<PAGE>
UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended: January 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
0-3255
(Commission File Number)
JAYARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1864519
(State or other jurisdiction of incorporation) (IRS Employer Identification No)
Post Office Box 741528, Houston, Texas 77274
(Address of principal executive offices ) (Zip Code)
(713) 783-9184
(Registrant's telephone number, including area code)
(Former name, former address and fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class Outstanding at January 31, 1997
Common Stock $0.30 Par Value 9,221,199
<PAGE>
Part. I
Item I.
Jayark Corporation And Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Unaudited Audited
01/31/97 04/30/97
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $484,425 $533,676
Accounts Receivable-Trade, Less Allowance For 5,226,003 6,029,889
Doubtful Accounts
of $635,833 in January 1997 and $808,427 in
April 1996
Other Accounts Receivable 332,414 478,120
Federal and State Income Taxes Refundable 0 695,501
Inventories 8,443,272 8,654,377
Deferred Federal Income Taxes 0 295,798
Other Current Assets 276,482 303,436
Total Current Assets 14,762,596 16,990,797
Non Current Assets
Property & Equipment, Less Accumulated 726,001 781,266
Depreciation and Amortization
Excess of Cost Over Net Assets of Businesses 295,442 311,461
Acquired, Less Accum
Amortization of $436,995 in January 1997 and
$420,975 in April 1996
Deferred Federal Income Taxes 0 52,063
Total Non-Current Assets 1,021,443 1,144,790
Total Assets $15,784,039 $18,135,587
Liabilities
Current Liabilities
Notes Payable & Lines of Credit $8,464,603 $9,051,585
Notes Payable to Related Parties 1,000,000 500,000
Current Maturities of Long Term Debt 1,754 38,558
Accounts Payable 2,362,051 1,829,131
Accrued Salaries and Deferred Compensation 277,923 128,990
Commissions Payable 227,185 280,630
Accrual Related to LCL Investment 164,579 1,202,624
Other Current Liabilities 390,502 546,621
Total Current Liabilities 12,888,597 13,578,139
Non Current Liabilities
Long Term Debt, Excluding Current Maturities 14,019 72,020
Subordinated Debentures 1,400,000 1,400,000
Other Long Term Liabilities, Related to LCL 0 500,000
Investment
Total Non Current Liabilities 1,414,019 1,972,020
Total Liabilities 14,302,616 15,550,159
Commitments
Stockholders' Equity
Common Stock of $.30 Par Value. Authorized 2,766,359 2,393,639
10,000,000 Shares;
Issued 9,221,199 Shares in January 1997 and
7,978,799 Shares
in April 1996
Additional Paid-In Capital 8,066,122 7,966,730
Deficit (9,351,058) (7,774,941)
Total Stockholders' Equity 1,481,423 2,585,428
Total Liabilities & Stockholders' Equity $15,784,039 $18,135,587
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Jayark Corporation And Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
01/31/97 01/31/96 01/31/97 01/31/96
<S> <C> <C> <C> <C>
Net Revenues $9,888,369 $11,700,055 $38,913,949 $32,665,793
Costs & Expenses:
Cost of Revenues 8,387,580 9,966,570 31,932,458 26,083,118
Selling, General and 2,231,730 2,342,543 7,437,483 7,047,227
Administrative
Interest 294,643 307,290 870,673 772,853
Loss on Investment 0 4,580,000 0 4,580,000
Other (Income) Expense 8,000 0 (70,549) (75,000)
Total Costs & Expenses 10,921,953 17,196,403 40,170,065 38,408,198
Pre Tax Earnings (Losses) (1,033,584) (5,496,348) (1,256,116) (5,742,405)
Provision (Credit) for Income 320,113 (750,000) 320,113 (750,000)
Taxes
Net Income (Loss) ($1,353,697)($4,746,348) ($1,576,229)($4,992,405)
Earnings (Loss) per Common Share ($0.15) ($0.59) ($0.18) ($0.63)
Weighted Average Common Shares 9,221,200 7,978,799 8,667,521 7,866,480
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Jayark Corporation And Subsidiaries
Consolidated Statements of Cash Flows
For The Nine Months Ended
(Unaudited)
<TABLE>
<CAPTION>
01/31/97 01/31/96
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) ($1,576,229) ($4,992,405)
Adjustments to Reconcile Earnings (Loss) to Cash
From Operating Activities:
Depreciation and Amortization of Property and 166,696 203,384
Equipment
Amortization of Excess of Cost Over Net Assets 16,020 15,385
of Businesses Acquired
Deferred Income Tax Expense (Benefit) 347,861 0
Change In Assets and Liabilities Net of Effects 0 0
From Acquisition of Subs:
(Increase) Decrease in Accounts Receivable Net 949,592 (339,421)
(Increase) Decrease in Inventories 211,105 (2,298,712)
(Increase) Decrease in Other Current Assets 26,954 239,426
Increase (Decrease) in Accounts Payable 532,920 486,379
Increase (Decrease) in Federal & State Income 695,501 0
Taxes Payable
Increase (Decrease) in Accrued Salaries and 148,933 97,226
Deferred Compensation
Increase (Decrease) in Commissions Payable (53,445) (112,053)
Increase (Decrease) in Other Liabilities (1,221,941) 2,145,634
Net Cash Provided By (Used In) Operating 243,967 (4,555,157)
Activities
Cash Flows From Investing Activities:
Capital Expenditures for Property and (111,431) (119,281)
Equipment
Investment In & Advances In Certain Assets 0 0
Acquired
Net Cash Provided By (Used In) Investing (111,431) (119,281)
Activities
Cash Flows From Financing Activities:
Payment of Notes Payable (586,982) 3,032,044
Payment of Long Term Debt (94,805) 424,791
Proceeds From Issuance of Notes Payable 500,000 500,000
Proceeds From Issuance of Common Stock 0 0
Net Cash Provided By (Used In) Financing (181,787) 3,956,835
Activities
Net Increase (Decrease) in Cash and Cash (49,251) (717,603)
Equivalents
Cash & Cash Equivalents at Beginning of Year 533,676 1,176,698
Cash & Cash Equivalents at End of Year $484,425 $459,095
Supplemental Disclosures of Cash Flow Information:
Cash Paid For:
Interest 826,372 691,431
Income Taxes 0 0
Non-Cash Transactions:
Common Stock Issued in Connection With LCL 472,112 1,156,863
Investment
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1. The consolidated balance sheet of Jayark Corporation and subsidiaries
(the "Company"), as of January 31, 1997, and the related consolidated
statements of operations and cash flows for the periods ended January,
1997 and 1996 are unaudited. The consolidated balance sheet as of April
30, 1996 has been derived from audited financial statements. The
consolidated financial statements should be read in conjunction with the
audited financial statements and footnotes for the year ended April 30, 1996,
included in the Company's report on Form 10-K.
2. The interim financial statements reflect all adjustments (consisting of
only normal and recurring accruals and adjustments) which are, in the opinion
of management, necessary to a fair statement of the results for the interim
periods presented. The Company's operating results for any particular interim
period may not be indicative of results for the full year.
3. Certain reclassifications have been made in the 1996 financial statements
to conform them to and make them consistent with the presentation used in the
1997 financial statements.
<PAGE>
Item 2.
Management's Discussion & Analysis of Results of Operations
Three Months Ended January 31, 1997 as compared to January 31, 1996
NET REVENUES
Consolidated Revenues of $9,888,000 represent a decrease of $1,812,000, or
15.5%, as compared to the same period in 1996. The Audio Visual subsidiary's
revenues increased $254,000, or 10.2%, compared to last year due to the
continued emphasis on increasing direct sales as opposed to rental revenues,
thus resulting in increased unit sales. The Household subsidiary's revenues
decreased $2,066,000, or 22.4%, as compared to the same period last year. This
decrease is primarily due to lower direct import sales as a result of a soft
retail economy.
COST OF REVENUES
Consolidated Cost of Revenues of $8,388,000 decreased $1,579,000, or 15.8%,
as compared to the same period last year. The Audio Visual subsidiary's cost of
revenues increased $216,000, or 10.4%, associated with the increase in sales.
The cost of revenues for the Household subsidiary decreased $1,795,000, or
22.7%, associated with the decrease in sales.
GROSS MARGIN
Consolidated Gross Margin of $1,501,000 was 15.2% of revenues, as compared to
14.8% for the same period last year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $2,232,000 decreased $111,000 or 4.7% as compared
to the same period last year. The Audio Visual subsidiary expenses increased
$22,000 or 6.7% when compared to the same period last year as a result of
increased costs associated with the rise in sales. The Household subsidiary
expenses decreased $96,000 or 5.2%. This decrease was due to the drop in sales
which resulted in lower payroll, commissions, travel, and operating expenses. A
decrease in corporate expenses of $36,000 or 20.9% accounted for the balance of
the change in expenses.
<PAGE>
INTEREST EXPENSE
Consolidated Interest Expense of $295,000 decreased $13,000, or 4.1%, due
to decreased payments on the subordinated debt offset by increased borrowings.
LOSS ON ABANDONMENT OF INVESTMENT
Consolidated Loss On Abandonment of Investment of $0, decreased $4,580,000
as compared to the same period last year. This was a result of the Company's
abandonment of its investment in and the writeoff of advances in certain assets
and a business acquired in June, 1995.
PRE-TAX INCOME (LOSS)
Consolidated Pre-Tax Loss of ($1,034,000) was incurred as compared to a
loss of ($5,496,000) for the same period last year primarily due to the loss on
abandonment of an investment and the writeoff of advances in certain assets and
a business acquired in June, 1995. The remaining decrease of $117,000 resulted
from the drop in sales.
NET INCOME
Consolidated Net Loss of ($1,354,000) as compared to a net loss of
($4,746,000) during the same period last year occurred primarily as a result of
the loss on abandonment referred to above coupled with a decrease in the credit
for income taxes and reduced revenues.
<PAGE>
Nine Months Ended January 31, 1997 as compared to January 31, 1996
NET REVENUES
Consolidated Revenues of $38,914,000 represent an increase of $6,248,000,
or 19.1%, as compared to the same period in 1996. The Audio Visual subsidiary's
revenues increased $682,000, or 8.0%, compared to last year due to the continued
emphasis on increasing direct sales as opposed to rental revenues, thus
resulting in increased unit sales at a lower gross profit margin as compared to
rental gross profit. The Household subsidiary's revenues increased $5,566,000,
or 23.0%, as compared to the same period last year. This increase is primarily
due to improved sales with the mass merchandisers. The remaining increase is a
result of the bulk sale of certain slow moving inventory which was sold at a
very low margin.
COST OF REVENUES
Consolidated Cost of Revenues of $31,932,000 increased $5,849,000, or
22.4%, as compared to the same period last year. The Audio Visual subsidiary's
cost of revenues increased $628,000, or 8.9%, associated with the increase in
sales. The cost of revenues for the Household subsidiary increased $5,221,000,
or 27.4%, due to increased sales.
GROSS MARGIN
Consolidated Gross Margin of $6,981,000 was 17.9% of revenues, as compared to
20.1% for the same period last year. The Audio Visual subsidiary gross margin
percent decreased from 17.1% to 16.4%, or 4.0% as compared with the same period
last year. The Household subsidiary gross margin percent decreased from 21.2%
to 18.4%, or 13.2% due to very low margins obtained from the bulk sale of
certain slow moving inventory.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $7,437,000 increased $390,000, or 5.5%, as
compared to the same period last year. The Audio Visual subsidiary expenses
increased $43,000, or 4.4%, when compared to the same period last year due to
increased sales. Household subsidiary expenses increased $363,000, or 6.6%.
This increase was due to commissions on higher sales, bank service charges,
warehousing costs, professional fees, and increased inventory reserves. A
decrease in corporate expenses of $16,000 or 3.1% accounted for the balance of
the change in expenses.
<PAGE>
INTEREST EXPENSE
Consolidated Interest Expense of $871,000 increased $98,000, or 12.7% due
to increased levels of borrowings.
LOSS ON ABANDONMENT OF INVESTMENT
Consolidated Loss On Abandonment of Investment of $0, decreased $4,580,000
as compared to the same period last year. This was a result of the Company's
abandonment of its investment in and the writeoff of advances in certain assets
and a business acquired in June, 1995.
PRE-TAX INCOME (LOSS)
Consolidated Pre-Tax Losses of ($1,256,000) were incurred as compared to a
loss of ($5,742,000) for the same period last year. This increase was primarily
due to the loss on abandonment of an investment and the writeoff of advances in
certain assets and a business acquired in June, 1995. The remaining decrease of
$94,000 occurred as a result of lower margins and increased costs.
NET INCOME
Consolidated Net Losses of ($1,576,000) as compared to a net loss of
($4,992,000) during the same period last year occurred primarily as a result of
the reason referred to above coupled with a decrease in the credit for income
taxes.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital amounted to $1,874,000 at January 31, 1997, compared to
$3,413,000 at April 30, 1996. The decrease is principally due to the loss
during the period.
Net cash provided by operating activities was $244,000 in 1997, compared to
$4,555,000 net cash used in 1996. The change was due principally to decreases
in the net loss, inventories, accounts receivable, and recognizing a future tax
refund. This change was offset by increases in other liabilities.
Net cash used in investing activities was $111,000 in 1997, compared to $119,000
in 1995.
Net cash used in financing activities was $181,000 in 1997, compared to
$3,957,000 net cash provided in 1996. The change was principally due to notes
payable and long term debt.
In January 1992, the Company renewed and extended a financing arrangement with
State Street Bank and Trust Company ("SSB") to make available a total of
$20,300,000 in combination of revolving lines of credit and term loans. Over the
course of the next several years, the financing arrangement was amended with
availability ranging from $11,500,000 to $16,325,000 of which AVES had a line of
$1,500,000 with interest charged at prime plus 1%.
In September 1996, the financing arrangement was further amended to increase
Rosalco's line of credit from $10,000,000 to $11,000,000 with interest charged
at prime plus 1 3/4%. The $1,000,000 seasonal overadvance was available through
December 31, 1996, and thereafter the line of credit reverted back to
$10,000,000. In consideration for the seasonal advance, certain related parties
advanced an additional $500,000 to the Company in September 1996, which was
applied to Rosalco's outstanding line of credit. The related party advances now
totaling $1,000,000 are payable on demand and interest is paid monthly at prime
plus 2 1/2%.
FORBEARANCE AGREEMENT
On March 12, 1997, the Company entered into a Forbearance and Modification
Agreement (the "Forbearance Agreement") with its primary lender SSB. In the
Forbearance Agreement the Company acknowledges that Rosalco was not in
compliance with certain loan covenants under its current financing agreements
with SSB. The Forbearance Agreement provides Rosalco with a Line of Credit of
$7,250,000 through April 15, 1997, $7,000,000 through May 15, 1997 and $6,750,00
after May 16, 1997 until May 30, 1997, when the line of credit is due and
payable. At the same time, the Company borrowed $1,100,000 from a newly created
entity, substantially all of the equity of which is owned by certain directors
and principal shareholders of the Company. The proceeds of this loan was used
<PAGE>
to pay down part of Rosalco's loan balance with SSB. The $1,100,000 loan is
payable on demand after May 30, 1997, provides interest at 8% per annum, payable
monthly, and is secured by a pledge of the capital stock of AVES. Certain
warrants to purchase Company common stock were also issued to the related party
lender in conjunction with the $1,100,000 loan. As part of the Forbearance
Agreement, the Company's unlimited guarantee to SSB of Rosalco's loan was
reduced to $200,000.
In addition, on March 13, 1997, the AVES Line of Credit with SSB was refinanced
with the proceeds of a new lending arrangement with BSB Bank and Trust Company
("BSB"). AVES' new line of credit of $1,250,000 bears interest at prime plus 1
1/2%, and is partially guaranteed by a director and principal stockholder of the
Company. As part of this transaction, as well as under the Forbearance
Agreement, AVES was released by SSB from its guarantee of the obligations of the
Company and Rosalco. Likewise, the Forbearance Agreement provides that any
claim SSB may have in respect of the Company's $200,000 guarantee of Rosalco's
obligations, may not be enforced against the assets or capital stock of AVES.
During 1996, the Company's Rosalco operations had substantial losses caused by a
very soft retail environment, slower deliveries from overseas suppliers, credit
restraints on customers, as well as a change in product mix. In 1997, Rosalco's
losses continued due to low margins caused by competitive pressures and price
reductions.
As a result of these losses, the Company has experienced substantial reductions
in its working capital and cash positions. Financial flexibility has been
substantially diminished. The Rosalco Forbearance and Modification Agreement
expires May 31, 1997. The Company is pursuing a number of financing
alternatives for Rosalco including equity investment, refinancing, or possible
sale. There can be no assurances that the Company will be successful in
consummating these financing alternatives. If it is not successful, and if SSB
does not continue to extend credit to the Company, it may not have sufficient
liquidity to continue the operations of Rosalco.
LCL MATTERS
During August 1995, Jayark, LCL and Rosalco, a wholly-owned subsidiary of
Jayark, entered into a Reimbursement Agreement with certain related third
parties to provide to The CIT Group/Commercial Services, Inc. ("CIT"), the
primary lender to LCL, irrevocable standby letters of credit and cash in the
aggregate amount of $1,700,000 to serve as additional collateral against which
CIT would lend additional working capital to LCL pursuant to CIT's lending
arrangements with LCL.
In consideration for providing the additional collateral, the guarantors have
received shares of common stock of the Company in proportion to the amount of
additional collateral initially provided by them. Excluding the shares
attributable to Rosalco, the Company issued a total of 282,400 shares of its
common stock to the guarantors.
<PAGE>
The arrangement with CIT for the additional financing secured by the additional
collateral expired on February 28, 1996. The arrangement indicated that on that
date, in the event that CIT shall have applied any of the additional collateral
to LCL's obligations to CIT, LCL would reimburse the guarantors for the
collateral so applied by CIT. In July 1996, CIT notified the parties that CIT
was applying the additional collateral to LCL's obligations.
As a result of the application of the collateral by CIT, the guarantors have
received shares of common stock of the Company. Excluding the shares
attributable to Rosalco, the Company issued a total of 960,000 shares of its
common stock to the guarantors.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
10(25) Forbearance and Modification Agreement dated March 12, 1997,
between Jayark Corporation, Rosalco, Inc., AVES Audio Visual Systems,
Inc., David L. Koffman, and State Street Bank and Trust Company of
Boston, Massachusetts.
10(26) Stock Pledge Agreement dated March 12, 1997, between Jayark
Corporation and State Street Bank and Trust Company of Boston,
Massachusetts.
10(27) Subordination Agreement dated March 12, 1997, between Jayark
Corporation, Rosalco, Inc., AVES Audio Visual Systems, Inc., David L.
Koffman, and State Street Bank and Trust Company of Boston,
Massachusetts.
10(28) Revolving Note dated March 12, 1997 between Jayark Corporation
and A-V Texas Holding, LLC.
10(29) Stock Pledge Agreement dated March 12, 1997 between Jayark
Corporation and A-V Texas Holding, LLC.
10(30) Stock Warrant to purchase 3,666,667 shares of common stock dated
March 12, 1997 between Jayark Corporation and A-V Texas Holding, LLC.
10(31) Commercial Security Agreement dated February 18, 1997, between
AVES Audio Visual Systems, Inc. and BSB Bank and Trust Company.
10(32) Promissory Note dated February 18,1997, between AVES Audio Visual
Systems, Inc. and BSB Bank and Trust Company.
10(33) Commercial Guaranty dated February 18, 1997, between AVES Audio
Visual Systems, Inc., David L. Koffman and BSB Bank and Trust Company.
10(34) Subordinated Promissory Note dated March 12, 1997 between Rosalco,
Inc. and Jayark Corporation.
(b) Report on Form 8-K - None
<PAGE>
Signatures
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 thereunto duly authorized.
JAYARK CORPORATION
Registrant
/s/ David L. Koffman March 21, 1997
David L. Koffman, President
Chief Executive Officer
/s/ Robert C. Nolt March 21, 1997
Robert C. Nolt
Chief Financial Officer
<PAGE>
EXHIBIT 10(25)
--------------
FORBEARANCE AND MODIFICATION AGREEMENT
This FORBEARANCE AGREEMENT (this "Agreement") is made this 12th day of
March, 1997, among State Street Bank and Trust Company (the "Bank"), Rosalco,
Inc. (the "Borrower"), AVES Audio Visual Systems, Inc. ("AVES"), Jayark
Corporation ("Jayark"), and David L. Koffman (the "Limited Guarantor").
WHEREAS, the Bank has made extensions of credit to the Borrower pursuant to
a certain Loan and Security Agreement (All Assets), dated as of April29, 1996,
between the Borrower and the Bank (the "Loan Agreement");
WHEREAS, the Obligations (as defined in the Loan Agreement) of the Borrower
to the Bank pursuant to the Loan Agreement are evidenced by, among other things,
a $10,000,000 Note-Grid-Fluctuating Interest, dated as of April 29, 1996, made
by the Borrower in favor of the Bank (the "Note");
WHEREAS, all obligations of the Borrower to the Bank, including without
limitation the Obligations, are guaranteed by AVES and Jayark pursuant to a
certain Multi-Entity Guaranty (Unlimited), dated as of April 26, 1996, made by
AVES, Jayark and the Borrower in favor of the Bank (the "Multi-Entity
Guaranty");
WHEREAS, the Limited Guarantor executed and delivered to the Bank a Limited
Guaranty, dated as of October31, 1996, pursuant to which the Limited Guarantor
guarantied to the Bank all obligations of the Borrower or AVES to the Bank, the
liability under which was limited to an amount not exceeding $500,000 in the
aggregate (the "Limited Guaranty");
<PAGE>
WHEREAS, certain defaults and events of default, more particularly
described on Schedule A attached hereto (the "Specified Defaults"), have
occurred and are continuing;
WHEREAS, notwithstanding the foregoing, the Borrower, AVES, Jayark and the
Limited Guarantor have requested that the Bank forbear from demanding
payment in full of the Obligations;
WHEREAS, in response to such request, the Bank has agreed to refrain from
exercising its rights and remedies under the Loan Agreement, the Note, the
Multi-Entity Guaranty and the Limited Guaranty, all security agreements
securing the Obligations (as defined in the Loan Agreement), and all other
agreements and documents relating to the Obligations (collectively, the
"Loan Documents") until the Forbearance Termination Date (as hereinafter
defined), upon the following terms and conditions.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. Ratification of Existing Agreements.
(a) All of the Obligations as evidenced by or otherwise arising under
the Loan Documents, except as otherwise expressly modified in this
Agreement upon the terms set forth herein, are, by each party's
execution of this Agreement, ratified and confirmed in all respects.
The Borrower confirms that the Bank has a first priority perfected
security interest in all of the collateral described in the Loan
Documents, which collateral secures all of the Obligations. Jayark
hereby specifically acknowledges and consents to this Agreement and
ratifies and confirms in all respects its obligations under the Multi-
Entity Guaranty (as amended hereby). In addition, by the execution of
this Agreement, the Borrower and Jayark represent and warrant that no
<PAGE>
counterclaim, right of set-off or defense of any kind exists or is
outstanding with respect to any of such Obligations.
(b) Notwithstanding anything contained in Section 1(a) to the
contrary, the enforcement directly or indirectly by the Bank of the
Multi-Entity Guaranty as against Jayark shall be limited to all assets
of Jayark other than (i) Jayark's ownership interest in the stock of
AVES, and (ii) any assets of AVES in the possession of Jayark,
including, without limitation, accounts, accounts receivable,
inventory, equipment, furniture and , fixtures; provided, however, in
the event that the Bank is required to disgorge all or a portion of
the $1,100,000 Loan (as hereinafter defined) as a result of a claim
made against the Bank under the provisions of the Bankruptcy Code (11
U.S.C. 101 et. seq.) or other applicable law, the Bank's claim
against AVES in any such proceeding shall not be limited by the terms
of this Section.
Section 2. Amount of Obligations. As of the date hereof, the Borrower
and Jayark acknowledge and agree that the outstanding principal amount of
the Obligations under the Loan Documents is equal to $7,640,384.82, the
accrued but unpaid interest, which continues to accrue, totals $21,223.29,
the undrawn amount of all letters of credit issued by the Bank pursuant to
the Loan Documents is $282,878.55, and all fees, costs and expenses
(including legal fees) total $35,000.
Section 3. Existing Defaults. The Borrower and Jayark agree and
acknowledge that (i) the Obligations and the Loan Documents are currently
in default as a result of the Specified Defaults, and (ii) the Bank is
entitled to exercise all of its rights and remedies thereunder and under
applicable law.
<PAGE>
Section 4. Forbearance. Subject to the terms
and conditions set forth herein, and in consideration of the
representations, warranties and agreements made by the Borrower and Jayark
herein, the Bank agrees to forbear from exercising its rights and remedies
under the Loan Documents until that certain date (the "Forbearance
Termination Date") which is the earliest to occur of:
(a) Subject to a one business day cure period after notice from the
Bank, the failure of the Borrower or Jayark to comply with any terms
applicable to such party set forth in this Agreement;
(b) The failure of any representation or warranty made by the
Borrower, AVES, Jayark or the Limited Guarantor herein to have been
true and complete as of the date made.
(c) The occurrence of any material adverse change in the financial
condition of the Borrower after the date of this Agreement, as
determined by the Bank in its reasonable discretion;
(d) The commencement by the Borrower, AVES, Jayark or the Limited
Guarantor or any affiliate thereof of any litigation against the Bank
or any affiliate of the Bank in connection with or related to this
Agreement or any of the Loan Documents;
(e) After any applicable notice and cure period, (i) the occurrence
after the date of this Agreement of any Event of Default under the
Loan Documents (as amended hereby), including, without limitation, any
of the Specified Defaults, or (ii) the continuance after the date of
this Agreement of any Event of Default under the Loan Documents (as
amended hereby), including, without limitation, any of the Specified
Defaults, which first occurred prior to the date of this Agreement;
<PAGE>
(f) The termination of the employment of the Recovery Group as
financial advisor to the Borrower (unless a replacement reasonably
satisfactory to the Bank has been immediately retained by the
Borrower);
(g) May 30, 1997.
On and after the Forbearance Termination Date, (i) the Bank shall not be
required to make any further advances to the Borrower under the Loan
Documents, (ii) all of the Obligations shall become immediately due and
payable in full, without any further notice to the Borrower or Jayark,
(iii) the Bank shall be free in its sole and absolute discretion to proceed
to enforce any or all of its rights under or in respect of this Agreement,
the Loan Documents and applicable law in order to collect and realize upon
the Obligations, and (iv) interest shall accrue on the Obligations until
paid in full, without further notice to the Borrower or Jayark, at the
default rate of interest provided in the Loan Documents. Nothing contained
herein shall constitute a waiver or release of any of the Specified
Defaults.
Section 5. Conditions Precedent. The forbearance obligations of the
Bank shall be subject to the prior satisfaction, on or before the date
hereof, of the following conditions precedent:
(a) The Borrower shall have received an unsecured subordinated loan
from Jayark in the minimum amount of $1,100,000 (the "$1,100,000
Loan"), in a form acceptable to the Bank and its legal counsel,
$1,000,000 of the proceeds of which will be applied to the Obligations
pursuant to the Loan Documents, and (i) $100,000 of the proceeds of
the $1,100,000 Loan shall be delivered directly to the Bank to be held
in a separate cash collateral account at the Bank, (ii) the Borrower
hereby grants a security interest to the Bank in such cash collateral
which shall secure the Borrower's obligations under this Agreement and
<PAGE>
the Loan Documents, and (iii) upon the occurrence of the Forbearance
Termination Date or an event which with the passage of time or the
giving of notice, or both, would result in the Forbearance Termination
Date, the Bank may in its sole discretion apply such cash collateral
to the obligations under this Agreement or the Loan Documents.
(b) The Borrower shall have paid all of the fees and expenses of
counsel for the Bank, and all of the fees and expenses of its own
counsel.
(c) The Borrower shall have provided the Bank with evidence in form
and substance satisfactory to the Bank of the Borrower, AVES and
Jayark's corporate or other power and authority to execute and deliver
this Agreement and all related documents and to perform the terms
thereof.
(d) The Bank shall have received a stock pledge agreement, in form
satisfactory to the Bank in its sole and absolute discretion, granting
to the Bank as security for the Obligations a first priority security
interest in all of the stock of the Borrower, along with the original
stock certificates evidencing such ownership and stock powers executed
in blank.
(e) All obligations of AVES to the Bank pursuant to the Loan and
Security Agreement (All Assets), dated as of April29, 1996, between
AVES and the Bank, the $1,500,000 Note-Grid-Fluctuating Interest,
dated as of April29, 1996, made by AVES in favor of the Bank, and all
documents executed and delivered in connection therewith (the "AVES
Loan Documents") shall have been indefeasibly paid in full.
(f) The Borrower shall have executed and delivered a Lock-box
Agreement in form and substance satisfactory to the Bank.
(g) The Borrower shall have delivered a Borrowing Base Certificate in
the form of Exhibit A attached to the Loan Agreement to the Bank as of
the date hereof.
<PAGE>
(h) The Borrower shall have delivered financial projections for the
120-day period following the date of this Agreement, including balance
sheet, profit and loss statement and statement of cash flows (each of
which shall be presented on a week-by-week basis), in form and
substance satisfactory to the Bank.
(i) The Borrower and each of Jayark and the Limited Guarantor shall
deliver to the Bank a subordination agreement with respect to any
existing or future indebtedness of the Borrower owing to such parties,
in form and substance satisfactory to the Bank. If the Borrower is or
becomes indebted to any of its affiliates (as defined in the Loan
Agreement), the Borrower and such affiliate shall deliver to the Bank
a subordination agreement with respect to such indebtedness, in form
and substance satisfactory to the Bank.
Section 6. Covenants. Without any prejudice or impairment whatsoever
to any other rights and remedies of the Bank contained in the Loan
Agreement, the Note or in any of the other Loan Documents, the Borrower
covenants and agrees with the Bank as follows:
(a) The Borrower will deliver to the Bank an inventory assessment
plan, developed with assistance by and in conjunction with its
financial advisor, on or before March 31, 1997 or such other date as
may be mutually agreeable to the Borrower and the Bank..
(b) The Borrower shall continue to employ at least one day per week
the Recovery Group as financial advisor, or a replacement financial
advisor reasonably acceptable to the Bank, whose responsibilities
shall include periodically assessing the business operations and
assets of the Borrower and assisting the Borrower in its efforts to
enhance revenue and cash flow throughout the term of this Agreement.
The financial advisor shall also be responsible for assisting the
Borrower in developing and implementing a plan to provide for the
payment in full of all Obligations no later than May 30, 1997. Such
<PAGE>
plan shall be delivered to the Bank no later than April 15, 1997.
Upon the occurrence and during the continuance of a default under this
Agreement or of an Event of Default (as defined in the Loan
Agreement), the Bank shall have the right, at its sole discretion, but
at the sole cost of the Borrower, to require the Borrower to employ,
at any frequency reasonably determined by the Bank, the Recovery Group
as financial advisor, or a replacement financial advisor reasonably
acceptable to the Bank, whose responsibilities shall include, but not
be limited to, continually assessing the business operations, business
prospects and assets of the Borrower and assisting the Borrower in its
efforts to enhance revenue and cash flow.
(c) The Borrower shall at all times be in compliance with all of the
terms, covenants and provisions contained in this Agreement and the
Loan Documents, as they may be amended hereby, and all of the
representations and warranties contained in this Agreement shall be
correct and complete as of the date made.
(d) The Borrower and Jayark shall at any time or from time to time
execute and deliver such further instruments, and take such further
action as the Bank may reasonably request, in each case to further
affect the purposes of this Agreement or any of the Loan Documents,
including, without limitation, the execution and delivery of
additional UCC-1 Financing Statements to be filed with the county
recorder having jurisdiction over the Borrower's chief executive
office located in Jeffersonville, Indiana. In addition, the Borrower
will use its reasonable efforts, such efforts to be documented in
writing, to obtain a landlord waiver in form and substance acceptable
to the Bank to be signed by the Borrower's landlord within fifteen
(15) days of the date of this Agreement relating to the Borrower's
lease of warehouse space in Rancho Dominguez, California. The
Borrower's failure, through no fault of its own, to obtain such
landlord waiver shall not constitute a default under this Agreement.
<PAGE>
(e) On a weekly basis, the Borrower shall deliver a report to the
Bank with respect to any inventory of the Borrower which is in transit
to or from a warehouse maintained by the Borrower, including, without
limitation, any inventory purchased by the Borrower which is being
transported by ocean going vessel to a port in the United States,
setting forth the following: (i) a description and the amount of such
inventory, (ii) the name of the shipper, (iii) the carrier which is
transporting such inventory, and (iv) the shipping charges owed to
such carrier for such shipment and the total amount unpaid to such
carrier for all shipments to date. To the extent that such inventory
is represented by a bill of lading, the Borrower shall immediately
deliver such bill of lading to the Bank on demand.
(f) The Borrower shall deliver the following financial information to
the Bank, in form and substance satisfactory to the Bank: (i) on a
daily basis, a listing of the Borrower's sales for the previous day,
(ii) on a weekly basis, a cash flow report, showing the cash flow for
the Borrower for the period from the date of this Agreement through
the date of such cash flow report, with comparisons to the amounts
budgeted for such period, a listing of the inventory of the Borrower,
and a completed Borrowing Base Certificate in the form of Exhibit A
attached to the Loan Agreement, (iii) on a monthly basis, within
twenty (20) days of the end of each calendar month, an aging of the
accounts receivable of the Borrower, an aging of the accounts payable
of the Borrower, and a listing of the inventory of the Borrower, (iv)
on a monthly basis, within thirty (30) days of the end of each
calendar month, a consolidating balance sheet, profit and loss
statement and statement of cash flows of the Borrower, together with a
Certificate of No Defaults, signed by the President or the Chief
Financial Officer of the Borrower in the form of Exhibit A attached
hereto, and (v) any other financial information requested by the Bank
from time to time. During normal business hours, the Borrower shall
<PAGE>
permit the Bank or its designated agents to inspect the books and
records of the Borrower and to make copes therefrom, all at the cost
and expense of the Borrower.
(g) The Borrower shall not request, and the Bank shall not be
required to issue, letters of credit to be issued by the Bank which
have expiration dates later than May 30, 1997.
(h) The Borrower shall, on demand, pay all of the fees and expenses
of counsel for the Bank.
(i) If, at any time and for any reason, the aggregate amount of the
outstanding loans made to the Borrower pursuant to the Loan Documents
exceeds the lesser of the Credit Limit or the Borrowing Base (as
defined in the Loan Agreement as amended hereby), then the Borrower
shall, within one business day after demand by the Bank, pay to the
Bank, in cash, the amount of such loans in excess of the Credit Limit.
Section 7. Amendment and Modifications to Loan Agreement. The Loan
Agreement is hereby amended and modified in the following respects:
(a) Section 5(a)(4) of the Loan Agreement is hereby amended
in its entirety as follows:
(4) the lesser of:
(i) an amount equal to (a) $2,750,000 from the date
hereof through and including March 31 1997 or (b)
$2,500,000 thereafter; or
(ii)forty-five percent (45%) of all Eligible Inventory
(as defined below) consisting of finished goods located
in warehouses, in transit or which have been ordered
pursuant to a purchase order backed by a letter of
credit issued by the Bank, but which have not yet been
negotiated (exclusive of Inventory in Transit covered
by subsection (3) above); MINUS
<PAGE>
(b) Section 5(a)(5) of the Loan Agreement is hereby amended in its
entirety as follows:
(5) one hundred percent (100%) of the aggregate amount then undrawn
on all outstanding letters of credit and Banker's Acceptances issued
by the Bank for the account of the Borrower, which shall in no event
exceed $750,000.
(c) Section 5(b) of the Loan Agreement is hereby amended in its
entirety to read as follows:
(b) The term "Credit Limit" as used herein shall mean, (i)
during the period prior to and including April 15, 1997, an
amount equal to $7,250,000, (ii) during the period from
April 16, 1997 through and including May 15, 1997, an amount
equal to $7,000,000, and (iii) after May 16, 1997, an amount
equal to $6,750,000.
(d) Section 12(h) of the Loan Agreement is hereby amended by deleting
the phrase "forty-five (45) days" and inserting, in its place, the
phrase "thirty (30) days".
(e) Section 14(g) of the Loan Agreement is hereby amended in its
entirety to read as follows:
(g) (Liens) create, permit to be created or suffer to
exist any lien, encumbrance, charge, security interest or
any other type of preferential arrangement, or grant a
negative pledge to any party other than the Bank
(collectively, "Lien") upon any of the Collateral or any
other property of Borrower, now owned or hereafter
acquired, except: (i) landlords', carriers',
warehousemen's, mechanics' and other similar Liens
arising by operation of law in the ordinary course of
Borrower's business; which secure indebtedness not yet
due and payable, (ii) arising out of pledges or deposits
under worker's compensation, unemployment insurance, old
age pension, social security, retirement benefits or
other similar legislation; (iii) purchase money Liens
arising in the ordinary course of business (so long as
the indebtedness secured thereby does not exceed the
lesser of the cost or fair market value of the property
subject thereto, and such Lien extends to no other
property); (iv) those Liens and encumbrances set forth on
Schedule "B" annexed hereto; and (v) in favor of Bank;
<PAGE>
(f) Section 14(l) of the Loan Agreement is hereby amended in its
entirety to read as follows:
(l) (Transactions with Affiliates) enter into any lease
or other transaction with any shareholder, officer,
subsidiary, parent, any subsidiary of any parent, any
affiliate or any affiliate of any parent, on terms any
less favorable than those which might be obtained from
persons who (or entities which) are not such a
shareholder, officer, subsidiary, parent or affiliate;
provided, however, Borrower shall not make any payments
to its parent corporation in any one month in excess of
$20,000 in consideration for services to be provided to
the Borrower by Jayark Corporation, which payments shall
be subject to that certain Subordination Agreement, dated
as of even date herewith;
Section 8. Amendment and Modification to Multi-Entity Guaranty.
Section 1 of the Multi-Entity Guaranty is hereby amended by
inserting the following at the end thereof:
Notwithstanding anything to the contrary contained in
this Guaranty, (i) the liability of AVES hereunder shall
be terminated, and (ii) the liability of Jayark
Corporation hereunder with respect to the Obligations
owing by Rosalco, Inc. shall be the sum of all such
Obligations up to but not exceeding Two Hundred Thousand
Dollars ($200,000) in the aggregate, which amount shall
specifically include: (i) all costs and expenses
(including court costs and legal expenses) reasonably
incurred or expended by the Bank in connection with this
Guaranty and the enforcement hereof, (ii) all interest on
amounts recoverable under this Guaranty from the time
such amounts become due until payment at the rate
applicable to the Obligations owing by Rosalco, Inc, and
(iii) any other amounts due and owing under this
Guaranty. Each payment by Jayark Corporation pursuant to
this Guaranty on account of the Obligations of Rosalco,
Inc. shall reduce the liability of Jayark Corporation
hereunder by a like amount. The dealings of the Bank
with any Customer need not be limited to any particular
sum notwithstanding the limitation herein upon the
liability of Jayark Corporation. The Bank shall not take
any action to collect upon or enforce this Guaranty
against Jayark Corporation on account of the Obligations
of Rosalco, Inc. until the expiration of forty-five (45)
days from the date that the Bank first makes written
demand upon Jayark for payment of such Obligations
pursuant to this Guaranty.
<PAGE>
Section 9. Accumulated Operating Cash Flow. The Borrower shall
have attained a minimum of the following Accumulated Operating Cash
Flow as of the each of the following dates:
Minimum Accumulated
Attainment Date Operating Cash Flow
March 31, 1997 $ 25,000
April 30, 1997 $425,000
Accumulated Operating Cash Flow shall be calculated on a consistent basis in
accordance with the calculations contained in Exhibit B attached hereto.
Section 10. Release. Each of the Borrower, AVES, Jayark and the Limited
Guarantor, on its own behalf and on behalf of its prospective shareholders,
directors, employees and agents and their successors and assigns, hereby
waive, release and discharge the Bank and all directors, officers,
employees, attorneys and agents of the Bank, from any and all claims,
demands, actions or causes of action arising out of or in any way relating
to the Loan Documents or the AVES Loan Documents and any documents,
agreements, dealings or other matters connected with the Loan Documents or
the AVES Loan Documents, including without limitation all known and unknown
matters, claims, transactions or things occurring prior to the date of this
Agreement relating to the Loan Documents or the AVES Loan Documents. AVES
specifically and expressly represents and warrants to the Bank that AVES
has no claims, counterclaims, rights of set-off, defenses of any kind,
demands, actions or causes of action arising out of or in any way relating
to the Loan Documents or the AVES Loan Documents or any documents,
agreements, dealings or other matters connected with the Loan Documents or
the AVES Loan Documents, including without limitation all known and unknown
matters, claims, transactions or things occurring prior to the date of this
Agreement relating to the Loan Documents or the AVES Loan Documents. The
Limited Guarantor specifically and expressly represents and warrants to the
Bank that the Limited Guarantor has no claims, counterclaims, rights of set
off, defenses of any kind, demands, actions or causes of action arising out
of or in any way relating to the Loan Documents or the AVES Loan Documents
and any documents, agreements, dealings or other matters connected with the
Loan Documents or the AVES Loan Documents, including without limitation all
known and unknown matters, claims, transactions or things occurring prior
to the date of this Agreement relating to the Loan Documents or the AVES
Loan Documents.
<PAGE>
Section 11. Representations and Warranties.
(a) All of the representations and warranties made by the Borrower in
the Loan Agreement are true and correct as of the date hereof as if
made on and as of the date hereof, except to the extent that any of
such representations and warranties relate by their terms to a prior
date or except as otherwise disclosed in writing to the Bank on or
before such date; and the Borrower has no actual knowledge that any
other representations and warranties made by the Borrower in the Loan
Documents are not true and correct on and as of the date hereof.
(b) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated, nor the
compliance with the provisions hereof will violate any provisions of
the Articles of Organization or Bylaws of the Borrower, AVES or
Jayark, or any law, statute or regulation, or any order or decree of
any court or governmental instrumentality, or will conflict with, or
result in a breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which the
Borrower, AVES, Jayark or the Limited Guarantor is a party or by which
any of them or any of their property may be bound, or, except as
contemplated under this Agreement, result in the creation or
imposition of any mortgage, pledge, security interest, encumbrance,
<PAGE>
lien, charge, attachment, judgment, levy, or other condition having
the practical effect of any of the foregoing upon any property of the
Borrower, AVES, Jayark and the Limited Guarantor.
(c) The Borrower, AVES and Jayark have the corporate power and
authority to execute, deliver and carry out the terms and provisions
of this Agreement and the other documents executed in connection
herewith or contemplated hereby (collectively, the "Forbearance
Documents"), and the Borrower, AVES and Jayark have taken or caused to
be taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the Forbearance
Documents. This Agreement and each of the Forbearance Documents
constitute the legal, valid and binding obligations of the Borrower,
AVES, Jayark and the Limited Guarantor and are enforceable in
accordance with their respective terms.
(d) To the best knowledge of the Borrower, there are no material
Events of Default under the Loan Documents existing as of the date
hereof other than the Events of Default listed as items 1-13 on
Schedule A attached hereto
Section 12. Forbearance Fee. Commencing on the date hereof, and until
the Obligations are paid in full, the Borrower shall pay to the Bank a fee
equal to $20,000 per month (the "Forbearance Fee"), payable in advance on
the first day of each month beginning with the month of March , 1997 (which
initial Forbearance Fee shall be due and payable on the date hereof),
provided, that one-half of the amount of each required payment of the
Forbearance Fee shall be deferred and paid on the Forbearance Termination
Date, provided further, that if the Borrower repays the Obligations in full
prior to the Forbearance Termination Date, the deferred portion of the
Forbearance Fee will be waived. The Forbearance Fee replaces the $7,500
monthly administrative fee currently being charged pursuant to the Loan
Documents.
<PAGE>
Section 13. Consent to Appointment of Receiver. In addition to all of
the other rights and remedies available to the Bank under this Agreement
and the Loan Documents, on or after the Forbearance Termination Date, each
of the Borrower and Jayark expressly consents to the appointment of a
receiver as requested by the Bank in its sole discretion for its properties
and business in any state or federal court proceeding or administrative
proceeding. The Borrower will take no action to contest, object to or
otherwise interfere with the request for or appointment of a receiver and
the Borrower shall cooperate fully in making all of its books and records
available to a receiver and in giving such receiver dominion and control
over all properties, business records and business of the Borrower. If the
Bank requests the appointment of a receiver, the Borrower will promptly
execute all documents required by the Bank to evidence the Borrower's
consent to such appointment. The Bank shall provide the Borrower with
seven (7) business days prior written notice of any request by the Bank for
the appointment of a receiver. The Bank's right to require a receiver for
Borrower's properties and business shall be in addition to, and not in lieu
or limitation of, the Bank's other rights and remedies under the Loan
Documents, this Agreement or otherwise and may be executed by the Bank
prior to, concurrently with, or successive to any other rights and remedies
available.
Section 14. No Waiver. Except as otherwise expressly provided for in
this Agreement, nothing in this Agreement shall extend to or affect in any
way any of the obligations of the Borrower or Jayark or any of the Bank's
rights and remedies arising under the Loan Documents. The acceptance by
the Bank of any partial payment of any amount due shall not constitute a
waiver of the rights of the Bank to collect the remaining portion thereof.
Section 15. Release of AVES. Upon compliance with the conditions
precedent set forth in Section 5 hereof, the obligations of AVES as a
<PAGE>
guarantor under the Multi-Entity Guaranty shall be terminated and the Bank
hereby waives, releases and discharges AVES from all claims, demands,
actions or causes of action arising out of or relating to the Multi-Entity
Guaranty. The Borrower has advised the Bank that the loan to Jayark will
be secured by a pledge of AVES common stock.
Section 16. Release of the Limited Guarantor. Upon compliance with the
conditions precedent set forth in Section 5 hereof, the obligations of the
Limited Guarantor as a guarantor under the Limited Guaranty shall be
terminated and the Bank hereby waives, releases and discharges the Limited
Guarantor from all claims, demands, actions or causes of action arising out
of or relating to the Limited Guaranty.
Section 17. Expenses. The Borrower agrees to pay to the Bank on the
date hereof and upon demand from time to time hereafter (a)an amount equal
to any and all reasonable out-of-pocket costs or expenses (including
reasonable legal fees and disbursements) incurred or sustained by the Bank
in connection with the administration of credit extended by the Bank to the
Borrower or the preservation of or enforcement of its rights under the Loan
Documents or in respect of any of the Borrower's other obligations to the
Bank. The Borrower hereby authorizes and directs the Bank, upon five (5)
day's notice from the Bank, to charge the Borrower's deposit accounts at
the Bank for all such costs and expenses.
Section 18. Notices. All notices, demands or other communications
required or permitted hereunder shall be in writing and shall be telecopied
(followed by overnight mail), personally delivered or sent by registered or
certified mail, postage-prepaid, return receipt requested, or by receipted
overnight delivery service to the addressee, at its address set forth below:
<PAGE>
If to the Borrower: With a copy to:
Rosalco, Inc. Robert Nolt
257 America Place 300 Plaza Drive
Jeffersonville, IN 47130 Vestal, NY 13850
Fax: (812) 284-6658 Fax: (607) 797-7103
If to Jayark, AVES or the With a copy to:
Limited Guarantor:
c/o David L. Koffman Robert Nolt
300 Plaza Drive 300 Plaza Drive
Vestal, NY 13850 Vestal, NY 13850
Fax: (607) 797-7103 Fax: (607) 797-7103
If to the Bank: With a Copy to;
State Street Bank and Trust Company Mintz, Levin, Cohn, Ferris,
225 Franklin Street Glovsky and Popeo, P.C.
Boston, MA 02110 One Financial Center
Attention: John D. Gaziano, Jr., V.P. Boston, MA 02111
Attention: James M. Benninger, V.P. Attention: Paul J. Ricotta
Fax: (617) 664-4176 Fax: (617) 542-2241
or at such other address as shall be designated by any of the foregoing parties
in a written notice to the other parties complying as to delivery with the terms
of this Section. All such communications shall be deemed received (i) in the
case of hand delivery, on the day of delivery, (ii) in the case of overnight
mail or overnight courier service, on the next business day after such
communication is mailed, postage prepaid, or placed in the hands of such courier
service for delivery, (iii) in the case of telecopy, on the day the sender
receives electronic confirmation that a facsimile has been successfully
transmitted to the recipient thereof, and (iv) in the case of registered or
certified mail, on the fifth business day after such communication is mailed,
postage prepaid, with the United States Postal Service.
<PAGE>
Section 19. Miscellaneous.
(a) This Agreement shall be binding and shall be deemed effective
only when executed by all of the parties hereto.
(b) This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties hereto;
provided, however, neither the Borrower, AVES, Jayark nor the Limited
Guarantor may assign this Agreement or any rights or obligations
hereunder, and any prohibited assignment shall be absolutely void.
Without notice to or consent of the Borrower, AVES, Jayark or the
Limited Guarantor, the Bank may assign this Agreement and its rights
and duties hereunder. The parties hereto do not intend that any of
the benefits of this Agreement shall inure to any third party, and no
third party shall be a third party beneficiary hereof.
(c) Headings and section numbering contained in this Agreement have
been set forth herein for convenience only.
(d) Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purposes of determining the
legal enforceability of such provision, and the unenforceability of
any provision of this Agreement shall not invalidate the
enforceability of any other provision of this Agreement.
(e) This Agreement constitutes the entire Agreement among the parties
hereto with respect to the Bank's forbearance of its rights and
remedies under the Loan Documents.
(f) This Agreement cannot be changed or terminated orally, but only
by a writing signed by all of the parties hereto.
(g) This Agreement supersedes all prior agreements, understandings
and negotiations relating to the Bank's forbearance as provided
herein, all of which are merged into this Agreement.
<PAGE>
(h) This Agreement may be executed in any number of counterparts each
of which, when executed and delivered, shall be deemed to be an
original and all of which, when taken together, shall constitute but
one and the same Agreement.
Section 20. Continuing Effect. Except as specifically modified hereby,
the Loan Documents shall remain in full force and effect, and the Borrower and
Jayark acknowledge and agree to comply with all of the provisions of the Loan
Documents, as modified hereby.
Section 21. No Future Commitments. The Borrower, AVES, Jayark and the
Limited Guarantor acknowledge that while the Bank may agree to review a plan or
plans for restructuring of the existing obligations, the Bank has not agreed or
committed to enter into such restructuring. Nothing contained in this Agreement
shall be deemed to constitute the Bank's agreement that the
<PAGE>
Bank will agree to any restructuring. The Borrower, AVES, Jayark and the
Limited Guarantor acknowledge and agree that they are not relying upon any
expectation that the Bank will agree to any restructuring in the future. The
Borrower, AVES, Jayark and the Limited Guarantor further acknowledge and agree
that, absent a written modification of the terms of this Agreement in accordance
with the provisions hereof, the Obligations shall become due and payable in full
in cash on the Forbearance Termination Date.
Section 22. WAIVER OF JURY TRIAL. THE BORROWER HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OF THE
BORROWER'S OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH
OBLIGATIONS.
Section 23. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed by its duly authorized officer as of the day and year first
above written.
WITNESS: ROSALCO, INC.
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Its: Chairman
<PAGE>
WITNESS: STATE STREET BANK AND TRUST COMPANY
Name: /s/ Paul J. Ricotta Name: /s/ James M. Benninger
Its: Vice President
WITNESS: JAYARK CORPORATION
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Its: Chairman
WITNESS: Agreed to solely with respect to Sections
4(d), 5(j), 10, 11(b),11(c), 16, 19(b) and
21 hereof:
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Its: Limited Guarantor
Agreed to solely with respect to Sections
4(d), 5(d), 5(f), 10, 11(b), 11(c), 15, 19(b)
and 21 hereof:
WITNESS: AVES AUDIO VISUAL SYSTEMS, INC.
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Its: Chief Executive Officer
<PAGE>
SCHEDULE A
SPECIFIED DEFAULTS
Prior to and as of the date hereof but not after the date hereof, the
Borrower is in default of the following financial covenants:
1. Section 14(b) of the Loan and Security Agreement (All Assets)
(the "Loan Agreement") with respect to the Debt to Capital Base;
2. Section 14(c) of the Loan Agreement with respect to the Current
Ratio;
3. Section 14(d) of the Loan Agreement with respect to Minimum Net
Earnings; and
4. Section 14(i) of the Loan Agreement with respect to loans made by
the Borrower.
5. Section 14(j) of the Loan Agreement with respect to the guaranty
of indebtedness.
6. Section 14(l) of the Loan Agreement with respect to leases with
shareholders or affiliates of the Borrower.
7. Section 15(c) of the Loan Agreement with respect to violations of
the Loan Documents
8. Section 15(f) of the Loan Agreement with respect to liens of
creditors.
9. Section 15(l) of the Loan Agreement with respect to material
adverse changes in the financial condition of the Borrower.
10. Section 15(o) of the Loan Agreement with respect to changes in
the identify of the management of the Borrower.
11. Section 15(u) of the Loan Agreement with respect to the
occurrence of an event of default by a guarantor
12. Section 15(x) of the Loan Agreement with respect to the
occurrence of an event of default under the Loan and Security
Agreement (All Assets) between AVES and the Bank on account of
the occurrence of an event of default under the Loan Documents.
<PAGE>
13. Section 5(a) of the Loan Agreement with respect to the aggregate
principal amount of the loan.
The Borrower has informed the Bank that prior to and as of the date hereof
but not after the date hereof, the Borrower may be in default of other
covenants and obligations under the Loan Documents. The Bank acknowledges
that these additional defaults, although not enumerated, shall constitute
Specified Defaults.
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE OF NO DEFAULTS
I do hereby certify to State Street Bank and Trust Company (the "Bank")
that I have reviewed the Forbearance and Modification Agreement dated as of
March 12, 1997 among the Bank, Rosalco, Inc., AVES Audio Visual Systems, Inc.,
Jayark Corporation and David L. Koffman (the "Forbearance Agreement") and the
Loan Documents (as defined therein); I further certify that I have caused the
investigations necessary to make this certification; I further certify that to
the best of my knowledge no default under the Forbearance Agreement or Event of
Default (as defined in the Loan Documents) exists as of the date hereof [or
describing such default or Event of Default if one exists].
Dated: This 12th day of March, 1997
Name: /s/ David L. Koffman
Title: Chairman
<PAGE>
EXHIBIT B
ROSALCO, INC.
11-FEB-97
12-MAR 14-MAR 21-MAR 28-MAR 04-APR
Revenue 542,850 814,278 856,393 271,425
Gross Profit 74,101 111,152 116,901 37,051
Gross Margin 13.7% 13.7% 13.7% 13.7%
Operating Inc 35,921 (10,087) (169,272) (116,561)
EBT (17,674) (10,087) (169,272) (116,561)
OCF 49,611 (80,155) 107,618 (258,207)
Accum 49,611 (30,544) 77,074 (181,133)
Interest (53,595)
Proceeds 1,000,000
NCF 996,016 (80,155) 107,618 (258,207)
Accum 996,016 915,881 1,023,479 765,272
OCF-tested monthly 77,074
Covenant > $25,000
Collateral
A/R 1/2 3,727,993 2,841,502 3,098,677 3,193,475 3,120,995
A/R other 1,131,216 1,147,922 1,251,818 1,290,113 1,260,832
Cust L/C 116,183 300,000 300,000 300,000 300,000
Inventory 5,738,715 6,120,075 5,758,351 5,360,590 5,607,545
Total 10,714,110 10,409,499 10,406,844 10,144,178 10,289,372
Rates
A/R 1/2 90% 90% 90% 90% 90%
A/R other 80% 80% 80% 80% 80%
Cust L/C 90% 90% 90% 90% 90%
Inventory 45% 45% 45% 45% 45%
Availability
A/R 1/2 3,355,195 2,557,352 2,788,809 2,874,128 2,808,896
A/R other 904,973 918,338 1,001,453 1,032,090 1,006,668
Cust L/C 104,565 270,000 270,000 270,000 270,000
Inventory 2,582,422 2,750,000 2,591,258 2,412,268 2,500,000
Total 6,947,158 6,495,889 6,651,520 6,588,483 6,587,561
Borrowings
(proceeds) (150,000) (150,000) (150,000) (150,000) (150,000)
Line 6,790,385 6,319,290 6,399,445 6,291,826 6,550,034
L/C's 282,879 250,000 250,000 250,000 250,000
Total 6,923,264 6,419,290 6,499,445 6,391,826 6,650,034
Excess Avail 23,892 76,389 152,075 196,657 (62,473)
Monthly Max
Borrowings 6,499,445
Inventory 6,120,075
Inv. Avail 2,750,000
11-APR 18-APR 25-APR 02-MAY
Revenue 407,138 542,850 678,563 814,276
Gross Profit 59,627 84,903 112,880 143,558
Gross Margin 14.6% 15.6% 16.6% 17.6%
Operating Inc 39,322 (30,942) 50,210 (254,925)
EBT (9,549) (30,942) 50,210 (254,925)
OCF 228,260 330,694 175,275 (230,323)
Accum 47,127 377,821) 553,096 322,773
Interest (48,871)
Proceeds 1,000,000
NCF 179,389 330,694 175,275 (230,323)
Accum 944,661 1,275,355 1,450,630 1,220,307
OCF-tested monthly 553,096
Covenant >$500,000
Collateral
A/R 1/2 3,050,079 2,902,574 2,757,906 2,947,960
A/R other 1,232,184 1,172,594 1,114,150 1,190,929
Cust L/C 300,000 300,000 300,000 300,000
Inventory 5,504,194 6,372,113 5,284,003 5,192,245
Total 10,088,457 9,747,281 9,466,059 9,631,134
Rates
A/R 1/2 90% 90% 90% 90%
A/R other 80% 80% 80% 80%
Cust L/C 90% 90% 90% 90%
Inventory 45% 45% 45% 45%
Availability
A/R 1/2 2,745,071 2,612,317 2,482,115 2,653,164
A/R other 985,747 938,075 891,320 952,743
Cust L/C 270,000 270,000 270,000 270,000
Inventory 2,476,887 2,417,451 2,382,301 2,336,610
Total 6,477,706 6,237,843 6,025,737 6,212,417
Borrowings
(proceeds) (150,000) (150,000) (150,000) (150,000)
Line 6,370,645 6,039,951 6,884,878 6,094,999
L/C's 250,000 250,000 250,000 250,000
Total 6,470,645 6,139,951 5,964,676 6,194,999
Excess Avail 7,051 97,892 61,051 17,418
Monthly Max
Borrowings 6,650,034
Inventory 6,607,545
Inv. Avail 2,500,000
09-MAY 16-MAY 23-MAY 30-MAY TOTAL
Revenue 421,177 561,569 842,354 982,747 7,735,620
Gross Profit 78,444 111,632 167,448 195,356 1,293,053
Gross Margin 18.6% 19.9% 19.9% 19.9% 15.7%
Operating Inc 58,139 (8,394) 129,343 (169,693) (448,919)
EBT 10,897 (8,394) 129,343 (169,693) (598,827)
OCF 240,034 329,535 243,718 (723,734) 412,328
Accum 562,807 892,342 1,136,060 412,328
Interest (47,242)
Proceeds
NCF 192,792 329,535 243,718 (723,734) 1,262,618
Accum 1,413,099 1,742,634 1,988,352 1,262,618
OCF-tested monthly
Covenant
Collateral
A/R 1/2 2,874,208 2,721,030 2,712,520 3,143,688
A/R other 1,161,134 1,099,253 1,095,815 1,270,000
Cust L/C 300,000 300,000 300,000 300,000
Inventory 5,120,001 5,030,928 4,897,313 4,741,273
Total 9,455,343 9,151,209 9,005,648 9,454,981
Rates
A/R 1/2 90% 90% 90% 90%
A/R other 80% 80% 80% 80%
Cust L/C 90% 90% 90% 90%
Inventory 45% 45% 45% 45%
Availability
A/R 1/2 2,686,787 2,448,927 2,441,268 2,829,319
A/R other 928,907 879,402 876,652 1,018,000
Cust L/C 270,000 270,000 270,000 270,000
Inventory 2,304,000 2,263,917 2,203,791 2,133,573
Total 6,089,695 5,882,248 5,791,711 6,248,892
Borrowings
(proceeds) (150,000) (150,000) (150,000) (150,000)
Line 5,902,207 5,572,673 5,328,955 6,052,689
L/C's 250,000 250,000 250,000 250,000
Total 6,002,207 5,672,873 5,428,955 6,152,689
Excess Avail 87,488 189,573 362,768 98,203
Monthly Max
Borrowings 6,194,999
Inventory 5,192,245
Inv. Avail 2,336,510
Proceeds March April May
$ 150,000 45% 45% 45%
850,000
$1,000,000
<PAGE>
EXHIBIT 10(26)
--------------
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (as amended, amended and
restated, supplemented or otherwise modified from time to time,
this "Agreement"), dated as of March 12, 1997, is made by JAYARK
CORPORATION a New York corporation, with its principal place of
business at 300 Plaza Drive, Vestal, New York 13850 (the
"Pledgor"), in favor of STATE STREET BANK AND TRUST COMPANY,
having an office at 225 Franklin Street, Boston, Massachusetts
02110 (the "Secured Party").
WHEREAS, the Secured Party intends to enter into a
Forbearance and Modification Agreement (the "Forbearance
Agreement"), dated of even date herewith, with Rosalco, Inc.
f/k/a Rosalco Acquisition Corporation (the "Borrower"), whereby
the Secured Party will agree to forbear from exercising certain
rights and remedies against the Borrower, a wholly owned
subsidiary of the Pledgor, on account of defaults under certain
credit facilities extended by the Secured Party to the Borrower,
which credit facilities are evidenced by, among other things, a
certain Loan and Security Agreement (the "Loan Agreement"), dated
as of April 29, 1996, between the Borrower and the Secured Party,
and a $10,000,000 Note-Grid-Fluctuating Interest (the "Note"),
dated as of April 29, 1996, made by the Borrower in favor of the
Secured Party.
WHEREAS, it is a condition precedent to the effectiveness of
the Forbearance Agreement that the holder of the outstanding
capital stock of the Borrower shall pledge its stock to secure
the payment and performance of all of the Secured Obligations (as
hereinafter defined).
WHEREAS, the Pledgor is the legal and beneficial owner of
the shares of capital stock of the Borrower as listed on
Schedule A attached hereto (collectively, the "Pledged Shares"),
which shares constitute all of the issued and outstanding shares
of all classes of capital stock of the Borrower.
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Pledge. The Pledgor hereby pledges and grants
to the Secured Party a continuing first priority security
interest in all of the Pledgor's now existing or hereafter
arising right, title and interest in and to the following
property (collectively, the "Pledged Collateral") to secure all
of the Secured Obligations:
(i) the Pledged Shares (which to the extent permitted
by law are, and shall remain at all times until this
Agreement terminates, certificated securities) and any
interest of the Pledgor in the entries on the books of any
financial intermediary pertaining to the Pledged Shares;
(ii) all additional shares of stock of the Borrower
from time to time acquired by the Pledgor in any manner
(which to the extent permitted by law are, and shall remain
at all times until this Agreement terminates, certificated
securities), which shares shall be deemed to be part of the
Pledged Shares, and any interest of the Pledgor in the
entries on the books of any financial intermediary
pertaining to such additional shares;
<PAGE>
(iii) all dividends, cash, options, warrants,
rights, instruments, distributions, returns of capital,
income, profits and other property, interests or proceeds
from time to time received, receivable or otherwise
distributed or owing to the Pledgor in respect of, or in
exchange for, any or all of the Pledged Shares
(collectively, "Distributions"); and
(iv) all Proceeds (as defined under the UCC as in
effect in any relevant jurisdiction or under other relevant
law) of any of the foregoing (i)-(iii), including, without
limitation, any and all (a) proceeds of any insurance,
indemnity, warranty or guarantee payable to the Pledgor at
any time with respect to any of the Pledged Collateral,
(b) payments (in any form whatsoever) made or due and
payable to the Pledgor in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or
any part of the Pledged Collateral by any governmental
authority (or any person or entity acting on behalf of a
governmental authority), (c) instruments representing
obligations to pay amounts in respect of any Pledged Shares,
and (d) other amounts at any time paid or payable under or
in connection with any of the Pledged Collateral.
Section 2. Secured Obligations. This Agreement secures,
and the Pledged Collateral is collateral security for, the prompt
payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise (including, without
limitation, the payment of interest and other amounts which would
accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under Section
362(a) of the Bankruptcy Code) of (i) all obligations of the
Pledgor now or hereafter existing under or in respect of the Loan
Agreement, the Note and the Forbearance Agreement, and (ii) all
obligations of the Pledgor now or hereafter existing under or in
respect of this Agreement (the obligations described in clauses
(i) and (ii) are collectively referred to as the "Secured
Obligations").
Section 3. Delivery of Pledged Collateral. All
certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously
delivered to the Secured Party, shall immediately upon receipt
thereof by the Pledgor be delivered to and held by or on behalf
of the Secured Party pursuant hereto. All Pledged Collateral
shall be in suitable form for transfer by delivery and shall be
accompanied by duly executed instruments of transfer or
assignment in blank (with signatures appropriately guaranteed),
all in form and substance satisfactory to the Secured Party. The
Secured Party shall have the right, at any time after the
occurrence and during the continuance of any default under the
Forbearance Agreement, with or without notice to the Pledgor, (i)
to endorse, assign or otherwise transfer, or to register in the
name of the Secured Party or any of its nominees, any or all of
the Pledged Collateral, and (ii) to exchange certificates
representing or evidencing Pledged Collateral for certificates of
smaller or larger denominations.
Section 4. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is, and at the time of any delivery of any
Pledged Collateral to the Secured Party will be, the legal and
beneficial owner of the Pledged Collateral. All Pledged
Collateral is and will be owned by the Pledgor free and clear of
any lien or other encumbrance except for the lien created by this
Agreement.
<PAGE>
(b) The Pledgor has full power, authority and legal right
to pledge all the Pledged Collateral pursuant to this Agreement.
This Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable against the Pledgor in
accordance with its terms.
(c) No consent of any party, and no consent, authorization,
approval, or other action by, and no notice to or filing with,
any governmental authority or other person or entity is required
either (a) for the pledge by the Pledgor of the Pledged
Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by the Pledgor, (b) for
the exercise by the Secured Party of the voting or other rights
provided for in this Agreement, or (c) for the exercise by the
Secured Party of the remedies in respect of the Pledged
Collateral pursuant to this Agreement.
(d) All of the Pledged Shares have been, and to the extent
hereafter issued will be, duly authorized and validly issued and
fully paid and nonassessable.
(e) As of the date hereof, (a) the Pledged Shares of the
Borrower identified on Schedule A constitute all of the issued
and outstanding shares of capital stock of the Borrower, and (b)
Schedule A constitutes a true and complete description of the
Pledged Shares.
(f) The Pledgor has delivered to the Secured Party all
certificates representing the Pledged Shares, and such delivery
of the Pledged Collateral pursuant to this Agreement creates a
valid and perfected first priority security interest in the
Pledged Collateral securing the payment of the Secured
Obligations.
(g) All information set forth herein relating to the
Pledged Collateral is accurate and complete in all respects.
(h) The pledge of the Pledged Collateral pursuant to this
Agreement does not violate Regulation G, T, U or X of the Federal
Reserve Board.
Section 5. Covenants
(a) The Pledgor shall not (i) sell, convey, assign or
otherwise dispose of, or grant any option, right or warrant with
respect to, any of the Pledged Collateral, (ii) create or permit
to exist any lien or other encumbrance upon or with respect to
any Pledged Collateral other than the lien and security interest
granted to the Secured Party under this Agreement, or
(iii) permit the Borrower to merge, consolidate or change its
legal form, except as expressly permitted by the Loan Agreement
and unless all of the outstanding capital stock of the surviving
or resulting corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other
constituent corporation.
(b) The Pledgor shall (i) cause the Borrower not to issue
any stock or securities in addition to or in substitution for the
Pledged Shares, except to the Pledgor, all of which shall be in
certificated form, and (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all
additional stock or securities which are required to be pledged
hereunder.
<PAGE>
(c) At any time and from time to time, at the expense of
the Pledgor, the Pledgor shall promptly execute and deliver all
further instruments and documents, including supplemental or
additional UCC-1 financing statements, and take all further
action that may be necessary or that the Secured Party may
request, in order to perfect and protect any pledge or security
interest granted or purported to be granted hereby or to enable
the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
(d) The Pledgor at all times will be the sole beneficial
owner of the Pledged Collateral.
(e) The Pledgor shall, upon obtaining any additional
Pledged Shares of the Borrower, promptly (and in any event within
five (5) business days) deliver to the Secured Party all original
certificates representing such additional Pledged Shares,
together with appropriate stock powers signed in blank. All such
additional Pledged Shares shall, for all purposes hereunder, be
considered Pledged Collateral.
Section 6. Voting Rights; Distributions; Etc.
(a) So long as no default hereunder or under the
Forbearance Agreement shall have occurred and be continuing, the
Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any
part thereof for any purpose not inconsistent with the terms or
purpose of this Agreement; provided, however, that the Pledgor
shall not in any event exercise such rights in any manner which
may have an adverse effect on the value of the Pledged Collateral
or the security intended to be provided by this Agreement.
(b) Upon the occurrence and during the continuance of a
default hereunder or under the Forbearance Agreement, all rights
of the Pledgor to exercise the voting and other consensual rights
it would otherwise be entitled to exercise pursuant to Section
6(a) hereof shall immediately cease, and all such rights shall
become vested in the Secured Party, which shall thereupon have
the sole right to exercise such voting and other consensual
rights.
(c) Without waiving, modifying or otherwise derogating from
any prohibition against the making of Distributions by the
Borrower as provided in the Loan Agreement, the Note or the
Forbearance Agreement, all Distributions made by the Borrower,
whether prior to, or after the occurrence of a default under the
Forbearance Agreement, shall be delivered directly to the Secured
Party for application to the Secured Obligations.
(d) The Pledgor shall, at the Pledgor's expense, from time
to time, execute and deliver to the Secured Party appropriate
instruments as the Secured Party may request in order to permit
the Secured Party to exercise the voting and other rights which
it may be entitled to exercise pursuant to Section 6(b) hereof
and to receive all Distributions which it may be entitled to
receive pursuant to Section 6(c) hereof.
(e) All Distributions which are received by the Pledgor
contrary to the provisions of this Agreement shall be received in
trust for the benefit of the Secured Party, shall be segregated
from other funds of the Pledgor and shall immediately be paid
over to the Secured Party as Pledged Collateral in the same form
as so received (with any necessary endorsement).
<PAGE>
Section 7. Remedies upon Default; Decisions Relating to
Exercise of Remedies.
(a) If any default hereunder or under the Forbearance
Agreement shall have occurred and be continuing, the Secured
Party shall have the right, in addition to other rights and
remedies provided for herein or otherwise available to it to be
exercised from time to time, (i) to retain and apply any
Distributions to the Secured Obligations, and (ii) to exercise
all the rights and remedies of a secured party on default under
the UCC in effect in any applicable jurisdiction at that time,
and the Secured Party may also in its sole discretion, without
notice except as specified below, sell the Pledged Collateral or
any part thereof (including, without limitation, any partial
interest in the Pledged Shares) in one or more parcels at public
or private sale, at any exchange, broker's board or at any of the
Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such other
terms as the Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price
of the Pledged Collateral. The Secured Party or any of its
affiliates may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral
sold at such sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price of any
Pledged Collateral. Each purchaser at any such sale shall
acquire the property sold absolutely free from any claim or right
on the part of the Pledgor, and the Pledgor hereby waives (to the
full extent permitted by law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or
hereafter enacted. The Pledgor acknowledges and agrees that, to
the extent notice of sale shall be required by law, five (5)
business days' notice to the Pledgor of the time and place of any
public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Secured Party
shall not be obligated to make any sale of Pledged Collateral
regardless that a notice of sale may have been given. The
Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and
place to which it was so adjourned. The Pledgor hereby waives
any claims against the Secured Party arising by reason of the
fact that the price at which any Pledged Collateral may have been
sold at such a private sale was less than the price which might
have been obtained at a public sale, even if the Secured Party
accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree.
(b) The Pledgor agrees that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities laws, the
Secured Party may be compelled, with respect to any sale of all
or any part of the Pledged Collateral, to limit purchasers to
persons or entities who will agree, among other things, to
acquire the Pledged Collateral for their own account, for
investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges that any such private sales
may be at prices and on terms less favorable to the Secured Party
than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities
Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Secured Party shall
have no obligation to engage in public sales and no obligation to
delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it under the
Securities Act or under applicable state securities laws, even if
such issuer would agree to do so.
<PAGE>
(c) If the Secured Party determines to exercise its right
to sell any or all of the Pledged Collateral, upon written
request, the Pledgor shall from time to time furnish to the
Secured Party all such information as the Secured Party may
request in order to determine the number of Pledged Shares
included in the Pledged Collateral which may be sold by the
Secured Party as exempt transactions under the Securities Act and
the rules of the Securities and Exchange Commission thereunder,
as the same are from time to time in effect.
(d) In addition to any of the other rights and remedies
hereunder, the Secured Party shall have the right to institute a
proceeding seeking specific performance in connection with any of
the agreements or obligations hereunder.
(e) The surplus realized, if any, upon the liquidation of
the Pledged Collateral shall be distributed in accordance with
section 9-504 of the Uniform Commercial Code.
Section 8. Attorney-in-Fact. Upon the occurrence and
continuation of an Event of Default, the Pledgor appoints the
Secured Party its attorney-in-fact with an interest, with full
authority in the place and stead of the Pledgor and in the name
of the Pledgor, or otherwise, from time to time in the Secured
Party's discretion, to take any action and to execute any
instrument consistent with the terms of this Agreement which the
Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement. The foregoing grant of authority is
a power of attorney coupled with an interest and such appointment
shall be irrevocable for the term of this Agreement. The Pledgor
hereby ratifies all that such attorney shall lawfully do or cause
to be done by virtue hereof.
Section 9. Reasonable Care. The Secured Party shall be
deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equivalent
to that which the Secured Party, in its individual capacity,
accords its own property consisting of similar instruments or
interests, it being understood that the Secured Party shall not
have responsibility for, among other things, (i) ascertaining or
taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged
Collateral, whether or not the Secured Party has or is deemed to
have knowledge of such matters, (ii) taking any necessary steps
to preserve rights against any person or entity with respect to
any Pledged Collateral, or (iii) selling, liquidating or
disposing of the Pledged Collateral, or agreeing to allow the
Pledgor to do any of the same, in order to preserve the value of
the Pledged Collateral.
Section 10. Obligations Absolute. All obligations of the
Pledgor hereunder shall be absolute and unconditional
irrespective of (i) any bankruptcy, reorganization or the like of
the Borrower, (ii) any lack of validity or enforceability of the
Loan Agreement, the Note, the Forbearance Agreement or any
related documents, (iii) any change in the time, manner or place
of payment of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of, or any consent
to any departure from the Loan Agreement, the Note, the
Forbearance Agreement or any related documents, (iv) any
exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to any departure
from any guaranty, for all or any of the Secured Obligations; or
(v) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Borrower. The
Pledgor hereby waives any and all suretyship defenses.
<PAGE>
Section 11. No Release. Nothing set forth in this
Agreement shall (i) relieve the Pledgor from the performance of
any term, covenant, condition or agreement on the Pledgor's part
to be performed or observed under or in respect of any of the
Pledged Collateral or from any liability to any person or entity
under or in respect of any of the Pledged Collateral, or (ii)
impose any obligation on the Secured Party to perform or observe
any such term, covenant, condition or agreement on the Pledgor's
part to be so performed or observed, or (iii) impose any
liability on the Secured Party for any act or omission on the
part of the Pledgor relating thereto or for any breach of any
representation or warranty on the part of the Pledgor contained
in this Agreement.
Section 12. Termination. When all the Secured Obligations
(other than Secured Obligations in the nature of continuing
indemnities and expense reimbursement obligations not yet due and
payable) have been indefeasibly paid in full in cash and have
been terminated, this Agreement shall terminate. Upon
termination of this Agreement, the Secured Party shall, upon the
written request and at the expense of the Pledgor, forthwith
assign, transfer and deliver to the Pledgor, against receipt and
without recourse to or warranty by the Secured Party, such of the
Pledged Collateral as may be in the possession of the Secured
Party and as shall not have been sold or otherwise applied
pursuant to the terms hereof, and, if applicable, shall execute
UCC termination statements on Form UCC-3. The Secured Party
shall have no responsibility to undertake any other actions upon
termination of this Agreement except as provided in this Section.
Section 13. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse and hold the
Secured Party and its respective successors, assigns, employees,
agents and servants (collectively, "Indemnitees") harmless from
and against any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments
and any and all reasonable out of pocket costs and expenses
(including, without limitation, reasonable attorneys' fees and
expenses) of whatsoever kind and nature imposed on, asserted
against, or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement or in any way
connected with the administration of the transactions
contemplated hereby or the enforcement of any of the terms
hereof, or the preservation of any rights hereunder; provided
that the Pledgor shall have no obligation to an Indemnitee
hereunder to the extent it is finally judicially determined that
such indemnified liabilities arise solely from the gross
negligence or willful misconduct of such Indemnitee. Upon
written notice by any Indemnitee of the assertion of an
indemnified claim hereunder, the Pledgor shall assume full
responsibility for the defense thereof. If any action, suit or
proceeding arising from any of the foregoing is brought against
any Indemnitee, the Pledgor shall, if requested by such
Indemnitee, resist and defend such action, suit or proceeding or
cause the same to be resisted and defended by counsel reasonably
satisfactory to such Indemnitee. Each Indemnitee shall, unless
any other Indemnitee has made the request described in the
preceding sentence and such request has been complied with, have
the right to employ its own counsel (or internal counsel) to
investigate and control the defense of any matter covered by the
indemnity set forth in this Section, and the fees and expenses of
such counsel shall be paid by the Pledgor; provided that, only to
the extent no conflict exists between or among the Indemnitees,
as reasonably determined by the Indemnitees, the Pledgor shall
not be obligated to pay the fees and expenses of more than one
counsel for all Indemnitees as a group with respect to any
indemnified claim.
<PAGE>
(b) If and to the extent that the obligations of the
Pledgor under this Section are unenforceable for any reason, the
Pledgor hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations that is permissible
under applicable law.
(c) The obligations of the Pledgor contained in this
Section shall survive the termination of this Agreement and the
discharge of the Secured Obligations.
(d) Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute
Secured Obligations secured by the Pledged Collateral.
Section 14. Expenses. Upon demand, the Pledgor will pay to
the Secured Party the amount of any and all reasonable out of
pocket expenses, including the reasonable fees and expenses of
its counsel and the reasonable fees and expenses of any experts
and agents, which the Secured Party may incur in connection with
(i) the collection of the Secured Obligations, (ii) the custody
or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the
exercise or enforcement of any of the rights of the Secured Party
hereunder, or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof. All amounts payable by the
Pledgor under this Section shall be due upon demand and shall be
part of the Secured Obligations. The Pledgor's obligations under
this Section shall survive the termination of this Agreement and
the discharge of the Pledgor's other obligations hereunder.
Section 15. No Waiver; Cumulative Remedies.
(a) No failure on the part of the Secured Party to
exercise, no course of dealing with respect to, and no delay on
the part of the Secured Party in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy
hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies
herein provided are cumulative and are not exclusive of any
remedies provided by law.
(b) In the event the Secured Party shall have instituted
any proceeding to enforce any right, power or remedy under this
instrument by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any
reason, then and in every such case, the Pledgor and the Secured
Party shall be restored to their respective former positions and
rights hereunder with respect to the Pledged Collateral, and all
rights, remedies and powers of the Secured Party shall continue
as if no such proceeding had been instituted.
Section 16. Modifications in Writing. No amendment,
modification, supplement, termination or waiver of or to any
provision of this Agreement, nor consent to any departure by the
Pledgor therefrom, shall be effective unless the same shall be in
writing and signed by the Secured Party. Any such amendment,
modification, supplement, termination, waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is
specifically required by this Agreement, no notice to or demand
on the Pledgor in any case shall entitle the Pledgor to any other
or further notice or demand in similar or other circumstances.
<PAGE>
Section 17. Addresses for Notices. All notices, requests,
demands and other communications provided for hereunder shall be
in writing and shall be telecopied (followed by overnight mail),
personally delivered or sent by registered or certified mail,
postage prepaid, return receipt requested, or by receipted
overnight delivery service to the addressee, at its address set
forth below:
If to the Pledgor: Jayark Corporation
300 Plaza Drive
Vestal, NY 13850
Attention: David L. Koffman, President
Fax: 607-797-7103
If to the Secured Party : State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attention: John D. Gaziano, Jr., Vice President
James M. Benninger, Vice President
Fax: (617) 664-4176
or at such other address as shall be designated by any of the
foregoing parties in a written notice to the other parties
complying as to delivery with the terms of this Section. All
such communications shall be deemed received (i) in the case of
hand delivery, on the day of delivery, (ii) in the case of
overnight mail or overnight courier service, on the next business
day after such communication is mailed, postage prepaid, or
placed in the hands of such courier service for delivery, (iii)
in the case of telecopy, on the day the sender receives
electronic confirmation that a facsimile has been successfully
transmitted to the recipient thereof, and (iv) in the case of
registered or certified mail, on the fifth business day after
such communication is mailed, postage prepaid, with the United
States Postal Service.
Section 18. Assignment. This Agreement shall be binding
upon the Pledgor, its successors and assigns, and shall inure,
together with the rights and remedies of the Secured Party
hereunder, to the benefit of the Secured Party and each of its
successors, transferees and assigns. No other person or entity
(including, without limitation, any other creditor of the
Pledgor) shall have any interest herein or any right or benefit
with respect hereto. The Pledgor may not assign its rights or
obligations under this Agreement to any other person or entity.
The Secured Party may assign or otherwise transfer its rights
under this Agreement or any indebtedness held by it secured by
this Agreement to any other person or entity, and such other
person or entity shall thereupon become vested with all the
benefits in respect thereof granted to the Secured Party.
Section 19. Governing Law. This Agreement shall be
governed by, and shall be construed and enforced in accordance
with, the laws of the Commonwealth of Massachusetts, without
regard to its principles of conflicts of laws.
<PAGE>
Section 20. Consent to Jurisdiction. All judicial
proceedings brought against the Pledgor with respect to this
Agreement may be brought in any state or federal court of
competent jurisdiction in the Commonwealth of Massachusetts and,
by execution and delivery of this Agreement, the Pledgor accepts
for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid
courts.
Section 21. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
Section 22. Execution in Counterparts. This Agreement and
any amendments, waivers, consents or supplements hereto may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same
agreement.
Section 23. Headings. The Section headings used in this
Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
Section 24. WAIVER OF TRIAL BY JURY. THE PARTIES HERETO
IRREVOCABLY WAIVE TRIAL BY JURY IN CONNECTION WITH ANY MATTER
ARISING OUT OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be duly executed and delivered as of the date first above
written.
WITNESS: JAYARK CORPORATION
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Title: President
ACCEPTED:
STATE STREET BANK AND TRUST COMPANY
Name: /s/ James M. Benninger
Title: Vice President
<PAGE>
SCHEDULE A
CLASS PAR CERTIFICATE NUMBER PERCENTAGE OF ALL CAPITAL
OF STOCK VALUE NO(S). OF SHARES STOCK OF ISSUER
Common $0.10 1 1000 100%
<PAGE>
EXHIBIT 10(27)
--------------
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made as
of this 12th day of March, 1997, by and among ROSALCO, INC. (the
"Borrower"), JAYARK CORPORATION, AVES AUDIO VISUAL SYSTEMS, INC.
and DAVID L. KOFFMAN (collectively, the "Subordinated Lenders"),
and STATE STREET BANK AND TRUST COMPANY (the "Senior Lender").
WHEREAS, the Borrower and the Senior Lender have entered
into a Forbearance and Modification Agreement (the "Forbearance
Agreement"), dated of even date herewith, whereby the Senior
Lender will make certain accommodations to the Borrower with
respect to obligations of the Borrower owing to the Senior
Lender.
WHEREAS, the Borrower is the wholly owned subsidiary of
Jayark Corporation;
WHEREAS, Jayark Corporation has made an unsecured loan to
the Borrower, evidenced by a promissory note (the "Subordinated
Note"), dated March 11, 1997, in the principal amount of
$1,100,000;
WHEREAS, the Subordinated Lenders may make additional loans
and advances to the Borrower;
WHEREAS, as a condition precedent to the willingness of the
Senior Lender to enter into the Forbearance Agreement, the Senior
Lender has required that each of the Subordinated Lenders
subordinate the obligations of the Borrower owing to the
Subordinated Lenders, including, without limitation, the
Subordinated Note.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
Section 1. Definitions.
"Senior Debt" shall mean:
(a) the amount of all loans and other indebtedness,
obligations and liabilities from time to time outstanding under
that certain Loan and Security Agreement (All Assets), dated as
of April 29, 1996, between the Borrower and the Senior Lender, as
evidenced by that certain $10,000,000 Note-Grid-Fluctuating
Interest, dated as of April 29, 1996, and the Forbearance
Agreement, as the same may be amended, modified, extended,
renewed, refinanced, replaced or refunded, in whole or in part,
including any interest accruing after the commencement of any
proceeding by or against the Borrower under the federal
bankruptcy laws, or similar laws, as now or hereafter in effect,
and any interest that would have accrued but for the commencement
of such proceedings, whether or not such interest is allowed or
allowable as a claim in such proceeding, and all fees, expenses,
charges, attorney's fees, costs of collection, letter of credit
obligations or other sums chargeable to the Borrower under such
documents, whether now existing or hereafter arising, whether
primary or secondary, absolute or contingent, matured or
unmatured; and
<PAGE>
(b) All obligations (contingent or otherwise) under all
agreements and instruments heretofore or hereafter securing the
obligations of the Borrower in respect of the Senior Debt,
including any guaranty thereof by any person or entity; and
(c) Any and all other indebtedness, obligations and
liabilities of the Borrower of any nature whatsoever, now or
hereafter outstanding, in favor of the Senior Lender, whether
primary or secondary, absolute or contingent, matured or
unmatured.
"Subordinated Debt" shall mean:
(a) The monetary obligations of the Borrower to any of the
Subordinated Lenders of any nature whatsoever, now or hereafter
outstanding, whether primary or secondary, absolute or
contingent, matured or unmatured, including, without limitation,
pursuant to the Subordinated Note, as the same may be amended,
modified, extended, renewed, refinanced, replaced or refunded in
whole or in part; and
(b) All obligations (contingent or otherwise) under all
agreements and instruments heretofore or hereafter securing the
obligations of the Borrower in respect of the Subordinated Debt,
including any guaranty thereof by any person or entity; and
(c) Any and all other indebtedness, obligations and
liabilities of the Borrower of any nature whatsoever now or
hereafter outstanding in favor of the Subordinated Lenders,
whether primary or secondary, absolute or contingent, matured or
unmatured.
Section 2. Subordination. The Borrower, for itself and its
successors and assigns, covenants and agrees, and each of the
Subordinated Lenders and each successor holder of the
Subordinated Debt by its acceptance thereof, likewise covenants
and agrees that, notwithstanding any other provision of the
Subordinated Debt to the contrary, the payment of the
Subordinated Debt is and shall be subordinated and junior in
right of payment to the prior payment in full of all of the
Senior Debt at any time outstanding, to the extent and in the
manner set forth herein. In furtherance of the foregoing, except
to the extent set forth in Section 3 hereof, until all of the
Senior Debt has been paid in full, (i) the Borrower shall not at
any time make or give to the Subordinated Lenders, directly or
indirectly, any payment (including, without limitation, any
payment of principal, interest, late charges, or costs of
collection) or item of value on account of the Subordinated Debt;
and (ii) the Subordinated Lenders shall not at any time (w)
demand, accept, take, receive or retain, directly or indirectly
(including, without limitation, through the exercise of any right
of setoff, counterclaim or crossclaim), any payment or item of
value on account of the Subordinated Debt, including, without
limitation, any security interest, lien or collateral assignment,
(x) accelerate any payment due under the Subordinated Debt, (y)
commence any action to collect the Subordinated Debt or to
realize upon any of the collateral or security securing the
Subordinated Debt, or (z) exercise any of its rights or remedies
against any third-party, including any guarantors, on account of
the Subordinated Debt.
Section 3. Distribution Events.
(a) In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, foreclosure,
reorganization or other similar proceedings in connection
therewith, relative to the Borrower or to any of its properties,
or, in the event of any proceedings for voluntary liquidation,
dissolution, sale of all or substantially all of the assets of
<PAGE>
the Borrower, bulk sale, winding up of the Borrower, distribution
or marshaling of its assets, assignment for the benefit of
creditors or any composition with creditors of the Borrower,
whether or not involving insolvency or bankruptcy (any of the
foregoing events being hereinafter referred to as a "Distribution
Event"), then and in any such event, all Senior Debt shall be
paid in full in cash (or in another manner acceptable to the
Senior Lender) before any payment or distribution of any sort,
whether in cash, securities or other property, shall be made on
account of the Subordinated Debt. Any such payment or
distribution on the Subordinated Debt which would, but for the
provisions hereof, be payable or deliverable to any of the
Subordinated Lenders, shall be paid or delivered directly to the
Senior Lender, until all Senior Debt shall have been paid in
full.
(b) Each of the Subordinated Lenders agrees that it shall,
at its own expense, take all actions necessary to prove the full
amount of the Subordinated Debt in connection with any
Distribution Event, and the Subordinated Lenders shall not
expressly, by implication or by inaction, waive, modify or
compromise any claim in connection with any Distribution Event
without the prior written consent of the Senior Lender.
(c) Upon the occurrence of any Distribution Event, the
Senior Lender is hereby irrevocably appointed and constituted the
true and lawful attorney-in-fact for each of the Subordinated
Lenders with full power and substitution to act in the place and
stead of the Subordinated Lenders for the following purposes: (i)
to collect any dividends, payments, securities, instruments,
property or distributions which would otherwise be payable to any
of the Subordinated Lenders, (ii) to prove each of the
Subordinated Lender's claims and to file any necessary or
appropriate proofs of claim, (iii) to accept or reject, to the
extent to which each of the Subordinated Lenders would be
entitled to accept or reject, any plan of reorganization or
arrangement, (iv) to vote for any trustee in any bankruptcy
proceeding, and (v) in general, to do any act which any of the
Subordinated Lenders might otherwise do. This power of attorney,
being coupled with an interest, shall be irrevocable until the
Senior Debt has been fully paid in cash.
Section 4. Limit on Right of Action. Each of the
Subordinated Lenders agrees that so long as any amount of the
Senior Debt remains outstanding, the Subordinated Lenders will
not take any action to accelerate or demand the payment of the
Subordinated Debt, or collect (whether or not through judicial
proceedings) upon the Subordinated Debt, or foreclose or
otherwise realize on any security or guaranty given by the
Borrower or any person or entity to secure or guarantee the
Subordinated Debt, until the occurrence of a Distribution Event
(subject, however, to the provisions of Section 3 hereof).
Section 5. Marshaling. In foreclosing or realizing on the
Senior Lender's security interests in the assets of the Borrower
securing the Senior Debt or in any other assets securing the
Senior Debt, the Senior Lender may proceed in any manner and in
any order which the Senior Lender, in its sole discretion, shall
choose, even though a higher price might have been realized if
the Senior Lender had proceeded to foreclose or realize on its
security interests in another manner or order. The Senior Lender
shall not be required to marshal is claims against one or more
assets securing the Senior Debt.
Section 6. Turnover; Power of Attorney. If any of the
Subordinated Lenders shall receive any payment or other item of
value on account of the Subordinated Debt in violation of this
Agreement, (i) the Subordinated Lenders shall hold such payment
or other item of value in trust for the Senior Lender and shall
turn over to the Senior Lender in the exact form received all
cash, checks, drafts, notes and other items of payment or value,
and (ii) the Subordinated Lenders and the Borrower hereby appoint
<PAGE>
the Senior Lender their true and lawful attorney-in-fact with
full power of substitution, in their names or otherwise, for the
sole benefit of the Senior Lender, to endorse the name of the
Subordinated Lenders and/or the Borrower on such checks, drafts,
notes, or other items of payment. The powers vested in the
Senior Lender pursuant to this paragraph are, and shall be deemed
to be, coupled with an interest and irrevocable until full
payment of the Senior Debt.
Section 7. Security Interest in Subordinated Debt
Instruments. Each of the Subordinated Lenders hereby grants to
the Senior Lender a first priority lien and security interest in
all of its right, title and interest in the Subordinated Debt.
The Subordinated Lenders shall deliver all original promissory
notes or writings evidencing the Subordinated Debt to the Senior
Lender, endorsed to the order of the Senior Lender, including,
without limitation, the Subordinated Note. Upon the payment in
full in cash of the Senior Debt, the Senior Lender shall endorse
without recourse the Subordinated Debt instruments, including all
such promissory notes, to the order of the Subordinated Lenders,
and shall return such instruments to the Subordinated Lenders.
Section 8. Amendment or Waiver of Subordinated Debt. The
provisions of this Agreement and the provisions of the
Subordinated Debt, including without limitation, the Subordinated
Note, may not be amended or waived without the prior written
consent of the Senior Lender.
Section 9. No Transfer. None of the Subordinated Lenders
has, or will, assign, transfer, sell or further subordinate any
of the Subordinated Debt, or create, incur or suffer to exist any
security interest, lien or encumbrance upon the Subordinated
Debt, or otherwise dispose of any of the Subordinated Debt.
Section 10. Reinstatement of Subordination. If, after
payment in whole or in part of the Senior Debt, any claim is ever
made on the Senior Lender for repayment or recovery of all or any
portion of any such payment, and the Senior Lender repays all or
a portion of such payment (the "Disgorged Payment"), this
Agreement shall be reinstated and shall apply to the Disgorged
Payment to the same extent as if the Disgorged Payment had never
originally been received by the Senior Lender, notwithstanding
any termination or cancellation of this Agreement. If any of the
Subordinated Lenders has received any payment or item of value on
account of the Subordinated Debt, which payment or item of value
would not have been made if the Disgorged Payment had not
originally been paid to the Senior Lender, then the Subordinated
Lenders shall, upon demand, turn over such payment or item of
value to the Senior Lender.
Section 11. Continuing Offer. This Agreement shall
constitute a continuing offer to the holders of the Senior Debt,
whether now existing or hereafter arising, and all such holders
shall be entitled to the benefits of this Agreement and may
enforce the provisions hereof.
Section 12. Survival of Rights. The terms of this
Agreement, the subordination effected hereby and the rights of
any present or future holders of the Senior Debt shall not be
affected by: (i) any amendment of, or addition or supplement to,
the Senior Debt, or any agreements or documents securing or
guaranteeing any of the Senior Debt (including, without
limitation, increases to the principal amount of the Senior
Debt), (ii) any exercise, non-exercise or delay in exercising any
right, power or remedy under or in respect of the Senior Debt or
any instrument or agreement relating thereto, or securing or
guaranteeing any of same, or (iii) any waiver, consent, release,
indulgence, extension, renewal, modification or other action,
inaction or omission in respect of the Senior Debt or any
<PAGE>
instrument or agreement relating thereto, or which secures or
guarantees any of the same, in each instance whether or not any
of the Subordinated Lenders shall have had notice or knowledge of
any of the foregoing.
Section 13. Further Assurances. The Borrower and each of
the Subordinated Lenders, for themselves and their respective
successors and assigns, agree to execute and deliver to the
Senior Lender, at the expense of the Borrower, such further
documents and instruments and to take such further action as the
Senior Lender or the Subordinated Lenders may at any time or
times reasonably request in order to carry out the provisions and
intent of this Agreement.
Section 14. No Liability.
(a) The Senior Lender shall have no responsibility to
advise the Subordinated Lenders of any information known or
knowable to the Senior Lender regarding the financial condition
of the Borrower or of any circumstances bearing on the risk of
non-payment of the Senior Debt, the Subordinated Debt or any
other indebtedness of the Borrower.
(b) The powers conferred on the Senior Lender by this
Agreement are solely to protect the Senior Lender's interest and
shall not impose upon the Senior Lender any duty to exercise any
such power. The Senior Lender shall be under no duty to exercise
or refrain from exercising any power in order to protect or
preserve the rights of the Subordinated Lenders or the Borrower,
including, without limitation, the taking of any action or
inaction (i) impairing any collateral securing the Senior Debt,
or (ii) enforcing the Senior Lender's rights and remedies against
the Borrower pursuant to the Senior Debt. Nothing contained in
this Agreement or otherwise shall be deemed to constitute the
Senior Lender the partner, joint venturer or fiduciary of the
Subordinated Lenders, nor to create any fiduciary relationship
between the Senior Lender and the Subordinated Lenders.
Section 15. Representations. Each of the Subordinated
Lenders hereby represents that:
(a) Each of the Subordinated Lenders has full power,
authority and the legal right to execute, deliver and perform
this Agreement, and the execution, delivery and performance of
this Agreement has been duly authorized by all necessary
corporate action, does not require any approval or consent of any
trustee or the holders of any indebtedness or obligations of the
Subordinated Lenders, and will not violate any provision of any
law, governmental regulation, order or decree or any provision of
any indenture, mortgage, contract or other agreement to which any
of the Subordinated Lenders is a party or by which it may be
bound.
(b) No consent, license, approval or authorization of, or
registration or declaration with, any governmental
instrumentality, domestic or foreign, is required in connection
with the execution, delivery and performance by each of the
Subordinated Lenders of this Agreement.
(c) This Agreement constitutes the legal, valid and binding
obligation of each of the Subordinated Lenders, enforceable in
accordance with its terms, except as limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors' rights generally.
(d) The Subordinated Note has been entered into for good
and valuable consideration and constitutes the only evidence of
the Subordinated Debt as of the date hereof. The Borrower has
not granted any security interest or lien to any of the
Subordinated Lenders which secures the Subordinated Debt, and no
<PAGE>
third-party has given any guaranty to any of the Subordinated
Lenders with respect to the Subordinated Debt.
Section 16. Miscellaneous.
(a) Waivers. Each of the Subordinated Lenders and the
Borrower hereby waive notice of, acceptance of, and reliance upon
this Agreement, notice of any default, notice of any extensions
or renewals, releases of collateral or other indulgences of any
character, and all other notices to which the Subordinated
Lenders and the Borrower otherwise might be entitled. Each of
the Subordinated Lenders and the Borrower further waive all
rights to presentment, protest, and notice of nonpayment, and all
suretyship defenses and defenses in the nature thereof. No delay
or omission by the Senior Lender in exercising any of its rights
shall operate as a waiver of such rights or any other right. A
waiver by the Senior Lender on any one occasion shall not operate
as a waiver on any future occasion. All of the Senior Lender's
rights and remedies, whether arising out of this Agreement or any
other agreement, instrument or paper, shall be cumulative and may
be exercised singularly or concurrently.
(b) Amendments. This Agreement may not be waived, changed
or discharged orally, but only by an agreement in writing and
signed by all of the parties hereto.
(c) Addresses for Notices. etc. All notices, requests,
demands and other communications provided for hereunder shall be
in writing and shall be telecopied (followed by overnight mail),
personally delivered or sent by registered or certified mail,
postage prepaid, return receipt requested, or by receipted
overnight delivery service to the addressee, at its address set
forth below:
If to the Borrower: Rosalco, Inc.
257 America Place
Jeffersonville, IN 47130
Attention: David L. Koffman, President
Fax: 812-284-6658
If to the Subordinated Lenders: c/o Jayark Corporation
300 Plaza Drive
Vestal, NY 13850
Attention: David L. Koffman, President
Fax:607-797-7103
If to the Senior Lender: State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attention: John D. Gaziano, Jr., Vice President
James M. Benninger, Vice President
Fax: (617) 664-4176
<PAGE>
or at such other address as shall be designated by any of the
foregoing parties in a written notice to the other parties
complying as to delivery with the terms of this Section. All
such communications shall be deemed received (i) in the case of
hand delivery, on the day of delivery, (ii) in the case of
overnight mail or overnight courier service, on the next business
day after such communication is mailed, postage prepaid, or
placed in the hands of such courier service for delivery, (iii)
in the case of telecopy, on the day the sender receives
electronic confirmation that a facsimile has been successfully
transmitted to the recipient thereof, and (iv) in the case of
registered or certified mail, on the fifth business day after
such communication is mailed, postage prepaid, with the United
States Postal Service.
(d) Successors and Assigns. The covenants,
representations, warranties and agreements herein set forth shall
be binding upon each of the Subordinated Lenders, the Borrower
and their successors, heirs and permitted assigns, and shall
inure to the benefit of the Senior Lender and its successors and
assigns.
(e) Conflicts. In the event that any provision of the
Subordinated Debt conflicts with the provisions of this
Agreement, the provisions of this Agreement shall control.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same original instrument.
(g) Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(h) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of
Massachusetts, without regard to its principles of conflicts of
laws.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
WITNESS: ROSALCO, INC.
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Title: Chairman
<PAGE>
WITNESS: JAYARK CORPORATION
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Title: President
WITNESS: AVES AUDIO VISUAL SYSTEMS, INC.
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
Title: Chief Executive Officer
WITNESS:
Name: /s/ Mary Cifaratta Name: /s/ David L. Koffman
WITNESS: STATE STREET BANK AND TRUST COMPANY
Name: /s/ Paul J. Ricotta Name: /s/ James M. Benninger
Title: Vice President
<PAGE>
EXHIBIT 10(28)
--------------
This Note and each replacement Note shall bear the following legend: The
Securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or registered or qualified under the "blue
sky" laws of any State. The securities may not be pledged, hypothecated,
assigned, sold or transferred unless registered under that Act and registered or
qualified under the blue sky laws as may be applicable or unless, in the opinion
of counsel reasonably satisfactory to the Company, exemptions from such laws are
available.
REVOLVING NOTE
$1,100,000 Vestal, New York
March 12, 1997
Jayark Corporation, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to the order of A-V Texas Holding, LLC or
registered assigns the principal amount of up to One Million One Hundred
Thousand ($1,100,000) Dollars as shall be set forth from time to time on the
attached grid to this Note and the Company hereby authorizes the Holder of this
Note to endorse and make notation on the attached grid to evidence borrowings
outstanding from time to time under this Note. Each such endorsement shall
constitute evidence of the accuracy thereof, absent manifest error. The Company
may borrow and prepay under this Note from time to time, provided, however,
total principal borrowings under this Note may not exceed $1,100,000 at any one
time. The total principal outstanding and accrued and unpaid interest shall be
due and payable on the earlier of (i) demand (provided that no demand may be
made prior to May 23, 1997) or (ii) the calling for payment, whether by
acceleration, demand, default, maturity or otherwise of that certain Loan and
Security Agreement (All Assets), dated as of April 29, 1996 made by State Street
<PAGE>
Bank and Trust Company, as lender, and Rosalco, Inc., as borrower. All payments
of principal and interest hereunder shall be in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
public and private debts, at the principal office of the Company, in Vestal, New
York. The Company further agrees to pay interest (computed on the basis of a
360-day year of twelve 30-day months) at said office of the Company, in like
coin or currency, on the portion outstanding of such principal amount from time
to time from the date hereof, monthly, in arrears on the first day of each month
commencing March 1, 1997, at the rate of eight (8%) percent per annum until such
unpaid portion of such principal amount shall have become due and payable. To
the extent principal is not paid on maturity, whether by demand or otherwise,
interest shall accrue on the then outstanding principal amount at the rate
fourteen (14%) percent per annum thereafter and, so far as may be lawful, on any
overdue installment of interest, at the rate of fourteen (14%) percent per
annum.
1. Exchanges and Transfers of the Note.
1.1. Register; Transfer or Exchange of Notes. The Company shall
keep at its office or agency maintained in Vestal, New York a register in which
the Company shall provide for the registration of this Note and for the
registration of transfer of the Note. The Holder of this Note may, at its
<PAGE>
option and either in person or by duly authorized attorney, surrender the same
for registration of transfer or exchange at such office and, without expense to
such Holder (other than transfer taxes, if any), receive in exchange therefor a
new Note, dated as of the date to which interest has been paid on the Note so
surrendered, for the same aggregate unpaid principal amount as this Note for
transfer or exchange and registered in such name or names as may be designated
by such Holder. Every Note so made and delivered in exchange for any Note shall
in all other respects be in the same form and have the same terms as the Note so
surrendered for transfer or exchange.
1.2. Loss, Theft, Destruction or Mutilation of Notes. Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity bond in such reasonable amount as
the Company may determine (or if such Note is held by the original Holder, of an
unsecured indemnity agreement reasonably satisfactory to the Company) or, in the
case of any such mutilation, upon surrender an cancellation of such Note, the
Company will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Note, a new Note of like tender and unpaid principal amount and dated
as of the date to which interest has been paid on the Note so lost, stolen,
destroyed or mutilated.
1.3. Registered Holders. The Company may deem and treat the
<PAGE>
person in whose name any Note is registered as the absolute owner and holder of
such Note for the purpose of receiving payment of the principal of and interest
on such Note and for the purpose of any notices, waivers or consents thereunder,
whether or not such Note shall be overdue, and the Company shall not be affected
by notice to the contrary. Payments with respect to any Note shall be made only
to the registered Holder thereof.
2. Surrender of the Note.
2.1. Surrender of Notes. The Company may, as a condition of
payment of the principal of, and interest on, this Note, on maturity, whether by
demand or otherwise, require the surrender hereof.
3. Covenants.
3.1. To Pay Principal and Interest. The Company covenants and
agrees that so long as this Note shall be outstanding it will comply with the
following:
(a) The Company will, and will cause any subsidiaries, to keep
proper books of record and account in which full, true and correct entries will
be made of its transactions in accordance with generally accepted accounting
principles.
(b) The Company will, and will cause each of its subsidiaries
to,
<PAGE>
A. pay and discharge promptly or cause to be paid and discharged promptly
all taxes, assessments and governmental charges or levies imposed upon it or
upon it income or profits or upon any of its property, real, personal or mixed,
or upon any part thereof, before the same shall become in default, as well as
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien or change upon its property; provided, however, that neither
the Company nor any subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company or such subsidiary, as the case may be, shall have set aside
on its books reserves (provided for and segregated to the extent required by
generally accepted accounting principles) deemed by it adequate with respect
thereto;
B. maintain and keep or cause to be maintained and kept its properties in
good repair, working order and condition, and from time to time make or cause to
be made all needful and proper repairs, renewals, replacements and improvements
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
(c) The Company will, and will cause each of its subsidiaries to
<PAGE>
maintain insurance in such extent and against such hazards and liabilities as is
commonly maintained by companies similarly situated.
(d) The Company will not sell, lease, transfer or otherwise
dispose of any substantial part of its properties and assets or consolidate with
or merge into any person or permit any
person to merge into it without the consent of the Holder, which consent will
not be unreasonably withheld.
4. Events of Default.
4.1. Events of Default. If one or more of the following events,
herein called Events of Default, shall happen for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court of any order, rule or regulation of any
administrative or governmental body) and be continuing:
(a) Default shall be made in the payment of the principal of
this Note, when and as the same shall become due and payable after the passage
of a grace period of ten (10) days, whether at maturity, on demand or at a date
fixed for prepayment or by acceleration or otherwise; or
(b) Default shall be made in the payment of any installment of
<PAGE>
interest on this Note according to its tenor when and as the same shall become
due and payable and such default shall continue for a period of 10 days; or
(c) Default shall be made in the due observance or performance
of any covenant, condition or agreement on the part of the Company contained in
this Note; or
(d) The Company shall be adjudicated a bankrupt or insolvent, or
shall consent to the appointment of a receiver, trustee or liquidator of itself
or of any material part of its property, or shall admit in writing its inability
to pay its debts generally as they come due, or shall make a general assignment
for the benefit of creditors, or shall file a voluntary petition or an answer
seeking reorganization or arrangement in a proceeding under any bankruptcy law
(as now or hereafter in effect) or an answer admitting the material allegations
of a petition filed against the Company in any such proceeding, or shall, by
voluntary petition, answer or consent, seek relief under the provisions of any
other now existing or future bankruptcy or other similar law providing for the
reorganization or winding up of corporations, or the Company or its directors or
majority stockholders shall take action looking to the dissolution or
liquidation of the Company; or
(e) An order, judgment or decree shall be entered by any court
of competent jurisdiction appointing, without the consent of the Company, a
receiver, trustee or liquidator of the Company or of any material part of its
<PAGE>
property, and such receiver, trustee or liquidator shall not have been removed
or discharged within 90 days thereafter, or any material part of the property of
the Company shall, in any judicial proceeding, be sequestered and shall not be
returned to the possession of the Company within 90 days thereafter; or
(f) A petition against the Company in a proceeding under any
bankruptcy law (as now or hereinafter in effect) shall be filed and shall not be
dismissed within 30 days after such filing, or, in case the approval of such
petition by a court of competent jurisdiction is required, shall be filed and
approved by such a court as properly filed and such approval shall not be
withdrawn or the proceeding dismissed within 30 days thereafter, or if, under
the provisions of any other similar law providing for reorganization or winding
up of corporations and which may apply to the Company, any court of competent
jurisdiction, custody or control of the Company or of any material part of its
property and such jurisdiction, custody or control shall not be relinquished or
terminated within 30 days thereafter; or
(g) The Company or any subsidiary of the Company shall be
declared in default in the payment of principal or interest on any evidence of
indebtedness for money borrowed (other than this Note) and such default shall
continue for more than the period of grace, if any, therein specified, unless
such default shall have been cured or waived prior to such indebtedness becoming
or being declared to be due and payable prior to its stated maturity, or default
<PAGE>
shall continue for more than the period of grace, if any, therein specified, or
default in the performance or observance of any other term, condition or
agreement contained in any such evidence of indebtedness for money borrowed or
in any agreement relating thereto if as a result of such default such evidence
of indebtedness is declared to be due and payable prior to its stated maturity;
then, in any such event, any registered holder or holders of this Note may
declare this Note to be immediately due and payable and upon such declaration
the same shall become and be immediately due and payable, together with accrued
interest thereon, anything in this Note to the contrary notwithstanding.
4.2. Suits for Enforcement. In case any one or more of the
Events of Default specified in 4.1 shall happen and be continuing, the Holder
of this Note may, pursuant to the provisions of 4.1, declare this Note to be
immediately due and payable, may proceed to protect and enforce its rights by
suit in equity, action at law and/or by other appropriate proceeding, whether
for the specific performance (to the extent permitted by law) of any covenant or
agreement contained in this Note, or in aid of the exercise of any power granted
in this Note, or may proceed to enforce the payment of this Note or to enforce
any other legal or equitable right of holder of this Note. Nothing contained in
this 4.2 or in 4.1 shall in any manner impair that absolute and unconditional
right of the holder of this Note to receive payment of the principal of and
<PAGE>
interest, on this Note when the same shall become due and payable in accordance
with the terms thereof, and to institute suit for the enforcement of such
payment.
4.3. Remedies Cumulative. No remedy herein conferred upon the
Holder of this Note is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
4.4. Remedies Not Waived. No course of dealing between the
Company and the Holder of this Note shall operate as a waiver of any right of
such holder hereunder or under such Note, and no delay on the part of such
holder in exercising any right hereunder or thereunder shall so operate.
5. Costs of Collection. In case of a default in the payment of
any principal of or interest on this Note, the Company will pay to the holder
hereof such further amount as shall be sufficient to cover the costs and
expenses of collection, including (without limitation) reasonable attorneys'
fees.
6. Legend. This Note and each replacement Note shall bear the
following legend:
The Securities represented by this certificate have not been
<PAGE>
registered under the Securities Act of 1933, as amended, or registered or
qualified under the "blue sky" laws of any State. The securities may not be
pledged, hypothecated, assigned, sold or transferred unless registered under
that Act and registered or qualified under the blue sky laws as may be
applicable or unless, in the opinion of counsel reasonably satisfactory to the
Company, exemptions from such laws are available.
7. Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
This Note may only be assigned by the Holder to affiliates of the Holder.
8. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of New York.
9. Security. This Note is secured by, and entitled to the benefits
of that certain Pledge Agreement dated the date hereof, each made by the Company
in favor of the Holder of this Note.
10. Notice. Any notice pursuant to this Note shall be made by
registered or certified mail:
If to the Holder at the address shown on the register maintained by
<PAGE>
the Company pursuant to 1.1 of this Note.
If to the Company:
300 Plaza Drive
Vestal, New York 13850
11. Headings. The headings of the sections and subsections of
this Note are inserted for convenience only and do not constitute a part of this
Note.
IN WITNESS WHEREOF, Jayark Corporation has caused this Note to be
signed in its corporate name by one of its officers thereunto duly authorized
and this Note to be dated as of the day and year first above written.
JAYARK CORPORATION
By: /s/ David L. Koffman
Title: President
<PAGE>
EXHIBIT 10(29)
--------------
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (as amended, amended and restated, supplemented
or otherwise modified from time to time, this "Agreement"), dated as of March
12, 1997, is made by JAYARK, CORPORATION, a New York corporation, with its
principal place of business at 300 Plaza Drive, Vestal, New York 13850 (the
"Pledgor"), in favor of A-V Texas Holding, LLC, having an office at 300 Plaza
Drive, Vestal, New York 13850 (the "Secured Party")
WHEREAS, the Secured Party intends to make a loan to the Pledgor
(the"Loan") in the original principal amount of up to $1,100,000 to be evidenced
by a Revolving Note (the "Note") to be dated the date hereof
WHEREAS, the Pledgeor is the legal and beneficial owner of the shares of
capital stock of AVES Audio Visual Systems, Inc. ("AVES") as listed on Schedule
A attached hereto (collectively, the "Pledged Shares"), which shares constitute
all of the issued and outstanding shares of all classes of capital sock of AVES.
WHEREAS, it is a condition precedent to the making of the Loan and the
acceptance by the Secured Party of the Note that the Pledgor pledge the Pledged
Shares to secure the payment and performance of all of the Secured Obligations
(as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Pledge. The Pledgor hereby pledges and grants to the Secured
Party a continuing first priority security interest in all of the Pledgor's now
existing or hereafter arising right, title and interest in and to the following
property (collectively, the "Pledged Collateral") to secure all of the Secured
Obligations:
(i) the Pledged Shares; (which in the extent permitted by law are,
and shall remain at all times until this Agreement terminates, certificated
securities and any interest of the Pledgor in the entries on the books of
any financial intermediary pertaining to the Pledged Shares;
(ii) all additional shares of stock of AVES from time to time
acquired by the Pledgor in any manner (which to the extent permitted by law
are, and shall remain at all times until this Agreement terminates,
certificated securities), which shares shall be deemed to be part of the
<PAGE>
Pledged Shares, and any interest of the Pledgor in the entries on the books
of any financial intermediary pertaining to such additional shares;
(iii) all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to time received, receivable or otherwise
distributed or owning to the Pledgor in respect of, or in exchange for, any
or all of the Pledged Shares (collectively, "Distributions"); and
(iv) all Proceeds (as defined under the UCC as in effect in any
relevant law) of any of the foregoing (i)-(iii), including, without
limitation, any and all (a) proceeds of any insurance, indemnity, warranty
or guarantee payable to the Pledgor at any time with respect to any of the
Pledged Collateral, (b) payments (in any form whatsoever) made or due and
payable to the Pledgor in connection with any part of the Pledged
Collateral by any governmental authority (or any person or entity acting on
behalf of a governmental authority), (c) instruments representing
obligations to pay amounts in respect of any Pledged Shares, and (d) other
amounts at any time paid or payable under or in connection with any of the
Pledged Collateral.
Section 2. Secured Obligations. This Agreement secures, and the Pledged
Collateral is collateral security for, the prompt payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code)
of (i) all obligations of the Pledgor now or hereafter existing under or in
respect of the Loan and the Note, and (ii) all obligations of the Pledgor now or
hereafter existing under or in respect of this Agreement (the obligations
described in clauses (i) and (ii) are collectively referred to as the "Secured
Obligations").
Section 3. Delivery of pledged Collateral. All certificates, agreements
or instruments representing or evidencing the pledged Collateral, to the extent
not previously delivered to the Secured Party, shall immediately upon receipt
thereof by the Pledgor be delivered to and held by or on behalf of the Secured
Party pursuant hereto. All Pledged Collateral shall be in suitable form for
transfer by delivery and shall be accompanied by duly executed instruments of
transfer or assignment in blank (with signatures appropriately guaranteed), all
in form and substance satisfactory to the Secured Party. The Secured Party
shall have the right, at any time after the occurrence and during the
continuance of any default under the Note, with or without notice to the
Pledgor, (i) to endorse, assign or otherwise transfer, or to register in the
<PAGE>
name of the Secured Party or any of its nominees, any or all of the Pledged
Collateral, and (ii) to exchange certificates representing or evidencing Pledged
Collateral for certificates of smaller or larger denominations.
Section 4. Representation and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is, and at the time of any delivery of any Pledged
Collateral to the Secured Party will be, the legal and beneficial owner of the
Pledged Collateral. All Pledged Collateral is and will be owned by the Pledgor
free and clear of any lien or other encumbrance except for the lien created by
this Agreement.
(b) The Pledgor has full power, authority and legal right to pledge all
the Pledged Collateral pursuant to this Agreement. This Agreement constitutes
the legal, valid and binding obligation of the Pledgor, enforceable against the
Pledgor in accordance with its terms.
(c) No consent of any party, and no consent, authorization, approval, or
other action by, and not notice to or filing with, any governmental authority or
other person or entity is required either (a) for the pledged by the Pledgor of
the pledged Collateral pursuant to this Agreement or for the execution, delivery
or performance of this Agreement by the Pledgor, (b) for the exercise by the
Secured Party of the voting or other rights provided for in this Agreement, or
(c) for the exercise by the Secured Party of the remedies in respect of the
Pledge Collateral pursuant to this Agreement.
(d) All of the Pledged Shares have been, and to the extent hereafter
issued will be, duly authorized and validly issued and fully paid and
nonassessable.
(e) As of the date hereof, (a) the Pledged Shares of AVES identified on
Schedule A constitute all of issued and outstanding shares of capital stock of
AVES, and (b) Schedule A constitutes a true and complete description of the
Pledged Shares.
(f) The Pledgor has delivered to the Secured Party all certificates
representing the Pledged Shares, and such delivery of the Pledged Collateral
pursuant to this Agreement creates a valid and perfected first priority security
interest in the Pledged Collateral securing the payment of the Secured
Obligations.
(g) All information set forth herein relating to the Pledged Collateral is
accurate and complete in all respects.
(h) The pledge of the Pledged Collateral pursuant to this Agreement does
not violate Regulation G, T, U or X of the Federal Reserve Board.
<PAGE>
Section 5. Covenants
(a) The Pledgor shall not (i) sell, convey, assign or otherwise dispose of
, or grant any option, right or warrant with respect to any of the Pledged
Collateral, (ii) create or permit to exist any lien or other encumbrance upon or
with respect to any Pledged Collateral other than the lien and security interest
granted to the Secured Party under this Agreement, or (iii) permit AVES to
merge, consolidate or change its legal form, except as expressly permitted by
the Secured Party and unless all of the outstanding capital stock of the
surviving or resulting corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation.
(b) The Pledgor shall (i) cause AVES not to issue any stock or securities
in addition to or in substitution for the Pledged Shares, except to the Pledgor,
all of which shall be in certificated form, and (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
additional sock or securities which are required to be pledged hereunder.
(c) At any time and form time to time, at the expense of the Pledgor, the
Pledgor shall promptly execute and deliver all further instruments and
documents, including supplemental or additional UCC-1 financing statements, and
take all further action that may be necessary or that the Secured Party may
request, in order to perfect and protect any pledge or security interest granted
or purported to be granted hereby or to enable the Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
(d) The Pledgor at all times will be the sole beneficial owner of the
Pledged Collateral.
(e) The Pledgor shall, upon obtaining any Pledged Shares of AVES, promptly
(and in any event within five (5) business days) deliver to the Secured Party
all original certificates representing such additional Pledged Shares, together
with appropriate stock powers signed in blank. All such additional Pledged
Shares shall, for all purposes hereunder, be considered Pledged Collateral.
Section 6. Voting Rights; Distributions; Etc.
(a) So long as no default hereunder or under the Note shall have occurred
and be continuing, the Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Shares or any part thereof
for any purpose not inconsistent with the terms or purpose of this Agreement;
provided, however, that the Pledgor shall not in any event exercise such rights
in any manner which may have an adverse effect on the value of the Pledged
<PAGE>
Collateral or the security intended to be provided by this Agreement.
(b) Upon the occurrence and during the continuance of a default hereunder
or under the Note, all rights of the Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to Section
7(a) hereof shall immediately cease, and all such rights shall be come vested in
the Secured Party, which shall thereupon have the sole right to exercise such
voting and other consensual rights.
(c) Without waiving, modifying or otherwise derogating form any
prohibition against the making of distributions by AVES, all distributions made
by AVES, whether prior to, or after the occurrence of a default under the Note,
shall be delivered directly to the Secured Party for application to the Secured
Obligations.
(d) The Pledgor shall, at the Pledgor's expense, from time to time,
execute and deliver to the Secured Party appropriate instruments as the Secured
Party may request in order to permit the Secured Party to exercise the voting
and other rights which it may be entitled to exercise pursuant to Section 7(b)
hereof and to receive all Distributions which it may be entitled to receive
pursuant to Section 7(c) hereof.
(d) All Distributions which are received by the Pledgor contrary to the
provisions of this Agreement shall be received in trust for the benefit of the
Secured Party, shall be segregated from other funds of the Pledgor and shall
immediately be paid over the Secured Party as Pledged Collateral in the same
from as to received (with any necessary endorsement).
Section 7. Remedies upon Default; Decisions Relating to Exercise of
Remedies.
(a) If any default hereunder or under the Note shall have occurred and be
continuing, the Secured Party shall have the right, in addition to there rights
and remedies provided for herein or otherwise available to it to be exercised
from time to time; (i) to retain and apply any distributions to the Secured
Obligations, and (ii) to exercise all the rights and remedies of a secured party
on default under the UCC in effect in any applicable jurisdiction at that time,
and the Secured Party may also in its sole discretion, without notice except as
specified below, sell the Pledged Collateral or any part thereof (including,
without limitation, any partial interest in the Pledged Shares) in one or more
parcels at public or private sale, at any exchange, brokers' board or at any of
the Secured Party's offices or elsewhere, for cash, on credit or fur future
delivery, and at such price or prices and upon such other terms ad the Secured
party may deem commercially reasonable, irrespective of the impact of any such
sales on the market price of the Pledged Collateral. The Secured Party or any
of its affiliates may be the purchaser of any or all of the Pledged Collateral
<PAGE>
at any such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Pledged Collateral at any such sale, to use and apply and of the Secured
Obligations as a credit on account of the purchase price of any Pledged
Collateral. Each purchaser at any such sale shall acquire the property sold
absolutely free from any claim or right on the part of the Pledgor and the
Pledgor hereby waives (to the full extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Pledgor acknowledges and agrees that, to the extent notice of sale shall be
required by law, five (5) business days' notice to the Pledgor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless that a notice of
sale may have been given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time by announcement at
the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. The Pledgor hereby
waives any claims against the Secured Party arising by reason of the fact that
the price at which any pledged Collateral may have been sold at such private
sale was less than the price which might have been obtained at a public sale,
even if the Secured Party accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree. The Pledgor hereby agrees
that the Secured Party has the right to apply all of the Pledged Collateral to
the satisfaction of the Secured Obligations and transfer title to the name of
the Secured Party without the necessity of compliance with public or private
sale and in that regard the Pledgor waives the application of the provisions of
the UCC to the Pledged Collateral and any rights to any surplus which may arise
from such collateral.
(b) The Pledgor agrees that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended (the "Securities Act"), and applicable
state securities laws, the Secured Party may be compelled, with respect to any
sale of all or any part of the Pledged Collateral, to limit purchasers to
persons or entities who will agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges that any such private
sales may not be at prices and on terms less favorable to the Secured Party than
those obtainable through a public sale without such restrictions (including,
without limitation, a public offering made pursuant to a registration statement
under the Securities Act), and, notwithstanding such circumstances, agrees that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Secured Party shall have no obligation to engage
<PAGE>
in public sales and not obligation to delay the sale of any Pledged Collateral
for the period of time necessary to permit the issuer thereof to register in
under the Securities Act or under applicable state securities laws, even if such
issuer would agree to do so.
(c) If the Secured party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, the Pledgor shall from time
to time furnished to the Secured Party all such information as the Secured Party
may request in order to determine the number of Pledged Shares included in
Pledged Collateral which may be sold by the Secured Party as exempt transactions
under the Securities Act and the rules of the Securities and Exchange Commission
thereunder, as the same ares from time to time in effect.
(d) In addition to any of the other rights and remedies hereunder, the
Secured Party shall have the right to institute a proceeding seeking specific
performance in connection with any of the agreements or obligations hereunder.
Section 8. Attorney-in-Fact. Upon the occurrence and continuation of an
Event of Default, the Pledgor appoints the Secured party its attorney-in-fact
with and interest, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor, or otherwise, from time to time in the Secured
Party's discretion, to take any action and to execute any instrument consistent
with the terms of this Agreement. The foregoing grant of authority is a power
of attorney coupled with an interest and such appointment shall be irrevocable
for the term of this Agreement. The pledgor hereby ratifies all that such
attorney shall lawfully do or cause to be done by virtue hereof.
Section 9. Reasonable Care. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equivalent to that which the Secured Party, in its individual
capacity, accords its own property consisting of similar instruments or
interests, it being understood that the Secured Party shall not have
responsibility for, among other things, (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not the Secured Party has or is
deemed to have knowledged of such matters, (ii) taking any necessary steps to
preserve rights against any person or entity with respect to any Pledged
Collateral, or (iii) selling liquidating or disposing of the Pledged Collateral,
or agreeing to allow the Pledgor to do any of the same, in order to preserve the
value of the Pledged Collateral.
Section 10. Obligations Absolute. All obligations of the Pledgor
<PAGE>
hereunder shall be absolute and unconditional irrespective of (i) any
bankruptcy, reorganization or the like of the Borrower, (ii) any lack of
validity or enforceability of the Loan, the Note or any related documents, (iii)
any change in the time, manner or place of payment of, or in any other term of,
all or any of the secured Obligations, or any other amendment or waiver of, or
any consent to any departure from the Loan, the Note or any related documents,
(iv) any exchange, release or non-perfection of any other collateral, or any
release or amendment or waiver of or consent to any departure from any guaranty,
for all or any of the Secured Obligations, or (v) any other circumstances which
might otherwise constitute a defense available to , or a discharge of, the
Pledgor. The Pledgor hereby waives any and all suretyship defenses.
Section 11. No Release. Nothing set forth in this Agreement shall (i)
relive the Pledgor from the performance of any term, covenant, condition or
agreement on the Pledgor's part to be performed or observed under or in respect
of any of the Pledged Collateral, or (ii) impose any obligation on the Secured
Party to perform or observe any such term, covenant, condition or agreement on
the Pledgor's part to be so performed or observed, or (iii) impose any liability
on the Secured Party for any act or omission on the part of the Pledgor relating
thereto or for any breach of any representation or warranty on the part of the
Pledgor contained in this Agreement.
Section 12. Termination. When all the Secured Obligations (other than
Secured Obligations in the nature of continuing indemnities and expense
reimbursement obligations not yet due and payable ) have been indefeasibly paid
in full in cash and have been terminated, this Agreement shall terminate. Upon
termination of this Agreement, the Secured Party shall, upon the written request
and at the expense of the Pledgor, forthwith assign, transfer and deliver to the
Pledgor, against receipt and without recourse to or warranty by the Secured
Party, such of the Pledged Collateral as may be in the possession of the Secured
Party and as shall not have been sold or otherwise applied pursuant to the terms
hereof, and, if applicable, shall execute UCC termination statements on Form UCC
3. The Secured Party shall have no responsibility to undertake any other
actions upon termination of this Agreement except as provided in this Section.
Section 13. Indemnity
(a) The Pledgor agrees to indemnify, reimburse and hold the Secured Party
and its respective successors, assigns, employees, agents and servants
(collectively, "Indemnitees") harmless from and against any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suites,
judgments and any all reasonable out of pocket costs and expenses (including,
without limitation, reasonable attorney's fees and expenses) of whatsoever kind
<PAGE>
and nature imposed on, asserted against, or incurred by any of the Indemnities
in any way relating to or arising out of this Agreement or in any way connected
with the administration of the transaction contemplated hereby or the
enforcement of any of the terms hereof, or the preservation of any rights
hereunder, provided that the Pledgor shall have no obligation to an indemnitee
hereunder to the extent it is finally judicially determined that such
indemnified liabilities arise solely from the gross negligence or willful
misconduct of such indemnitee. Upon written notice by any Indemnitee of the
assertion of an indemnified claim hereunder, the Pledgor shall assume full
responsibility for the defense thereof. If any action, suit or proceeding
arising from any of the foregoing is brought against any Indemnitee, the Pledgor
shall, if requested by such Indemnitee, resist and defend such action, suite or
proceeding or cause the same to be resisted and defended by counsel reasonably
satisfactory to such Indemnitee. Each Indemnitee shall, unless any other
Indemnitee has made the request described in the preceding sentence and such
request has been complied with, have the right to employ its own counsel (or
internal counsel) to investigate and control the defense of any matter covered
by the indemnity set forth in this Section, and the fees and expenses of such
counsel shall be paid by the Pledgor, provided that, only to the extent no
conflict exists between or among the Indemnitees, as reasonably determined by
the Indemnitees, the Pledgor shall not be obligated to pay the fees and expenses
of more than one counsel for all Indemnitees as a group with respect to any
indemnified claim.
(b) If and to the extent that the obligations of the Pledgor under this
Section are unenforceable for any reason, the Pledgor hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations that is
permissible under applicable law.
(c) The obligations of the Pledgor contained in this Section shall survive
the termination of this Agreement and the discharge of the Secured Obligations.
(d) Any amounts paid by any Indemnities as to which such Indemnitee has
the right to reimbursement shall constitute Secured Obligations secured by the
Pledged Collateral.
Section 14. Expenses. Upon demand, the Pledgor will pay to the Secured
Party the amount of any and all reasonable out of pocket expenses, including the
reasonable fees and expenses of its counsel and the reasonable fees and expenses
of any experts and agents, which the Secured Party may incur in connection with
(i) the collection of the Secured Obligations, (ii) the custody or preservation
of, or the sale, of collection from, or other realization upon, any of the
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
the Secured Party hereunder, or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof. All amounts payable by the Pledgor under
<PAGE>
this Section shall be due upon demand and shall be part of the Secured
Obligations. The Pledgor's obligations under this Section shall survive the
termination of this Agreement and the discharge of the Pledgor's other
obligations hereunder.
Section 15. No Waiver, Cumulative Remedies.
(a) No failure on the part of the Secured Party to exercise no course of
dealing with respect to, and no delay on the part of the Secured Party in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.
(b) In the event the Secured Party shall have instituted any proceeding to
enforce any right, power or remedy under this instrument by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinues or
abandoned for any reason, then and in every such case, the Pledgor and the
Secured party shall be restored to their respective former positions and rights
hereunder with respect to the Pledged Collateral, and all rights, remedies and
powers of the Secured Party shall continue as if no such proceeding had been
instituted.
Section 16. Modifications in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by the Pledgor therefrom, shall be effective unless the
same shall be in writing and signed by the Secured Party. Any such amendment,
modification, supplement, termination, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Agreement, no notice to or
demand on the Pledgor in any case shall entitle the Pledgor to any other or
further notice or demand in similar or other circumstances.
Section 17. Addresses for Notices. All notices, requests, demands and
other communications provided for hereunder shall be in writing and shall be
telecopied (followed by overnight mail), personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or by
receipted overnight delivery service to the addressee, at its address set forth
below:
<PAGE>
If to the Pledgor:
Jayark Corporation
300 Plaza Drive
Vestal, NY 13850
Attn: Robert Nolt, Secretary
If to the Secured Party:
A-V Texas Holding, LLC
300 Plaza Drive
Vestal, NY 18350
Attn: David Koffman, Member
or at such other address as shall be designated by any of the foregoing parties
in a written notice to the other parties complying as to delivery with the terms
of this Section. All such communications shall be deemed received (i) in the
case of hand delivered, on the day of delivery, (ii) in the case of overnight
mail or overnight courier service, on the next business day after such
communication is mailed, postage prepaid, or placed in the hands of such courier
service for delivery, (iii) in the case of telecopy, or the day the sender
receives electronic confirmation that a facsimile has been successfully
transmitted to the recipient thereof, and (iv) in the case of registered or
certified mail, on the fifth business day after such communication is mailed,
postage prepaid, with the United States Postal Service.
Section 18. Assignment. This Agreement shall be binding upon the Pledgor,
its successors and assigns, and shall inure, together with the rights and
remedies of the Secured Party hereunder, to benefit of the Secured Party and
each of its successors, transferees and assigns. No other person or entity
(including, without limitation, andy other creditor of the Pledgor) shall have
any interest herein or any right or benefit with respect hereto. The Pledgor
may not assign its rights or obligations under this Agreement to any other
person or entity. The Secured Party may assign or otherwise transfer its rights
under this Agreement or any indebtedness held by it may assign or otherwise
transfer its rights under this Agreement or any indebtedness held by it secured
by this Agreement to any other person or entity, and such other person or entity
shall thereupon become vested with all the benefits in respect thereof granted
to the Secured Party.
Section 19. Governing Law. This Agreement shall be governed by, and shall
be constructed and enforced in accordance with the laws of the State of New
York, without regard to its principles of conflicts of laws.
<PAGE>
Section 20. Consent to Jurisdiction. All judicial proceedings brought
against the Pledgor with respect to this Agreement may be brought in any state
or federal court of competent jurisdiction in the State of New York and, by
execution and delivery of this Agreement, the Pledgor accepts for itself and in
connection with its properties, generally and unconditionally, the nonexclusive
jurisdiction of the aforesaid courts.
Section 21. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 22. Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same agreement.
Section 23. Headings. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
Section 24. WAIVER OF TRIAL BY JURY. THE PARTIES HERETO IRREVOCABLY
WAIVE TRIAL BY JURY IN CONNECTION WITH ANY MATTER ARISING OUT OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered as of the date first above written.
JAYARK CORPORATION
Name: /s/ David L. Koffman
Title: President
ACCEPTED:
A-V TEXAS HOLDING, LLC
Name:
Title:
<PAGE>
SCHEDULE A
CLASS PAR CERTIFICATE NUMBER PERCENTAGE OF ALL CAPITAL
OF STOCK VALUE NO.(S) OF SHARES STOCK OF ISSUER
100%
<PAGE>
EXHIBIT 10(30)
--------------
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
STOCK WARRANT
To Purchase 3,666,667 Shares of Common Stock of
Jayark Corporation, a Delaware Corporation
(the "Company")
Subject to Adjustment as Set Forth
in Section 5 and Particularly Section 5(g)
DATE OF INITIAL ISSUANCE: March 12, 1997
THIS CERTIFIES THAT, for value received, A-V Texas Holding, LLC or
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company during the Term of this Warrant at the times provided for
herein, the number of shares of Common Stock, par value $.30 per share, of the
Company (the "Common Stock") as specified herein, at the Warrant Price (as
hereinafter defined), payable in the manner specified herein. The conversion of
this Warrant shall be subject to the provisions, limitations and restrictions
herein contained.
SECTION 1. Definitions.
Common Stock - shall mean and include the Company's authorized Common
Stock, as constituted on the date the Certificate of Incorporation is amended as
provided in the definition of "Term of this Warrant" below, and shall also
include any capital stock of any class of the Company hereafter authorized which
has the right to participate in the distribution of earnings and assets of the
Company without limit to amount or percentage.
Securities Act - the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
Term of this Warrant - shall mean the period beginning on the date the
Company amends its Certificate of Incorporation to provide for no less than
20,000,000 authorized shares of Common Stock (at any par value) and ending on
February 1, 2007.
<PAGE>
Warrant Price - is defined in Section 2.1 hereof.
Warrant Rights - the rights of the Holder to purchase shares of Common
Stock upon conversion of this Warrant, which rights shall not relate to shares
of Common Stock already purchased pursuant to this Warrant.
Warrant Shares - shares of Common Stock purchased or
purchasable by the Holder of this Warrant upon the conversion
hereof.
SECTION 2. Conversion of Warrant.
2.1. Right to Exercise Warrant. At any time and from time
to time during the term of this Warrant, the Holder hereof shall
have the right to convert this Warrant, in whole or part(s) to
purchase up to the number of shares of Common Stock set forth on
the cover page hereof, subject to adjustment as provided in
Section 5.
The Warrant Price shall be $.30 per share subject to
adjustment as provided in Section 5 and shall be paid in cash.
2.2. Procedure for Cashless Conversion of Warrant. The
registered holder hereof shall convert this Warrant by the
surrender of this Warrant and the Notice of Conversion form
attached hereto duly executed at the office of the Company at 300
Plaza Drive, Vestal, New York 13850 (or such other office or
agency of the Company as it may designate by notice in writing to
the registered holder hereof at the address of such holder
appearing on the books of the Company), into shares of Warrant
Shares as provided in this Section 2.
Upon conversion of this Warrant in accordance with this
Section 2, the registered holder hereof shall be entitled to
receive a certificate for the number of shares of Warrant Shares
determined in accordance with the foregoing.
2.3. Transfer and Restriction Legend. This Warrant is
freely transferable by the Holder, except as transferability may
be limited by federal and state securities laws. Each
certificate for Warrant Shares shall bear the following legend
(and any additional legend required by (i) any applicable state
securities laws and (ii) any securities exchange upon which such
Warrant Shares may, at the time of such exercise, be listed) on
the face thereof unless at the time of exercise such Warrant
Shares shall be registered under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT
<PAGE>
AND ANY APPLICABLE STATE SECURITIES LAWS OR
THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS."
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate
issued upon completion of a public distribution under a
registration statement of the securities represented thereby)
shall also bear such legend unless, in the opinion of counsel for
the holder thereof (which counsel shall be reasonably
satisfactory to counsel for the Company) the securities
represented thereby are not, at such time, required by law to
bear such legend.
SECTION 3. Covenants as to Common Stock. The Company
covenants and agrees that all shares of Common Stock that may be
issued upon the exercise of the rights represented by this
Warrant will, upon issuance and receipt by the Company of the
Warrant Price, be validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that it
will pay when due and payable any and all federal and state taxes
which may be payable in respect of the issue of this Warrant, or
any Common Stock or certificates therefor issuable upon the
exercise of this Warrant. The Company further covenants and
agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise of the rights
represented by this Warrant. The Company further covenants and
agrees that if any shares of capital stock to be reserved for the
purpose of the issuance of shares upon the conversion of this
Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may
be validly issued or delivered upon conversion, then the Company
will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be. If and
so long as the Common Stock issuable upon the conversion of this
Warrant is listed on any national securities exchange, the
Company will, if permitted by the rules of such exchange, list
and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon
conversion of this Warrant.
SECTION 4. Ownership.
4.1 Register; Transfer or Exchange of Warrants. The
Company shall keep at its office maintained in Vestal, New York a
register in which the Company shall provide for the registration
of Warrants and for the registration of transfer of Warrants.
The Holder of any Warrant may, at its option and either in person
or by duly authorized attorney, surrender the same for
registration of transfer or exchange at such office and, without
expense to such Holder (other than transfer taxes, if any),
receive in exchange therefor a new Warrant or Warrants, dated as
<PAGE>
of the date to which transfer is effectuated, for the same
aggregate amount of shares as the Warrant or Warrants so
surrendered for transfer or exchange and each registered in such
name or names as may be designated by such Holder. Every Warrant
so made and delivered in exchange for any Warrant shall in all
other respects be in the same form and have the same terms as the
Warrant so surrendered for transfer or exchange.
4.2. Ownership of This Warrant. The Company may deem and
treat the person in whose name this Warrant is registered as the
holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the
Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for
registration of transfer as provided in this Section 4.
4.3. Transfer and Replacement. This Warrant and all rights
hereunder are subject to applicable federal and state securities
laws, transferable in whole or in part upon the books of the
Company by the Holder hereof in person or by duly authorized
attorney, and a new Warrant or Warrants, of the same tenor as
this Warrant but registered in the name of the transferee or
transferees shall be made and delivered by the Company upon
surrender of this Warrant duly endorsed. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant
if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant; provided that if the Holder
hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or
institutional holder, an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section
4, and no evidence of loss or theft or destruction shall be
necessary. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any transfer
or replacement. Except as otherwise provided above, in the case
of the loss, theft or destruction of a Warrant, the Company shall
pay all expenses, taxes and other charges payable in connection
with any transfer or replacement of this Warrant, other than
stock transfer taxes (if any) payable in connection with a
transfer of this Warrant, which shall be payable by the Holder.
SECTION 5. Adjustment of Warrant Price and Number of Shares
of Common Stock or Warrants.
(a) In case the Company shall (i) pay a dividend or
make a distribution in shares of its capital stock (whether
shares of Common Stock or of capital stock of any other class) or
distribute evidences of indebtedness or assets, (ii) sub-divide
its outstanding shares of Common Stock (iii) combine its
<PAGE>
outstanding shares of Common Stock into a smaller number of
shares, or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the conversion
privilege and Warrant Price in effect immediately prior to such
action shall be adjusted so that the holders of any Warrants
thereafter surrendered for exercise shall be entitled to receive
the number of shares of capital stock of the Company which he or
she would have owned immediately following such action had such
Warrant been exercised immediately prior thereto. An adjustment
made pursuant to this subsection (a) shall become effective
retroactively immediately after the record date in the case of a
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an
adjustment made pursuant to this subsection (a), the holder of
any shares of this Warrant thereafter surrendered for conversion
shall become entitled to receive shares of two or more classes of
capital stock of the Company, the Board of Directors (whose
reasonable determination shall be made in good faith) shall
determine the allocation of the adjusted conversion price between
or among shares of such classes of capital stock.
(b) The Company may elect, upon any adjustment of the
Warrant Price hereunder, to adjust the number of Warrants
outstanding, in lieu of the adjustment in the number of shares of
Common Stock purchasable upon the conversion of each Warrant as
hereinabove provided, so that each Warrant outstanding after such
adjustment shall represent the right to purchase one share of
Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of
Warrants (calculated to the nearest tenth) determined by
multiplying the number one by a fraction, the numerator of which
shall be the Warrant Price in effect immediately prior to such
adjustment and the denominator of which shall be the Warrant
Price in effect immediately after such adjustment.
(c) In case of any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock), or in case of any sale or conveyance to another
corporation of the property of the Company as, or substantially
as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then
outstanding shall have the right thereafter, by converting such
Warrant, to purchase the kind and number of shares of stock or
other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased
<PAGE>
upon conversion of such Warrant immediately prior to such
reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision
shall include provision for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Section 5. The Company shall not effect any such
consolidation, merger or sale unless prior to or simultaneously
with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger of the
corporation purchasing assets or other appropriate corporation or
entity shall assume, by written instrument executed and delivered
to the Company, the obligation to deliver to the holder of each
Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this
Warrant. The foregoing provisions shall similarly apply to
successive reclassification, capital reorganizations and other
changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) After each adjustment of the Warrant Price
pursuant to this Section 5, the Company will promptly prepare a
certificate signed by the President, and by the Treasurer or an
Assistant Treasurer or the Secretary or any Assistant Secretary,
of the Company setting forth: (i) the Warrant Price as so
adjusted, (ii) the number of shares of Common Stock purchasable
upon conversion of each Warrant after such adjustment, and, if
the Company shall have elected to adjust the number of Warrants,
the number of Warrants to which the registered holder of each
Warrant shall then be entitled.
(e) For purposes of Section 5(a) and 5(b) hereof, the
following shall also be applicable:
(A) The number of shares of Common Stock
outstanding at any given time shall include shares of Common
Stock owned or held by or for the account of the Company and
the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be
considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Warrant Price shall be
made unless such adjustment would require a decrease of a
least $.0001 in such price; provided that any adjustments
which by reason of this clause (B) are not required to be
made at the time of and together with the next subsequent
adjustment which, together with any adjustment(s) so carried
forward, shall require an increase or decrease of at least
$.0001 in the Warrant Price then in effect hereunder.
(f) If and whenever the Company shall grant to all
holders of Common Stock, as such, rights or warrants to subscribe
for or to purchase, or any options for the purchase of, Common
<PAGE>
Stock or securities convertible into or exchangeable for carrying
a right, warrant or option to purchase Common Stock, the Company
shall concurrently therewith grant to each Registered Holder as
of the record date for such transaction of the Warrants then
outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date
used to determine the stockholders entitled to the rights,
warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number or whole shares of
Common Stock then issuable upon conversion (assuming, for
purposes of this section 5 (f), that exercise of Warrants is
permissible during periods prior to the Warrant Exercise Date) of
his Warrants. Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might
be called for pursuant to this Section 5.
(g) Anything in this Warrant to the contrary
notwithstanding, the number of shares of Common Stock to which
this Warrant shall relate shall be reduced to 35.29827% of the
number of that time exercisable in the event all or substantially
all of the stock of the Company's subsidiary, Aves Audio Visual
Systems, Inc. ("AVES") or all or substantially all of the assets
of AVES are transferred to the Holder of that certain Revolving
Note in the aggregate original principal amount of up to
$1,100,000 dated the date of this Warrant, pursuant to any levy,
foreclosure, transfer in lieu of foreclosure or other similar
security enforcement right upon default of such Revolving Note,
whether pursuant to operation of that certain Pledge Agreement
dated the date hereof in favor of such Holder, or otherwise.
SECTION 6. Notice of Extraordinary Dividends. If the Board
of Directors of the Company shall declare any dividend or other
distribution on its Common Stock except out of earned surplus or
by way of a stock dividend payable in shares of its Common Stock,
the Company shall mail notice thereof to the Holder hereof not
less than fifteen (15) days prior to the record date fixed for
determining shareholders entitled to participate in such dividend
or other distribution, and the Holder hereof shall not
participate in such dividend or other distribution unless this
Warrant may be converted, in whole or in part, pursuant to
Section 2.1 of this Warrant, and is converted prior to such
record date. The provisions of this Section 6 shall not apply to
distributions made in connection with transactions covered by
Section 5.
SECTION 7. Fractional Shares. Fractional shares shall not
be issued upon the conversion of this Warrant but in any case
where the Holder would, except for the provisions of this Section
7, be entitled under the terms hereof to receive a fractional
share upon the conversion of this Warrant, the Company shall,
upon the conversion of this Warrant, pay a sum in cash equal to
the excess of the value of such fractional share (determined in
such
<PAGE>
reasonable manner as may be prescribed in good faith by the Board
of Directors of the Company).
SECTION 8. Notices. Any notice or other document required
or permitted to be given or delivered to the Holder or the
Company shall be effected on the seventh day following delivery
to the United States Post Office, proper postage prepaid, sent by
certified or registered mail return receipt requested, or on the
day delivered by hand and receipted, or on the second business
day after delivery to a recognized overnight courier service,
addressed to the Holder at the address thereof specified in the
records of the Company or to such other address as shall have
been furnished to the Company in writing by the Holder or the
Company at 124 West Main Street, High Bridge, New Jersey 08829 or
to such other address as shall have been furnished in writing to
the Holder by the Company.
SECTION 9. No Rights as Stockholder; Limitation of
Liability. This Warrant shall not entitle the Holder to any of
the rights of a shareholder of the Company. No provision hereof,
in the absence of affirmative action by the Holder to purchase
shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any
liability of the Holder for the Warrant Price hereunder or as a
shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
SECTION 10. Law Governing. This Warrant shall be governed
by, and construed and enforced in accordance with, the laws of
the State of New York.
SECTION 11. Miscellaneous. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by
an instrument in writing signed by the party (or any predecessor
in interest thereof) against which enforcement of the same is
sought. The headings in this Warrant are for purposes of
reference only and shall not affect the meaning or construction
of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed by its duly authorized officer this 24th day of February 1997.
JAYARK CORPORATION
Name: /s/ David L. Koffman
Title: President
<PAGE>
EXHIBIT 10(31)
--------------
COMMERCIAL SECURITY AGREEMENT
Principal $1,250,000.00
Loan Date 02-18-1997
Maturity 03-01-2000
Loan No 11759
Call 032
Collateral SCHA
Account 5412
Officer GS895
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: AVES AUDIO VISUAL SYSTEMS, INC. Lender: BSB BANK & TRUST COMPANY
6116 SKYLINE DRIVE Commercial Loan Department
HOUSTON, TX 17274 P.O. Box 1056
Binghamton, NY 13902
THIS COMMERCIAL SECURITY AGREEMENT Is entered Into between AVES AUDIO VISUAL
SYSTEMS, INC. (referred to below as "Grantor"); and BSB BANK & TRUST COMPANY
(referred to below as "Lender"). For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated In this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by
law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
All inventory, accounts, equipment and general intangibles
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for
any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means AVES AUDIO VISUAL SYSTEMS, INC., its
successors and assigns
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and earned interest, together with all
other indebtedness and costs and expenses for which Grantor is responsible
under this Agreement or under any of the Related Documents. In addition, the
word "Indebtedness" includes all other obligations, debts and liabilities,
plus interest thereon, of Grantor, or any one or more of them, to Lender, as
well as all claims by Lender against Grantor, or any one or more of them,
whether existing now or later; whether they are voluntary or involuntary,
due or not due, direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Grantor may be liable individually or jointly with
others; whether Grantor may be obligated as guarantor, surety, accommodation
party or otherwise.
Lender. The word "Lender" means BSB BANK & TRUST COMPANY, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated February 18,
1997, in the principal amount of $1,250,000.00 from AVES AUDIO VISUAL
SYSTEMS, INC. to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions for
the note or credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts Grantor
may open in the future, excluding, however, all IRA and Keogh accounts, and
all trust accounts for which the grant of a security interest would be
prohibited by law. Grantor authorizes Lender, to the extent 02-
permitted by applicable law, to charge or setoff all Indebtedness against any
and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Organization. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Texas.
Grantor has its chief executive office at 6116 SKYLINE DRIVE, HOUSTON, Ix
11274. Grantor will notify lender of any change in the location of
Grantor's chief executive office.
Authorization. The execution, delivery, and performance of this Agreement by
Grantor have been duly authorized by all necessary action by Grantor and do
riot conflict with, result in a violation of, or constitute a default under
(a) any provision of its articles of incorporation or organization, or
bylaws, or any agreement or other instrument binding upon Grantor or (b) any
law, governmental regulation, court decree, or order applicable to Grantor.
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by
<PAGE>
Lender to perfect and continue Lender's security interest in the Collateral.
Upon request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as ifs irrevocable
attorney-in -fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any line, and without further authorization from Grantor, file
a carbon, photographic or other reproduction of any financing statement or
of this Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the continuation of the
perfection of Lender's security interest in the Collateral. Grantor
promptly will notify Lender before any change in Grantor's name including
any change to the assumed business names of Grantor. This is a continuing
Security Agreement and will continue in effect even though all or any part
of the Indebtedness is paid in full and even though for a period of time
Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and alt persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account; and no
agreement under which any deductions or discounts may be claimed shall have
been made with the account debtor except those disclosed to Lender in
writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d)
alt other properties where Collateral is or may be located, Except in the
ordinary course of its business, Grantor shall not remove the Collateral from
its existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the
State of Texas, without the prior written consent of Lender.
Transactions involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to buyers
who quality as a buyer in the ordinary course of business. A sale in the
ordinary course of Grantor's business does not include a transfer in partial
or total satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to any
lien, security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written consent of
Lender. This includes security interests even if junior in right to the
security interests granted under this Agreement. Unless waived by Lender, all
proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to
any sale or other disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims arid demands of all other
persons.
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such information
as Lender may require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall deliver to Lender,
as often as Lender shall require, such lists, descriptions, and designations of
such Collateral as Lender may require to
identify the nature, extent, and location of such Collateral. Such information
shall be submitted for Grantor and each of its subsidiaries or related
companies.
Maintenance and inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will net commit or
permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable tunes to examine, inspect, arid audit the
Collateral wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or damage of or to
any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount of
the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor nay withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's
sole opinion. If the Collateral is subjected to a lien which is not
discharged within fifteen (15) days, Grantor shall deposit with Lender cash,
a sufficient corporate surety bond or other security satisfactory to Lender
in an amount adequate to provide for the discharge of the lien plus any
interest, costs, reasonable attorneys' fees or other charges that could
accrue as a result of foreclosure or sale of the Collateral. in any contest
Grantor shall defend itself and Lender and shall satisfy any final adverse
judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the
contest proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules arid regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor nay contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Granter represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage.
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Supertund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99499 ("SARA"1. the
Hazardous Materials Transportation Act. 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42
<PAGE>
U.S.C. Section 6901, et seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the foregoing. The terms
"hazardous waste" and hazardous substance" shall also include, without
limitation, petroleum and petroleum by-products or any fraction thereof and
asbestos. The representations and warranties contained herein are based on
Grantor's due diligence in investigating the Collateral for hazardous wastes
and substances. Grantor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This obligation
to indemnify shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.
Maintenance of Casualty Insurance- Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender. GRANTOR MAY FURNISH THE REQUIRED INSURANCE WHETHER
THROUGH EXISTING POLICIES OWNED OR CONTROLLED BY GRANTOR OR THROUGH
EQUIVALENT INSURANCE FROM ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT
BUSINESS IN THE STATE OF TEXAS. If Grantor tails to provide any required
insurance or fails to continue such insurance in force, Lender may, but shall
not be required to, do so at Grantor's expense, and the cost of the insurance
will be added to the Indebtedness. If any such insurance is procured by
Lender at a rate or charge not fixed or approved by the State Board of
Insurance, Grantor will be so notified, and Grantor will have the option for
five (5) days of furnishing equivalent insurance through any insurer
authorized to transact business in Texas. Grantor, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least thirty (30)
days' prior written notice 10 Lender and not including any disclaimer of the
insurer's liability for failure to give such a notice. Each insurance policy
also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor or
any other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest, Grantor will provide Lender
with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required
under this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest in the
Collateral.
Application of Insurance Proceeds- Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All proceeds
of any insurance on the Collateral, including accrued proceeds thereon, shall
be held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent
to repair or replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within six (6)
months after their receipt and which Grantor has not committed to the repair
or restoration of the Collateral shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days
before payment is due, the reserve funds are insufficient, Grantor shall upon
demand pay any deficiency to Lender. The reserve funds shall be held by
Lender as a general deposit and shall constitute a non~interest-bearing
account which Lender may satisfy by payment of the insurance premiums
required to be paid by Grantor as they become due. Lender does not hold the
reserve funds in trust for Grantor, and Lender is not the agent of Grantor
for payment of the insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain Grantor's sole
responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured; (a) the then current value on the basis of which insurance
has been obtained and the manner of determining that value; and (f) the
expiration date of the policy. In addition, Grantor shall upon request by
Lender (however not more often than annually) have an independent appraiser
satisfactory to Lender determine, as applicable, the cash value or
replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest
in such Collateral. Until otherwise notified by Lender, Grantor may collect any
of the Collateral consisting of accounts. At any time and even though no Event
of Default exists, Lender may exercise its rights to collect the accounts and
to notify account debtors to make payments directly to Lender for application
to the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as
Lender, 0 Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall not of itself
be deemed to be a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security
interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the Note rate from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses shall become a
part of the Indebtedness and, at Lender's option, will (a) be payable on demand,
(b) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the Note, or (c) be
treated as a balloon payment which will be due and payable at the Note's
maturity. This Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due on
the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in any
of the Related Documents or in any other agreement between Lender and
Grantor.
False Statements. Any warranty, representation or statement made or furnished
to Lender by or on behalf of Grantor under this Agreement, the Note or the
Related Documents is false or misleading in any material respect, either now
or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any
<PAGE>
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor Of Grantor Of by any
governmental agency against the Collateral or any other collateral securing
the Indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender. however, this Event of Default shall not apply it
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Grantor gives Lender written notice of the creditor or
forfeiture proceeding and deposits with Lender monies or a surety bond for
the creditor or forfeiture proceeding, in an amount determined by Lender, in
its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or such Guarantor dies or
becomes incompetent. Lender, at its option, may, but shall not be required
to, permit the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in doing
so, cure the Event of Default.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Right to Cure. If any default, other than a Default on Indebtedness, is curable
and if Grantor has not been given a prior notice of a breach of the same
provision of this Agreement, it may be cured (and no Event of Default will have
occurred) if Grantor, after Lender sends written notice
demanding cure of such default, (a) cures the default within thirty (30) days;
or (b), if the cure requires more than thirty (30) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Texas Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter, provided
Lender does so without a breach of the peace or a trespass, upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after
repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of
a type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time alter which any private sale or any other
intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten (10)
days before the time of the sale or disposition. All expenses relating to
the disposition of the Collateral, including without limitation the expenses
of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a pad of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right, (b)
the receiver may be an employee of Lender and may serve without bond, and
(c) all fees of the receiver and his or her attorney shall become part of
the Indebtedness secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, choses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
the Collateral as Lender may determine, whether or not Indebtedness or
Collateral is then due. For these purposes, Lender may, on behalf of and in
the name of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments and
items pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on
the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall be
liable for a deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall
be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to
exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding arid agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of New York. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of the State of
New York. Lender and Grantor hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Grantor
against the other. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Attorneys' Fees and Other Costs. Lender may hire an attorney to help collect
the Note if Grantor does not pay, and Grantor will pay Lender's reasonable
attorneys' fees. Grantor also will pay Lender all other amounts actually
incurred by Lender as court costs, lawful fees for tiling, recording, or
releasing to any public office any instrument securing the Note; the
reasonable cost actually expended for repossessing, storing, preparing for
sale and selling any security: and fees for noting a lien on or transferring
a certificate of title to any motor vehicle offered as security
<PAGE>
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall
mean each and every Grantor. This means that each of the persons signing
below is responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage
prepaid, addressed to the party to whom the notice is to be given at the
address shown above. Any party may change its address for notices under this
Agreement by giving format written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. To the
extent permitted by applicable law, if there is more than one Grantor,
notice to any Grantor will constitute notice to all Grantors. For notice
purposes, Grantor will keep Lender informed at all times of Grantor's
current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing
or payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment
for the Collateral; (c) to settle or compromise any and all claims arising
under the Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file any claim
or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or otherwise,
which in the discretion of Lender may seem to be necessary or advisable.
This power is given as security for the Indebtedness, and the authority
hereby conferred is and shall be irrevocable and shall remain in full force
and effect until renounced by Lender.
Servability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
FEBRUARY 18,1997.
GRANTOR:
AVES AUDIO VISUAL SYSTEMS, INC.
Name: /s/ Howard M. Rittberg
Title: Assistant Secretary
LENDER:
BSB BANK & TRUST COMPANY
By: /s/ Mr. R. Snell
Title: Authorized Officer
<PAGE>
EXHIBIT 10(32)
--------------
PROMISSORY NOTE
Principal $1,250,000.00
Loan Date 02/18/97
Maturity 03-01-2000
Loan No 11759
Call 032
Collateral SCHA
Account 6412
Officer GS895
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: AVES AUDIO VISUAL SYSTEMS, INC. Lender: BSB BANK & TRUST COMPANY
6116 SKYLINE DRIVE Commercial Loan Department
HOUSTON, TX 77274 P.O. Box 1056
Binghamton, NY 13902
Principal Amount: $1,250,000.00 Initial Rate: 9.750%
Date of Note: February 18,1997
PROMISE TO PAY. AVES AUDIO VISUAL SYSTEMS, INC. ("Borrower") promises to pay to
BSB BANK & TRUST COMPANY ("Lender"), or order, In lawful money of the United
States of America, the principal amount of One Million Two Hundred Fifty
Thousand & 00,100 Dollars ($1,250,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on March 1, 2000. in addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning March 1, 1997,
and all subsequent interest payments are due on the same day of each month after
that. Borrower will pay Lender at Lender's address shown above or at such other
place as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each day. The Index currently is 8.250%
per annum. The Interest rate to be applied to the unpaid principal balance of
this Note will be at a rate of 1.500 percentage points over the Index, resulting
in an initial rate of 9.750% per annum. NOTICE.. Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Farly payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
4.000% of the unpaid portion of the regularly scheduled payment or $10.00,
whichever Is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (d) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of Borrower's property on or
in which Lender has a lien or security interest. This includes a garnishment of
any of Borrower's accounts with Lender. (f) Any guarantor dies or any of the
other events described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within thirty (30) days; or (b) if
the cure requires more than thirty (30) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid Interest immediately due, without
notice, and then Borrower will pay that amount. Borrower agrees to pay all costs
and expenses incurred by Lender to collect this Note. This includes, subject to
any limits under applicable law, Lender's reasonable attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, arid any
anticipated post judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and accepted by Lender
in the State of New York. if there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Broome County, the State
of New York. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other. This Note shall be governed by and construed in accordance with the
laws of the State of New York.
RIGHT OF SETOFF. In addition to Lender's right of setoff arising by operation of
law, Borrower grants to Lender a contractual possessory security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account and whether evidenced by a
certificate of deposit), including without limitation all accounts held jointly
with someone else and all accounts Borrower may open in the future, excluding
however all IRA and Keogh accounts, and all trust accounts for which the grant
of a security interest would be prohibited by law. Borrower authorizes Lender,
to the extent permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
COLLATERAL. This Note is secured by All Accounts, Inventory, Equipment and
General Intangibles now owned or acquired later, together with all proceeds of
collateral. If there is any inconsistency between the terms and conditions of
this Note and the terms and conditions of the collateral documents, the terms
and conditions of this Note shall prevail.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: DAVID L. KOFFMAN, CHIEF EXECUTIVE OFFICER; and
FRANK RABINOVITZ, PRESIDENT. Borrower agrees to be liable for all sums either:
(a) advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Note if: (a) Borrower
or any guarantor is in default under the terms of this Note or any agreement
<PAGE>
that Borrower or any guarantor has with Lender, including any agreement made
in connection with the signing of this Note; (b) Borrower or any
guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender: or (d) Borrower has
applied funds provided pursuant to this Note for purposes other than
those authorized by Lender.
BORROWING BASE. The maximum credit outstanding at any one time shall not
exceed the lesser of $1,250,000.00 or the sum of 75% of qualified
accounts plus 40% of inventory. Qualified Accounts are defined as those
accounts receivable balances less that 90 days. By the 30th day of the
following month, Borrower shall submit to Lender an accounts receivable
aging schedule indicating all accounts receivable by payee, date and
amount, plus schedules of inventory. tithe monthly schedules disclose
that the combined product of receivables and inventory exceeds the
maximum credit available, the Borrower shall include with such schedules
a principal payment sufficient to reduce the principal indebtedness to
the maximum credit available as determined above. In such an instance
when Borrower is unable to comply with this requirement, the Lender,
without prior notice, shall have the option of charging Borrower's
general operating account for the funds needed to bring the credit within
compliance. Additionally, future requests for advances made under this
line shall be accompanied by current aging and inventory schedules
indicating sufficient availability to allow such an advance. These
schedules should be submitted to the Lender allowing a sufficient amount
of time to process such a request.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of
dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the
modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE NOTE.
BORROWER:
AVES AUDIO VISUAL SYSTEMS, INC.
Name: /s/ Howard M. Rittberg
Title: Assistant Secretary
<PAGE>
EXHIBIT 10(33)
--------------
COMMERCIAL GUARANTY
Principal $
Loan Date
Maturi
Loan No
Call 032
Collateral SCHA
Account 6412
Officer GS895
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
Borrower: AVES AUDIO VISUAL SYSTEMS, INC. Lender: BSB BANK & TRUST COMPANY
6116 SKYLINE DRIVE Commercial Loan Department
HOUSTON, TX 17274 P.O. Box 1056
Binghamton, NY 13902
Guarantor: David L. Koffman
300 Plaza Drive
Binghamton, NY 13903
AMOUNT OF GUARANTY. The amount of this Guaranty is 50.000% of all
amounts due now or later from Borrower to Lender as provided below
without limit.
.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration,
DAVID L. KOFFMAN ('Guarantor') absolutely and unconditionally guarantees
and promises to pay to BSB BANK & TRUST COMPANY ("Lender") or its
order, in legal tender at the United States of America, 60.000% or the
Indebtedness (as that term is defined below) of AVES AUDIO VISUAL
SYSTEMS1 INC. ('Borrower") to Lender on the terms and conditions set
forth in this Guaranty. Under this Guaranty, the liability of Guarantor
is unlimited and the obligations of Guarantor are continuing. Guarantor
agrees that Lender, in its sole discretion, may determine which portion
of Borrower's indebtedness to Lender is covered by Guarantor's percentage
guaranty.
DEFINITIONS. The following word; shall have the following meanings when
used in this Guaranty;
Borrower. The word "Borrower" means AVES AUDIO VISUAL SYSTEMS, INC.
Guarantor. The word "Guarantor" means DAVID L. Koffman.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor
for the benefit of Lender dated February 18, 1997. Indebtedness. The
word "Indebtedness" is used in its most comprehensive sense and means
and includes any and all of Borrower's liabilities, obligations,
debts, and indebtedness to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans,
advances, interest. costs, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, other obligations, and liabilities or
Borrower, or any of them, and any present or future judgments against
Borrower, or any of them: and whether any such Indebtedness is
voluntary or involuntary, incurred. due or not duo, absolute or
contingent, liquidated or unliquidated, determined or undetermined;
whether Borrower may be liable individually or jointly with others, or
primarily or secondarily, or as guarantor or surety whether recovery
on the Indebtedness may be or may become barred or unenforceable
against Borrower by any reason whatsoever: and whether the
Indebtedness arises from transactions which may be voidable on account
of infancy, insanity, ultra vireos, or otherwise.
Lender. The word "Lender" means BSB BANK & TRUST COMPANY, Its
successors and assigns.
Related Documents. The worlds "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties. security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open
and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all times the performance and prompt payment when
due, whether at maturity or earlier by reason of acceleration or otherwise,
of all indebtedness. Accordingly, no payments made upon the Indebtedness
will discharge or diminish the continuing liability of Guarantor in
connection with any remaining portions of the Indebtedness or any of the
Indebtedness which subsequently arises or is thereafter incurred or
contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by
Lender without the necessity of any acceptance by Lender, or any notice to
Guarantor or to borrower, and will continue in full force until all
indebtedness incurred or contracted before receipt by Lender of any notice
of revocation shall have been fully and finally paid and satisfied and all
other obligations of Guarantor under this Guaranty shall have been
performed in full. If Guarantor elects to revoke this Guaranty, Guarantor
may only do so in writing. Guarantor's written notice of revocation must
be mailed to Lender, by certified mail, at the address of Lender listed
above or such other place as Lender may designate in writing. Written
revocation of this Guaranty will apply only to advances or new indebtedness
created after actual receipt by Lender of Guarantor's written revocation.
For this purpose and without limitation, the term "new Indebtedness" does
not include indebtedness which at the time of notice of revocation is
contingent unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to
bind Guarantor for all indebtedness incurred by Borrower or committed by
Lender prior to receipt of Guarantor's written notice of revocation,
including any extensions, renewals, substitutions or modifications of the
Indebtedness. All renewals, extensions substitutions and modifications of
the indebtedness granted after Guarantor's revocation, are contemplated
under this Guaranty and, specifically will not be considered to be new
Indebtedness. This Guaranty shall bind the estate of Guarantor as to
Indebtedness created both before and after the death or incapacity of
Guarantor, regardless of Lender's actual notice of Guarantor's death.
Subject to the foregoing, Guarantor's executor or administrator or other
legal representative may terminate this Guaranty in the same manner in
which Guarantor might have terminated it and with the same effect. Release
of any other guarantor or termination of any other guaranty of the
Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors
shall not affect the liability of any remaining Guarantors under this
Guaranty. It is anticipated that fluctuations may occur in the aggregate
amount of Indebtedness covered by this Guaranty, and it is specifically
acknowledged and agreed by Guarantor that reductions in the amount of
Indebtedness, even to zero dollars ($0.00), prior to written revocation of
this Guaranty by Guarantor shall not constitute a termination of this
Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs,
successors and assigns so long as any of the guaranteed indebtedness
remains unpaid and even though the Indebtedness guaranteed may from time to
time be zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof without notice or demand and without
lessening Guarantor's liability under this Guaranty, from time to time: (a)
prior to revocation as set forth above, to make one or more additional
secure or unsecured loans to Borrower, to tease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower. (b) to
alter, compromise renew, extend, accelerate, or otherwise change one or
more times the time for payment or other terms of the Indebtedness or any
part of the Indebtedness, including increases and decreases of the rate of
interest on the Indebtedness; extensions may be repeated and may be for
longer than the original loan term; ( c) to take and hold security for the
payment of this Guaranty or the indebtedness, and exchange, enforce, waive,
subordinate, fail or decide not to perfect, and release any such security
with or without the substitution of new collateral; (d) to release,
substitute, agree not to sue, or deal with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any manner
Lender may choose; (e) to determine how, when and what application of
payments and credits shall be made on the indebtedness; (f) to apply such
security and direct the order or manner of sale thereof including without
<PAGE>
limitation, any nonjudicial sate permitted by the terms or the controlling
security agreement or deed of trust, as Lender in Its discretion may
determine; (g) to sell, transfer, assign, or grant participation in all or
any part of the Indebtedness; and (h) to assign or transfer this Guaranty
in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (a) no representations or agreements of any kind
have bean made to Guarantor which would limit or quality in any way the
terms of this Guaranty; (b) this Guaranty is executed at Borrower's
request and not at. the request of Lender; (c) Guarantor has full power,
right and authority to enter into this Guaranty; (d) the provisions of this
Guaranty do not conflict with or result In a default under any agreement or
other instrument binding upon Guarantor and do not result in a violation
of any law regulation, court decree or order applicable to Guarantor; (e)
Guarantor has not and will not, without the prior written consent of
Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise
dispose of all or substantially all of Guarantor's assets, or any interest
therein; (I) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, end all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and
correct In all material respects and fairly present the financial condition
of Guarantor as of the dates the financial information Is provided; (g) no
material adverse change has occurred in Guarantor's financial condition
since the date of the most recent financial statements provided to Lender
and no event has occurred which may materially adversely affect Guarantor's
financial condition; (h) no litigation. claim, investigation.
administrative proceeding or similar action (including those for unpaid
taxes) against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower: and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition.
Guarantor agrees to keep adequately informed from such means of any fads,
events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that .absent a request
for information, Lender shall have no obligation to disclose to Guarantor
any information or documents acquired by Lender In the course of its
relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor
waives any right to require Lender (a) to continue lending money or to
extend other credit to Borrower; (b) to make any presentment. protest,
demand, or notice of any kind, Including notice of any nonpayment of the
indebtedness or of any nonpayment related to any collateral, or notice of
any action or nonaction on the part of Borrower. Lender, any surety,
endorser, or other guarantor in connection with the Indebtedness or in
connection with the creation of new or additional loans or obligations; (
c) to resort for payment or to proceed directly all at once against any
person, including Borrower or any other guarantor; (d) to proceed directly
against or exhaust any collateral held by Lender from Borrower, any other,
guarantor or any other person; (e) to pursue any other remedy within
Lender's power: or (I) to commit any act or omission of any kind, or at any
time, with respect to any matter whatsoever.
It now or hereafter (a) Borrower shall be or become insolvent, and (b) the
indebtedness shall not at all times until paid be fully secured by
collateral pledged by Borrower, Guarantor hereby forever waives and
relinquishes In favor of Lender and Borrower, and their respective
successors, any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so
that at no lime shall Guarantor be or become a "creditor" of Borrower
within the meaning of 11 U.S.C. section 547(b). or any successor provision
of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of
(a) any "one action" or "anti-deficiency" law or any other law which may
prevent Lender from brining any action, Including a claim for deficiency,
against Guarantor. before or after Lender's commencement or completion of
any foreclosure action, either judicially or by exercise of a power of
sale; (b) any election of remedies by Lender which destroys or otherwise
adversely affects Guarantor's subrogation rights or Guarantor's rights to
proceed against Borrower for reimbursement, including without any loss of
rights Guarantor may suffer by reason of any law limiting, qualifying, or
discharging the Indebtedness; (c) any disability or other defense of
Borrower, or any other guarantor, or of any other person. or by reason of
the cessation of Borrower's liability from any cause whatsoever, other than
payment In full in legal tender, of the indebtedness; (d) any right to
claim discharge of the indebtedness on the basis of unjustified impairment
of any collateral for the Indebtedness; (e) any statute of limitation, if
at any time any action or suit brought by Lender against Guarantor is
commenced there is out-landing Indebtedness of Borrower to Lender which is
not barred by any applicable statute of limitations, or (f) any defenses
given to Guarantors at law or in equity other than actual payment and
performance of the Indebtedness. It payment Is made by Borrower, whether
voluntarily or otherwise. or by any third party, or by any third party, on
the indebtedness and thereafter Lender is forced to remit the amount of
that payment to Borrower's trustee in bankruptcy or to any similar person
under any federal or state bankruptcy law or law for the relief of debtors,
the Indebtedness shall be considered unpaid for the purpose of enforcement
of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right whether
such claim, demand or right may be asserted by the Borrower, the Guarantor,
or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set tenth above is made with Guarantor's
full knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy
or law. If any such waiver Is determined to be contrary to any applicable
law or public policy, such waiver strait be effective only to the extent
permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of
setoff against the money, securities or other property of Guarantor given
to Lender by operation of law, Lender shall have, with respect to
Guarantor's obligations to Lender under this Guaranty and to the extent
permitted by law, a contractual possessory security interest in and a right
of setoff against, and Guarantor hereby assigns, conveys, delivers,
pledges, and transfers to Lender all of Guarantor's right title and
interest in and to, all deposits, money, securities and other property of
Guarantor now or hereafter in its possession of or on deposit with Lender,
whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right to setoff may be exercised without demand upon or notice
to Guarantor. No security interest or right of setoff shall be deemed to
have been waived by any act or conduct on the part of Lender or by any
neglect to exercise such right of setoff or to enforce such security
interest or by any delay in so doing. Every right of setoff and security
interest shall continue in full force and effect until such right of setoff
or security interest is specifically waived or released to an instrument in
writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether non existing or hereafter
created, shall be prior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes
insolvent. Guarantor hereby expressly subordinates any claim Guarantor may
have against Borrower, upon any account whatsoever, to claim that Lender
may now or hereafter have against Borrower. In the event of insolvency and
consequent liquidation of the assets of Borrower through bankruptcy, by an
assignment for the benefit of creditors, by voluntary liquidation, or
otherwise, the assets of Borrower applicable to the Lender. Guarantor does
hereby assign to Lender all claims which it may have or acquire against
Borrower or against any assignee or trustee, bankruptcy of Borrower,
provided however, that such assignment shall be effective only for the
purpose of assuring to Lender full payment to Lender of the Indebtedness.
If Lender so requests, any notes or credit agreements now or hereafter
evidencing any debts or obligations of Borrower, Guarantor shall be marked
with a legend that the same are subject to this Guaranty and shall be
delivered to Lender. Guarantor agrees, and Lender hereby is authorized, in
the name of Guarantor, from time to time to execute and the financing
statements and continuation statements and to execute such other documents
and to take such other actions as Lender deems necessary or appropriate to
perfect, preserve and enforce its right under the Guaranty.
<PAGE>
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Guaranty.
Amendment. This Guaranty, together with any Related Documents,
constitute; the entire understanding and agreement of the parties as to
the matters set forth in this Guaranty. No alteration of or amendment tot
his Guaranty shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable by Law. This Guaranty has been delivered to Lender and
accepted by Lender in the State of New York. If there is a lawsuit,
Guarantor agrees upon Lender's request to submit to the jurisdiction of
the courts of Broome County, State of New York. Lender and Guarantor
hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Guarantor against the other.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of New York.
Attorney's Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including reasonable attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this Guaranty. Lender may pay some else to help enforce this Guaranty,
and Guarantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's reasonable attorneys' fees and legal
expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (and
including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Guarantor
also shall pay all court costs and such additional fees as may be directed
by the court.
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile,
and,, except for revocation notices by Guarantor, shall be effective when
actually delivered or when deposited with a nationally recognized
overnight courier, or when deposited in the United States mail, first
class postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above or to such other addresses as either
party may designate to the other in writing. All revocation notices by
Guarantor shall be in writing and shall be effective only upon delivery to
Lender as provided above in the section titled "DURATION OF GUARANTY'. If
there is more than one Guarantor, notice to any Guarantor will constitute
notice to all Guarantors. For notice purposes, Guarantor agrees to keep
Lender informed at all times of Guarantor's current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than on Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one
or more of them. The words "Guarantor", Borrower" and "Lender" include
the heirs, successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a
court of competent jurisdiction finds any provision of this Guaranty to be
invalid or unenforceable as to any person or circumstance, such finds
shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not
necessary for Lender to inquire into the powers of Borrower or Guarantor
or of the officers, directors, partners, or agents acting or purporting to
act on their behalf and any indebtedness made or created in reliance upon
the professed exercise of such powers shall be guaranteed under this
Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty. No prior waiver by
Lender, nor any course of dealing between Lender and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Guaranty, the granting of such consent by Lender in
any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
GUARANTOR'S FINANCIAL STATEMENTS. Guarantor will furnish Lender with
Guarantor's signed personal financial statement certified by Guarantor as
being true and correct and a copy of Guarantor's Federal Income Tax return
with schedules. These financial statements will be furnished as soon as
possible but in no event later than 120 days after the end of each calendar
year. Guarantor agrees to promptly notify Lender of any substantial
adverse change in Guarantor's financial condition.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF
THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND
DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF
GUARANTY". NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS
GUARANTY EFFECTIVE. THIS GUARANTY IS DATED FEBRUARY 18, 1997.
GUARANTOR;
Name: /s/ David L. Koffman
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE 0F NEW YORK )
) ss
COUNTY OF NEW YORK )
On this day before me, the undersigned Notary Public, personally appeared
DAVID L. KOFFMAN, to me known to be the individual described in an who
executed the Commercial Guaranty, and acknowledged that he or she signed
the Guaranty of his or her free and voluntary act and deed for the uses
and purposes therein mentioned.
Given under my hand this 18th Day of February, 1997.
By: Danita V. Cade Residing at 150 E. 52nd St., 17th Floor, NY, NY 10022
Notary Public in and for the State of New York My Commission Expires 5/31/98
DANITA V CADE Notary Public State of New York No 41-4933504
Qualified in Queens County Commission Expires May 31, 1998
<PAGE>
EXHIBIT 10(34)
--------------
SUBORDINATED PROMISSORY NOTE
$1,100,000.00 March 12, 1997
FOR VALUE RECEIVED, the undersigned Rosalco, Inc., a Delaware
corporation (the "Maker"), hereby promises to pay to Jayark corporation, (the
"Holder"), at 300 Plaza Drive, Vestal, New York 13850, or at such other place
as the Holder may from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of ONE MILLION ONE HUNDRED THOUSAND DOLLARS ($1,100,000.00), together with
interest on such principal sum at the rate of eight percent (8%) per annum by
payment of interest only on the first day of each month commencing April 1,
1997.
The total principal outstanding and accrued and unpaid interest shall
be due and payable on the earlier of (i) demand (provided that no demand may be
made prior to May 30, 1997) or (ii) the calling for payment, whether by
acceleration, demand, default, maturity or otherwise of that certain Loan and
Security Agreement (All Assets), dated as of April 29, 1996 made by State Street
Bank and Trust Company, as lender, and Rosalco, Inc., as borrower. Interest
shall be calculated on the basis of actual days elapsed and a 360-day year.
The principal and accrued interest under this Note may be prepaid by
the Maker, in whole or in part, without premium or penalty.
The right to receive payments under this Note is and shall be
subordinated to the prior payment in full and in cash of all amounts payable
under the Senior Indebtedness (as hereinafter defined) of Maker (including
interest thereon) from time to time outstanding, and pursuant to the
Subordination Agreement to be executed simultaneously herewith between the
lender of the Senior Indebtedness and the Holder of this Note. No payment or
prepayment of any amount of principal or interest under this Note shall be made
without the written consent of the Senior Lender (as hereinafter defined). Upon
any dissolution, winding up or total or partial liquidation or reorganization of
Maker, the Senior Indebtedness shall be paid in full in cash or cash
equivalents, before the Holder shall be entitled to receive any payment of
principal of or interest on this Note or any
<PAGE>
distribution of any assets or securities. If, notwithstanding the
foregoing, the Holder shall receive any payment under this Note at a time when
such payment is prohibited or before the payment in full of all Senior
Indebtedness of Maker, then such payment or distribution shall be received and
paid over or delivered to the holders of the Senior Indebtedness to the extent
necessary to pay in full the principal of and interest on such Senior
Indebtedness in accordance with its terms. "Senior Indebtedness" shall mean all
obligations of Maker to State Street Bank and Trust Company (the "Senior
Lender") intended to be executed simultaneously herewith.
This Note shall, at the option of the Holder, become immediately due
and payable upon the occurrence of any of the following events:
a. failure of the Maker to pay the principal or interest due
under this Note, after 10 days notice to the Maker;
b. insolvency of the Maker or its inability to pay debts as
they mature;
c. voluntary application by the Maker to a tribunal for the
appointment of a trustee or receiver of any substantial part of the assets of
the Maker or the voluntary commencement of proceedings by the Maker (other than
for voluntary liquidation and/or dissolution of a subsidiary of the Maker) with
respect to the Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or other liquidation law of any
jurisdiction;
d. application to such tribunal or commencement of such
proceedings against the Maker by a third party, and the Maker indicates its
approval, consent or acquiescence, or an order is entered appointing a receiver
or trustee or adjudicating the Maker bankrupt or insolvent or approving the
petition in any such proceeding, and such order remains in effect for ninety
(90) days; or
e. any conveyance of all or substantially all of the assets of
Maker;
This Note is executed and delivered by Maker as described in a
Forbearance and Modification Agreement among the Maker, Jayark corporation, AVES
Audio visual Systems, Inc. and the Senior Lender. (the "Agreement").
<PAGE>
Presentment, protest, notice of nonpayment and protest and all
other similar notices are hereby waived by the Maker.
In any action for collection of this Note, the court shall award
costs and expenses in the action, including reasonable attorneys' fees, to the
prevailing party. If the positions of the parties are partially sustained, the
court may allocate the costs and expenses proportionately as it deems equitable,
or not at all.
This Note may not be modified orally. Any notice relating to this
Note shall be in writing and effective only when it has been delivered as
required for notices under the Asset Purchase Agreement. This Note shall be
interpreted and the rights and liabilities of the parties hereto determined in
accordance with the laws of the State of Illinois applicable to agreements made
and to be performed entirely within such State. The provisions of this Note
shall be binding upon the Maker and its successors and assigns, and shall inure
to the benefit of the Holder and its legal assigns.
Intending to be bound, the Maker has caused this Note to be executed
by its duly authorized President, as of the day and year first above written.
Rosalco, Inc.
Name: /s/ David L. Koffman
Title: Chairman
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<NAME> JAYARK CORPORATION
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 484
<SECURITIES> 0
<RECEIVABLES> 6,194
<ALLOWANCES> 636
<INVENTORY> 8,443
<CURRENT-ASSETS> 14,763
<PP&E> 2,165
<DEPRECIATION> 1,439
<TOTAL-ASSETS> 15,784
<CURRENT-LIABILITIES> 12,889
<BONDS> 0
0
0
<COMMON> 2,766
<OTHER-SE> (1,285)
<TOTAL-LIABILITY-AND-EQUITY> 15,784
<SALES> 38,914
<TOTAL-REVENUES> 38,914
<CGS> 31,932
<TOTAL-COSTS> 31,932
<OTHER-EXPENSES> 7,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 871
<INCOME-PRETAX> (1,256)
<INCOME-TAX> 320
<INCOME-CONTINUING> (1,576)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,576)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
