Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events upon the terms
and conditions therein specified.
The principal indebtedness evidenced by this Term Loan Note
shall be payable as provided in the Loan Agreement and in any event on January
2, 2003.
Interest shall be payable on the outstanding daily unpaid
principal amount of the Term Loan from the date first written above until
payment in full and shall accrue and be payable at the rate and on the dates set
forth in the Loan Agreement both before and after default and before and after
maturity and judgment, with interest on overdue principal and interest to bear
interest at the rate set forth in Section 3.11 of the Loan Agreement, to the
fullest extent permitted by applicable law.
Each payment hereunder shall be made to the Agent on behalf of
the Bank in immediately available funds not later than 1:00 p.m. (Los Angeles
time) on the day of payment (which must be a Banking Day). All payments received
after 1:00 p.m. (Los Angeles time) on any particular Banking Day shall be deemed
EXHIBIT A-3
received on the next succeeding Banking Day. All payments shall be made in
lawful money of the United States of America.
The Bank shall use its best efforts to keep a record of
payments received by it with respect to this Term Loan Note, and, absent
manifest error, such record shall be presumptive evidence of the amounts owing
under this Term Loan Note.
The undersigned hereby promise to pay all costs and expenses
of any rightful holder hereof incurred in collecting the undersigned's
obligations hereunder or in enforcing or attempting to enforce any of such
holder's rights hereunder, including reasonable attorneys' fees and
disbursements (including the allocated costs of in-house counsel), whether or
not an action is filed in connection therewith.
Each of the undersigned acknowledges and agrees that it shall
be jointly and severally liable for the indebtedness and obligations evidenced
by this Term Loan Note. The joint borrower provisions contained in Section 10.13
of the Loan Agreement are hereby incorporated herein by this reference in their
entirety.
Subject to the provisions of the Loan Agreement, the
undersigned hereby waive presentment, demand for payment, dishonor, notice of
dishonor, protest, notice of protest and any other notice or formality, to the
fullest extent permitted by applicable laws.
This Term Loan Note shall be delivered to and accepted by the
Bank in the State of California, and shall be governed by, and construed and
enforced in accordance with, the local laws thereof.
AB PLASTICS CORPORATION, M.O.S. PLASTICS, INC.,
a California corporation a California corporation
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
EXHIBIT X-0
XXXXXXX X-0
XXXX LOAN NOTE
(Manufacturers)
$7,000,000.00 ___________, 1998
______________, California
FOR VALUE RECEIVED, the undersigned jointly and severally
promise to pay to the order of Manufacturers Bank, a California banking
corporation (the "Bank"), the principal amount of SEVEN MILLION AND NO/100
DOLLARS ($7,000,000.00) together with interest on the principal amount of the
Term Loan remaining unpaid from time to time from the date the Term Loan is made
until the date of payment in full, payable as hereinafter set forth.
Reference is made to the Commercial Loan Agreement dated as of
even date herewith, by and among the undersigned, as Borrowers, and the Bank and
The Sumitomo Bank of California, collectively as the "Banks," and The Sumitomo
Bank of California, as the "Agent" (the "Loan Agreement"). Terms defined in the
Loan Agreement and not otherwise defined herein are used herein with the
meanings defined for those terms in the Loan Agreement. This is one of the Term
Loan Notes referred to in the Loan Agreement, and any holder hereof is entitled
to all of the rights, remedies, benefits and privileges provided for in the Loan
Agreement as originally executed or as it may from time to time be supplemented,
modified or amended. The Loan Agreement, among other things, contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events upon the terms and conditions therein specified.
The principal indebtedness evidenced by this Term Loan Note
shall be payable as provided in the Loan Agreement and in any event on January
2, 2003.
Interest shall be payable on the outstanding daily unpaid
principal amount of the Term Loan from the date first written above until
payment in full and shall accrue and be payable at the rate and on the dates set
forth in the Loan Agreement both before and after default and before and after
maturity and judgment, with interest on overdue principal and interest to bear
interest at the rate set forth in Section 3.11 of the Loan Agreement, to the
fullest extent permitted by applicable law.
Each payment hereunder shall be made to the Agent on behalf of
the Bank in immediately available funds not later than 1:00 p.m. (Los Angeles
EXHIBIT A-4
time) on the day of payment (which must be a Banking Day). All payments received
after 1:00 p.m. (Los Angeles time) on any particular Banking Day shall be deemed
received on the next succeeding Banking Day. All payments shall be made in
lawful money of the United States of America.
The Bank shall use its best efforts to keep a record of
payments received by it with respect to this Term Loan Note, and, absent
manifest error, such record shall be presumptive evidence of the amounts owing
under this Term Loan Note.
The undersigned hereby promise to pay all costs and expenses
of any rightful holder hereof incurred in collecting the undersigned's
obligations hereunder or in enforcing or attempting to enforce any of such
holder's rights hereunder, including reasonable attorneys' fees and
disbursements (including the allocated costs of in-house counsel), whether or
not an action is filed in connection therewith.
Each of the undersigned acknowledges and agrees that it shall
be jointly and severally liable for the indebtedness and obligations evidenced
by this Term Loan Note. The joint borrower provisions contained in Section 10.13
of the Loan Agreement are hereby incorporated herein by this reference in their
entirety.
Subject to the provisions of the Loan Agreement, the
undersigned hereby waive presentment, demand for payment, dishonor, notice of
dishonor, protest, notice of protest and any other notice or formality, to the
fullest extent permitted by applicable laws.
This Term Loan Note shall be delivered to and accepted by the
Bank in the State of California, and shall be governed by, and construed and
enforced in accordance with, the local laws thereof.
AB PLASTICS CORPORATION, M.O.S. PLASTICS, INC.,
a California corporation a California corporation
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
EXHIBIT A-4
EXHIBIT B
REQUEST FOR CREDIT
1. This Request for Credit is executed and delivered by AB PLASTICS
CORPORATION, a California corporation, and M.O.S. PLASTICS, INC., a California
corporation (collectively the "Borrowers"), to The Sumitomo Bank of California,
as Agent, pursuant to that certain Commercial Loan Agreement (as amended,
modified or extended, the "Agreement") dated as of ___________, 1998, entered
into by Borrowers, the Guarantor, the Agent and the Banks therein named. Any
terms used herein and not defined herein shall have the meanings defined in the
Agreement.
2. Borrowers hereby request that the Banks make an extension of credit
under the Revolving Line of Credit for the account of Borrowers pursuant to the
Agreement, as follows:
(a) Principal Amount of Extension of Credit: $____________.
(b) Date of Extension of Credit: _______________, 19___.
(c) Type of Extension of Credit (check one box only):
[ ] Prime Rate Credit.
[ ] Offshore Rate Credit with a ___-day
interest period, commencing
_____________ and ending
____________.
(d) This extension of credit will be (check one box
only):
[ ] Used by AB Plastics and shall be
made against the AB Plastics
Borrowing Base.
[ ] used by MOS Plastics and shall be
made against the MOS Plastics
Borrowing Base.
EXHIBIT B - Page 1
3. In connection with the extension of credit requested herein,
Borrowers hereby represent, warrant and certify to Agent and the Banks that, as
of the date of the extension of credit set forth in paragraph 2(b), above: such
request shall not exceed the availability under the Revolving Line of Credit;
each representation and warranty made by Borrowers in Article 5 of the Agreement
will be true and correct in all material respects, both immediately before and
after such extension of credit is made, as though such representations and
warranties were made on and as of the date of such extension of credit; no
actions, suits or proceedings will be pending against or affecting Borrowers or
any of their subsidiaries in any court of law or before any governmental agency
which might reasonably be expected to materially adversely affect the business,
operations or condition (financial or otherwise) of Borrowers and their
subsidiaries, taken as a whole; no material adverse change will have occurred in
the business, operations or condition (financial or otherwise) of Borrowers and
their subsidiaries, taken as a whole, since the date of the most recent
financial statements delivered pursuant to the Agreement; and no event which is
(or with notice or lapse of time or both would be) an Event of Default under the
Agreement, will have occurred and be continuing. (If any of the foregoing
statements is not true and correct, attach a statement specifying in detail the
circumstances thereof and the actions Borrowers are taking or propose to take
with respect thereto.)
4. This Request for Credit is executed on _______________, 19__, by
authorized officers of Borrowers, on behalf of Borrowers. The undersigned, in
such capacity, hereby certify each and every matter contained herein to be true
and correct.
"Borrowers":
AB PLASTICS CORPORATION, M.O.S. PLASTICS, INC.,
a California corporation a California corporation
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
EXHIBIT B - Page 2
EXHIBIT C
REQUEST FOR CONVERSION
1. This Request for Conversion is executed and delivered by AB
PLASTICS CORPORATION, a California corporation, and M.O.S. PLASTICS, INC., a
California corporation (collectively the "Borrowers") to The Sumitomo Bank of
California, as Agent, pursuant to that certain Commercial Loan Agreement (as
amended, modified or extended, the "Agreement") dated as of ____________, 1998,
entered into by Borrowers, the Guarantor, the Agent and the Banks therein named.
Any terms used herein and not defined herein shall have the meanings defined in
the Agreement.
2. Borrowers hereby request that the Banks convert one or more
(i) outstanding Prime Rate Credits to Offshore Rate Credits, and/or (ii) one or
more existing Offshore Rate Credits to other Offshore Rate Credits pursuant to
the Agreement, as follows:
(a) Total Amount of Prime Rate Credits to be Converted:
$____________________.
(b) Existing Offshore Rate Credit to be Converted is in
Amount of $_________ and has an Interest Period
Expiring ____________.
(c) Date of Conversion: ______________, 19___.
(d) Requesting Conversion to an Offshore Rate Credit with
a __-day Interest Period, Commencing ________________
and Ending _______________.
3. In connection with the conversion requested herein,
Borrowers hereby represent, warrant and certify to Agent and the Banks that, as
of the date of the requested conversion set forth in paragraph 2(b), above: each
representation and warranty made by Borrowers in Article 5 of the Agreement will
be true and correct in all material respects, both immediately before and after
such conversion is made, as though such representations and warranties were made
on and as of the date of such conversion; no actions, suits or proceedings will
EXHIBIT C - Page 1
be pending against or affecting Borrowers or any of their subsidiaries in any
court of law or before any governmental agency which might reasonably be
expected to materially adversely affect the business, operations or condition
(financial or otherwise) of Borrowers and their subsidiaries, taken as a whole;
no material adverse change will have occurred in the business, operations or
condition (financial or otherwise) of Borrowers and their subsidiaries, taken as
a whole, since the date of the most recent financial statements delivered
pursuant to the Agreement; and no event which is (or with notice or lapse of
time or both would be) an Event of Default under the Agreement, will have
occurred and be continuing. (If any of the foregoing statements is not true and
correct, attach a statement specifying in detail the circumstances thereof and
the actions Borrowers are taking or propose to take with respect thereto.)
4. This Request for Conversion is executed on _____________,
19__, by authorized officers of Borrowers, on behalf of Borrowers. The
undersigned, in such capacity, hereby certify each and every matter contained
herein to be true and correct.
"Borrowers":
AB PLASTICS CORPORATION, M.O.S. PLASTICS, INC.,
a California corporation a California corporation
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
EXHIBIT C - Page 2
EXHIBIT D
REQUEST FOR LETTER OF CREDIT
1. This Request for Letter of Credit is executed and delivered
by AB PLASTICS CORPORATION, a California corporation, and M.O.S. PLASTICS, INC.,
a California corporation (collectively the "Borrowers") to The Sumitomo Bank of
California, as Agent, pursuant to that certain Commercial Loan Agreement (as
amended, modified or extended, the "Agreement") dated as of ____________, 1998
entered into by Borrowers, the Guarantor, the Agent and the Banks therein named.
Any terms used herein and not defined herein shall have the meanings defined in
the Agreement.
2. Borrowers hereby request that Sumitomo issue a letter of
credit for the account of Borrowers pursuant to the Agreement, as follows:
(a) Face Amount of Letter of Credit: $________.
(b) Date of Issuance: _____________, 19__.
(c) Beneficiary under Letter of Credit:
Name: ________________________
Address: _______________________
_______________________
_______________________
(d) Expiry Date: __________________, 19___
(e) Documents to be submitted with drafts:
(f) Purpose of Letter of Credit: _______________
____________________________________________
(g) Additional Information/Terms: ______________
____________________________________________
3. The requested letter of credit is (check one box only):
EXHIBIT D -- Page 1
[ ] a new letter of credit in addition to letters of
credit already outstanding.
[ ] a supplement, modification, amendment, renewal, or
extension to or of the following outstanding letter(s)
of credit: [Identify]
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
4. The requested letter of credit is (check one box only):
[ ] a standby letter of credit.
[ ] a commercial letter of credit.
5. This extension of credit will be (check one box only):
[ ] used by AB Plastics and shall be made against the AB
Plastics Borrowing Base.
[ ] used by MOS Plastics and shall be made against the MOS
Plastics Borrowing Base.
6. In connection with the issuance of the letter of credit requested
herein, Borrowers hereby represent, warrant, and certify to Agent and the Banks
that:
(a) As of the date of issuance of the letter of
credit requested herein, each representation and warranty made
by Borrowers in Article 5 of the Agreement will be true and
correct in all material respects, both immediately before and
after the issuance of such letter of credit, as though such
representations and warranties were made on and as of the date
of issuance of such letter of credit; no actions, suits or
proceedings will be pending against or affecting Borrowers or
any of their subsidiaries in any court of law or before any
governmental agency which might reasonably be expected to
EXHIBIT D -- Page 2
materially adversely affect the business, operations or
condition (financial or otherwise) of Borrowers and their
subsidiaries, taken as a whole; no material adverse change
will have occurred in the business, operations or condition
(financial or otherwise) of Borrowers and their subsidiaries,
taken as a whole, since the date of the most recent financial
statements delivered pursuant to the Agreement; and no event
which is (or with notice or lapse of time or both would be) an
Event of Default under the Agreement, will have occurred and
be continuing. (If any of the foregoing statements is not true
and correct, attach a statement specifying in detail the
circumstances thereof and the actions Borrowers are taking or
propose to take with respect thereto.)
(b) Following the issuance of the letter of credit
requested herein, (i) the amount of all outstanding letters of
credit, including amounts drawn on letters of credit and not
yet reimbursed by Borrowers, will not exceed $500,000 in the
aggregate, and (ii) the amount of standby letters of credit
issued in favor of governmental agencies in lieu of worker's
compensation insurance premiums shall not exceed $200,000 in
the aggregate.
7. This Request for Letter of Credit is executed on
___________, 19___, by authorized officers of Borrowers, on behalf of Borrowers.
The undersigned, in such capacity, hereby certify each and every matter
contained herein to be true and correct.
"Borrowers":
AB PLASTICS CORPORATION, M.O.S. PLASTICS, INC.,
a California corporation a California corporation
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
By: __________________________ By: __________________________
__________________________ __________________________
[Printed Name & Title] [Printed Name & Title]
EXHIBIT D -- Page 3
EXHIBIT E
[ATTACH FORM OF COMPLIANCE CERTIFICATE]
SCHEDULE 4.1(x)
CONTINUING INDEBTEDNESS OF MOS PLASTICS
All indebtedness reflected in the MOS Plastics financial
statements as of December 31, 1997, other than indebtedness owed to Comerica
Bank - California and to Xxxxx Xxxxxx.
SCHEDULE 5.7
LAWSUITS/CLAIMS
1. Claim by Xxxxxxxxx Xxxxxxxxx for wrongful termination of employment by AB
Plastics due to alleged age discrimination.
SCHEDULE 5.9
DEFAULTS ON EXISTING OBLIGATIONS
None.
SCHEDULE 5.13
PERMITTED ENCUMBRANCES
A. AB Plastics
1. TM Acceptance Corporation - Capital leases on three (3) Toshiba
Plastic Injection Molding Machines, with all attachments, accessories,
replacements, improvements, modifications and substitutions, and proceeds,
including insurance.
2. Toyota Lift of Los Angeles, Inc. - 2 Toyota forklifts #61020 and
61054, UCC-1 filed 4/19/96 as #96-11360360 - (treated as lease by Borrower).
3. General Electric Capital Corporation - Various machinery and
equipment located at AB Mexico's facilities in Tijuana, Mexico.
4. Transamerica Business Credit Corporation - Certain machinery and
equipment, consisting of five (5) injection molding machines and additions,
parts, accessories, attachments, substitutions, repairs, improvements and
replacements, and proceeds thereof.
5. The Sumitomo Bank of California - Mortgage on the land, buildings
and improvements owned by AB Plastics and located in Gardena, California.
6. Junior liens in favor of Tandem on substantially all assets (other
than real property).
B. MOS Plastics
1. The CIT Group/Equipment Financing, Inc. - Certain machinery and
equipment and attachments, replacements, substitutions and additions.
2. JLA Credit Corporation - Certain equipment and tooling.
3. Hewlett-Packard Company - Certain equipment purchased from
Hewlett-Packard Company.
4. U.S. Bancorp Leasing & Financial - Machine Tool Finance Group -
Husky Model LX300 RS 50/42, 330-ton injection molding machine and Husky Model A
Top-Entry Servo Robot, each with all accessories and attachments.
5. Orix Credit Alliance, Inc. - Husky Model LX300 RS injection molding
machine and Husky Top-Entry Robot and accessories.
6. Advanta Business Services - Computer hardware and software system.
C. Compass.
1. Junior liens in favor of Tandem on substantially all assets.
D. Permitted Encumbrances may also include, from time to time, (a) liens for
taxes, assessments or other governmental charges not delinquent, or being
contested in good faith and by appropriate proceedings and with respect to which
proper reserves have been taken by either Borrower; provided, that the lien
shall have no effect on the priority of the liens in favor of Bank and a stay of
enforcement of any such lien shall be in effect; (b) deposits or pledges to
secure obligations under workers compensation, social security or similar laws,
or under unemployment insurance; (c) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety, performance and appeal bonds and other
obligations of like nature arising in the ordinary course of either Borrower's
business (d) judgment liens that have been stayed or bonded and mechanics',
worker's, materialmen's or other like liens arising in the ordinary course of
either Borrower's business with respect to obligations which are not past due or
which are being contested in good faith by such Borrower; (e) liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that any such lien shall not encumber any other property of
either Borrower.
SCHEDULE 5.15
LOCATION OF INVENTORY AND EQUIPMENT
(for Borrowers, Guarantor and AB Mexico)
AB Plastics:
00000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
000 Xxxx 000xx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
0000 Xxxxx Xxxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Lots 3 and 4A of Block 5
Baja Maquiladora Industrial Park
Tijuana, Baja California, Mexico
MOS Plastics:
0000 Xxxxxx Xxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
AB Mexico:
Xxxx 0 xxx 0X xx Xxxxx 0
Xxxx Xxxxxxxxxxx Industrial Park
Tijuana, Baja California, Mexico
SCHEDULE 6.5
EBITDA CALCULATION
