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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
April 14, 1998
FORWARD INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
New York 0-6669 13-1950672
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
275 Hempstead Turnpike
West Hempstead, New York 11552
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(Address of principal executive offices)
Registrant's Telephone Number, including
area code: (516) 564-1100
Not Applicable
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(Former Address, if changed since last report)
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Item 5. Other Events.
On April 14, 1998, Forward Industries, Inc. (the "Company") entered
into a Loan and Security Agreement for the creation of a $5 million credit
facility with Summit Bank of New Jersey. The new facility includes a $4.5
million revolving loan and letter of credit facility with availability based on
inventory and receivables and a $0.5 million equipment loan facility. This
agreement will replace the Company's prior $1.1 million arrangement with 1st
Source Bank of South Bend.
Item 7.
(a) Financial Statements of Business Acquired: N/A.
(b) Pro Forma Financial Statements: N/A
(c) Exhibits:
10(a) Loan and Security Agreement, dated as of April 13, 1998,
among the Company, Koszegi Industries, Inc. and Summit Bank.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
May 11, 1998
FORWARD INDUSTRIES, INC.
By: /s/ Theodore H. Schiffman
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Theodore H. Schiffman
Chairman and Chief Executive Officer
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EXHIBIT INDEX
Exhibit No.
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10(a) Loan and Security Agreement, dated as of April 13, 1998, among
the Company, Koszegi Industries, Inc. and Summit Bank.
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SUMMIT BANK
TO
KOSZEGI INDUSTRIES, INC.
AND
FORWARD INDUSTRIES, INC.
$4,500,000.00 REVOLVING LOAN
$500,000 EQUIPMENT AVAILABILITY LOAN
LOAN AND SECURITY AGREEMENT
APRIL 13, 1998
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INDEX
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PAGE
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SECTION 1
DEFINITIONS....................................................1
SECTION 2
LOANS......................................................... 8
SECTION 3
COLLATERAL................................................... 14
SECTION 4
CONDITIONS PRECEDENT......................................... 14
SECTION 5
REPRESENTATIONS AND WARRANTIES............................... 17
SECTION 6
COVENANTS BY BORROWER........................................ 20
SECTION 7
EVENTS OF DEFAULT............................................ 27
SECTION 8
BANK'S RIGHTS AND REMEDIES................................... 29
SECTION 9
BORROWER'S RIGHTS AND REMEDIES............................... 32
SECTION 10
MISCELLANEOUS PROVISIONS..................................... 32
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TABLE OF EXHIBITS
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EXHIBITS
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$4,500,000 Master Note ..................................................... A
$500,000 Equipment Line of Credit Note.......................................B
Form of Equipment Term Loan..................................................C
Power of Attorney..................................................D-1 and D-2
Assignment of Lease and Landlord's Subordination and Consent............... E
Trademark Assignment of Security.............................................F
TABLE OF SCHEDULES
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Schedule
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Other Names................................................................5.3
Subsidiaries...............................................................5.4
Line of Business...........................................................5.5
Existing Liens.............................................................5.9
Change Name, Merger, Acquisition..........................................5.12
Place of Business.........................................................5.13
Common Stock Options and Warrants.........................................5.16
Certain Accounts..........................................................5.19
Existing Debt.............................................................5.23
Loan or Advances.......................................................6.23(k)
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LOAN AND SECURITY AGREEMENT
AGREEMENT entered into this 13th day of April, 1998 among KOSZEGI
INDUSTRIES, INC., a corporation of the State of Indiana, having its principal
office at 702 S. Chapin Street, South Bend, Indiana 46624, FORWARD INDUSTRIES,
INC., a corporation formed under the laws of the State of New York, having an
address at 275 Hempstead Turnpike, West Hempstead, New York 11552 and SUMMIT
BANK, a state banking organized under the laws of the State of New Jersey,
having an office at 750 Walnut Street, Cranford, New Jersey 07016.
SECTION 1
DEFINITIONS
1.1. As used in this Agreement, the following terms shall have the
meanings hereinafter provided (such meanings to be equally applicable to both
the singular and plural forms of the terms defined):
"Account": As such term is defined in paragraph (ii) of the definition
of the term "Collateral" in this Subsection 1.1.
"Account Debtor": The Person obligated under any Account.
"Advances": (i) With respect to the Revolving Loan, direct borrowings
extended by the Bank and Letters of Credit issued by the Bank pursuant to
Subsection 2.1 hereof, and (ii) with respect to the Equipment Availability
Loan, direct borrowing extended by the Bank pursuant to Subsection 2.2 hereof.
"Affiliate": As to any Person, any other Person or any group acting in
concert in respect of such Person that directly or indirectly, through one or
more Persons, is in control of, is controlled by, or is under common control
with, such Person.
"Agreement": The contents hereof and of any and all exhibits and
schedules annexed hereto, as may be amended and/or restated from time to time.
"Annual Operating Income": All income generated by the business
operations of the Borrower during the given fiscal year before the payment of
taxes and extraordinary losses or gains as result of the sale of assets
relating to discontinued operations.
"Assignment of Intellectual Property": The Trademark Assignment of
Security executed and delivered by the Borrower, substantially in the form of
Exhibit G annexed hereto, as may be amended and/or restated from time to time.
"Back-to-Back Letters of Credit": Those letters of credit, in an
aggregate amount not to exceed at any one time $500,000, which may be issued by
the Bank from time to time, in the Bank's sole discretion, outside the terms of
this Agreement, in favor of the Borrower to secure payment of letters of credit
issued for the account of customers of the Borrower, which customer's letters
of credit shall be issued by a financial institution acceptable to the Bank,
advised through the Bank and confirmed by the Bank pursuant to documentation in
form and substance satisfactory to the Bank.
"Bank": Summit Bank, a state bank formed pursuant to the laws of the
State of New Jersey.
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"Banks' Rights and Remedies": All of the rights and remedies of the
Bank described in Section 8.
"Base Rate": The Bank's commercial rate from time to time in effect,
and the rate of interest charged under this Agreement shall change (but in no
event higher than the maximum lawful rate) on each date the Base Rate shall
change, without notice to the Borrower. The Base Rate is determined from time
to time by the Bank as a means of pricing some loans to its customers and is
neither tied to any external rate of interest or index, nor does it necessarily
reflect the lowest rate of interest actually charged by the Bank to any
particular class or category of customers of the Bank. The Base Rate may be
from time to time announced by the Bank, but the failure of the Bank to
announce the Base Rate or to give the Borrower notice of changes in the Base
Rate shall not relieve the Borrower of its obligation to pay such changed rate.
"Borrower": Individually and collectively, Koszegi and
Forward. The term Borrower shall be construed such that all terms and
conditions set forth in this Agreement and in any of the other Loan Documents
shall apply to each Borrower, individually, and to both Borrowers,
collectively.
"Borrower's Rights and Remedies": Any of the rights or remedies
described in Section 9.
"Borrowing Base": As such term is defined in Subsection 2.1(a).
"Borrowing Base Certificate": A certificate signed by the President or
Chief Financial Officer of the Borrower mathematically computing the Borrowing
Base, in form and in content satisfactory to the Bank.
"Business Day": Any day except Saturday or Sunday or other day on
which banks in the State of New Jersey are authorized or required by law to
close.
"Capitalized Lease Obligations": Any Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Debt shall be the
capitalized amount of such obligations determined in accordance with GAAP.
"Closing Date": The date of execution hereof.
"Collateral": All -
(i) inventory of the Borrower, wheresoever located (including
inventory in transit), whether now owned or hereafter acquired, including,
without limitation, raw materials, work in process, finished goods and
materials used or consumed in business and other goods held for sale or lease
or furnished or to be furnished under contracts of service (the "Inventory");
(ii) accounts of the Borrower, whether now existing or hereafter
arising, including, without limitation, all accounts receivable and contract
rights and any rights to payment for goods sold or leased or for services
rendered which are not evidenced by an instrument or chattel paper, whether or
not such rights have been earned by performance (the "Accounts");
(iii) equipment of the Borrower, wheresoever located, whether now
owned or hereafter acquired, including, without limitation, machinery, motor
vehicles, trailers, tools, trade, sales and production equipment, furniture,
furnishings, fixtures and all other goods used by the Borrower which do not
constitute inventory (the "Equipment");
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(iv) instruments (including, without limitation, negotiable
instruments and non-negotiable instruments), chattel paper, letters of credit,
securities, investment property and documents of title (including, without
limitation, bills of lading, dock warrants, dock receipts and warehouse
receipts) (the "Instruments"), general intangibles (including, without
limitation, income tax refunds, copyrights, licenses, rights, patents, patent
rights, franchise rights, distributorship rights, trademarks, trademark rights,
service marks, service mark rights, formulae, customer lists and goodwill) (the
"Intangibles"), all of the Borrower, whether now owned or existing or hereafter
arising or acquired;
(v) interests of the Borrower in Inventory, wheresoever located,
whether now owned or existing or hereafter arising or acquired, as to which an
Account, chattel paper, instrument or general intangible has arisen;
(vi) as to all of the foregoing (i) through (v) inclusive, cash
proceeds, non-cash proceeds and products thereof, payments under insurance
policies (whether or not the Bank is the loss payee thereof), additions and
accessions thereto, replacements and substitutions therefor, rent proceeds
arising out of rental or lease agreements and all related books, records,
journals, computer print-outs and data, of the Borrower; and
(vii) all other collateral security described in Section 3.
"Collections": All payments or collections received by the Bank in
available funds, which payments shall be subject to a two (2) Business Day
clearance period as more fully described in Subsection 2.1 (i) and (k).
"Controlled Group": As such term is defined in the Internal Revenue
Code of 1986, as amended from time to time.
"Debt": At any date, without duplication, (i) all obligations of the
Borrower for borrowed money (not including customer deposits held by the
Borrower), (ii) all obligations of the Borrower evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of the Borrower to
pay the deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business, (iv) all obligations of the
Borrower as lessee under Capital Lease Obligations, (v) all Debt of others
secured by a Lien on any asset of the Borrower, whether or not such Debt is
assumed by the Borrower, (vi) all Debt of others guaranteed by the Borrower,
(vii) all indebtedness and other obligations arising under acceptance
facilities and the face amount of all letters of credit issued for the account
of the Borrower and, without duplication, all drafts drawn thereunder, (viii)
all indebtedness and other obligations arising under interest rate swap
arrangements, interest rate cap agreements and other interest rate hedging
arrangements and (ix) any withdrawal or other liability incurred under ERISA by
the Borrower (or the Borrower and its Affiliates) to a multi-employer plan.
"Default": An event or condition which with the passage of time or the
giving of notice or both would constitute an Event of Default.
"Default Rate": The lesser of (i) the interest rate per annum equal to
five percent (5%) plus the highest interest rate normally accruing with respect
to any Loan, computed daily, for the actual number of days elapsed as if each
full calendar year consisted of three hundred sixty (360) days; or (ii) the
highest rate permitted by law.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended from time to time.
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"Equipment": As such term is defined in paragraph (iii) of the
definition of the term "Collateral" in this Subsection 1.1.
"Equipment Availability Loan": The credit facility described in
Subsection 2.2.
"Equipment Line of Credit Note": The Equipment Line of Credit Note
described in Subsection 2.2(g) and any promissory notes in renewal thereof or
substitution or replacement therefor.
"Equipment Term Loan": Any term loan made under the Equipment
Availability Loan as evidenced by a Equipment Term Note in accordance with
Subsection 2.2(b).
"Equipment Term Note": Each Equipment Term Note described in
Subsection 2.2(b) and any promissory notes in renewal thereof or substitution
or replacement therefor.
"Event of Default": Any one of the occurrences described in Section 7.
"Forward": Forward Industries, Inc., a corporation organized under the
laws of the State of New York.
"GAAP": Generally accepted accounting principles applied on a
consistent basis. Except as specifically set forth herein to the contrary, the
terms "Debt", "Tangible Net Worth" and "Capitalized Lease Obligation," as well
as any other accounting term capitalized and/or used in this Agreement which
are not specifically defined shall have the meanings customarily given thereto
in accordance with GAAP.
"Instruments": As such term is defined in paragraph (iv) of the
definition of the term "Collateral" in this Subsection 1.1.
"Intangibles": As such term is defined in paragraph (iv) of the
definition of the term "Collateral" in this Subsection 1.1.
"Internal Revenue Code": The Internal Revenue Code of 1986, as
amended.
"Inventory": As such term is defined in paragraph (i) of the
definition of the term "Collateral" in this Subsection 1.1.
"Koszegi": Koszegi Industries, Inc., a corporation organized under the
laws of the State of Indiana.
"Landlord's Agreement": Each Assignment of Lease and Landlord's
Waivers and Consent executed by the Borrower and by each landlord with respect
to each location leased by the Borrower, substantially in the form of Exhibit E
annexed hereto or otherwise in form and substance satisfactory to the Bank.
"Letter of Credit": Each documentary letter of credit issued by the
Bank on behalf of the Borrower pursuant to Subsection 2.1(m) hereof, which
Letter of Credit shall be in form and substance reasonably acceptable to the
Bank.
"Letter of Credit Documentation": Any applications, reimbursement
agreements, security agreements, certificates, resolutions and/or other
documentation as executed and delivered in connection with the issuance of any
Letter of Credit, in form and substance satisfactory to the Bank.
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"Lien": Any mortgage, lien, judicial lien, encumbrance, security
interest, charge, pledge, hypothecation, assignment, conditional sale or other
title retention agreement, and the like, relating to any real or personal
property interest of the Borrower, whether legal or equitable.
"Loans": The Revolving Loan and the Equipment Availability Loan.
"Loan Documents": This Agreement, the Master Note, the Equipment Line
of Credit Note, each Equipment Term Note, the Powers of Attorney, each
Landlord's Agreement, each Warehouseman's Waiver, the Assignment of
Intellectual Property, any Letter of Credit Documentation, the UCC-1 Financing
Statements, and any other document, instrument or writing executed and
delivered pursuant hereto or thereto, all as may be amended and/or restated
from time to time.
"Master Note": The Master Note described in Subsection 2.1(g) and any
promissory notes in renewal thereof or substitution or replacement therefor.
"Material Adverse Effect": (i) any materially adverse effect on the
business, operations, condition (financial or otherwise), assets or property of
the Borrower, or (ii) any fact or circumstance as to which, singly or in the
aggregate, the Bank has reason to believe there is a reasonable possibility of
(a) a materially adverse effect described in clause (i) or (b) the inability of
the Borrower to perform in any material respect its obligations hereunder or
under any of the other Loan Documents, or (iii) any material adverse effect on
the Collateral or (iv) any material adverse effect on the validity or
enforceability of any of the Loan Documents.
"Notes": The Master Note, the Equipment Line of Credit Note and each
Equipment Term Note.
"Notice of Borrowing": A notice signed by the President of the
Borrower requesting an Advance and setting forth the information required
hereby.
"Obligations": (i) Any and all indebtedness, obligations, letters of
credit or other liabilities of the Borrower to the Bank, including, without
limitation, liabilities and agreements of every kind and nature of the Borrower
to or with the Bank, or to or with any Affiliate of the Bank, or of any
guarantor of the Borrower's indebtedness, obligations, letters of credit,
liabilities and agreements to or with the Bank, or to or with any Affiliate of
the Bank, whether now existing or hereafter arising, and whether now or
hereafter contemplated, pursuant to this Agreement, or otherwise, whether in
the form of refinancing, loans, guarantees, bankers' acceptances, foreign
exchange contracts, options and letters of credit, interest, charges, expenses,
fees (including, without limitation attorneys' fees) or otherwise, direct or
indirect, (including, without limitation, any participation or interest of the
Bank [or of an Affiliate of the Bank] in any obligation of the Borrower to
others) acquired outright, conditionally or as collateral security from
another, absolute or contingent, joint and/or several, liquidated or
unliquidated, due or not due, contractual or tortious, secured or unsecured,
arising by operation of law or otherwise, including, but without limiting
generality of the foregoing, indebtedness, obligations or liabilities to the
Bank by the Borrower as a member of any partnership, syndicate, association or
other group, and whether incurred by the Borrower as principal, surety,
endorser, guarantor, accommodation party or otherwise, together with any
extensions, renewals or modifications thereof; (ii) all obligations of the
Borrower for any future advances made by the Bank to the Borrower whether or
not evidenced by a promissory note and all obligations under any renewals,
extensions or changes in the form of, or substitution for, any of said
indebtedness, obligations or liabilities; (iii) all sums and charges payable to
the Bank pursuant to this Agreement; (iv) all interest and late charges on any
of the foregoing; and (v) all obligations of the Borrower now or hereafter
existing under this Agreement.
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"Obligors": The Borrower and any and all other Persons liable, either
absolutely or contingently in connection with this Agreement not named herein,
including endorsers, sureties, guarantors and owners of any property securing
any sums due in connection with this Agreement.
"PBGC": The Pension Benefit Guaranty Corporation or any successor
thereto.
"Person": An individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity or a government or
any political subdivision or agency thereof.
"Plan": Any plan subject to the minimum funding requirements of
Section 412 of the Internal Revenue Code of 1986, as amended from time to time.
"Power of Attorney": The Power of Attorney executed by the Borrower,
substantially in the form of Exhibit D annexed hereto.
"Qualified Account": An Account which meets all of the following
requirements from the time it comes into existence until it is collected in
full:
(i) Such Account is outstanding not more than sixty (60) days
from the due date of such Account and one hundred twenty (120) days from the
date of the invoice evidencing such Account; is not a contra account; is
payable in lawful currency of the United States of America;
(ii) More than fifty percent (50%) of the aggregate amount of
Accounts of the relevant Account Debtor are not outstanding more than sixty
(60) days from the due date of such Accounts and one hundred twenty (120) days
from the date of invoice evidencing such Accounts.
(iii) If any Account Debtor's aggregate Accounts exceed twenty
percent (20%) of the Borrower's total Accounts, the portion exceeding twenty
percent (20%) shall be deemed not to be a Qualified Account.
(iv) Such Account arose out of an enforceable order or contract
for the performance of services by the Borrower, which has been fully and
satisfactorily performed, or from the absolute sale of goods by the Borrower in
which goods the Borrower had the sole and complete ownership, and such goods
have been shipped or delivered to the relevant Account Debtor in accordance
with such order or contract; is not subject to any bill and hold arrangement,
has not been delivered on consignment, and the Borrower has delivered or will
deliver to the Bank, upon either Bank's request, invoices and shipping and
delivery receipts with respect thereto;
(v) The title of the Borrower to such Account is absolute; such
Account is not subject to any Lien except that such Account must be subject to
a first priority Lien in favor of the Bank; and such Account does not arise out
of an order or contract which, by its terms, forbids or makes void or
unenforceable the Lien of the Bank thereon;
(vi) The Borrower has not received any note, trade acceptance,
draft or other instrument with respect to or in payment for such Account or any
chattel paper with respect to the goods giving rise to such Account except such
instruments or chattel paper of which the Borrower has notified the Bank;
(vii) Such Account is not subject to any setoff, counterclaim,
defense, allowance or adjustment other than discounts for prompt payment shown
on the related invoice, or to dispute, objection or
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complaint by the relevant Account Debtor concerning his liability on such
Account; the goods, the sale of which gave rise to such Account, have not been
returned, rejected, lost or damaged; the amount of such Account shown on the
Borrower's books or on any invoice or statement delivered to the Bank is owing
to the Borrower; and no partial payment has been made on such Account by
anyone;
(viii) Such Account arose in the ordinary course of the business
of the Borrower; and no notice of bankruptcy, receivership, insolvency,
dissolution, termination of existence, credit impairment, or the like, of the
relevant Account Debtor, or notice of death of the relevant Account Debtor or
of any partner of the relevant Account Debtor has been received by the Borrower
or the Bank;
(ix) The Account Debtor obligated on such Account is not an
Affiliate or a Subsidiary of the Borrower;
(x) The relevant Account Debtor is not the United States of
America or any department, agency or instrumentality thereof unless the
Borrower assigns its right to payment of such Account to the Bank in form and
substance satisfactory to the Bank, so as to comply with the Assignment of
Claims Act of 1940, as amended (31 U.S.C. ss.203 et seq.);
(xi) The Bank has not notified the Borrower that such Account or
the relevant Account Debtor is unsatisfactory in the sole judgment of the Bank.
"Qualified Inventory": Inventory which meets all of the following
requirements as of the date of asserted qualification;
(i) Such Inventory consists of raw materials or finished goods;
(ii) The Borrower has the sole and complete ownership of such
Inventory, and as to which Inventory the Borrower has received documents of
title and which is in the possession of the Borrower, evidence of which the
Borrower has delivered or will deliver to the Bank, upon either Bank's request,
including, but not limited to, invoices, shipping and delivery receipts, bills
of lading and documents of title;
(iii) Such Inventory is not subject to any Lien, except that such
Inventory must be subject to a perfected first priority Lien in favor of the
Bank;
(iv) Such Inventory is not subject to the claim of any other
Person and has not been delivered to any Person on consignment;
(v) Such Inventory is not obsolete and has not been returned,
rejected, lost or damaged and is of merchantable quality;
(vi) Such Inventory has been purchased in the ordinary course of
the Borrower's business;
(vii) The Bank has not notified the Borrower that such Inventory
is unsatisfactory in the sole judgment of the Bank;
(viii) Such Inventory is located at the Borrower's locations
within the United States set forth on Schedule 5.13 annexed hereto for which a
Landlord's Agreement has been delivered to the Bank.
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"Reportable Event": As such term is defined in Title IV of ERISA.
"Revolving Loan": The credit facility described in Subsection 2.1.
"Subsidiary": Any corporation or other entity with respect to which
more than a majority (by number of votes) of the common stock or other
comparable ownership interest of which is owned or controlled directly or
indirectly by the Borrower or one or more Subsidiaries of the Borrower or by
the Borrower and one or more Subsidiaries of the Borrower.
"Tangible Net Worth": As of the time of any determination thereof,
total assets less intangible assets less total liabilities, as determined in
accordance with GAAP.
"Termination Date": March 31, 2001, or such other date as the Bank may
agree in writing to extend the Termination Date until, without there being any
obligation on the part of the Bank to extend the Termination Date.
"Warehousemen's Waiver": Each warehousemen's waiver agreement executed
by each warehouseman where the Borrower warehouses Collateral, if any, in form
and substance satisfactory to the Bank.
1.2 Other Terms. Terms such as "accounts", "accounts receivable",
"contract rights", "letters of credit", "advices", "confirmations",
"equipment", "instruments", "chattel paper", "investment property", "documents
of title", "goods", "general intangibles", "account debtors", "proceeds",
"products", and the like, shall, unless otherwise specifically defined herein,
have the meanings applicable to them for the purposes of Article 9 (Secured
Transactions) of the Uniform Commercial Code in force and effect in the State
of New Jersey at the date of this Agreement.
SECTION 2
LOANS
2.1 Subject to the terms and conditions of this Agreement, and
provided no event or condition constituting a Default or an Event of Default
has occurred:
(a) General Terms. The Bank agrees to lend and make Advances to
the Borrower from time to time until the Termination Date, amounts which shall
not exceed in the aggregate at any one time outstanding a principal amount
equal to the lesser of (i) FOUR MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($4,500,000.00) or (ii) the sum of (a) eighty percent (80%) of the
Qualified Accounts plus (b) forty percent (40%) of the lower of the net cost to
the Borrower or the market value of the Qualified Inventory plus (c) forty
percent (40%) of Letters of Credits. (Item (ii) shall hereinafter be referred
to as the "Borrowing Base"). Notwithstanding anything contained herein to the
contrary, in no event shall at any one time Advances against (i) Qualified
Inventory exceed $1,000,000 and (ii) foreign Qualified Accounts exceed
$500,000. The Bank reserves the right from time to time, in the exercise of its
sole discretion to increase and/or decrease (x) the amount of the Revolving
Loan; (y) the Borrowing Base or (z) the dollar limit on aggregate advances
against Qualified Accounts and/or Qualified Inventory. On the date hereof,
after consummation of the transactions contemplated herewith, the Borrower
shall have excess availability under the Revolving Loan in an amount of not
less than $250,000. Notwithstanding anything contained herein to the contrary
item (i) above shall be reduced by the amount of any outstanding Back-to-Back
Letters of Credit.
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(b) Disbursements. Advances made to the Borrower pursuant to the
Revolving Loan shall be delivered by credit to account #4116019276 (the
"Operating Account"), to be maintained by the Borrower for so long as any Loans
remaining outstanding, or in such other manner as the Borrower may reasonably
direct. The Borrower shall by two (2:00) p.m. eastern standard time on the
Business Day any Advance is requested, deliver to the Bank a Notice of
Borrowing, in form and substance satisfactory to the Bank, setting forth the
following information:
(i) The date, which shall be a Business Day, on which such
Advance is to be made; and
(ii) The total principal amount of such Advance.
(c) Interest Rate. The unpaid principal amount of the Revolving
Loan from time to time outstanding shall bear interest at a rate of interest
per annum equal to the Base Rate plus three-quarters of one percent (3/4%) each
computed daily, for the actual number of days elapsed as if each full calendar
year consisted of three hundred sixty (360) days. Each time the Base Rate shall
change, the rate of interest associated with such rate shall change
contemporaneously without notice to the Borrower, but in no event shall the
rate exceed the maximum rate of interest permitted by law.
(d) Payments of Principal and Interest. Except as otherwise set
forth in this Subsection 2.1(d), the unpaid principal balance of the Revolving
Loan and all unpaid and accrued interest thereon shall be payable by the
Borrower to the Bank on the Termination Date or in accordance with Subsection
2.1(j) or 8.1(a). Payment of interest on outstanding principal amount of the
Revolving Loan shall occur monthly, in arrears, in immediately available funds,
on the first Business Day of each month beginning on the first Business Day in
the month next succeeding the date of this Agreement. All payments of interest
and principal, howsoever designated by the Borrower shall be applied first on
account of accrued interest and the remainder of such payments, if any, on
account of the unpaid principal balance.
(e) Manner of Payment. The Borrower hereby directs the Bank to
debit the Operating Account, on any date on which a payment is due under the
Revolving Loan in an amount equal to any unpaid portion of such payment.
Inadequate funds in said account or the failure of the Bank to debt said
account shall not relieve the Borrower from its obligation to pay said amounts
due under the Revolving Loan.
(f) Statement of Account. At least once each month the Bank shall
render and send to the Borrower a statement of account showing with respect to
the Revolving Loan amounts loaned, all other charges, expenses and items
chargeable to the Borrower, payments made by the Borrower against the unpaid
principal balance, other appropriate debits and credits and the balance of the
unpaid principal amount as of the date of such statement of account. Each
statement of account shall be presumed to be correct in all respects, except
for specific objections which the Borrower makes in writing within thirty (30)
days from the date upon which the statement of account is sent. In the event
that the Borrower makes an objection, such objection shall contain evidence of
the alleged error, which evidence shall be reviewed by the Bank. The Bank's
final determination shall be conclusive on all parties absent manifest error.
(g) Master Note. Advances outstanding under the Revolving Loan
shall be evidenced by the Master Note substantially in the form of Exhibit A
annexed hereto and the balance due from time to time on the Master Note shall
be conclusively evidenced by the Bank's records of disbursements and
repayments, subject to Subsection 2.1(f).
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(h) Excess Advances. If at any time the aggregate Advances
outstanding under the Revolving Loan exceeds the Borrowing Base, the Borrower
shall immediately pay to the Bank, in immediately available funds, the amount
of such excess, along with all accrued interest thereon. Nothing contained in
this Subsection 2.1(h) shall be deemed or be construed to obligate the Bank to
honor any item of payment which would give rise to an overdraft.
(i) Cash Collateral Account. All checks, drafts, cash and other
remittances in payment or on account of payment of the Accounts and any other
Collateral, and the cash proceeds of any returned, rejected or repossessed
goods, the sale or lease of which gave rise to an Account, whether paid into a
lock box or otherwise (all of the foregoing herein collectively referred to as
"items of payment"), shall be deposited into a bank account designated by the
Bank and from which the Bank alone has power to access and withdrawal (the
"Cash Collateral Account"). The Borrower shall deposit, or cause to be
deposited, such items of payment for credit to the Cash Collateral Account
immediately upon receipt thereof, and in precisely the form received, except
for the endorsement of the Borrower, if necessary, to permit the collection of
any such items of payment, which endorsement the Borrower hereby agrees to make
(the "Collections"). Pending such deposit, the Borrower will not commingle, to
the extent they come into the Borrower's possession, any such items of payment
with any of its other funds or property, but will hold them in trust, separate
and apart. The Borrower shall pay to the Bank on the date hereof and the first
Business Day of each July, October, January and April commencing the first
Business Day of July, 1998, a collateral management fee in the amount of
$7,500.
(j) Application of Collections. For purposes of calculating the
amount available under the Borrowing Base:
(i) Any other item of payment received by the Bank shall be
credited against the unpaid principal balance then outstanding on the Revolving
Loan when received by the Bank (or any department of the Bank) pursuant to
Subsection 2.1(i) hereof; and
(ii) Such credits shall be conditioned upon final payment to
the Bank in cash or solvent credits of the items of payment giving rise to them
and if any item of payment is not so paid, the amount of any credit given for
it shall be charged to the Borrower's deposit account whether or not the item
of payment is returned.
(k) Computing Interest on Collections. For purposes of
calculating interest on the Revolving Loan, interest shall continue to accrue
on the amount of any Collections received by the Bank for a period of not more
than two (2) Business Days after receipt (it being understood that any
Collections received by 1:00 p.m. on any Business Day shall be deemed received
by the Bank on such Business Day, and any Collections received after 1:00 p.m.
on such Business Day shall be deemed received by the Bank on the following
Business Day), notwithstanding that the Bank has credited the amount thereof
for the purpose of calculating the amount available under the Borrowing Base in
accordance with subsection 2.1(j).
(l) Lock Box. The Borrower shall establish a lock box at the Bank
over which the Bank shall have sole control. The Borrower shall execute such
documents as requested by the Bank and pay to the Bank all of the Bank's
reasonable and customary charges for establishing such lock box arrangements.
(m) Letters of Credit. Subject to the terms hereof, Advances
under the Revolving Loan may be, if requested by the Borrower, in the form of
Letters of Credit to purchase Inventory. In the event the Borrower desires to
obtain an Advance in the form of a Letter of Credit the Borrower shall (i)
provide the Bank with at least three (3) Business Days prior written notice,
(ii) complete, execute and deliver to the Bank such Letter of Credit
Documentation as required by the Bank, (iii) pay to the Bank a commission in
the amount of one and one-
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half of one percent (1 1/2%) of the stated amount of each Letter of Credit and
such other standard fees and expenses as required by the Bank in connection
with Letters of Credit, and (iv) take such other actions as required by the
Bank. Notwithstanding anything contained herein to the contrary (i) no Letter
of Credit shall have an expiry date after the Termination Date and (ii) the
maximum aggregate amount of all Letters of Credit outstanding hereunder shall
be limited to amount available under the Revolving Loan in accordance with
2.1(a) hereof less any outstanding direct borrowings. All Letters of Credit
issued hereunder shall be subject to the terms and conditions set forth in any
Letter of Credit Documentation.
(1) Reimbursement. Upon a drawing with respect to any Letter of
Credit, the Borrower shall be irrevocably and unconditionally obligated
forthwith without presentment, demand, protest or other formalities of any
kind, to reimburse Bank for any amounts paid with respect to a Letter of
Credit, which reimbursement shall occur in the form of a loan under Revolving
Loan to the extent there is availability.
(2) Obligations Absolute. The obligation of Borrower to reimburse
Bank for payments made under, and other amounts payable in connection with, any
Letter of Credit shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement, including, without
limitation, the following circumstances:
(A) any lack of validity or enforceability of any Letter of
Credit or any agreement;
(B) the existence of any claim, set-off, defense or other
right which any Obligor, any of its Affiliates, or the Bank, on the one hand,
may at any time have against any beneficiary or transferee of any Letter of
Credit (or any Persons for whom any such transferee may be acting), or any
other Person, on the other hand, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including any
underlying transaction between Borrower or any of its Affiliates and the
beneficiary of the Letter of Credit);
(C) any draft, demand, certificate or any other document
presented under any Letter of Credit is alleged to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(D) payment under a Letter of Credit against presentation of
a demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit; provided that, in the case of any payment by
Bank under any Letter of Credit, the Bank has not acted with gross negligence
or willful misconduct in determining that the demand for payment under such
Letter of Credit complies on its face with any applicable requirements for a
demand under such Letter of Credit.
(E) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(F) the fact that a Default or an Event of Default shall
have occurred and be continuing.
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(n) Prepayment. The Revolving Loan and the Equipment Availability
Loan may be prepaid in whole at any time provided that: (i) the Borrower gives
the Bank at least sixty (60) days prior written notice of its intention to
prepay said Loans; (ii) the Borrower prepays in full said Loans; and (iii) the
Borrower pays to the Bank a prepayment penalty in the amount of $50,000 if such
prepayment occurs prior to the first anniversary date of this Agreement. Said
Loans shall only be deemed to be prepaid in the event that they are repaid in
full and the Borrower terminates each said Loans.
2.2 Subject to the terms and conditions of this Agreement, and
provided no event or condition constituting a Default or an Event of Default
has occurred:
(a) General Terms. The Bank shall lend and make Advances under
the Equipment Availability Loan to the Borrower from time to time until the
Termination Date amounts (including all Equipment Term Loans) which shall not
exceed in the aggregate, at any one time outstanding, the sum of FIVE HUNDRED
THOUSAND DOLLARS AND 00/100 ($500,000). Advances under the Equipment
Availability Loan are to be used by the Borrower solely for the purpose of
financing existing equipment and acquiring new equipment and/or motor vehicles
for use in the Borrower's business as described in Subsection 5.5.
Notwithstanding anything contained herein, no Advance made to the Borrower
under the Equipment Availability Loan shall exceed seventy percent (70%) of the
appraised orderly liquidation value of the existing equipment being financed,
said appraisal to be in form and substance satisfactory to the Bank, or one
hundred percent (100%) of the invoice price of the equipment being purchased
(exclusive of soft costs, including freight and taxes). Once funds under the
Equipment Availability Loan have been advanced and repaid, said funds may not
be reborrowed.
(b) Disbursements. Subject to the provisions of Subsection
2.2(h), amounts loaned to the Borrower pursuant to this Equipment Availability
Loan shall be delivered to the Borrower by credit to the Operating Account
maintained by the Borrower with the Bank or in such other manner as the
Borrower may reasonably request.
Each Advance under the Equipment Availability Loan shall be in an
amount of not less than $50,000. At any such time the amount of Advances under
the Equipment Availability Loan, not evidenced by Equipment Term Note[s],
aggregates at least TWO HUNDRED FIFTY THOUSAND and 00/100 DOLLARS ($250,000.00)
or in the event the amount of Advances under the Equipment Availability Loan,
not evidenced by Equipment Term Note[s], does not aggregate at least TWO
HUNDRED FIFTY THOUSAND and 00/100 DOLLARS ($250,000.00) after any six month
period, the Borrower shall execute and deliver to the Bank a Equipment Term
Note in the principal amount of said aggregate Advances, substantially in the
form of Exhibit C annexed hereto.
(c) Interest Rate. The outstanding principal amount of the
Equipment Line of Credit Note and each Equipment Term Loan shall bear interest
at a rate of interest per annum equal to the Base Rate plus one and one half of
one percent (1 1/2%), computed daily, for the actual number of days elapsed as
if each full calendar year consisted of three hundred sixty (360) days. The
rate of interest on Equipment Line of Credit Note and each Equipment Term Loan
shall change (but in no event higher than maximum lawful rate) on each date the
Base Rate shall change, without notice to the Borrower. Each change in the
interest rate on each Equipment Term Loan shall be in the same amount and
direction as each such change in the Base Rate.
(d) Payment of Principal and Interest. Interest with respect to
Advances under the Equipment Line of Credit Note, which have not been converted
to Equipment Term Loans, shall be due and payable on the first Business Day of
each month, beginning on the first Business Day of the month immediately
succeeding the month in which an Advance is made and terminating on the date
that said Advances are converted to a Equipment Term Loan pursuant to
Subsection 2.2(b) hereof, at which time all accrued interest shall be due and
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payable. Each Equipment Term Loan shall be repaid, in immediately available
funds, by the Borrower in thirty-six (36), consecutively monthly installments,
with respect to Equipment Term Loans financing existing equipment, and such
number of consecutively monthly installments as determined by the Bank, with
respect to Equipment Term Loans financing new equipment, of principal, plus
interest thereon, on the first Business Day of each month, beginning on the
first Business Day of the month immediately succeeding the month in which
Equipment Term Note is executed and delivered pursuant to Subsection 2.2(b)
hereof. All payments, howsoever designated by the Borrower, shall be applied
first on account of accrued interest and the remainder of such payments, if
any, on account of the unpaid principal balance of the Equipment Term Loan.
Notwithstanding anything contained herein or any Loan Document to the contrary,
all amounts outstanding under the Equipment Availability Loan and each
Equipment Term Loan shall be due and payable on the Termination Date.
(e) Manner of Payment. The Borrower hereby directs the Bank to
debit the Operating Account maintained by the Borrower with the Bank on any
date on which payment is due under the Equipment Availability Loan and any
Equipment Term Loan, in an amount equal to the amount of such payment.
(f) Statement of Account. At least once each month the Bank shall
render and send to the Borrower a statement of account showing with respect to
the Equipment Availability Loan amounts loaned, all other charges, expenses and
items chargeable to the Borrower, payments made by the Borrower against the
unpaid principal balance other appropriate debits and credits and the unpaid
principal amount as of the date of the statement. The statement of account
shall be conclusively presumed to be correct in all respects, except for
specific objections which the Borrower makes in writing within thirty (30) days
from the date upon which the statement of account is sent. Each statement of
account shall be presumed to be correct in all respects, except for specific
objections which the Borrower makes in writing within thirty (30) days from the
date upon which the statement of account is sent. In the event that the
Borrower makes an objection, such objection shall contain evidence of the
alleged error, which evidence shall be reviewed by the Bank. The Bank's final
determination shall be conclusive on all parties absent manifest error.
(g) Equipment Line of Credit Note. The maximum principal amount
of the Equipment Availability Loan shall be evidenced by the Equipment Line of
Credit Note substantially in the form of Exhibit B annexed hereto (provided
that to the extent that any portion of the principal amount of the Equipment
Availability Loan is evidenced by a Equipment Term Note said principal amount
shall not be deemed to be evidenced by the Equipment Line of Credit Note), and
the balance due from time to time on the Equipment Line of Credit Note and each
Equipment Term Note shall be conclusively evidenced by the Bank's records of
disbursements and repayments, subject to Subsection 2.2(f).
(h) Other Conditions. Subject to the other terms and conditions
set forth herein, by one (1:00) p.m. eastern standard time at least three (3)
Business Days prior to any Advance being made under the Equipment Availability
Loan, the Borrower shall deliver to the Bank, in form and substance
satisfactory to the Bank, the following:
(1) Written notification from the Borrower requesting an
Advance under the Equipment Availability Loan and the amount of said Advance.
(2) Paid invoices for the equipment and/or motor vehicle(s)
to be financed with the proceeds of the Equipment Term Loan.
(3) Execution and delivery to the Bank of appropriate
financing statements and/or other documentation as is necessary to perfect the
Bank's security interest in the equipment and/or motor vehicle(s) being
financed with the proceeds of the Equipment Term Loan.
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<PAGE>
(4) Endorsement to the insurance policies described in
Subsection 6.6 hereof extending said coverage to the equipment and/or motor
vehicle(s) being financed.
(i) Prepayment. Except as restricted by the provisions of
Subsection 2.1(n) hereof, the Borrower may prepay any Equipment Term Loan at
any time without penalty.
SECTION 3
COLLATERAL
3.1 In consideration of the Bank making the Loans (including the
Advances) to the Borrower in accordance with the terms and conditions of this
Agreement, and to secure payment and performance of all of the Obligations:
(a) Grant of Security Interest. The Borrower hereby grants to the
Bank a security interest in the Collateral which security interest shall remain
in full force and effect until all of the Obligations are fully paid and
satisfied. The Bank and the Borrower acknowledge that the security interest in
the Collateral granted to the Bank shall be and is a perfected first priority
Lien.
(b) Collateral in Bank's Possession. As further security for the
full and prompt payment of the Obligations, the Borrower hereby grants to the
Bank a Lien upon and security interest in and to all amounts that may be owed
from time to time to the Borrower by the Bank in any capacity, including, but
without limitation, any balance or share belonging to the Borrower of any
deposit or other account with the Bank, which Lien and security interest shall
be independent of any right of set off which the Bank may have. The Borrower
also hereby grants the Bank a Lien upon and security interest in any
securities, instruments or other property owned by the Borrower or in which the
Borrower has an interest, which now or hereafter are in the possession or
control of the Bank or in transit by mail or carrier to or from the Bank or in
possession of any Person acting in the Bank's behalf, without regard to whether
the Bank received the same in pledge, for safekeeping or otherwise.
SECTION 4
CONDITIONS PRECEDENT
4.1 The duty of the Bank to make the first Advance is conditioned upon
prior delivery by the Borrower to the Bank, each dated the date of this
Agreement except as otherwise specified, of the following:
(a) Agreement. This Loan and Security Agreement, properly
executed.
(b) Notes. The Notes, properly executed.
(c) Resolution of Koszegi. A certified copy of a resolution of
the Board of Directors of Koszegi, in form and substance satisfactory to the
Bank, authorizing the execution, delivery and performance of the Loan
Documents, the Notes, the transactions contemplated by all of the foregoing
documents and all such other and further actions in connection with this
Agreement and the other Loan Documents, as designated officers of Koszegi may
deem necessary and proper.
(d) Resolution of Forward. A certified copy of a resolution of
the Board of Directors of Forward, in form and substance satisfactory to the
Bank, authorizing the execution, delivery and performance
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of the Loan Documents, the transactions contemplated by all of the foregoing
documents and all such other and further actions in connection with this
Agreement and the other Loan Documents, as designated officers of Forward may
deem necessary and proper.
(e) Certificate of Incumbency of Koszegi. A certificate by the
Secretary of Koszegi certifying the names, true signatures and incumbency of
each of the duly elected officers signing the documents described in this
Subsection 4.1 together with a certificate by another officer of Koszegi
certifying as to the name, true signature and incumbency of the Secretary of
Koszegi.
(f) Certificate of Incumbency of Forward. A certificate by the
Secretary of Forward certifying the names, true signatures and incumbency of
each of the duly elected officers signing the documents described in this
Subsection 4.1 together with a certificate by another officer of Forward
certifying as to the name, true signature and incumbency of the Secretary of
Forward.
(g) Certificate of Incorporation of Koszegi. Copy, certified by
the Secretary of State of Indiana, of the Certificate of Incorporation of
Koszegi along with any amendments thereto.
(h) Certificate of Incorporation of Forward. Copy, certified by
the Secretary of State of New York, of the Certificate of Incorporation of
Forward along with any amendments thereto.
(i) Good Standing. Certificate of the Secretary of State of
Indiana and all other jurisdictions where Koszegi is incorporated and/or is or
should be qualified to do business, dated within thirty (30) days prior to the
date of this Agreement, as to the good standing of Koszegi in each such
jurisdiction.
(j) Good Standing. Certificate of the Secretary of State of New
York and all other jurisdictions where Forward is incorporated and/or is or
should be qualified to do business, dated within thirty (30) days prior to the
date of this Agreement, as to the good standing of Forward in each such
jurisdiction.
(k) Bylaws of Koszegi. A copy, certified by the Corporate
Secretary of Koszegi, of its Bylaws.
(l) Bylaws of Forward. A copy, certified by the Corporate
Secretary of Forward, of its Bylaws.
(m) Insurance. An endorsement satisfactory to the Bank in form
and substance, of a reputable insurance company, licensed to conduct business
in the State of New Jersey, of appropriate insurance as required by Subsection
6.6.
(n) UCC, Intellectual Property Abstracts, Federal Tax Lien, State
Tax Lien and Judgment Searches. UCC and intellectual property abstracts,
Federal tax lien, State tax lien and judgment searches in all states and
counties where Koszegi and Forward are located, incorporated, formed, qualified
to do business or maintains any of the Collateral.
(o) Terminations and Discharges. Proof satisfactory to the Bank
in form and substance of the satisfaction, termination and discharge of any
Liens other than the Liens created by this Agreement and the other Loan
Documents.
(p) Financing Statements. Proof in form satisfactory to the Bank,
of the filing of financing statements covering the Collateral with the
Secretary of State of Indiana, Department of State of New
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York, Secretary of State of California, the Clerk of St. Joseph's County,
Indiana, Clerk of Nassau County, New York and the Clerk of Orange County,
California, which are all jurisdictions in the United States where the nature
of the Borrower's business or the location of the Collateral makes filing
necessary to perfect the Bank's Lien on the Collateral.
(q) Opinions. Opinions of Counsel to Koszegi and Forward, in form
and substance satisfactory to the Bank and its counsel.
(r) Power of Attorney. The Power of Attorney, properly executed.
(s) Leases and Warehousing Agreements. Copies of all leases and
warehousing agreements with respect to all locations of the Borrower or where
Collateral is maintained.
(t) Landlord's Agreements. All Landlord's Agreements, properly
executed.
(u) Assignment of Intellectual Property. The Assignment of
Intellectual Property, properly executed.
(v) Warehousemen's Waiver. All Warehousemen's Waivers, properly
executed.
(w) Accountants Reliance Letter. A letter from the Borrower's
accountants in form and substance satisfactory to the Bank and its counsel
allowing the Bank to rely on the financial statements of the Borrowers prepared
by such accountants and submitted to the Bank.
(x) Set-up Fee. Payment to the Bank of a set-up fee in the amount
of $25,000.
(y) Actuary's Letter. Letter or Certificate from Borrower's
actuary, accountant or attorney with respect to compliance with ERISA of all
pension and profit sharing plans, in form and substance satisfactory to the
Bank.
(z) Projections. Receipt of management prepared projections,
including balance sheet, profit and loss and cash flow information covering the
fiscal year ending September 30, 1998.
(aa) Other. All other documentation, certificates, searches and
other requirements reasonably required by the Bank.
4.2 Conditions Precedent to All Advances. The making by the Bank of
any Advance subsequent to the date of this Agreement is subject to the
satisfaction of the following conditions precedent:
(a) Compliance with this Agreement and Other Loan Documents. The
Borrower shall have complied and shall then be in compliance with all of the
terms, covenants and conditions of this Agreement and other Loan Documents;
(b) No Default or Event of Default. There shall exist no Default
or Event of Default;
(c) Representations and Warranties. The representations and
warranties contained in Section 5 shall be true and correct with the same
effect as though such representations and warranties had been made at the time
of the making of each Advance; and
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(d) Approvals or Documents. The Bank shall have received such
other approvals or documents as it may reasonably require or request.
4.3 Reaffirmation of Representations, Warranties and Other Conditions.
Any request for an Advance subsequent to the date of this Agreement shall
constitute a reaffirmation by the Borrower of the items set forth above under
Subsections 4.2(a), (b), (c) and (d).
SECTION 5
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank that:
5.1 Corporate Existence. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and there are no other jurisdictions in which the character
of the properties owned or the business transacted by the Borrower makes
qualification as a foreign corporation necessary.
5.2 Corporate Power. The Borrower has the corporate power to execute,
deliver and perform this Agreement and the other Loan Documents and to borrow
hereunder and has taken all necessary corporate action to authorize (i) the
borrowing hereunder on the terms and conditions of this Agreement and the other
Loan Documents and (ii) the execution, delivery and performance of this
Agreement and the other Loan Documents. The Borrower has the corporate power to
own, pledge and operate its properties and to conduct its business.
5.3 Necessary Franchises, Patents, etc. The Borrower possesses, either
by direct ownership or as licensee, in full force and effect, all necessary
franchises, patents, licenses, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights, fictitious name authorizations
or certificates and copyrights to conduct its business as now conducted,
without any conflict by, or with the franchises, patents, licenses, trademarks,
trademark rights, trade name, trade name rights, service marks, service mark
rights, fictitious name authorizations or certificates and copyrights of,
others. Except as set forth in Schedule 5.3 hereof, the Borrower has never, and
does not, transact any business utilizing tradenames, fictitious names, assumed
names and/or alternate names.
5.4 Subsidiaries. Except as disclosed as Schedule 5.4 attached hereto,
the Borrower has no Subsidiaries.
5.5 Line of Business. The Borrower is currently engaged in the
business described on Schedule 5.5 annexed hereto.
5.6 Financial Condition. Forward has furnished to the Bank financial
statements of Forward prepared as of September 30, 1997 by Patrusky, Mintz and
Semel on an audited basis (all said financial statements shall collectively be
referred to as the "Financial Statements"). The Financial Statements are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles, consistently applied, and fairly
present the condition and results of operations of the Borrower for the period
involved. Since the date of the Financial Statements, there has been no
material and adverse change in the financial condition of the Borrower not
reflected in the Financial Statements, and since such date neither the business
of nor the financial condition of the Borrower have been materially and
adversely affect by any occurrence, whether or not insured against.
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5.7 Taxes. All tax returns of the Borrower which are due have been
duly filed and are correct and all taxes, assessments and other governmental
charges upon the Borrower which are shown to be due and payable thereon have
been paid. The Borrower does not know of any proposed tax deficiency,
assessment, charge or levy against it, the payment of which is not adequately
provided for on the books of the Borrower.
5.8 Judgments, No Material Litigation. There are no outstanding
judgments against the Borrower; nor are there any actions, proceedings, claims
or investigations, pending or to Borrower's knowledge threatened, before any
court or governmental body.
5.9 Title to Properties, First Priority Lien. The Borrower has good
and marketable title in all of its properties and assets it purports to own,
free of all Liens except those in favor of the Bank and those disclosed on
Schedule 5.9 annexed hereto, and the Borrower has granted to the Bank in
Subsection 3.1 a valid, perfected first priority Lien on the Collateral. The
Borrower agrees to terminate within sixty (60) days of the date hereof that
certain UCC-1 Financing Statement No. 131557 filed with the New York Department
of State on June 27, 1994 in favor of The Greater Savings Bank of New York. No
monies and/or obligations are due or outstanding to The Greater Savings Bank of
New York and/or any of its successors or assigns.
5.10 No Consent or Approval. No consent or approval of any Person, no
waiver of any Lien or right of distraint or other similar right, and no
consent, license, approval or authorization of or registration, qualification,
designation, declaration or filing with any governmental authority (other than
the filing of financing statements in accordance with the Uniform Commercial
Code) is required in connection with the validity, enforceability, execution,
delivery and performance of this Agreement or any of the other Loan Documents
or the consummation of any other transactions contemplated hereby.
5.11 No Burdensome Restriction, No Violations. There is no term of any
contract, bond, note, indenture or other agreement or of any charter or other
corporate restriction or of any judgment, decree, order, statute, rule or
regulation which materially and adversely affects the Borrower's business,
properties, assets, operations, affairs or condition (financial or otherwise)
and the Borrower is not in violation of its certificate of incorporation or
bylaws; nor is the Borrower in default under, or in violation of, any term of,
any agreement, ordinance, resolution, decree, burden, note, indenture, order or
judgment to which it is a party or by which its properties are bound, and the
execution, delivery and performance of, and compliance with, this Agreement and
the other Loan Documents will not (with or without the giving of notice or
lapse of time, or both) result in any violation of, or be in conflict with, or
constitute a default under, any such term or violate, where such violation
shall have a material and adverse impact upon the Borrower, any provision of
federal, state or local law, regulations or ordinances, or result in the
creation of any Lien upon any of the assets of the Borrower, except for the
Lien created by this Agreement and the other Loan Documents.
5.12 Change Name, Merger, Acquisition. Except as disclosed on Schedule
5.12 attached hereto, the Borrower has not within the last nine (9) years (i)
changed its name or been known by any other name, (ii) been the surviving
corporation of a merger or consolidation, (iii) acquired all or substantially
all of the assets of any person or entity, or (iv) obtained assets in a
transaction subject to the bulk transfer laws.
5.13 Place of Business. The only places of business of the Borrower or
locations of Collateral are listed on Schedule 5.13 attached hereto.
5.14 Location of Collateral and Records. All of the Collateral, and
the Borrower's books, records, journals, orders, receipts and correspondence
are located only at the Borrower's places of business set forth in Subsection
5.13.
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5.15 ERISA/Pension Liability.
(i) No Reportable Event has occurred or is reasonably expected to
occur with respect to any Plan that would result in any liability of the
Borrower or any member of a Controlled Group of which the Borrower is a part;
(ii) Neither the Borrower nor any Affiliate of the Borrower has
incurred, or is reasonably expected to incur, any Withdrawal Liability to
Multiemployer Plans as each term is defined under ERISA;
(iii) Neither the Borrower nor any Affiliate of the Borrower has
received any notification that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, within the meaning of Title IV of ERISA, and
to the best knowledge of the Borrower, no Multiemployer Plan is reasonably
expected to be in reorganization or insolvent or to be terminated within the
meaning of Title IV of ERISA, in either case where all such reorganizations,
insolvencies or terminations would result in any liability of the Borrower;
(iv) With respect to each Plan which is an "employee pension
plan" within the meaning of Section 3(2) of ERISA and which is intended to
qualify under Section 401 of the Internal Revenue Code, a favorable
determination letter has been received from the Internal Revenue Service
stating that such Plan so qualifies, and nothing has occurred since the date of
the issuance of such determination letter which would cause such Plan to cease
to qualify under Section 401 of the Internal Revenue Code; and
(vi) None of the transactions contemplated by this Agreement or
by any Plan constitute a prohibited transaction as such term is defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
5.16 Ownership of Stock. Forward owns all of the capital stock of
Koszegi. Except as disclosed on Schedule 5.16 attached hereto with respect to
Forward, there are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell,
or any securities or obligations convertible into, or any powers of attorney
relating to, shares of capital stock of the Borrower.
5.17 No Default. No event or condition which constitutes a Default or
an Event of Default has occurred.
5.18 Binding Obligations. This Agreement and the other Loan Documents
have been duly executed and delivered and constitute the valid and legally
binding obligations of the Borrower, enforceable in accordance with their
terms.
5.19 Accounts. The most recent list of Accounts delivered to the Bank
is true and complete, and contains an accurate aging thereof. All of the
Accounts are collectible, subject to no counterclaims, defenses, claims for
adjustments or setoffs of any nature whatsoever, and require no further act by
the Borrower to make such Accounts owing by the Account Debtors. Except as
disclosed on Schedule 5.19 attached hereto, none of the Accounts include any
conditional sales, consignments or sales on any basis other than that of
absolute sale in the ordinary and usual course of business. No agreement has
been made under which any deductions or discounts may be claimed as to any
Account except regular discounts in the usual course of business.
5.20 Inventory. Inventory as of the date hereof consists of items of a
quality and quantity usable and/or saleable in the ordinary course of
Borrower's business. The value of obsolete items, items below standard quality
and items in the process of repair have been written down to realizable market
value, or adequate reserves
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have been provided therefor, and the values carried on the balance sheet of the
Borrower most recently delivered to the Bank are set at the lower of cost to
the Borrower or market value of the Inventory, in accordance with GAAP.
5.21 Compliance with Regulations and Laws. The Borrower has duly
complied with, and its facilities, business, assets, property, leaseholds and
equipment are in compliance in all material respects with, the provisions of
all regulations or law applicable to it including, without limitation, the Fair
Labor Standards Act, the Federal Occupational, Safety and Health Act and the
Environmental Protection Act, and all rules and regulations thereunder and all
similar state and local laws, rules and regulations; and there have been no
outstanding citations, notices or orders of noncompliance issued to the
Borrower or relating to its business, assets, property, leaseholds or equipment
under any such laws, rules or regulations.
5.22 Licenses and Permits. The Borrower has been issued all required
federal, state and local licenses, certificates or permits relating to, and the
Borrower and its facilities, business, assets, property, leaseholds and
equipment are in compliance in all material respects with all applicable
Federal, state and local laws, rules and regulations relating to, air
emissions, water discharge, noise emissions, solid or liquid disposal,
hazardous waste or materials, or other environmental health or safety matters.
5.23 Existing Debt. All existing Debt of the Borrower is set forth on
Schedule 5.23 annexed hereto.
5.24 Solvency of Borrower. Borrower is solvent on the date hereof. For
the purpose of this Agreement, the term "solvent" shall mean: (a) the fair
salable value of the Borrower's property is in excess of the total amount of
its debts; (b) the Borrower is able to pay its debts as they mature; and (c)
the Borrower has adequate capital to conduct its business in the ordinary
course.
5.25 Labor Matters. (i) The Borrower has not experienced any strike,
labor dispute, slowdown or work stoppage due to labor disagreements and (ii)
there is no such strike, dispute, slowdown or work stoppage threatened against
the Borrower.
5.26 Investment Company Act. The Borrower will not be, after giving
effect to the transactions contemplated hereby or any borrowing to be made
hereunder, (x) an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended, or (y) subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act or any foreign, federal or local
statute or regulation limiting its ability to incur indebtedness for money
borrowed or guarantee such indebtedness as contemplated hereby or by any other
Loan Document.
SECTION 6
COVENANTS BY BORROWER
The Borrower covenants and agrees that:
6.1 Preservation of Corporate Existence and Franchises. The Borrower
shall preserve and keep in full force and effect its corporate existence and
all franchises, rights and privileges necessary to the proper conduct of its
business, including, without limitation, all necessary franchises, patents,
licenses, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, fictitious name authorizations or certificates and
copyrights without any unlawful conflict with such franchises, patents,
licenses, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, fictitious name authorizations
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or certificates and copyrights of others. The Borrower shall promptly notify
the Bank of the use of any of the foregoing.
6.2 Amendments. The Borrower shall promptly deliver to the Bank copies
of any amendments or modifications to its certificate of incorporation or
bylaws certified with respect to the certificate of its incorporation by the
Secretary of State of the state of incorporation, and, with respect to the
bylaws, by the Secretary of the Borrower.
6.3 Compliance with Laws. The Borrower shall comply with all
applicable laws, ordinances, rules and regulations of any Federal, state or
local government or any instrumentality or agency thereof now or hereafter in
effect.
6.4 Taxes. The Borrower shall pay and discharge, as they become due,
all taxes, assessments, debts, claims and other governmental or
non-governmental charges lawfully imposed upon it or incurred by it or its
properties and assets, except taxes, assessments, debts, claims and charges
contested in good faith by appropriate proceedings and in respect of which the
Borrower shall have set aside adequate reserves for the payment of such tax,
assessment or charge in conformity with GAAP. The Borrower shall provide to the
Bank, upon the Bank's request, evidence of payment of such taxes, assessments,
debts, claims and charges satisfactory to the Bank.
6.5 Maintenance of Property. The Borrower shall maintain, preserve and
keep all its properties, equipment and assets (including, but not limited to,
Inventory) in good repair, working order and condition, and make, or cause to
be made, all necessary or appropriate repairs, renewals, replacements,
substitutions, additions, betterments and improvements thereto so that
efficiency of all such properties and assets shall at all times be properly
preserved and maintained.
6.6 Insurance. The Borrower shall maintain, or cause to be maintained,
such insurance on its properties and assets, including without limitation, the
Collateral, with responsible insurance companies licensed to do business in the
States of Indiana, New York and/or any other location of the Borrower or where
the Borrower maintains Collateral, against such casualties and in such amounts
as is from time to time reasonably required by the Bank. The insurance policies
shall be on a full replacement cost basis of the value of the Collateral. The
Borrower shall also maintain, or cause to be maintained, adequate general
liability insurance, and worker's compensation insurance. The insurance
policies of the Borrower shall name the Bank loss payee, as its interest may
appear, and additional insured. All policies shall contain a clause whereby no
actions on the part of the Borrower and/or the primary insured shall invalidate
such policies with respect to the Bank. All such policies of insurance shall be
in amounts and in substance satisfactory to the Bank and provide for at least
thirty (30) days advance notice in writing to the Bank of any cancellation or
modification thereof. If the Borrower fails to pay the premiums on any such
insurance, the Bank shall have the right (but shall be under no duty) to pay
such premiums for the Borrower's account and contemporaneously notify the
Borrower of such payment. The Borrower shall repay to the Bank any sums which
the Bank shall have so paid, together with interest thereon at the Default
Rate. The Borrower shall (a) deliver, to the Bank, upon its reasonable request,
a detailed list of insurance then in effect, stating (i) the names of the
insurance companies, (ii) the amounts and rates of the insurance, (iii) dates
of expiration thereof and the properties and risks covered thereby; (b) within
fifteen (15) days after notice from the Bank, obtain such additional insurance
as the Bank may reasonably request, based on the type of insurance typically
obtained by companies within the Borrower's industry; (c) provide to the Bank
copies of all insurance policies; and (d) assign to the Bank all rights to
receive proceeds directly to the Bank.
6.7 No Other Liens. The Borrower shall not directly or indirectly
permit to exist any Lien on the Collateral other than the Lien in favor of the
Bank and those Liens set forth on Schedule 5.9.
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6.8 Litigation Notice. The Borrower shall promptly notify the Bank of
(i) any litigation, actions, proceedings, claims or investigations pending or
threatened against any Obligor wherein the claimant seeks to recover in excess
of $10,000 (or its equivalent in another currency or currencies) per claim or
claims in excess of $10,000 in the aggregate and (ii) of the entry of any
judgment against the Obligor in excess of $10,000 (or its equivalent in another
currency or currencies) or judgments in excess of $10,000 in the aggregate
against any Obligor or the entry of any Lien against any of the Collateral,
other than the Lien in favor of the Bank or otherwise permitted by the terms
hereof.
6.9 Location of Collateral and Records. The Borrower shall keep the
Collateral, its records relating to the Collateral, and its other books,
records, journals, orders, receipts and correspondence at only those locations
set forth in Subsection 5.13, unless notice is given to the Bank at least
thirty (30) days in advance of, and the Bank consents in writing to, the
removal of the Collateral, and the books, records, journals, orders, receipts
and correspondence, to another location provided, however, that no such removal
may be effected before all filings required to be made to preserve the first
priority security interest of the Bank in the Collateral shall have been made
and with respect to any change in said location, the Borrower shall deliver to
the Bank a new Landlord's Agreement or Warehouseman's Waiver, in form and
substance satisfactory to the Bank, with respect to the new location.
6.10 Conduct of Business. The Borrower shall not engage in any
business other than the business specified in Subsection 5.5 without the
written permission of the Bank.
6.11 Change of Location. The Borrower shall not (1) change any of the
Borrower's locations or (2) create any new place(s) of business or (3)
eliminate any existing place of business, unless the Borrower notifies the Bank
in writing thirty (30) days in advance thereof and further provided that no
change in location or creation of a new location may be effected before all
filings required to be made to preserve the first priority security interest of
the Bank in the Collateral shall have been made and with respect to any said
change, the Borrower shall deliver to the Bank a new Landlord's Agreement or
Warehouseman's Waiver, in the form and substance satisfactory to the Bank, with
respect to the new location.
6.12 Financial Statements. The Borrower shall deliver to the Bank in
form and substance satisfactory to it, the following:
(a) Within thirty (30) days after the end of each fiscal
quarterly period a balance sheet of Forward, on a consolidated basis, as of the
end of such period, and a statement of cash flows and a statement of income
thereof for the period from the beginning of the current fiscal year to the end
of such period, prepared in accordance with GAAP, consistently applied, all in
reasonable detail and prepared management of Forward, together with such
financial information as required by the Bank in order to determine whether the
Borrower is compliance with its financial covenants described in Subsection
6.23 hereof and a certificate of the President or the Chief Financial Officer
of Forward certifying that said financial statements accurately represent in
all material respects the financial condition and results of operations of the
Borrower subject to year end adjustments, and stating whether his or her
examination has disclosed the existence of any condition or event which
constitute a Default hereunder and if so, specifying the nature and period of
existence thereof;
(b) Within ninety (90) days after each fiscal year end, a balance
sheet of Forward, on a consolidated basis as of the end of such period and a
statement of cash flows and a statement of income for such year to the end of
such period, prepared in accordance with GAAP, all in reasonable detail and
audited by independent certified public accountants, acceptable to the Bank,
together with an unqualified opinion, a management letter, if any, and to the
Borrower's best efforts, a reliance letter from said accountants, in form and
substance satisfactory to the Bank, stating that the Bank may rely on said
financial statements, together with such financial information as required by
the Bank in order to determine whether the Borrower is compliance with its
financial
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covenants described in Subsection 6.23 hereof and a certificate of the
President or Chief Financial Officer of Forward certifying that said financial
statements accurately represent in all material respects the financial
condition and results of operations of the Borrower and stating whether his or
her examination has disclosed the existence of any condition or event which
constitutes a Default hereunder, and if so, specifying the nature and period of
existence thereof; and
(c) Within five (5) days of the first and fifteen day of each
month, a Borrowing Base Certificate dated as of the first and fifteenth day of
each month, properly executed and completed;
(d) Within fifteen (15) days of the first day of each month, an
accounts receivable aging schedule, an accounts payable aging schedule and an
inventory report, all dated as of the last day of the prior month and in form
and substance acceptable to the Bank;
(e) Such additional financial information of the Borrower as the
Bank shall reasonably require, including, but not limited to, customer address
lists, reconciliation forms, daily sales, receipts, accounts receivable,
accounts payable, purchases and inventory amounts, such items to also include
original bills of lading or other evidence of shipment of goods if so required
by the Bank.
6.13 Costs, Expenses and Attorneys Fees.
(a) The Borrower shall pay on demand all reasonable and necessary
expenses and expenditures of the Bank, including, without limitation,
reasonable attorneys' fees and expenses, incurred or paid by the Bank in
protecting, enforcing or exercising the Bank's interest, rights or remedies
created by, connected with or provided in this Agreement and the other Loan
Documents or in enforcing performance in accordance herewith and therewith. The
Bank may, at its discretion and at any time when due, charge any account
maintained by the Borrower with the Bank, in an amount equal to the sums due
hereunder, and all such sums shall be added to the outstanding Obligations of
the Borrower to the Bank. The Bank shall use its best efforts to notify the
Borrower of any such charges made; and
(b) The Borrower shall pay on demand all reasonable legal fees,
recording expenses and other reasonable and necessary disbursements of the Bank
incident to the preparation, execution and delivery of this Agreement and the
other Loan Documents, or any amendment or modification hereto or thereto. The
Bank may, at its discretion and at any time when due, charge any account
maintained by the Borrower with the Bank, in an amount equal to the sums due
hereunder, and all such sums shall be added to the outstanding Obligations of
the Borrower to the Bank.
6.14 Book and Records. The Borrower shall, at all times and in
accordance with GAAP consistently applied, keep complete and accurate books and
records concerning its business, affairs and operations and concerning its
properties and assets, including, without limitation, concerning the
Collateral.
6.15 Instruments and Documents. The Borrower shall (i) upon request of
the Bank, deliver to the Bank all instruments and chattel paper (including all
executed copies thereof, except such executed copies retained by the obligors
thereunder) representing proceeds of the Collateral duly endorsed and
accompanied by duly executed instruments of assignments in form and substance
satisfactory to the Bank, and (ii) immediately upon receipt by the Borrower,
deliver to the Bank all invoices, original bills of lading, documents of title,
original contracts, chattel paper, instruments and any other writings relating
thereto, and other writings or evidence of performance of contracts or evidence
of shipment or delivery of the merchandise sold or services rendered in
connection therewith. The Borrower shall deliver to the Bank, promptly at the
Bank's request, from time to time, additional copies of any or all of such
papers or writings, and such other information with respect to any of the
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Collateral including such schedules of Accounts and other writings as the Bank
may, in its sole reasonable discretion, deem to be necessary or effectual to
evidence any Advances made or to evidence, enforce or perfect the Bank's
security interest in the Collateral, to facilitate collection of the
Collateral, or to carry into effect the provisions and intent of this Agreement
or any of the other Loan Documents, all at the sole expense of the Borrower.
6.16 Field Examination/Inspection. The Borrower shall from time to
time, without hindrance or delay, permit the Bank, its representatives, agents
and/or designees, to inspect or examine the properties and assets of the
Borrower, including, without limitation, the Collateral, and to examine, check,
and make copies of or abstracts from any of the Borrower's books, records,
journals, receipts, orders, correspondence or other data, to conduct field
examinations and to verify independently the orders of the Borrower and
Accounts. All such field examinations/inspections shall be at the Borrower's
sole cost and expense and shall be charged at a rate of $500 per day per person
conducting such field examination/inspections plus actual out-of-pocket
expenses incurred by the Bank. All such field examinations/inspections made
prior to the occurrence of an Event of Default or Default shall be made during
the Borrower's normal business hours.
6.17 ERISA, SEC Filings. The Borrower shall furnish to the Bank: (i)
as soon as possible and in any event within forty-five (45) days after the
Borrower or a duly appointed administrator of a Plan knows or has reason to
know that any Reportable Event has occurred with respect to any Plan, a
statement of the chief financial officer of the Borrower setting forth details
as to such Reportable Event and the action which the Borrower proposes to take
with respect thereto, together with a copy of the notice of such Reportable
Event given to the PBGC or a statement that such notice will be filed with the
annual report to the United States Department of Labor with respect to such
Plan if required under applicable regulations; (ii) promptly after the filing
thereof with the United States Department of Labor, the Internal Revenue
Service or the PBGC, copies of each annual and other report with respect to
each Plan; (iii) promptly after receipt thereof, a copy of any notice the
Borrower or any other member of a Controlled Group may receive from the United
States Department of Labor, the Internal Revenue Service or the PBGC with
respect to any Plan; (iv) promptly after the sending of, making available or
filing of the same, copies of any proxy statements and financial statements
which the Borrower shall send or make available to all of its stockholders, and
any registration statements and any reports which the Borrower shall file with
the Securities and Exchange Commission; and (v) promptly after receipt thereof,
a copy of any notice the Borrower may receive indicating an actual or potential
violation of any environmental law or regulation.
6.18 Use of Proceeds. The Borrower shall use the proceeds of (i) the
Revolving Loan for working capital purposes and (ii) the Equipment Availability
Loan to refinance on the date hereof existing equipment and to finance the
acquisition of new equipment, all for used in the Borrower's business.
6.19 Loss or Damage to Collateral. The Borrower shall immediately
notify the Bank of any material loss or damage to, or material diminution
(other than through obsolescence) in, or any occurrence which would materially
adversely affect, the value of any Collateral. In the event that the Bank, in
its sole discretion, determines that there has been any such loss, damage or
material diminution in value, the Borrower shall, whenever the Bank so requests
and provided that such Collateral and the loss or damage to such Collateral is
not adequately covered by insurance (or the insurance company has not
disclaimed coverage), pay to the Bank, within such period as the Bank shall
specify, such amount as the Bank, in its sole discretion, shall have determined
represents such loss, damage or material diminution in value.
6.20 Default Notice. The Borrower shall immediately notify the Bank of
the occurrence of any Default or Event of Default accompanied by a certificate
of the Borrower specifying the nature and period of existence thereof and a
certification stating what action the Borrower is taking in respect of the
Default or Event of Default. If the Borrower receives a notice of a default
from any creditor other than the Bank and such notice
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specifies a monetary default in excess of the sum of $10,000 (or defaults in
excess of $10,000 in the aggregate in any fiscal year) the Borrower shall
deliver to the Bank a copy of such notice of default immediately upon receipt
thereof.
6.21 Compliance with Agreement. The Borrower shall observe, perform
and comply with, and shall continue, until all Obligations of the Borrower to
the Bank under this Agreement and the other Loan Documents, are fully paid and
satisfied, to observe, perform and comply with, all of the terms, agreements,
and covenants contained in this Agreement and the other Loan Documents.
6.22 Government Accounts. If any of the Accounts, contract rights,
chattel paper, general intangibles or instruments arise out of contracts with
the United States or any of its departments, agencies or instrumentalities, the
Borrower shall notify the Bank thereof and execute any necessary writings in
order that all money due or to become due under such contracts shall be
assigned to the Bank and proper notice of the assignment given under the
Federal Assignment of Claims Act.
6.23 Negative Covenants. The Borrower shall not:
(a) Debt. Create, incur or assume any Debt, except for the
Obligations and as disclosed on Schedule 5.23 annexed hereto.
(b) Contingent Liabilities. Assume, guarantee, endorse or
otherwise become liable in connection with the obligations of any Person, firm
or corporation except:
(i) Liabilities of the Borrower resulting from product
warranties made by the Borrower in the ordinary course of its business; and
(ii) Liabilities of the Borrower resulting from its
endorsement of items or instruments for deposit or collection in the ordinary
course of its business.
(c) Sale or Other Disposition of Assets. Sell, lease, abandon, or
otherwise dispose of all or any substantial part of its properties or assets.
(d) Acquisition of Assets. Purchase, lease, or otherwise acquire
the properties, assets or real estate, or any interest therein, of any Person
except the purchasing, leasing or otherwise acquiring of assets by the Borrower
in the ordinary course of its business in bona fide arm's length transactions.
(e) Mergers, Joint Ventures. Consolidate with, merge into, or
participate in any joint venture with, any Person or permit any Person to
consolidate with, merge into or participate in any joint venture with the
Borrower.
(f) Investments. Purchase or acquire the obligations, securities
or stock of, or make capital contributions to, any Person, except:
(i) Marketable direct obligations of the United States of
America;
(ii) Bonds, bills or notes of any state, county, or
municipality of the United States of America, which are not in default as to
principal or interest, and which are rated Aa, or better, by Moody's Investors
Service;
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(iii) Customer's notes, chattel paper, or the like received
as non-cash proceeds of the sale of the Inventory of the Borrower in the
ordinary course of its business;
(iv) Certificates of Deposit and Repurchase Agreements;
(g) Subsidiaries. Create or acquire, or permit the creation or
acquisition of, any Subsidiary.
(h) Capital Structure. Alter its existing capital stock structure
by the issuance of new shares of existing classes of stock or by creation of
new classes of stock, or otherwise.
(i) Change of Ownership. Permit or cause a change in the
ownership of the presently issued and outstanding capital stock of all of the
issued and outstanding capital stock of the Borrower.
(j) Dividends and Redemption. Declare or pay any dividend or
distribution, in cash or otherwise, on any shares of stock of the Borrower or
redeem, return, purchase or otherwise acquire directly or indirectly any of its
shares of stock now or hereafter outstanding, except that Koszegi may
distribute to Forward up to $250,000 during the period commencing on the date
hereof and ending on such date as all Obligations are fully satisfied so long
as no Default or Event of Default has occurred or will result from said
distribution.
(k) Loans or Advances to Other Persons. Make loans or advances to
any of its officers, directors or shareholders, or to any other Person other
than those outstanding as of the date hereof and listed on Schedule 6.23(k)
attached hereto.
(l) Liens. Create, assume or suffer to exist any Lien on any of
its properties or assets whether now owned or hereafter acquired, except:
(i) any Lien in favor of the Bank;
(ii) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due; and
(iii) Any other Liens set forth on Schedule 5.9 annexed
hereto.
(m) Assignment of Accounts. Create, assume or suffer to exist any
assignment of Accounts.
(n) Debt to Tangible Net Worth. Cause, suffer or permit the ratio
of Debt of the Borrower (on a consolidated basis, excluding all Persons other
than Koszegi and Forward) to Tangible Net Worth of the Borrower (on a
consolidated basis, excluding all Persons other than Koszegi and Forward), at
any time, to be more than 3 to 1.
(o) Minimum Tangible Net Worth. Cause, suffer or permit Tangible
Net Worth of the Borrower (on a consolidated basis, excluding all Persons other
than Koszegi and Forward), at anytime, to be less than (i) $2,750,000 during
the period commencing on the date hereof and ending September 29, 1998; (ii)
$3,250,000 during the period commencing September 30, 1998 and ending September
29, 1999 and (iii) $4,000,000, thereafter.
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(p) Minimum Annual Operating Income. Cause, suffer or permit the
Annual Operating Income of the Borrower (on a consolidated basis, excluding all
Persons other than Koszegi and Forward)to be less than (i) $500,000 for the
fiscal year ending September 30, 1998; (ii) $750,000 for the fiscal year ending
September 30, 1999 and (iii) $1,000,000 for the fiscal year ending September
30, 2000.
(q) Management. Neither Theodore H. Schiffman and/or Michael
Schiffman shall cease to be actively involved in day-to-day management and
operations of the Borrower.
Notwithstanding the provisions of 6.23 (f), (j) and (k) hereof,
Forward shall be permitted, so long as a Default or an Event of Default does
not result therefrom, to pay operating expenses of Koszegi Asia, Ltd. and
Terrapin Australia Pty Ltd. in an aggregate amount not to exceed $1,000,000 per
annum.
6.24 Margin Stock. The Borrower does not own, nor has any present
intention of acquiring, any "Margin Stock" within the meaning of Regulation U
(12 CFR Part 221) of the Board of Governors of the Federal Reserve System
(herein called "Margin Stock"). None of the proceeds of the Advances shall be
used, directly or indirectly, for the purposes of purchasing or carrying, or
for the purpose of reducing or retiring any indebtedness which was originally
incurred for the purposes of purchasing or carrying, any Margin Stock or for
any other purpose which might cause the transactions contemplated hereby to be
considered a "purpose credit" within the meaning of said Regulation U, or which
might cause this Agreement to violate Regulation U, Regulation T, Regulation G,
Regulation X, or any other regulation of the Board of Governors of the Federal
Reserve System or the Securities Exchange Act of 1934, as amended.
6.25 Change in Officers. The Borrower shall furnish to the Bank within
fifteen (15) days of any election or appointment of officers or directors,
written notice of any change in the persons who from time to time become
officers and directors of the Borrower.
6.26 Qualified Inventory and Qualified Accounts. The Borrower shall
not knowingly submit or represent to the Bank any Inventory as Qualified
Inventory, or any Account as a Qualified Account, which does not meet all
requirements in every respect of Qualified Inventory, or of a Qualified Account
(as the case may be), the Borrower shall notify the Bank promptly, in writing,
when any Inventory or Account against which an Advance had been made or may be
made ceases to meet any of such requirements.
6.27 Further Assurances, Warranty of Title. The Borrower shall,
procure and deliver to the Bank or execute and deliver any mortgage, security
agreement, financing statement or amendments thereto, or other writing
necessary to evidence, preserve, protect or enforce the Bank's rights and
interests to or in the Collateral. The Borrower will defend the Collateral at
its own expense from all claims and defenses of all other Persons.
SECTION 7
EVENTS OF DEFAULT
There shall be an Event of Default upon the occurrence of any one of
the following:
7.1 Non-Payment. The Borrower's failure to pay, when due or at
maturity (whether as stated or by acceleration), as the case may be, any
payment of principal, interest or other charges due and owing to the Bank
including, without limitation, those Obligations arising pursuant to this
Agreement, including those described in Subsection 2.1(h) hereof; or
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7.2 Other Defaults. A breach by any Obligor of any term, agreement, or
covenant contained in this Agreement or the other Loan Documents including,
without limitation, those covenants contained in Section 6;
7.3 Warranties and Representations. If any warranty or representation
contained in this Agreement or the other Loan Documents, including without
limitation, the warranties and representations contained in Section 5, shall be
false or incorrect in any material respect when made or when deemed reaffirmed,
or if any financial statement given by or on behalf of any Obligor to the Bank
shall be false, incorrect, incomplete or misleading in any material respect
when given; or
7.4 Bankruptcy or Insolvency. (i) Any resolution shall be passed or
any action shall be taken by any Obligor for the termination, winding up,
liquidation or dissolution of any Obligor or its debts, or any Obligor shall
make an assignment for the benefit of creditors, become insolvent or be unable
to pay (or admit in writing its inability to pay) any of its debts as they
mature, or any Obligor shall file a petition in voluntary liquidation or
bankruptcy, or any Obligor shall file a petition or answer or consent seeking
reorganization or the readjustment of any of its Debt under applicable
insolvency or bankruptcy laws now or hereafter existing, or any Obligor shall
consent to the appointment of any receiver, administrator, liquidator,
custodian or trustee of all or any part of its property or assets, or corporate
action shall be taken by any Obligor for the purpose of effecting any of the
foregoing; or
(ii) By order or decree of any court of competent
jurisdiction, any Obligor shall be adjudicated a bankrupt or insolvent, or a
petition for proceedings in bankruptcy or liquidation or for the reorganization
or the readjustment of its Debt under applicable bankruptcy or insolvency laws
now or hereafter existing shall be filed against any Obligor, and any Obligor
shall admit the material allegations thereof, or shall not cause such petition
to be discharged within sixty (60) days, or any order (other than a final,
non-appealable order for which there shall be no grace period), judgment or
decree shall be made approving such petition and such order, judgment or decree
shall not be vacated, set aside or stayed within sixty (60) days of their
issuance or any receiver, administrator, liquidator or trustee shall be
appointed for any Obligor or for all or any part of its property and such
receiver, administrator, liquidator or trustee shall not be discharged or his
jurisdiction shall not be relinquished, vacated or stayed, on appeal or
otherwise, within sixty (60) days after his appointment; or
7.5 Cross-Default. The occurrence of any default by any Obligor in
connection with (i) any loans, advances or other extensions of credit by the
Bank to any Obligor other than the Advances; (ii) any Debt of any Obligor in
excess of $10,000 (or any Debts in excess of $10,000 in the aggregate per
annum) under any agreement or agreements or instrument or instruments relating
to such Debt or Debts if the effect of such default is to accelerate, or to
permit the acceleration of, the maturity of such Debt or Debts, or the
termination of any commitment to continue to make any loans thereunder, or any
such Debt or Debts shall be declared to be due and payable or required to be
prepaid other than by a regularly scheduled required payment, prior to its
stated maturity thereof; or
7.6 Other Warranties or Representations. If any warranty or
representation whether past, contemporaneous or future made in writing by any
Obligor or on behalf of any Obligor to the Bank, other than any warranty or
representation set forth in this Agreement, shall prove to be false, incorrect,
incomplete or misleading in any material respect, when made, or when deemed
made; or
7.7 Other Loan Documents. A default occurs under any of the other Loan
Documents, and such default is not cured within the applicable grace period
provided therein, if any, or one of the Obligors terminates its Obligations
under any of the Loan Documents; or
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7.8 ERISA. A Reportable Event shall have occurred which the Bank, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the PBGC of any Plan or for the appointment by the appropriate
United States district court of a trustee for any Plan, or if any Plan shall be
terminated or any such trustee shall be requested or appointed, or if Borrower
is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from any Obligor's complete or
partial withdrawal from such Plan; or
7.9 Execution; Attachment. Any execution or attachment shall be levied
against the Collateral; or
7.10 Judgment. The entry of a final judgment for the payment of money
or of a tax lien in excess of $10,000 (or $10,000 in the aggregate per annum)
against any Obligor and the failure of said Obligor to discharge the same
within fifteen days (15) from the date of the order, decree or process under
which or pursuant to which judgment was entered, or to secure a stay of
execution pending appeal of such judgment unless such judgment is fully covered
by insurance and the insurer has acknowledged liability or unless a bond for
the full amount of said judgment is presented to the entity responsible for the
enforcement of said judgment; or
7.11 Cancellation of Security Interest. Any security interest or Loan
Document shall be canceled, terminated, revoked or rescinded otherwise than in
accordance with the express terms thereof or with the prior written agreement,
consent or approval of the Bank; or any action at law, suit in equity or other
legal proceeding to cancel, revoke or rescind any security interest or Loan
Document shall be commenced by or on behalf of the any Obligor or any other
Person or Persons bound thereby, or by any governmental or regulatory authority
or agency of competent jurisdiction; or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or shall issue a judgment, order, decree or ruling to the
effect that, any security interest or Loan Documents or any one or more of the
Obligations or of any other Person or Persons under any one or more of the Loan
Documents are illegal, invalid or unenforceable in accordance with the terms
thereof; or
SECTION 8
BANK'S RIGHTS AND REMEDIES
8.1 Banks' Rights Exercisable at any Time. Exclusive of the occurrence
of an Event of Default or Default, the Bank may, in its reasonable discretion:
(a) Whenever the Bank determines in its reasonable discretion
that a condition or an event has occurred which has a Material Adverse Effect,
the Bank may terminate its making of any further Advances, and demand payment
of any and all Obligations then outstanding;
(b) Endorse the name of the Borrower upon any and all checks,
drafts, money orders and other instruments for the payment of money which are
payable to the Borrower and certificate insurance proceeds of Collateral;
(c) Call at the place(s) of business of the Borrower during
regular business hours, and, without hindrance or delay, inspect, conduct field
examinations, check and make abstracts or copies from its books, records,
journals, orders, receipts, correspondence and other data.
(d) Receive from all or any accountants and auditors employed by
the Borrower (which accountants and auditors the Borrower hereby authorizes and
directs to deliver to the Bank), at any time during the
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term of this Agreement, copies of any of the financial statements, trial
balances or other accounting records of any sort of the Borrower which are in
the possession of such accountants and auditors;
(e) Receive and have access to printouts and all other
information respecting financial records of the Borrower maintained by external
computer service companies (which the Borrower hereby authorizes and directs to
deliver or give access to the Bank of the same);
(f) Sign financing statements in the name of the Borrower, or
file financing statements without the Borrower's signature or file carbon,
photographic or other reproductions of financing statements, where permitted by
law, in any relevant state to perfect or maintain the Bank's security interest
in any or all of the Collateral;
(g) Communicate with customers and Account Debtors to verify
(including phone verifications) independently orders and Accounts (and the
Borrower agrees to furnish all such assistance and information as the Bank may
reasonably require in connection therewith), and to notify the customers and
Account Debtors to make payment directly to the Bank or its designee;
(h) Take any and all action which in its reasonable discretion is
necessary and proper to preserve its interest in the Collateral, including,
without limitation, paying debts of the Borrower which might, in the Bank's
sole discretion, impair the Collateral, or the Bank's security interest therein
or Lien thereon, including without limitation, paying taxes or assessments
imposed on the Collateral or unpaid insurance premiums and the sums so expended
by the Bank shall be secured by the Collateral shall be added to the amount of
the Obligations and shall be payable on demand with interest at the Default
Rate;
(i) Take control of any cash or non-cash proceeds of any Account,
chattel paper, instrument, and/or general intangibles which proceeds shall then
be deposited into the Cash Collateral Account; and
(i) Place the Borrower on daily monitoring pursuant to which the
Borrower shall, among other things, report daily sales, receipts, purchases,
accounts payable and inventory to the Bank.
8.2 Bank's Rights and Remedies Upon an Event of Default. Upon the
occurrence of an Event of Default the Bank shall have the following rights and
remedies to be exercised within their discretion, without further demand,
presentment, protest, advertisement, or notice of any kind, all of which are
hereby expressly waived by the Borrower except as specified below:
(a) The Bank may exercise any and all of the rights and remedies
provided in this Agreement, the other Loan Documents, the Uniform Commercial
Code and other applicable law in force and effect in the State of New Jersey
and in any other jurisdiction where the Borrower maintains property or assets;
(b) The Bank shall make no further Advances under and pursuant to
this Agreement or otherwise, and all of the Obligations of the Borrower to the
Bank shall immediately become due and payable (which Obligations shall
automatically be due and payable in the case of an Event of Default under
Subsection 7.4 hereof) and the interest rate on the Loans shall increase to the
Default Rate;
(c) The Bank may receive, open and dispose of mail addressed to
the Borrower and notify the Post Office authorities to change the address for
delivery of mail addressed to the Borrower to such address as the Bank may
designate;
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(d) The Bank may require the Borrower (and the Borrower hereby
agrees), at Borrower's own expense, to assemble or to cause to be assembled the
Collateral and make it available at the principal place of business of the
Borrower or other places of business of the Borrower or such other places as
the Bank may designate, and to allow the Bank to take possession or dispose of
the Collateral;
(e) The Bank may forthwith collect, receive, appropriate and
realize upon the Collateral or any part thereof, and/or, forthwith, without
advertisement, sell, lease, assign, give an option or options to purchase, or
sell or otherwise dispose of, the Collateral (or contract to do so), or any
part thereof or any interest which the Borrower may have therein, in one or
more parcels at public or private sale or sales, at any exchange or broker's
board or at any of the Bank's offices or elsewhere at such prices as they may
deem best in their discretion exercised in a commercially reasonable manner,
for cash or on credit or for future delivery without assumption of any credit
risk, and if notice of such sale or of other action by the Bank is required by
applicable law, the Borrower agrees that ten (10) days notice (which
notification shall be deemed given when mailed, postage prepaid, addressed to
the Borrower at its principal place of business set forth in Subsection 5.13)
of the time and place of any public sale or of the time after which a private
sale may take place shall be sufficient, which the Bank and the Borrower hereby
agree to be commercially reasonable;
(f) The Bank shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold, free of any
right or equity of redemption in which right or equity of redemption the
Borrower hereby waives and releases;
(g) The Bank may enter upon any and all places of business of the
Borrower, take possession and remove therefrom any and all of the Collateral
and the Borrower's books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral, and/or without cost
or expense to the Bank, make such use of any or all of the Borrower's places of
business as may be reasonably necessary to administer, control and collect the
Collateral, either personally or through any agent, or by means of a receiver
appointed by a court of competent jurisdiction;
(h) The Bank may settle, renew, extend, compromise, compound,
exchange or adjust claims in respect of any of the Collateral or any legal
proceedings brought in respect thereof;
(i) The Bank may subrogate to all of the Borrower's interests,
rights and remedies in respect of the Collateral including the right to stop
delivery, and to reclaim Inventory which any Account Debtor has returned,
rejected, revoked acceptance of and/or failed to return, and which has been
consigned or diverted, and to take possession of and sell or dispose of
Inventory;
(j) The Bank may demand, sue for, collect or receive any money or
property, at any time payable or receivable on account of or in exchange for,
or make any compromises they deem desirable, including, without limitation,
extending the time of payment, arranging for payment in installments, or
otherwise modifying the terms or rights with respect to any of the Collateral,
all of which may be without notice to or consent by any Obligor and without
otherwise discharging or affecting the Obligations, the Collateral or the
security interest therein or Lien thereon;
(k) The Bank may set off and apply to all or any part of the
Obligations, all the Collateral described in Section 3, and the Bank shall be
deemed to have exercised such right of set off and to have made a charge
against any such Collateral immediately upon the occurrence of such Event of
Default, even though the actual book entries may be made at some time
subsequent thereto;
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(l) The Bank may endorse the name of the Borrower upon any and
all checks, drafts, money orders and other instruments for the payment of
monies which are payable to the Borrower and constitute proceeds of the
Collateral; and
(m) Compromise, extend or renew any Account, chattel paper,
instrument, or general intangible or deal with the Borrower's Accounts, chattel
paper, instruments and general intangibles as the Bank may deem advisable; make
exchanges, substitutions or surrenders of Collateral; review any Account; deal
with the Borrower's Accounts as the Bank may deem advisable; and
(n) The Bank may do such other and further acts and deeds in the
name of the Borrower which the Bank may deem necessary or advisable to the
extent necessary for the Bank to realize upon the Collateral.
SECTION 9
BORROWER'S RIGHTS AND REMEDIES
9.1 The Borrower shall have all of the rights and remedies, whether
legal or equitable, provided in this Agreement and the other Loan Documents and
by the Uniform Commercial Code and other applicable law in force in New Jersey.
SECTION 10
MISCELLANEOUS PROVISIONS
10.1 No Liability; Indemnification.
(a) The Bank shall not be deemed to have assumed any liability or
responsibility to the Borrower or any Person for the correctness, validity or
genuineness of any instruments or documents that may be released or endorsed to
the Borrower by the Bank (which shall automatically be deemed to be without
recourse to the Bank in any event), or for the existence, character, quantity,
quality, condition, value or delivery of any goods purporting to be represented
by any such documents; and the Bank shall not be deemed to have assumed any
obligation or liability to any supplier or Account Debtor or to any other
Person. The Borrower hereby agrees to indemnify and defend the Bank and hold it
harmless in respect of any claim or proceeding arising out of any matter
referred to in this Subsection 10.1.
(b) The Borrower hereby agrees to indemnify and to hold the Bank
and each of its respective officers, directors, agents, employees and counsel
harmless from and against any and all claims, damages, liabilities, costs and
expenses (including, without limitation, reasonable fees, expenses and
disbursements of counsel) in connection with or arising out of any
investigation, litigation or proceeding, including without limitation, those
related to violation(s) involving any environmental laws, which may be incurred
by or asserted against the Bank or any such other indemnified Person arising by
virtue of the Bank's relationship with the Obligors as anticipated by this
Agreement or the other Loan Documents.
(c) The Borrower agrees to indemnify and hold harmless the Bank
from and against any taxes, liabilities, claims and damages, including
reasonable attorneys' fees and disbursements and other expenses incurred or
arising by reason of the taking or the failure to take action by the Bank in
respect of any transaction effected under this Agreement or in connection with
the Lien provided for herein, including, without limitation, any taxes payable
in connection with the delivery or registration of any of the Collateral as
provided herein.
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(d) The obligations of the Borrower under this Subsection 10.1
shall survive the termination of this Agreement.
10.2 Waivers.
(a) Notice of default and presentment, demand, protest and notice
of protest and of dishonor as to any provision of this Agreement or any other
Loan Document is hereby expressly waived by the Borrower, except as set forth
below and as may be otherwise specifically provided in this Agreement or in the
other Loan Documents.
(b) To the extent it may be lawful to do so, and without limiting
the Borrower's ability to seek protection under the federal bankruptcy laws,
the Borrower for itself and for any Person who may claim through or under it
hereby:
(1) agrees that neither it nor any such Person will set up,
plead, claim, or in any manner whatsoever take advantage of, any appraisement,
valuation, stay, extension or redemption laws, now or hereafter in force in any
jurisdiction, which may delay, prevent or otherwise hinder (i) the performance
or enforcement of, or foreclosure under, this Agreement or the other Loan
Documents, (ii) the sale of any of the Collateral or (iii) the putting of the
purchaser or purchasers thereof into possession of such property immediately
after the sale thereof;
(2) waives all benefit or advantage of any such laws;
(3) waives and releases all rights to have the Collateral
marshalled upon any foreclosure, sale or other enforcement of this Agreement;
and
(4) waives all claims, damages and demands against the
Bank's repossession, retention or sale of the Collateral and all defenses,
rights of set off and rights to interpose counterclaims of any nature.
10.3 Successors and Assigns, Assignments. "Bank" and "Borrower" as
used in this Agreement shall include the successors, representatives and
assigns of those parties, provided, however, that the Borrower shall not assign
or delegate any of its rights, remedies, warranties, representations or
covenants arising under this Agreement or any other Loan Document without the
prior written consent of the Bank, and any purported assignment or delegation
without such consent shall be void.
10.4 Applicable Law. This Agreement is to be executed and delivered
within the State of New Jersey, and is to be principally performed within the
State of New Jersey, and the Borrower and the Bank elect that the laws of New
Jersey shall govern the construction of this Agreement and the other Loan
Documents and the rights, remedies, warranties, representations, covenants, and
provisions hereof and thereof.
10.5 Severability. If any of the provisions of this Agreement or any
other Loan Document shall contravene or be held invalid under the laws of any
jurisdiction, this Agreement or any other Loan Document shall be construed as
if not containing such provisions and the rights, remedies, warranties,
representations, covenants and provisions hereof and thereof shall be construed
and enforced accordingly in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction, or any other provisions in
this Agreement, or in any other Loan Documents, as the case may be, in any
jurisdiction.
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10.6 Remedies Cumulative. The Defaults, Events of Default, rights, and
remedies, set forth in this Agreement and any other Loan Document or as may be
provided by applicable law, shall be cumulative and not alternative or
exclusive, and the Bank's Rights and Remedies may be exercised by the Bank at
such time or times, in such order of preference, as the Bank in its sole
discretion may determine.
10.7 Entire Agreement, Survival of Representations, Warranties and
Modifications. This Agreement and the other Loan Documents embody the entire
agreement and understanding between the Borrower and the Bank and supersedes
all prior agreements and understandings relating to the subject matter hereof.
All warranties, representations and covenants imposed or made herein, or on the
other Loan Documents shall survive the execution and delivery of this Agreement
and the other Loan Documents. No delay or omission of the Bank in exercising or
enforcing any of the Bank's Rights and Remedies hereunder shall constitute a
waiver thereof; nor shall any single or partial exercise by the Bank of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right; and no waiver by the Bank of any Default or Event of
Default should operate as a waiver of any other Default or Event of Default. No
term or provision of this Agreement, or any other Loan Document shall be
waived, amended, supplemented or modified except with the prior written consent
of the Bank, which consent makes explicit reference hereto or thereto. Except
as provided in the preceding sentence, no other agreement or transaction, of
whatsoever nature, entered into between the Bank and the Borrower at any time
(whether before, during or after the effective date or terms of this
Agreement), shall be construed in any particular as a waiver, modification or
limitation of any of the Bank's Rights and Remedies under this Agreement, or
the other Loan Documents nor shall anything in this Agreement, or in the other
Loan Documents be construed as a waiver, modification or limitation of any of
the Bank's Rights and Remedies, not only under the provisions of this Agreement
or the other Loan Documents but also of any such other agreement or
transaction.
10.8 Days. Any and all references to "days" in this Agreement shall
mean "calendar days" except as otherwise specifically provided in this
Agreement and by law.
10.9 Notices. All notices, requests and other communications pursuant
to this Agreement shall be in writing, either by letter (delivered by hand or
sent certified mail, return receipt requested) or facsimile (sending confirmed)
or by overnight delivery addressed to the Bank at 750 Walnut Street, Cranford,
New Jersey 07016, Attention: Asset Based Lending, or to Borrower at its
principal place of business as described in Subsection 5.13, Attention:
President, or at such other address as any party may give notice to the others
as herein provided. Any notice, request or communication hereunder shall be
deemed to have been given two (2) days after being deposited in the mails,
postage prepaid, or in the case of overnight delivery, the following Business
Day, or in the case of hand delivery, when delivered, or in the case of
telegraphic notice, upon delivery to the telegraph company, addressed as
aforesaid except where otherwise provided in this Agreement, provided, however,
that notice of a change of address, as hereinabove provided, shall be deemed to
have been given only when actually received by the party to which it is
addressed.
10.10 Agreement and Other Loan Documents Complementary. The provisions
of this Agreement shall be in addition to those of any guaranty, security
agreement, note or other evidence of liability held by the Bank, all of which
shall be construed as complementary to each other. In the event of ambiguity or
inconsistency between this Agreement, and any other Loan Document, then the
terms of this Agreement will govern.
10.11 Bank's Relationship. The Bank and the Borrower expressly agree
that the relationship of the Bank to the Borrower is that of a lender only, the
intent of this provision being to clarify and stipulate that the Bank is not a
partner or a co-venturer of the Borrower and that Bank's sole interest in the
Collateral is for the purpose of security for repayment of the Obligations of
the Borrower.
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10.12 Power of Attorney. The Borrower hereby appoints any officer or
agent of the Bank as its true and lawful attorney-in-fact, with power to
endorse the name of Borrower upon any notes, checks, drafts, money orders, or
other instruments or demands of payment of the Collateral that may come into
possession of the Bank, to sign or endorse the name of the Borrower upon any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against Account Debtors, assignments, verifications and
notices in connection with Accounts, letters of credit or advices or
confirmations thereof, and any instruments or documents relating thereto or to
the Borrower's rights therein; and sign and deliver, on behalf of the Borrower,
any and all notices directly to any issuer, advising bank or confirming bank,
wherein such issuer or bank is informed of the Bank's security interest in, or
the assignment of, any letters of credit or advices or confirmations thereof;
and to give written notice to such office and officials of the United States
Postal Service to effect such change or changes of address so that all mail
addressed to Borrower may be delivered directly to the Bank or a place where
the Bank shall designate, granting unto Borrower's said attorney full power to
do any and all things necessary to be done with respect to the above
transactions as fully and effectually as Borrower might or could do, and hereby
ratifying all that said attorney shall lawfully do or cause to be done by
virtue hereof.
10.13 Section Headings. Article and Section headings are for reference
only and shall not affect the interpretation or meaning of any provision of
this Agreement.
10.14 CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY. THE BORROWER
AND THE BANK EXPRESSLY AGREE TO THE JURISDICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN NEW JERSEY IN CONNECTION WITH ANY MATTER ARISING HEREUNDER,
INCLUDING THE COLLECTION AND ENFORCEMENT HEREOF.
THE BORROWER AND THE BANK EACH HEREBY IRREVOCABLY WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTIONS OF THE
BANK. THIS WAIVER IS MADE KNOWINGLY AND IN CONSIDERATION OF THE ADVANCES MADE
HEREUNDER.
10.15 No Duty to Preserve Collateral. The Bank shall be under no duty
or obligation to: (i) preserve, protect or marshal any Collateral; (ii)
preserve or protect the rights of any Obligor against any Person claiming an
interest in any Collateral adverse to that of any Obligor; (iii) realize upon
any Collateral in any particular order or manner or seek repayment of any
Obligation from any particular source; or (iv) permit any substitution or
exchange of all or any part of any Collateral or release any part of any
Collateral from any Lien, even if that substitution or release would leave the
Bank adequately secured.
10.16 Participation. The Bank shall have the right to sell
participation in the Advances and the Loans and the Obligations. The Borrower
shall provide all required assistance to the Bank in selling and closing any
participation, including permitting any prospective participant to inspect any
Obligor's books and records and the Collateral, provided, however, the Borrower
shall only have to deal with the Bank or its successors or assigns, or their
respective employees or agents, officers, and shall not, have to deal with any
such participants except as agents of the Bank, its successors and assigns.
10.17 Change in Law/Capital Adequacy Requirements. (a) If after the
date of this Agreement, the Bank shall determine that the adoption of, or any
change in, any applicable law, rule or regulation regarding capital
requirements for banks or bank holding companies, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation, or administration
thereof, or compliance by the Bank with any request or directive of such entity
regarding capital adequacy (whether or not having the force of law), has the
effect of reducing the return on the Bank's capital to
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a level below that which the Bank could have achieved (taking into
consideration the Bank's policies with respect to capital adequacy immediately
before such adoption, change or compliance and assuming that the Bank's capital
was fully utilized prior to such adoption, change or compliance) but for the
adoption, change or compliance as a consequence of its commitment to make or
the making or maintenance of the Advances, by an amount deemed by the Bank to
be material, Borrower shall pay to the Bank as an additional fee from time to
time, on demand, such amount as the Bank shall have reasonably determined to be
necessary to compensate it for such reduction, with interest on each such
amount from the date demanded until paid in full at the highest rate on any
Advance outstanding. The determination by the Bank of such amount, if done on
the basis of any reasonable averaging and attribution methods, shall, in the
absence of manifest error, be conclusive. At Borrower's request, the Bank shall
demonstrate the basis of any such determination. Failure on the part of the
Bank to demand compensation for such increased costs or reduction in amounts
received or receivable or reduction in return on capital with respect to any
period shall not constitute a waiver of the Bank's right to demand compensation
with respect to such period or any other period.
(b) If any change in existing law or regulation, any new law,
change in regulatory interpretation, or any other factor having the force of
law applicable to banks in general shall impose or charge any tax (other than
taxes on income in general), reserve, insurance, special deposit or similar
requirements or charges with respect to funds obtained by the Bank to make or
maintain the Advances, and the result is to increase the cost to the Bank of
obtaining or maintaining such funds or to reduce the return to the Bank on the
Advances, then the Bank shall so notify the Borrower in writing, certifying the
amount of and reasons for such increased costs or reduced return, and the
Borrower shall immediately pay to the Bank an amount sufficient to compensate
the Bank in full for such increased costs or such reduced return.
10.18 Termination and Release of Security Interest. This Agreement and
the security interest created hereby shall terminate when all the Obligations,
as determined by the Bank, shall have been fully and indefeasibly paid (other
than any Obligations consisting of contingent obligations in respect of
indemnities which survive such event and with respect to which notice for an
amount payable has not been presented to the Borrower at or prior to such
event) and when the Bank's agreement to make any further Advances hereunder
shall have terminated at which time the Bank shall execute and deliver to the
Borrower, or to such Person or Persons as the Borrower shall reasonably
designate, all Uniform Commercial Code termination statements, re-assignments
of intellectual property and similar documents prepared by the Borrower, at the
Borrower's expense, which the Borrower shall reasonably request to evidence
such termination.
-36-
<PAGE>
Executed at Woodbridge, New Jersey on the date first written above.
ATTEST: KOSZEGI INDUSTRIES, INC.
/s/ Stephen Schiffman BY: /s/ Theodore H. Schiffman
- ------------------------------ --------------------------------
STEPHEN SCHIFFMAN, SECRETARY THEODORE H. SCHIFFMAN, CHAIRMAN
ATTEST: FORWARD INDUSTRIES, INC.
/s/ Stephen Schiffman BY: /s/ Theodore H. Schiffman
- ------------------------------ --------------------------------
STEPHEN SCHIFFMAN, SECRETARY THEODORE H. SCHIFFMAN, CHAIRMAN
SUMMIT BANK
BY: /s/ Anthony Cortese
--------------------------------
ANTHONY CORTESE, VICE PRESIDENT
-37-
<PAGE>
EXHIBIT A
MASTER NOTE
Woodbridge, New Jersey
$4,500,000.00 April 13, 1998
ON THE TERMINATION DATE, UNLESS ACCELERATED EARLIER IN ACCORDANCE WITH
THE TERMS OF THE AGREEMENT (AS HEREINAFTER DEFINED) FOR VALUE RECEIVED, KOSZEGI
INDUSTRIES, INC., a corporation organized under the laws of the State of
Indiana and FORWARD INDUSTRIES, INC., a corporation organized under the laws of
the State of New York (collectively and individually, the "undersigned" or
"Borrower") promises to pay to the order of SUMMIT BANK (the "Bank") at its
office at 750 Walnut Street, Cranford, New Jersey 07016 or at such place as the
Bank may from time to time designate in writing, the lesser of FOUR MILLION
FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($4,500,000.00) or the amount actually
outstanding hereunder, in lawful monies of the United States of America.
This Note shall bear interest from the date hereof until maturity
(whether as stated or by acceleration), at the rate of interest per annum equal
the Base Rate plus three-quarters of one percent (3/4%). Interest shall be
calculated for actual number of days elapsed on the basis of a year of 360
days.
"Base Rate" shall mean the Bank's commercial rate from time to time in
effect, and the rate of interest charged under this Note shall change (but in
no event higher than the maximum lawful rate) on each date the Base Rate shall
change, without notice to the Borrower. The Base Rate is determined from time
to time by the Bank as a means of pricing some loans to its customers and is
neither tied to any external rate of interest or index, nor does it necessarily
reflect the lowest rate of interest actually charged by the Bank to any
particular class or category of customers of the Bank. The Base Rate may be
from time to time announced by the Bank, but the failure of the Bank to
announce the Base Rate or to give the Borrower notice of changes in the Base
Rate shall not relieve the Borrower of its obligation to pay such changed rate.
Interest on this Note is payable monthly on the first Business Day of
each month beginning on the first Business Day in the month next succeeding the
date of this Note, at maturity (whether by demand, acceleration or otherwise)
and upon the making of any prepayment. All payments however designated by the
undersigned, are to be applied first on account of interest on the unpaid
principal balance of this Note, the remainder, such payments, if any, on
account of the unpaid principal balance.
In the event that any payment shall not be received by the Bank within
TEN (10) days of the due date, the undersigned shall, to the extent permitted
by law, pay the Bank a late charge of 5% of the overdue payment (but in no
event to be less than $25.00 nor more than $2,500.00). Any such late charge
assessed is immediately due and payable.
This Note is the "Master Note" referred to in the Loan and Security
Agreement dated of even date herewith by and between the undersigned and the
Bank, as said agreement may be restated and/or amended from time to time (the
"Agreement"). This Note entitles the Bank and the undersigned to all benefits
set forth in the Agreement including, but not limited to, all the provisions
for the acceleration of the maturity of this Note and all other rights and
remedies set forth therein.
<PAGE>
Upon nonpayment of this Note at its stated or accelerated maturity, in
addition to such other and further rights and remedies provided by law or the
Agreement, the Bank may collect interest from the date of such maturity on the
principal balance owing hereon at the lesser of the Default Rate or the maximum
rate of interest permitted by law.
As security for the payment of all Obligations, as such term is
defined in the Agreement, of the undersigned to the Bank (including this Note
and any renewals, extensions or modifications thereof), the Bank has been
granted a security interest in the Collateral.
All terms of the Agreement are incorporated herein by reference and in
the event of ambiguity or inconsistency between the terms of the Agreement and
the terms hereof, the terms of the Agreement shall prevail. All capitalized
terms not specifically defined herein shall have the meaning ascribed to them
in the Agreement.
All parties hereto, whether makers, endorsers, guarantors or
otherwise, hereby waive demand, notice of non-payment, protest, and all other
notices or demands whatsoever, and do hereby consent that without notice to and
without releasing the liability of any party hereto, the obligation of any
party may from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, settled or released by the Bank.
No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
If this Note is referred to an attorney (whether or not a salaried
employee of the Bank) for collection, each party liable for the payment hereof
as maker, endorser or guarantor agrees that reasonable attorney's fees plus
costs, shall be added to such amount of this Note and shall be payable as part
thereof. Attorney's fees may be collectible from any collateral to the extent
permitted under the Bankruptcy Act or other law.
This Note is binding on the undersigned, their heirs, administrators,
executors and assigns and inure to the benefit of the holder and its successor
and assigns.
<PAGE>
This Note shall be governed by and construed in accordance with the
laws of the State of New Jersey.
ATTEST: KOSZEGI INDUSTRIES, INC.
BY:
- ------------------------------ --------------------------------
STEPHEN SCHIFFMAN, Secretary THEODORE H. SCHIFFMAN, Chairman
[SEAL]
ATTEST: FORWARD INDUSTRIES, INC.
BY:
- ------------------------------ --------------------------------
STEPHEN SCHIFFMAN, Secretary THEODORE H. SCHIFFMAN, Chairman
[SEAL]
<PAGE>
EXHIBIT B
EQUIPMENT LINE OF CREDIT
Woodbridge, New Jersey
$500,000.00 April 13, 1998
ON THE TERMINATION DATE, UNLESS ACCELERATED EARLIER IN ACCORDANCE WITH
THE TERMS OF THE AGREEMENT (AS HEREINAFTER DEFINED) FOR VALUE RECEIVED, KOSZEGI
INDUSTRIES, INC., a corporation organized under the laws of the State of
Indiana and FORWARD INDUSTRIES, INC., a corporation organized under the laws of
the State of New York (collectively and individually, the "undersigned" or
"Borrower") promises to pay to the order of SUMMIT BANK (the "Bank") at its
office at 750 Walnut Street, Cranford, New Jersey 07016 or at such place as the
Bank may from time to time designate in writing, the lesser of FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($500,000.00) or the amount actually outstanding
hereunder, in lawful monies of the United States of America.
This Note shall bear interest from the date hereof until maturity
(whether as stated or by acceleration), at the rate of interest per annum equal
the Base Rate plus one and one half of one percent (1 1/2%). Interest shall be
calculated for actual number of days elapsed on the basis of a year of 360
days.
"Base Rate" shall mean the Bank's commercial rate from time to time in
effect, and the rate of interest charged under this Note shall change (but in
no event higher than the maximum lawful rate) on each date the Base Rate shall
change, without notice to the Borrower. The Base Rate is determined from time
to time by the Bank as a means of pricing some loans to its customers and is
neither tied to any external rate of interest or index, nor does it necessarily
reflect the lowest rate of interest actually charged by the Bank to any
particular class or category of customers of the Bank. The Base Rate may be
from time to time announced by the Bank, but the failure of the Bank to
announce the Base Rate or to give the Borrower notice of changes in the Base
Rate shall not relieve the Borrower of its obligation to pay such changed rate.
Interest on this Note is payable monthly on the first Business Day of
each month beginning on the first Business Day in the month next succeeding the
date of an Advance under this Note, upon conversion to a term loan, at maturity
(whether by demand, acceleration or otherwise) and upon the making of any
prepayment. All payments however designated by the undersigned, are to be
applied first on account of interest on the unpaid principal balance of this
Note, the remainder, such payments, if any, on account of the unpaid principal
balance.
In the event that any payment shall not be received by the Bank within
TEN (10) days of the due date, the undersigned shall, to the extent permitted
by law, pay the Bank a late charge of 5% of the overdue payment (but in no
event to be less than $25.00 nor more than $2,500.00). Any such late charge
assessed is immediately due and payable.
This Note is the "Equipment Line of Credit Note" referred to in the
Loan and Security Agreement dated of even date herewith by and between the
undersigned and the Bank, as said agreement may be restated and/or amended from
time to time (the "Agreement"). This Note entitles the Bank and the undersigned
to all benefits set forth in the Agreement including, but not limited to, all
the provisions for the acceleration of the maturity of this Note and all other
rights and remedies set forth therein.
<PAGE>
Upon nonpayment of this Note at its stated or accelerated maturity, in
addition to such other and further rights and remedies provided by law or the
Agreement, the Bank may collect interest from the date of such maturity on the
principal balance owing hereon at the lesser of the Default Rate or the maximum
rate of interest permitted by law.
As security for the payment of all Obligations, as such term is
defined in the Agreement, of the undersigned to the Bank (including this Note
and any renewals, extensions or modifications thereof), the Bank has been
granted a security interest in the Collateral.
All terms of the Agreement are incorporated herein by reference and in
the event of ambiguity or inconsistency between the terms of the Agreement and
the terms hereof, the terms of the Agreement shall prevail. All capitalized
terms not specifically defined herein shall have the meaning ascribed to them
in the Agreement.
All parties hereto, whether makers, endorsers, guarantors or
otherwise, hereby waive demand, notice of non-payment, protest, and all other
notices or demands whatsoever, and do hereby consent that without notice to and
without releasing the liability of any party hereto, the obligation of any
party may from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, settled or released by the Bank.
No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
If this Note is referred to an attorney (whether or not a salaried
employee of the Bank) for collection, each party liable for the payment hereof
as maker, endorser or guarantor agrees that reasonable attorney's fees plus
costs, shall be added to such amount of this Note and shall be payable as part
thereof. Attorney's fees may be collectible from any collateral to the extent
permitted under the Bankruptcy Act or other law.
This Note is binding on the undersigned, their heirs, administrators,
executors and assigns and inure to the benefit of the holder and its successor
and assigns.
This Note shall be governed by and construed in accordance with the
laws of the State of New Jersey.
<PAGE>
In accordance with the Agreement to the extent a portion of the
principal amount of the Equipment Availability Loan is evidenced by a Equipment
Term Note said principal amount shall not be deemed evidenced hereby.
ATTEST: KOSZEGI INDUSTRIES, INC.
BY:
- ------------------------------ --------------------------------
STEPHEN SCHIFFMAN, Secretary THEODORE H. SCHIFFMAN, Chairman
[SEAL]
ATTEST: FORWARD INDUSTRIES, INC.
BY:
- ------------------------------ --------------------------------
STEPHEN SCHIFFMAN, Secretary THEODORE H. SCHIFFMAN, Chairman
[SEAL]
<PAGE>
EXHIBIT C
[FORM OF]
EQUIPMENT TERM NOTE
$____________ __________, New Jersey
__________ __, ____
FOR VALUE RECEIVED, KOSZEGI INDUSTRIES, INC., a corporation organized
under the laws of State of Indiana and FORWARD INDUSTRIES, INC., a corporation
organized under the laws of the State of New York (collectively and
individually, the "undersigned" or "Borrower"), promises to pay in lawful
monies of the United States of America to the order of SUMMIT BANK (the
"Bank"), at 750 Walnut Avenue, Cranford, New Jersey 07016 or at such place as
the Bank may from time to time designate in writing, the principal sum of
___________________ AND __/100 DOLLARS ($_____________), together with interest
thereon, as hereinafter provided, computed from the date hereof, or if not
demanded or otherwise accelerated, then in _______________ (__) equal
consecutive monthly installments of principal in the amount of
_______________________ DOLLARS ($____________), together with interest
thereon, payable on the first day of each month commencing on the first day of
__________, 199_ and ending on the first day of _____________, 199_, at which
time all outstanding principal and interest under this Note, and all unpaid
fees and charges in connection with the loan evidenced by this Note, shall be
due and payable.
1. The unpaid principal amount from time to time outstanding hereunder
shall bear interest at the rate of interest per annum equal to the Base Rate
plus one and one-half of one percent (1 1/2%), all interest hereunder to be
computed daily, based on a year consisting of three hundred sixty (360) days
for the actual number of days elapsed. "Base Rate" shall mean the Bank's
commercial rate from time to time in effect, and the rate of interest charged
under this Agreement shall change (but in no event higher than the maximum
lawful rate) on each date the Base Rate shall change, without notice to the
Borrower. The Base Rate is determined from time to time by the Bank as a means
of pricing some loans to its customers and is neither tied to any external rate
of interest or index, nor does it necessarily reflect the lowest rate of
interest actually charged by the Bank to any particular class or category of
customers of the Bank. The Base Rate may be from time to time announced by the
Bank, but the failure of the Bank to announce the Base Rate or to give the
Borrower notice of changes in the Base Rate shall not relieve the Borrower of
its obligation to pay such changed rate.
2. Interest on this Note is payable monthly on the first day of each
month beginning on the first day in the month next succeeding the date of this
Note, at maturity (whether by demand, acceleration or otherwise) and upon the
making of any prepayment. All payments, howsoever designated by the
undersigned, are to be applied first on account of interest on the unpaid
principal balance of this Note, and the remainder of such payments, if any, on
account of the unpaid principal balance.
3. In the event that any payment shall not be received by the Bank
within TEN (10) days of the due date, the undersigned shall, to the extent
permitted by law, pay the Bank a late charge of 5% of the overdue payment (but
in no event to be less than $25.00 nor more than $2,500.00). Any such late
charge assessed is immediately due and payable.
4. This Note is an "Equipment Term Note" referred to in the Loan and
Security Agreement dated March __, 1998 by and between the undersigned and the
Bank, as said agreement may be restated and/or
<PAGE>
amended from time to time ("Agreement"). This Note entitles the Bank and the
undersigned to all benefits set forth in the Agreement including, but not
limited to, all the provisions for the acceleration of the maturity of this
Note and all other rights and remedies set forth therein.
5. Upon nonpayment of this Note at its stated or accelerated maturity,
in addition to such other and further rights and remedies provided by law or
the Agreement, the Bank may collect interest from the date of such maturity on
the principal balance owing hereon at the lesser of the Default Rate or the
maximum rate of interest permitted by law.
6. As security for the payment of all Obligations, as such term is
defined in the Agreement, of the undersigned to the Bank (including this Note
and any renewals, extensions or modifications thereof), the Bank has been
granted a security interest and mortgage in the Collateral.
7. All terms of the Agreement are incorporated herein by reference and
in the event of any inconsistency between the terms of the Agreement and the
terms hereof, the terms of the Agreement shall prevail. All capitalized terms
not specifically defined herein shall have the meaning ascribed to them in the
Agreement.
8. All parties hereto whether makers, endorsers, guarantors, or
otherwise, hereby waive demand, notice of non-payment, protest, notice of
protest, presentment and all other notices of any kind whatsoever, and do
hereby consent that without notice to and without releasing the liability of
any party hereto, the obligations of any party may from time to time, in whole
or in part, be renewed, extended, modified, accelerated, compromised, settled
or released by the Bank.
9. No delay or omission on the part of the Bank in exercising any
right hereunder shall operate as a waiver of such right or any other right
under this Note.
10. If this Note is referred to an attorney (whether or not a salaried
employee of the Bank) for collection, each party liable for the payment hereof
as maker, endorser or guarantor agrees that reasonable attorney's fees plus
costs, shall be added to such amount of this Note and shall be payable as part
thereof. Attorney's fees may be collectible from any collateral to the extent
permitted under the Bankruptcy Act or other law.
11. If any payment of principal, interest or other charges under this
Note shall be due and payable on a day other than a Business Day, such payment
shall be due and payable on the next succeeding Business Day.
12. The provisions herein contained shall bind the undersigned and its
successors and assigns and inure to the benefit of the holder and its
successors and assigns.
13. This Note shall be governed by and construed in accordance with
the laws of the State of New Jersey.
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Note on the
date first above written.
KOSZEGI INDUSTRIES, INC.
ATTEST:
BY:
- ------------------------------ --------------------------------
[SEAL]
FORWARD INDUSTRIES, INC.
ATTEST:
BY:
- ------------------------------ --------------------------------
[SEAL]
<PAGE>
EXHIBIT D-1
POWER OF ATTORNEY
KOSZEGI INDUSTRIES, INC., a corporation of the State of Indiana (the
"Borrower"), hereby appoints any officer or agent of SUMMIT BANK (the "Bank"),
as its true and lawful attorney-in-fact, with power to endorse the name of the
Borrower upon any notes, checks, drafts, money orders, or other instruments or
demands of payment of Collateral (as such term is defined in a certain Loan and
Security Agreement by and among the Bank, the Borrower and one or more others
dated of even date herewith [together with any renewals, extensions,
amendments, modifications, replacements or restatements thereof, the "Loan
Agreement"]) that may come into possession of the Bank, to sign or endorse the
name of the Borrower upon any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against account debtors,
assignments, verifications and notices in connection with accounts, letters of
credit or advices or confirmations thereof, and any instruments or documents
relating thereto or to the Borrower's rights therein; and sign and deliver, on
behalf of the Borrower, any and all notices directed to any issuer, advising
bank or confirming bank, wherein such issuer or bank is informed of the Bank's
security interest therein, or the assignment of any letters of credit or
advices or confirmations thereof, and to give written notice to such office and
officials of the United States Postal Service to effect such change or changes
of address so that all mail addressed to the Borrower may be delivered directly
to the Bank granting unto the Borrower's said attorney full power to do any and
all things necessary to be done with respect to the above transactions as fully
and effectually as the Borrower might or could do, and hereby ratifying all the
said attorney shall lawfully do or cause to be done by virtue hereof. This
Power of Attorney shall be irrevocable until all Obligations (as defined in the
Loan Agreement) shall be fully paid and satisfied.
IN WITNESS WHEREOF, the undersigned officer executed this Power of
Attorney on the 13th day of April, 1998.
KOSZEGI INDUSTRIES, INC.
BY:
--------------------------------
THEODORE H. SCHIFFMAN, CHAIRMAN
[SEAL]
<PAGE>
EXHIBIT D-2
POWER OF ATTORNEY
FORWARD INDUSTRIES, INC., a corporation of the State of New York (the
"Borrower"), hereby appoints any officer or agent of SUMMIT BANK (the "Bank"),
as its true and lawful attorney-in-fact, with power to endorse the name of the
Borrower upon any notes, checks, drafts, money orders, or other instruments or
demands of payment of Collateral (as such term is defined in a certain Loan and
Security Agreement by and among the Bank, the Borrower and one or more others
dated of even date herewith [together with any renewals, extensions,
amendments, modifications, replacements or restatements thereof, the "Loan
Agreement"]) that may come into possession of the Bank, to sign or endorse the
name of the Borrower upon any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against account debtors,
assignments, verifications and notices in connection with accounts, letters of
credit or advices or confirmations thereof, and any instruments or documents
relating thereto or to the Borrower's rights therein; and sign and deliver, on
behalf of the Borrower, any and all notices directed to any issuer, advising
bank or confirming bank, wherein such issuer or bank is informed of the Bank's
security interest therein, or the assignment of any letters of credit or
advices or confirmations thereof, and to give written notice to such office and
officials of the United States Postal Service to effect such change or changes
of address so that all mail addressed to the Borrower may be delivered directly
to the Bank granting unto the Borrower's said attorney full power to do any and
all things necessary to be done with respect to the above transactions as fully
and effectually as the Borrower might or could do, and hereby ratifying all the
said attorney shall lawfully do or cause to be done by virtue hereof. This
Power of Attorney shall be irrevocable until all Obligations (as defined in the
Loan Agreement) shall be fully paid and satisfied.
IN WITNESS WHEREOF, the undersigned officer executed this Power of
Attorney on the 13th day of April, 1998.
FORWARD INDUSTRIES, INC.
BY:
--------------------------------
THEODORE H. SCHIFFMAN, CHAIRMAN
[SEAL]
<PAGE>
EXHIBIT E
ASSIGNMENT OF LEASE AND LANDLORD'S
SUBORDINATION AND CONSENT
This Assignment of Lease and Landlord's Subordination and Consent
(this "Assignment") made this ___ day of April, 1998, by and among [KOSZEGI]
[FORWARD] INDUSTRIES, INC., a corporation formed under the laws of the State of
[Indiana] [New York], having an address at [702 S. Chapin Street, South Bend,
Indiana 46624] [275 Hempstead Turnpike, West Hempstead, New York 11552]
("Assignor"); ______________________ a ___________________ formed under the
laws of the State of _________ ("Landlord"); and SUMMIT BANK, a state banking
association organized under the laws of the State of New Jersey, having an
office at 750 Walnut Street, Cranford, New Jersey 07016, ("Bank").
WHEREAS, by lease dated ______ __, 19__ (the "Lease"), the Landlord
leased to the Assignor certain premises located at
__________________________________________, such premises being more
particularly described on Schedule "A" (the "Premises"); and
WHEREAS, the Assignor has entered into a Loan and Security Agreement,
as may be amended and/or restated from time to time (the "Loan Agreement") with
the Bank and in connection therewith the Assignor has granted to the Bank a
security interest in the property described on Schedule "B" hereto (the
"Collateral"); and
WHEREAS, the Bank has entered into the Loan Agreement and is making
the requested loans and advances upon the condition that (i) the Landlord
subordinates and waives as to the Bank any claims, demands or rights the
Landlord may have or acquire with respect to the Collateral; and (ii) the
Assignor assigns, transfers and sets over to the Bank all of its right, title
and interest under the Lease, all as hereinafter described.
NOW THEREFORE, the parties hereto, intending legally to be bound
hereby, agree as follows:
1. Any and all security interests, liens, claims demands or rights,
including but not limited to the right to levy or distraint for unpaid rent or
otherwise, created by the Lease, by statute or under common law, which the
Landlord now has or may hereafter acquire in any of the Collateral shall be
subordinate and inferior to the lien or security interest of the Bank therein,
and, as to the Bank, the Landlord hereby specifically waives all rights of
levy, distraint or execution with respect to the Collateral and all rights to
notice from the Bank as to the disposition of the Collateral by the Bank or its
representatives, and all rights to object to any such disposition.
2. The Collateral shall at all times be considered to be personal
property. With respect thereto, such shall not constitute fixtures or become a
part of the Premises so long as any monies are owing to the Bank by the
Assignor.
3. In the event that it becomes necessary for the Bank to take
possession of the Collateral or any part thereof, the Landlord and the Assignor
will make no objection to the removal of the Collateral or any part thereof
from the Premises nor to the exercise by the Bank of any rights granted to a
secured party under the Uniform Commercial Code including, but not limited to,
the right to enter upon the Premises or any other premises where the Collateral
may be found and to inspect, store, prepare for sale, sell and/or remove the
Collateral.
4. The Landlord will provide written notice to the Bank by certified
or registered mail sent to: 750 Walnut Street, Cranford, New Jersey 07016,
Attention: Asset Based Lending, ("Default Notice") of the
-1-
<PAGE>
termination of the Assignor's right to possess the Premises, and will provide
the Bank with at least forty-five (45) days after receipt of the Default Notice
in which to remove any of the Collateral in which the Bank has a security
interest, unless the Bank elects to remain on the Premises for a longer period
of time in which case the Bank shall pay rent in accordance with the provisions
of paragraph 6 hereof. During said forty-five (45) day period referred to
above, the Bank shall only pay current utility charges and current taxes which
accrue during the period in which the Bank occupy the Premises, unless the
foregoing charges and taxes exceed the amount of rent payable under the Lease,
in which case the Bank shall only pay the rent for said period.
5. The Landlord consents to the installation and/or location of the
Collateral on the Premises.
6. As additional collateral security for the Obligations (as such term
is defined in the Loan Agreement), the Assignor hereby assigns, transfers and
sets over to the Bank all of its right, title and interest as tenant under the
Lease. Until the occurrence of a Default or an Event of Default under the Loan
Agreement or the other Loan Documents, the Bank hereby grants the Assignor a
license to occupy the Premises pursuant to the terms of the Lease. In the event
the Bank exercises its rights under this paragraph 6, notwithstanding the terms
of the Lease, the Bank shall only pay during any period beyond the forty-five
(45) day period referred to in paragraph 4, the normal rent payable under the
Lease for the period which the Bank occupies the Premises beyond said
forty-five (45) day period.
7. Upon the payment in full of all Obligations, this Assignment shall
be void and of no effect, but an affidavit, certificate, letter, or statement
of any officer, supervisor, or attorney of the Bank showing that any part of
said Obligations to remain unpaid shall be sufficient evidence of the validity,
effectiveness and continuing force in this Assignment, as to any person.
8. Nothing herein contained and no act done or omitted by the Bank
pursuant to the powers and rights granted it herein shall be deemed to be a
waiver by the Bank of its rights and remedies hereunder or under the Loan
Agreement or the other Loan Documents (as such term is defined in the Loan
Agreement), but this Assignment is made and accepted without prejudice to any
of the rights and remedies possessed by the Bank under the terms thereof. The
right of the Bank to collect the Obligations and to enforce any other security
therefor owned by it may be exercised by the Bank either prior to,
simultaneously with, or subsequent to any action taken by it hereunder.
9. The Lease has not been modified, renewed, supplemented or amended
as of the date hereof; the Lease remains a valid obligation of the Landlord and
is in full force and effect in accordance with its terms; the Landlord is aware
of no default by Assignor under the Lease; the Landlord is aware of no offsets,
counterclaims or defenses to the Lease or the obligations thereunder on the
part of the Assignor; the term of the Lease shall end on _____________, 19__.
10. All capitalized terms not defined herein shall have the same
meanings ascribed to them in the Loan Agreement.
11. This Assignment shall be binding upon the successors and assignees
of the Landlord and the Assignor and shall inure to the benefit of the
successors and assigns of the Bank.
12. This Assignment may be executed in one or more counterparts, each
of which shall constitute one and the same instrument.
-2-
<PAGE>
13. THIS ASSIGNMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
JERSEY. THE PARTIES HERETO AGREE AND CONSENT TO THE JURISDICTION OF THE FEDERAL
AND STATE COURTS LOCATED IN NEW JERSEY IN CONNECTION WITH ANY MATTER ARISING
HEREUNDER, INCLUDING THE COLLECTION AND ENFORCEMENT HEREOF.
14. THE PARTIES HERETO IRREVOCABLY WAIVER ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTER CLAIM ARISING OUT OF OR RELATING TO THIS
ASSIGNMENT OR THE ACTION OF THE BANK IN ENFORCEMENT HEREOF. THIS WAIVER IS MADE
KNOWINGLY AND FOR VALUABLE CONSIDERATION.
IN WITNESS WHEREOF, the undersigned have executed this instrument
under seal this ______ day of April, 1998.
ATTEST:
-----------------------------------
(LANDLORD)
BY:
- ------------------------------ --------------------------------
[KOSZEGI] [FORWARD] INDUSTRIES, INC.
(ASSIGNOR)
BY:
--------------------------------
SUMMIT BANK
(BANK)
BY:
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<PAGE>
STATE OF __________ :
: SS.
COUNTY OF _________ :
BE IT REMEMBERED that on this ____ day of _________, 1998 before me
the subscriber, a Notary Public, personally appeared ______________ who, I am
satisfied, is the person who signed the within instrument as _________ of
______________________, the ___________ named therein and he thereupon
acknowledged that the said instrument made by the ___________ and delivered by
him/her as such _______ is the voluntary act and deed of the ___________.
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<PAGE>
TRADEMARK ASSIGNMENT OF SECURITY
WHEREAS, Forward Industries, Inc., a corporation formed under the laws
of New York ("Borrower") located at 275 Hempstead Turnpike, West Hempstead, New
York 1152, has adopted, used is using the marks shown in the attached Schedule
A (the "Marks") a, for which there are registrations or applications in the
attached Schedule A; and
WHEREAS, Borrower is obligated to Summit Bank ("Lender") located at
750 Walnut Street, Cranford, New Jersey 07016, pursuant to a certain Loan and
Security Agreement ("Agreement") dated the date hereof, between Borrower and
Lender; and
WHEREAS, pursuant to the Agreement, Borrower is granting to Lender a
security interest in the Marks, the goodwill of the business symbolized by the
Marks, and the registrations and applications thereof.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Borrower does hereby grant to Lender a security
interest in and to the Marks, together with the goodwill of the business
symbolized by the Marks, and registrations and applications therefor, which
assignment and security interest shall secure all the Obligations as defined in
the Agreement and in accordance with the terms and provisions thereof.
The Borrower represents and warrants that it is the true and lawful
owner of all the Marks listed on Schedule A and said Marks constitute all the
United States Marks registered in the United States Patent and Trademark Office
and all applications for the United States Marks that the borrower now owns.
The Borrower agrees on a semi-annual basis to execute and deliver additional
Trademark Assignments of Security with respect to any new Mark in which the
Borrower hereinafter obtains rights. The Borrower further warrants that it is
not aware of any third party claim that any of the aspects of the Borrower's
present or contemplated business operations infringes or would not infringe on
any Mark. The Borrower grants to the Lender the absolute power of attorney to
sign, upon the occurrence and continuation of any Event of Default (as defined
in the Agreement), any document which is required by the United States Patent
and Trademark Office in order to effectuate an absolute assignment of all
right, title and interest in each Mark and record of the same.
The Borrower hereby agrees not to divest itself of any right under any
Mark, which divest would have a material adverse effect on the Borrower's
business, it's properties or it's ability to performance its obligations under
the Agreement.
The Borrower agrees to promptly, upon learning thereof, furnish the
Lender in writing all pertinent information available to the Borrower with
respect to any infringement or other violation of the Borrower's rights in any
Mark, which infringement or violation could have a material adverse effect on
the Borrower, its properties or its ability to perform its obligations under
the Agreement and other Loan Documents (as defined in the Agreement). The
Borrower further agrees to prosecute any Persons infringing upon any Mark to
the extent such infringement has a material adverse affect
<PAGE>
on the Borrower, its properties or its ability to perform its obligations under
the Agreement or other Loan Documents.
If an Event of Default shall occur and be continuing, the Lender may
take any and all of the following actions (which actions will be in addition to
any other rights and remedies it has under the Agreement or any other Loan
Document);
(i) Declare that the entire right, title and interest of the
Borrower in any Mark shall immediately vest in the Lender or its designee, in
which case the Lender shall be entitled to exercise the power of attorney
referred to above;
(ii) Take and practice or sell any Mark;
(iii) Direct the Borrower to refrain, in which the case the
Borrower shall refrain, from utilizing any Mark, directly or indirectly, and
Borrower shall execute such other and further documents as the Lender may
request further to confirm this and to transfer ownership to any Mark to the
Lender or its designee.
Lender expressly acknowledges and affirms that the rights and remedies
of Lender with respect to the assignment and security interest granted hereby
are more fully set forth in the Agreement.
Dated: WOODBRIDGE, NEW JERSEY
April ___, 1998
Witness: FORWARD INDUSTRIES, INC.
By:
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Title:
Witness: SUMMIT BANK
By:
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Title:
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