<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from _______ to _______
Commission file number 0-12567
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GUEST SUPPLY, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 22-2320483
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
720 U.S. Highway One
North Brunswick, New Jersey 08902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 908-246-3011
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
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(Title of class)
Indicate by a check mark whether the registrant (1) has filed all reports
required 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 as 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
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Indicate by check mark if disclosure of delinquent filers, pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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2
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value as of December 11,
1995 . . . . . . . . . . . . . . . . . . . . . . $139,903,313
Indicate the number of shares outstanding of each of the issuer's classes
of capital stock, as of the latest practicable date.
Common Stock, without par value, as of
December 11, 1995 . . . . . . . . . . . . . . . 6,146,335
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are incorporated by
reference herein and the Part of the Form 10-K into which the document is
incorporated: Part III incorporates information by reference from portions of
the Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders to
be held on March 6, 1996.
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3
PART I
ITEM 1. BUSINESS.
General
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The Company operates principally as a manufacturer, packager and
distributor of personal care guest amenities, housekeeping supplies, room
accessories and textiles to the lodging industry. The Company also
manufactures and packages personal care products for major consumer
products and retail companies. Personal care guest amenity items include
shampoo, hair conditioner, soap, bath gel, hand and body lotion, mouthwash,
shoe care and sewing kits, shower caps, soap dishes and decorative
containers and trays. The Company makes available more than 30 amenity
items in a variety of brands in Company-designed packaging options.
Housekeeping supplies for the lodging industry consist primarily of paper
products, cleaning chemicals and cleaning implements. Room accessories
include such items as wastebaskets, glassware, stationery, laundry bags,
pens, shower curtains and signs. The Company distributes more than 100
different housekeeping products and room accessories. Textiles include
sheets, towels and bedding. The products manufactured and packaged for its
consumer products and retail customers include health and beauty aid items
such as shampoo, hair conditioner, hand and body lotions, bath additives,
oral hygiene products and sun screens.
The Company has pursued a strategy designed to enhance its
leadership position in the lodging supply industry by becoming a full
service company with a nationwide network of Company-operated distribution
centers which provide prompt delivery to hotel properties. Each center
consists of a warehouse and sales office and is staffed by sales personnel
who call on customers to obtain orders and provide customer service.
The Company's housekeeping and room accessory product line
consists of over 100 different disposable products which are generally
available to the Company from several different manufacturers and
distributors of these products.
The Company's amenity product lines consist of customized amenity
programs designed by the Company for hotel chains ("customized corporate
amenity programs") or for individual lodging establishments ("customized
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4
individual amenity programs") and uncustomized amenities and accessories.
Customized corporate amenity programs consist of one or more
items which are presented in Company-designed packaging. This packaging
displays the corporate name or logo of the hotel chain or lodging
establishment for which the program is designed.
Customized corporate amenity programs are designed for hotel
chains, such as Choice International, The Four Seasons, Holiday Inns,
Howard Johnson, Hyatt Hotels, Marriott Corporation, Ramada and Wyndham
Hotels and may consist of up to 20 amenity and accessory items. In some
cases, purchasing decisions for these programs are made by the central
buying organization for the chain, and in other cases, such decisions are
made by individual members or franchisees of the chain.
Customized individual amenity programs typically consist of six
to 12 amenity and accessory items. Individual programs generally involve
more elaborate designing and packaging, in an attempt to accent the guest
room decor and the marketing image of the particular lodging establishment.
The Company has designed individual amenity programs for such lodging
establishments as The Arizona Biltmore Hotel in Phoenix, Arizona, Merv
Griffin's Resorts in Atlantic City, New Jersey, Boston Harbor Hotel in
Boston, Massachusetts, Nikko Hotels International in New York, New York and
The Registry Hotels in Dallas, Texas.
The Company sells amenities in uncustomized color coordinated
packaging under such brand names as Finesse(R), Jhirmack(R) and Jergens(R).
Some of these brand name products are also sold as part of customized
amenity programs. In addition, the Company markets its own lines of guest
amenity lines under the "Heritage Collection (TM)" and "Botanicals (TM)"
labels.
The Company's lodging industry customers consist of hotel chains
(including supply divisions), individual members or franchisees of hotel
chains, independent hotel properties, management companies and cruise ship
lines. The Company distributes its products to approximately 11,000
customers worldwide. Its present customers include hotel properties owned
or managed by 12 of the 15 largest lodging chains in the United States.
Six of these chains have customized corporate amenity programs designed by
the Company.
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5
The Company's strategy is to increase its penetration of the
lodging industry at all levels and to become a "one-stop shopping" supplier
to lodging establishments. In order to increase operating efficiencies and
responsiveness to customer needs, the Company has become a more vertically
integrated supplier of customized and uncustomized amenity programs by
enhancing its design capability, expanding its distribution network and
increasing its manufacturing capabilities. In addition, the Company sells
disposable housekeeping products, room accessories and textiles in order to
provide a complete range of products to the lodging industry.
As part of this strategy, the Company, through its manufacturing
subsidiary Guest Packaging, Inc., manufactures and packages substantially
all of its liquid products such as shampoos, hair conditioners, hand and
body lotions and bath gels, as well as a portion of its bar soap
requirements. The Company's manufacturing operations allow the Company to
provide both the service and wide variety of products required by the
lodging industry. In fiscal 1994, the Company began a program to expand
its manufacturing facility and to increase its production capability and
capacity. With the exception of storage tanks that will be installed in
the second quarter of fiscal 1996, the plant expansion project is
essentially complete. See "Manufacturing, Packaging and Shipping" below.
The Company's Breckenridge-Remy Co. ("Breckenridge") subsidiary
also contributes to the Company's strategy of vertical integration through
an improved and expanded product line and national distribution capability.
In addition to personal care products and room accessories, Breckenridge
markets a line of paper products, cleaning chemicals, glassware,
housekeeping items and textiles. Breckenridge's business includes a direct
sales force and a network of 11 distribution centers. This distribution
network provides the Company with the ability to warehouse products in
close proximity to the lodging properties served by the Company. In
addition, each distribution center is staffed with a direct sales force who
call on customers to obtain sales orders and provide direct customer
service. Breckenridge currently has an 84-person sales staff. Management
believes that the Company's product line and distribution capability has
provided improved service to all of its customer groups.
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6
Products
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The Company markets and sells a broad range of personal care,
housekeeping and disposable products for use in lodging establishments.
The Company's amenity product line consists of more than 30 different
products, including shampoo, hair conditioner, soap, bath gel, hand and
body lotion, mouthwash, showercaps, soap dishes, shoe shine and sewing kits
and decorative containers and trays. Six amenity products account for a
substantial majority of the Company's sales of customized and uncustomized
packaging options. The Company's housekeeping and room accessory product
line consists of over 100 products including paper products, cleaning
chemicals, cleaning implements, textiles (such as sheets, towels and other
bed linens) and other housekeeping items and accessories such as
wastebaskets, glassware, stationery, laundry bags, pens, shower curtains
and signs. The Company believes that its range of products for the lodging
industry is one of the most extensive available from a single source in the
United States.
Customized amenity programs consist of one or more items which
are packaged and presented in Company designed bottles, boxes, tubes and
wrappings. The packaging and wrappings display the corporate name or logo
of the hotel chain or lodging establishment for which the program is
designed. Customized corporate amenity programs are designed for hotel
chains. Customized individual amenity programs typically consist of six to
12 amenity and accessory items. These programs generally involve more
elaborate design and packaging, in an attempt to accent the guest room
decor and the marketing image of the particular lodging establishment.
The sales price per room stay for an amenity program varies with
the number of items selected by the customer. A customized individual
amenity program typically contains several items and is priced from $1.50
and up per room stay. Because customized corporate amenity programs and
uncustomized amenity programs also vary widely in number of items, the cost
of such programs also vary widely.
The Company sells national brand name products, as well as
generic and the Company's own private label products and accessories.
During the fiscal year ended September 30, 1995, less than 10% of the
Company's sales were attributable to sales of national brand name products
which include Finesse(R), Jhirmack(R) and Jergens(R).
Guest Supply also markets guest amenity programs under the
"Institute Swiss(R)" label and under Guest Supply's
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7
"Botanicals (TM)," "Heritage Jefferson Floral (TM)," "Heritage American
Country (TM)" and "Heritage Yankee Stripes (TM)". These programs were
designed by the Company as an alternative to customized amenity programs
with inventory available for immediate delivery.
The Company has entered into arrangements with certain
manufacturers of national brand name products pursuant to which the Company
has been granted the exclusive right to market certain products to the
lodging industry in the United States. Certain of these manufacturers have
reserved the right to approve the design of the packaging of their products
and to monitor quality control with respect to the manufacturing and
packaging processes. None of such exclusivity arrangements obligates the
Company to purchase products from any one supplier or to market any brand
exclusively.
The Company believes that there are adequate alternative sources
of supply available for all products it currently distributes. Moreover,
the Company believes that its competitive success is dependent more on the
quality of the Company's services, design capability and the selection and
availability of products, than on the availability of any one particular
brand name product or group of products.
Design, Marketing and Sales
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In the view of the Company, an important aspect of its marketing
approach and competitive position is the capability of its professional
design staff to assist customers in designing customized packaging and in
the coordination and presentation of their amenity programs. In addition,
the Company believes that its position in the industry is in part
attributable to the Company's ability, on a single source basis, to design,
manufacture, package and distribute complete customized amenity programs
for its customers which meet the customers' corporate image, product and
budgetary requirements and which include brand name products with a
reputation for high quality and wide-spread consumer acceptance.
The design of amenity programs takes into account five essential
elements: packaging components (size, shape and type of container),
packaging graphics (colors and logos), brand identity (use of national or
generic brands), product mix (which amenity items to present) and
presentation method (tray, placemat, wicker basket or decorative tin). The
Company's design personnel, who include graphic, industrial and mechanical
artists and packaging engineers, are responsible for creating packages,
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8
selecting colors and applying graphic designs to accent guest room decor
and for the production of finished engineering drawings and materials
specifications. The Company's design personnel consult directly with the
Company's customers on all aspects of the design of guest room amenities,
at times leading to unique and proprietary packaging and presentations of
amenity programs. The Company's design process can vary in length,
depending on the customer's needs and complexity of the program. Once a
design is accepted by the customer and a purchase order is received, the
initial shipment is typically made within ten to 14 weeks and the balance
of the shipment is generally delivered over the next 12 to 24 months.
The Company employs direct sales personnel who consult regularly
with the Company's existing customers and solicit new customers. In
addition, the Company employs in-house sales persons responsible for
telemarketing sales and customer service. Further, the senior management
of the Company devotes a substantial amount of time to sales activities, as
well as to the overall coordination of customers' amenity programs and the
development of new concepts to enhance the effectiveness of the programs.
The Company believes that prompt, professional and responsive customer
service is an important element in attracting new customers and satisfying
existing ones.
In addition, the Company maintains regional distribution centers
throughout the United States. This distribution network consists of 11
regional warehouses and a central facility in North Brunswick, New Jersey.
These distribution centers provide the Company with the ability to deliver
manufactured and purchased products to the lodging properties served by the
Company throughout the United States. In addition, each regional
distribution center is staffed with route salespersons who call on
customers to obtain sales orders and provide direct customer service.
The Company engages in direct mail solicitations. In addition,
the Company attends most major trade conventions and exhibits its product
lines at such events.
During the fiscal year ended September 30, 1995, sales to two
customers accounted for 11.3% and 10.8%, respectively, of the Company's
revenues.
The Company's consolidated sales included approximately
$4,882,000 by foreign subsidiaries for the fiscal year ended September 30,
1995. The Company currently has subsidiaries located in England, New
Zealand and Canada.
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9
At September 30, 1995 and September 30, 1994, the Company had
unfilled orders for its products which aggregated approximately $14,000,000
and $12,307,000, respectively. Most of the amount for fiscal 1995 is
expected to be shipped by September 30, 1996. Unfilled orders are not
necessarily an important indicator of total future sales, since a
substantial portion of the Company's revenues are attributable to sales of
disposable housekeeping products and accessories, uncustomized amenity
products and corporate amenity programs which are ordered for delivery on a
current basis and for which no significant unfilled orders exist. In
addition, certain orders are subject to further confirmation.
Substantially all of the Company's sales are to customers to whom
the Company extends credit. The Company's credit policy generally requires
payment in full within 30 days and allows discounts in certain cases for
early payment.
Manufacturing, Packaging and Shipping
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Most of the amenity products marketed and distributed by the
Company are sold in packaging and wrappings designed to customer
specifications by the Company and are customized with the name of the
particular hotel, in the case of customized individual amenity programs, or
the corporate logo of the lodging chain in the case of customized corporate
amenity programs, and also display the brand name of the product, where
appropriate. In some cases, the shapes of the containers are also designed
specifically to the customer's requirements. Packaging components include
bottles, boxes, bags, packets, tubes and various other containers that come
in a wide range of sizes and shapes.
The Company's manufacturing facility is located in Rahway, New
Jersey. This facility has approximately 68,000 square feet of production
space and is located in close proximity to a 120,000 square foot component
and raw material warehouse. The plant has 20 filling lines including 10
highly automated lines which the Company believes incorporate the most
efficient technology presently available. Each line is equipped to apply
front, back, and full wrap labels, and video jets for batch and date coding
of each container. A variety of reactors or compounding vessels with
capacities ranging from 100 to 6,000 gallons are located at this facility
as well as 180,000 gallons of liquid bulk storage vessels. The facility
also includes an analytical and development laboratory.
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10
In fiscal 1994, the Company began a program to expand its
manufacturing facility and to increase its production capability and
capacity. As part of this expansion project, 18,000 square feet of
manufacturing space was added to the Company's facility in Rahway, New
Jersey. Additional mixing and storage tanks were installed increasing
compounding capacity by more than 350%. The Company installed four new
high-speed filling lines which are highly automated and provide the Company
with the capacity and capability to manufacture retail size health and
beauty aid products in high volume. The completion of this expansion
project has taken approximately six months longer than planned due in part
to delays in obtaining construction permits and the receipt of processing
equipment from Europe. As a result of these delays, the Company has had to
operate on Saturdays and Sundays in order to meet customer requirements.
This has resulted in overtime expense which together with other
manufacturing inefficiencies reduced gross margin. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" below.
The expansion project is essentially complete, but the Company's
manufacturing operations continue to operate below planned profitability
levels. Difficulties inherent in receiving and stocking raw materials and
shipping raw materials to the Company's manufacturing facility from
temporary multiple warehouse locations are creating manufacturing
inefficiencies. Although the Company has a new 225,000 square foot
warehouse under construction, it is presently operating out of four
temporary raw materials warehouses necessitated by the rapid growth the
Company has experienced in its manufacturing operations. In the second
quarter of fiscal 1996, the Company plans to lease an additional interim
facility which the Company believes will provide adequate space to store
raw materials so that they can be located, loaded and shipped to meet
production schedules. The Company believes this additional interim
warehouse, in conjunction with improved planning systems, will resolve
material flow problems and improve efficiency. The Company believes that
with the new equipment and systems, it will be in a position to improve
efficiency in the production of high-quality health and beauty aids and
pharmaceutical products thereby providing the Company with what it believes
will be a competitive advantage. See "Item 2. Properties" below and "Item
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" below.
Currently, the Company compounds and fills substantially all of
its liquid products. Compounding
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involves the batch mixing of components such as detergents, conditioners,
dyes and fragrances in accordance with proprietary formulas. Filling
entails the transfer of finished products from bulk to the unit of use
containers in which they are distributed. Sales of liquid products
constituted approximately 40% of the Company's amenity sales for the fiscal
year ended September 30, 1995.
In addition, the Company utilizes its manufacturing facility to
compound, fill and package a variety of products used by consumer product
companies and retailers. These are principally health and beauty aid items
such as shampoo, hair conditioner, hand and body lotions, bath additives,
oral hygiene products and sun screens. In some instances the Company also
formulates products for its customers. The Company believes that these
services, among others, are attractive to these companies since most lack
production expertise or the costs of providing these functions in-house
could be prohibitive.
The Company's other products such as soaps, shower caps, soap
dishes, shoe shine and sewing kits, toothpaste, toothbrushes, razors,
shaving creams, paper products, cleaning chemicals, cleaning implements,
glassware and other accessories are produced by independent manufacturers.
Soaps are manufactured in accordance with the Company's specifications,
including colors and fragrances, from raw materials furnished by suppliers
selected by the Company. Additionally, the Company manufactures a portion
of its bar soap requirements, which it sells to the lodging industry, at
its facility in Rahway, New Jersey.
The bottles and other packaging components for the Company's
products are manufactured by independent suppliers in accordance with the
Company's or the Company's customers' specifications. In certain
instances, these independent suppliers utilize equipment and molds owned by
the Company. In certain instances, the Company also utilizes the services
of companies which decorate the bottles and other packaging components
prior to delivery to the Company or to its contract packagers.
The Company usually orders the raw materials for its products in
bulk quantities directly from the manufacturers of such products for
delivery to its manufacturing facilities or to the facilities of the
Company's contract packagers. This procedure permits the Company to assure
adequate supplies of product components and to benefit from quantity
discounts and other economies of scale.
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Substantially all of the Company's finished products are shipped
to the Company's warehouse facilities for later shipment to its customers.
See "Item 2. Properties" below. In the view of the Company, an important
aspect of its marketing approach and competitive position is its capacity
for localized distribution. The ability to store and distribute both
manufactured and purchased products in close proximity to the lodging
properties served by the Company is a service which the Company believes
will assist in providing improved service to its existing customer groups
and in attracting new customers.
Quality Control
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The Company believes that maintaining the highest standards of
quality in all aspects of its operations is an important aspect of its
ability to generate customer confidence and to maintain its competitive
position. To that end, the Company carries and markets only products that
have a reputation for quality and that meet the Company's own quality
standards.
The Company sends its representatives from time to time to the
facilities of its suppliers to inspect and approve the manufacturing and
packaging of all products prior to acceptance by the Company for delivery
to customers. In addition, certain suppliers of materials to the Company
also approve the Company's manufacturing procedures and inspect the
packaged products to insure compliance with their own quality standards.
The Company has adopted strict quality assurance systems and
procedures which it regularly reviews and revises with a view to
maintaining the consistency of the quality of its products. The Company
adheres to all applicable filling and packaging regulations of the U.S.
Food and Drug Administration, as well as others which are not technically
applicable to the Company's operations.
Proprietary Rights
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Although the Company follows a policy of protecting its
proprietary rights to its products and designs to the full extent legally
permissible, it does not believe that its business as a whole is materially
dependent upon such protection. Such protection has significance primarily
in the Company's marketing efforts. The Company has received protection
under federal trademark and copyright laws for certain names used in its
business, including Guest Supply(R), L'avenie(R), Guest Design(R),
Whispermint (TM), Alliance (TM), Evergreen (TM), Botanicals (TM), and the
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Heritage Collection (TM). The Company, from time to time, applies for
copyright and design patent protection for the designs of certain bottles
and other packaging components designed by the Company.
In addition, pursuant to arrangements with the producers of its
packaging components, the Company has obtained title to the molds which it
has developed for the production of certain bottles and other packaging
components. Many of these arrangements restrict these companies from using
the Company's molds for anyone other than the Company's customers without
the Company's consent. The aggregate net book value of all molds owned by
the Company at September 30, 1995 was approximately $1,093,000.
Competition
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The business of supplying disposable products, amenities and
accessories to the lodging industry is highly competitive. Important
competitive factors include price, product range, distribution capability
and product quality and design. The Company competes with companies which
offer customized amenity programs and broad lines of customized and
uncustomized amenity and personal care products, as well as large
distributors of housekeeping and related products. Some of these
competitors are large diversified multinational companies with extensive
production facilities and sales and marketing staffs and substantially
greater financial resources than the Company.
The Company believes that it can compete effectively with these
companies in view of the variety and quality of products it offers, the
scope and efficiency of customer services, its distribution capability and
price. In addition, the Company believes that its ability to offer
professional and sophisticated design assistance in formulating customized
amenity programs and products for customers enhances its competitive
position and distinguishes the Company from most of its competitors.
Personnel
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As of September 30, 1995, the Company had approximately 927
employees. None of the Company's employees is covered by a collective
bargaining agreement, and the Company considers its relationship with its
employees to be excellent.
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Executive Officers
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The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Age at
Name Position with the Company September 30, 1995
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<S> <C> <C>
Clifford W. Stanley President, Chief Executive 49
Officer and Director
James H. Riesenberg Vice President - Operations 60
Teri E. Unsworth Vice President - Market 44
Development and
Director
Paul T. Xenis Vice President - Finance 35
and Secretary
</TABLE>
Clifford W. Stanley has been President and Chief Executive
Officer of the Company since January 1988 and a director of the Company
since January 1987. From April 1986 to January 1988, he was Executive Vice
President and Chief Financial Officer of the Company. Mr. Stanley joined
the Company in August 1985 as Vice President - Finance. From 1984 until
joining the Company, Mr. Stanley was Vice President and Chief Operating
Officer for Transfer Print Foils, Inc. (hot stamping foils). During the
period from 1982 to 1984, he was Vice President of Finance for the Permacel
Division of Avery International. From 1979 through 1982, Mr. Stanley was a
Vice President of Johnson & Johnson.
James H. Riesenberg has been Vice President - Operations of the
Company since September 1985. Mr. Riesenberg was Vice President -
Operations of Almay Cosmetics, Inc., a division of Playtex Corporation,
from March 1984 until joining the Company. During the period from 1981
through 1984, Mr. Riesenberg was Vice President - Operations of Max Factor,
Inc., another division of Playtex Corporation.
Teri E. Unsworth has been Vice President - Market Development
since joining the Company in May 1985 and a director of the Company since
November 1989. Prior thereto, Ms. Unsworth was employed by Vidal Sassoon,
Inc. as Director of Sales from 1979 to 1981, as Product Director from 1981
to 1983 and as Group Product Director from 1983 to 1985.
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Paul T. Xenis has been Vice President - Finance since May 1994.
From April 1984 to May 1994, he was Corporate Controller of the Company.
Prior to joining the Company, Mr. Xenis was a senior accountant with KMG
Main Hurdman (now part of KPMG Peat Marwick LLP) from 1981 to 1984. Mr.
Xenis also serves as Secretary of the Company.
ITEM 2. PROPERTIES.
The Company's executive offices and principal operating
facilities are located in North Brunswick, New Jersey, where the Company
leases approximately 17,300 square feet of space in an office building.
The Company's lease provides for an annual rental of approximately
$186,000. The lease expires on August 31, 1996 and provides for one three-
year renewal option.
The Company also leases a 113,000 square foot warehouse and
distribution facility in North Brunswick, New Jersey at an annual rental of
approximately $395,500. The lease expires in November 1996 with an option
to terminate earlier.
In connection with its manufacturing and packaging operations,
the Company currently leases a manufacturing facility in Rahway, New Jersey
and a warehouse facility in Avenel, New Jersey. The manufacturing facility
consists of approximately 68,000 square feet of space. The lease for this
facility provides for an annual rental of approximately $73,000 and expires
in 2010. See "Item 1. Business -Manufacturing, Packaging and Shipping"
above. This lease may be cancelled by the Company on 90 days' notice. The
Avenel warehouse facility is approximately 120,000 square feet of space
with an annual rental of approximately $456,000. The lease expires in
November 1996 with an option to terminate earlier. Additionally, the
Company leases four temporary raw materials warehouses on a month-to-month
basis in New Jersey for an aggregate monthly rental of approximately
$48,000.
The Company has entered into an agreement to have a 225,000
square foot distribution and warehouse facility built to its specifications
in New Jersey, which will consolidate all of its current New Jersey
warehousing facilities. This lease provides for an initial annual rental
of approximately $926,000 and expires in 2006. Occupancy is expected in
September 1996.
As part of its regional distribution strategy, the Company
currently also leases 11 regional warehouses. The
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warehouses range in size from 12,000 square feet to 60,000 square feet and
are located in Ohio (three), Michigan, Indiana, Texas, Florida, Illinois,
Maryland, California and Georgia. The leases for these warehouses have
expiration dates through 1999 and the aggregate annual rental is
approximately $1,119,000.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is party to certain claims, suits
and complaints which arise in the ordinary course of business. Currently,
there are no such claims, suits or complaints which, in the opinion of
management, would have a material adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
Not applicable.
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17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the National Association
of Securities Dealers National Market System. The stock is quoted on the
National Association of Securities Dealers Automated Quotation System under
the symbol GEST. The table below sets forth the high and low market prices
during each of the last two fiscal years. The approximate number of
holders of the Company's common stock at September 30, 1995 was 423. No
cash dividends have been declared on the common stock since the Company was
organized.
On October 24, 1995, the Company effected a three-for-two split
of its common stock in the form of a stock dividend. All per share market
price information set forth below has been adjusted for this stock split.
Market Price Range
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Year Ended September 30, 1995
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<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
First Quarter $12.83 $10.25
Second Quarter 14.75 11.58
Third Quarter 17.67 13.58
Fourth Quarter 23.17 16.75
</TABLE>
Year Ended September 30, 1994
-----------------------------
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
First Quarter 9.33 6.67
Second Quarter 13.00 8.75
Third Quarter 12.17 9.67
Fourth Quarter 13.83 11.17
</TABLE>
On December 11, 1995, the closing sales price for the Company's
common stock was $23.125 per share.
<PAGE>
18
ITEM 6. SELECTED FINANCIAL DATA.
Years Ended September 30,
In thousands except per share amounts
-------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales $159,450 $116,325 $97,851 $86,047 $78,362
Gross Profit 37,365 30,751 26,804 22,531 20,608
Selling, General and
Administrative Expenses 28,409 24,858 22,865 20,437 18,795
Operating Income 8,956 5,893 3,939 2,094 1,813
Income Before
Extraordinary Item/1/ 5,090 4,117 1,412 400 191
Net Income 5,090 4,117 2,243 840 444
Working Capital 27,475 22,689 21,810 21,002 19,122
Total Assets 95,607 72,967 55,621 54,383 51,424
Total Long-term
Liabilities 22,866 16,778 13,793 15,488 14,053
Total Liabilities 56,498 39,722 26,960 28,063 25,935
Total Equity 39,109 33,245 28,661 26,320 25,489
Common Share Data/2/
--------------------
Weighted Average Shares
and Share Equivalents
Outstanding 7,293 7,041 6,470 6,410 6,210
Earnings Per Share
Before Extraordinary
Item/1/ $ 0.70 $ 0.58 $ 0.22 $ 0.06 $ 0.03
Earnings Per Share $ 0.70 $ 0.58 $ 0.35 $ 0.13 $ 0.07
Book Value Per Share $ 6.36 $ 5.50 $ 4.82 $ 4.49 $ 4.37
</TABLE>
/1/ Extraordinary item results from the utilization of net operating loss
carryforwards.
/2/ On October 24, 1995, the Company effected a three-for-two split of
its common stock in the form of a stock dividend. All common share data
have been adjusted for this stock split.
<PAGE>
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Fiscal 1995 Compared to Fiscal 1994
-----------------------------------
Sales for the year ended September 30, 1995 increased by 37.1% or
$43,125,000 to $159,450,000 from $116,325,000 for the year ended September
30, 1994. Revenues generated from hotel customers increased $32,548,000 or
31.3% to $136,372,000. This gain is the result of selling additional
products to existing customers, the addition of new customers, an increase
in the sales of textiles and the introduction of new items to the Company's
product line. The increase in sales attributable to new products and the
addition of new customers is a result of the Company's continuing efforts
to expand its product line and to emphasize its sales and marketing efforts
to increase sales to current customers and sell products to new customers.
In addition, according to statistics published by trade publications, room
demand increased in 1995, which Management believes further contributed to
the Company's sales increase.
Sales to consumer product companies and retailers were
$23,078,000 compared to $12,501,000 for the year ended September 30, 1994.
The increase of $10,577,000 or 84.6% was primarily due to increased sales
to existing customers. The Company attributes this increase to the service
and capabilities it provides to its customers.
Gross profit for the year ended September 30, 1995 was
$37,365,000 or 23.4% of sales compared to $30,751,000 or 26.4% for the year
ended September 30, 1994. The decrease in gross profit as a percentage of
sales was due primarily to inefficiencies experienced at the Company's
manufacturing facility. These inefficiencies are a result of delays in
completing the Company's plant expansion project and subsequent materials
flow problems. Although the plant expansion is now essentially complete,
the improvements that are being made in the material storage and planning
systems will not be fully implemented until the latter part of the second
quarter of fiscal 1996. See "Item 1. Business -Manufacturing, Packaging
and Shipping" above. The increase in textiles product sales also
contributed to the decrease in gross profit as a result of the lower gross
profit associated with textiles when compared with the Company's other
products. During 1995, the cost of pulp, cotton, tallow and plastic resins
increased. This resulted in the Company experiencing cost increases in
cartons, bottles, textiles and soap base. Although most of these cost
increases were passed through to the Company's customers,
<PAGE>
20
gross margin declined slightly as a result of these cost increases.
Selling, general and administrative expenses were $28,409,000 or
17.8% of sales for the year ended September 30, 1995 compared to
$24,858,000 or 21.4% for the prior year. The increase of $3,551,000 was
primarily due to increased payroll and payroll related costs. The decrease
in selling, general and administrative costs as a percentage of sales was
the result of increased sales volume combined with the effects of the
Company's cost containment program.
The effective tax rate increased to 35.2% in fiscal 1995 from
15.8% in fiscal 1994. This increase is the result of a reduction in the
utilization of net operating loss carryforwards.
Fiscal 1994 Compared to Fiscal 1993
-----------------------------------
Sales for the year ended September 30, 1994 increased by 18.9% or
$18,474,000 to $116,325,000 from $97,851,000 for the year ended September
30, 1993. Revenues generated from hotel customers increased $16,124,000 or
18.4% to $103,824,000. This gain is the result of selling additional
products to existing customers, the addition of new customers and the
introduction of textiles and other new items to the Company's product line.
The increase in sales attributable to new products and the addition of new
customers is a result of the Company's continuing efforts to expand its
product line and to emphasize its sales and marketing efforts to increase
sales to current customers and sell products to new customers. According
to statistics published by trade publications, room demand increased
approximately 4% during 1994. Management believes that this factor also
contributed to the increase in the Company's sales.
Sales to consumer product companies and retailers were
$12,501,000 compared to $10,151,000 for the year ended September 30, 1993.
The increase of $2,350,000 or 23.2% was primarily due to increased sales to
existing customers.
To accommodate growth in the Company's sales, the Company began
an expansion program in the third quarter of fiscal 1994 to increase its
production capabilities and the size of its manufacturing facility. When
completed, the Company believes that it will be in a position to improve
efficiency in the production of high quality health and beauty aids and
pharmaceutical products thereby providing the Company with what it believes
will be a competitive advantage.
<PAGE>
21
Gross profit for the year ended September 30, 1994 was
$30,751,000 or 26.4% of sales compared to $26,804,000 or 27.4% for the year
ended September 30, 1993. The decrease in gross profit as a percentage of
sales was due primarily to inefficiencies experienced at the Company's
manufacturing facility as a result of the ongoing expansion project. The
addition of textiles to the Company's product line also contributed to the
decrease as a result of the lower gross profit associated with this product
when compared with its other products.
Selling, general and administrative expenses were $24,858,000 or
21.4% of sales for the year ended September 30, 1994 compared to
$22,865,000 or 23.4% for the prior year. The increase of $1,993,000 was
primarily due to increased payroll and payroll related costs. The decrease
in selling, general and administrative costs as a percentage of sales was
the result of increased sales volume combined with the effects of the
Company's cost containment program.
The effective tax rate decreased to 15.8% in fiscal 1994 from
50.2% in fiscal 1993. This decrease is primarily the result of the
Company's adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (SFAS No. 109) in fiscal 1994. Under SFAS
No. 109, net operating loss carryforwards are accounted for as a reduction
in income tax expense as compared to an extraordinary item as presented in
fiscal 1993.
Liquidity and Capital Resources
-------------------------------
The Company had $27,475,000 of working capital at September 30,
1995 as compared to $22,689,000 at September 30, 1994. This increase was
the result of cash flows from operations, cash generated from bank
borrowings and the exercise of stock options offset by cash used for
capital expenditures in its expansion program discussed above.
At September 30, 1995, equipment and leasehold improvements
increased on a net basis by $7,521,000. The increase is due to the
expansion of the Company's manufacturing facility. The Company believes
that these expenditures are necessary to increase its production
capabilities to accommodate the Company's projected growth.
At September 30, 1995, the Company had a $18,000,000 revolving
credit facility with a bank expiring in January 1997, which revolving
credit facility was refinanced as described below. The amount available
under this credit facility was based upon agreed levels of
<PAGE>
22
eligible accounts receivable. At September 30, 1995, $15,430,000 was
outstanding under this facility and the Company had unused availability of
$1,970,000. At September 30, 1995, a portion of this facility bore
interest at a rate equal to LIBOR plus 1.5% and the remaining portions bore
interest at the bank's prime rate. At September 30, 1995, the Company also
had borrowings of $7,687,000 under two term loan agreements with a bank.
The term loans are due in equal monthly installments through February, 1999
and bear interest at a rate ranging from 6.45% to 8.25%.
On October 31, 1995, the Company entered into a credit agreement
with two banks providing for a seven-year $10,500,000 term loan and a two-
year $22,000,000 revolving credit facility. The term loan is payable in 84
equal monthly installments and bears interest at a rate equal to 7.0% per
annum. The revolving credit facility bears interest at a rate equal to
LIBOR plus 1.0%, the bank's prime rate or a fixed rate, as selected by the
Company. A portion of the proceeds under this credit facility was used to
repay the outstanding balance under the then existing revolving credit
facility and this credit facility is available for future working capital
needs. Under this credit agreement, the existing term loans in the amount
of $7,687,000 remain outstanding.
All of the Company's loans with the banks are secured by
substantially all of its assets and are subject to certain financial
covenants.
The Company believes that the amount available under its new
revolving credit facility together with the cash flow from operations will
be sufficient to meet the Company's short-term working capital requirements
and identifiable long-term capital needs. The Company also believes that,
if necessary, additional financing will be available to it on commercially
reasonable terms.
During 1995, the cost of pulp, cotton, tallow and plastic resins
increased. This resulted in the Company experiencing cost increases in
cartons, bottles, textiles and soap base. While most of these cost
increases were passed through to the Company's customers, these cost
increases have had a slight impact on the financial results of the Company.
<PAGE>
23
Recently Issued Accounting Standards
------------------------------------
The Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123). Under this
new standard, a new fair value based method of accounting for stock-based
compensation arrangements with employees is established. Entities may
continue to use the Opinion 25 method or adopt the SFAS No. 123 fair value
based method. If the Company continues to use the Opinion 25 method, SFAS
No. 123 requires footnote disclosure of proforma net income and earnings
per share information as if the fair value based method had been adopted.
The Company has not yet determined which method it will use. This
Statement is effective for financial statements for fiscal years beginning
after December 15, 1995, or for the fiscal year for which the Statement is
initially adopted for recognizing compensation expense, whichever comes
first.
The Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed" (SFAS No. 121). This new standard requires the
assessment of the recoverability of long-lived assets and certain
intangibles and related goodwill and recognition of any impairment losses.
The effect of SFAS No. 121 on the Company has not yet been determined.
This Statement is effective for fiscal years beginning after December 15,
1995.
<PAGE>
24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
GUEST SUPPLY, INC. AND SUBSIDIARIES
----------
Financial Statements
as of September 30, 1995
<PAGE>
25
Index to Financial Statements
-----------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
1. Financial Statements:
Independent Auditors' Report................................ 26
Consolidated Balance Sheets -- September
30, 1995 and 1994........................................... 27
Consolidated Statements of Operations --
Years Ended September 30, 1995, 1994
and 1993.................................................... 28
Consolidated Statements of Cash Flows
-- Years Ended September 30, 1995, 1994
and 1993.................................................... 29
Consolidated Statements of Shareholders'
Equity -- Years Ended September 30,
1995, 1994 and 1993......................................... 31
Notes to Consolidated Financial
Statements.................................................. 32
2. Financial Statement Schedule:
II - Valuation and Qualifying Accounts..................... 40
</TABLE>
All other schedules have been omitted because they are inapplicable or the
information is provided in the financial statements, including the notes
thereto.
<PAGE>
26
Independent Auditors' Report
----------------------------
The Board of Directors and Shareholders
Guest Supply, Inc.:
We have audited the consolidated financial statements of Guest
Supply, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we
also have audited the financial statement schedule listed in the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Guest Supply, Inc. and subsidiaries as of September 30, 1995 and 1994, and
the results of their operations and their cash flows for each of the years
in the three-year period ended September 30, 1995, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
November 21, 1995
<PAGE>
27
CONSOLIDATED BALANCE SHEETS
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
September 30, 1995 1994
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,825,000 $ 1,782,000
Accounts receivable, net of allowance for doubtful
accounts of $692,000 - 1995 and $852,000 - 1994 28,663,000 19,250,000
Inventories 28,269,000 22,132,000
Deferred income taxes 1,434,000 1,736,000
Prepaid expenses and other current assets 916,000 733,000
------------ -----------
Total current assets 61,107,000 45,633,000
Equipment and leasehold improvements, net of accumulated
depreciated and amortization 28,507,000 20,986,000
Other assets 97,000 84,000
Excess of cost over net assets acquired, net of
accumulated amortization of $3,521,000 - 1995
and $3,153,000 - 1994 5,896,000 6,264,000
------------ -----------
$ 95,607,000 $72,967,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 31,226,000 $21,036,000
Current maturities of long-term debt 2,406,000 1,908,000
------------ -----------
Total current liabilities 33,632,000 22,944,000
------------ -----------
Long-term debt 20,990,000 14,642,000
Convertible subordinated note 400,000
Deferred income taxes 1,876,000 1,736,000
------------ -----------
Total long-term liabilities 22,866,000 16,778,000
------------ -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock - without par value; authorized 1,000,000
shares, outstanding none
Common stock - without par value, stated value $0.10;
authorized 10,000,000 shares, issued and outstanding
6,146,335 shares - 1995 and 4,029,767 shares - 1994 542,000 330,000
Additional paid-in capital 34,922,000 34,301,000
Retained earnings (accumulated deficit) 3,778,000 (1,312,000)
Cumulative foreign currency translation adjustments (133,000) (74,000)
------------ -----------
Total shareholders' equity 39,109,000 33,245,000
------------ -----------
$ 95,607,000 $72,967,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
28
CONSOLIDATED STATEMENTS OF OPERATIONS
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended September 30, 1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
Sales $159,450,000 $116,325,000 $97,851,000
Cost of sales 122,085,000 85,574,000 71,047,000
------------ ------------ -----------
Gross profit 37,365,000 30,751,000 26,804,000
Selling, general and administrative expenses 28,409,000 24,858,000 22,865,000
------------ ------------ -----------
Operating income 8,956,000 5,893,000 3,939,000
Interest and other income 10,000 62,000 24,000
Interest expense (1,109,000) (1,063,000) (1,127,000)
------------ ------------ -----------
Income before income taxes and extraordinary item 7,857,000 4,892,000 2,836,000
Income tax expense 2,767,000 775,000 1,424,000
------------ ------------ -----------
Income before extraordinary item 5,090,000 4,117,000 1,412,000
Extraordinary item -
tax benefit resulting from the utilization of
net operating loss carryforwards 831,000
------------ ------------ -----------
Net income $ 5,090,000 $ 4,117,000 $ 2,243,000
============ ============ ===========
Earnings per common share:
Primary:
Income before extraordinary item $0.70 $0.58 $0.22
Extraordinary item $0.13
----- ----- -----
Net income $0.70 $0.58 $0.35
===== ===== =====
Fully diluted:
Income before extraordinary item $0.68 $0.58 $0.21
Extraordinary item $0.12
----- ----- -----
Net income $0.68 $0.58 $0.33
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
29
CONSOLIDATED STATEMENTS OF CASH FLOWS
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended September 30, 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income 5,090,000 4,117,000 2,243,000
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,800,000 2,417,000 2,416,000
Provision for losses on accounts receivable 223,000 419,000 720,000
(Gain) loss on sale of fixed assets (53,000) 4,000
Deferred income tax expense 442,000
Changes in assets and liabilities:
Increase in accounts receivable (9,636,000) (4,555,000) (2,064,000)
(Increase) decrease in inventories (6,137,000) (3,860,000) 339,000
Increase in prepaid expenses
and other current assets (183,000) (249,000) (18,000)
(Increase) decrease in other assets (13,000) 9,000 30,000
Increase in accounts payable
and accrued expenses 10,315,000 8,416,000 985,000
Foreign currency translation adjustments (59,000) 100,000 (136,000)
---------- ---------- ----------
(2,248,000) 2,644,000 2,276,000
---------- ---------- ----------
Net cash provided by operating activities 2,842,000 6,761,000 4,519,000
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of fixed assets 75,000 2,000
Capital expenditures (9,953,000) (9,322,000) (2,701,000)
---------- ---------- ----------
Net cash used in investing activities (9,953,000) (9,247,000) (2,699,000)
---------- ---------- ----------
Cash flows from financing activities:
Net borrowings (payments) on
revolving credit agreements 8,755,000 (5,877,000) (1,331,000)
Proceeds from issuance of long-term debt 10,000,000
Repayment of long-term debt (1,909,000) (1,329,000) (346,000)
Proceeds from issuance of common stock 308,000 367,000 234,000
---------- ---------- ----------
Net cash provided by (used in )
financing activities 7,154,000 3,161,000 (1,443,000)
---------- ---------- ----------
Net increase in cash and cash equivalents 43,000 675,000 377,000
Cash and cash equivalents at beginning of year 1,782,000 1,107,000 730,000
---------- ---------- ----------
Cash and cash equivalents at end of year 1,825,000 1,782,000 1,107,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
30
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended September 30, 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest $1,082,000 $1,130,000 $1,125,000
Income taxes, net of refunds $1,909,000 $234,000 $75,000
</TABLE>
Supplemental schedule of non-cash financing and investing activities:
The Company received an income tax benefit on the exercise of certain of its
stock options in the amount of $125,000 in 1995 which benefit was credited to
additional paid-in capital.
In June, 1995, the $400,000 convertible subordinate note was converted into
25,806 shares of the Company's common stock.
Excess of cost over net assets acquired and income taxes payable were
reduced by $184,000 and $411,000 in 1994 and 1993, respectively, resulting from
the utilization of acquired net operating loss carryforwards of a subsidiary.
<PAGE>
31
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Cumulative
Retained Foreign
Common Stock Additional Earnings Currency
Number Paid-In (Accumulated Translation
of Shares Amount Capital Deficit) Adjustments
------------ -------- ----------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1992 3,908,434 $318,000 $33,712,000 ($7,672,000) ($38,000)
Net income 2,243,000
Sales through employee stock
option and purchase plans 11,040 1,000 52,000
Common stock warrants exercised 42,000 4,000 177,000
Equity adjustments from
foreign currency translation (136,000)
--------- -------- ----------- ---------- ----------
Balance, September 30, 1993 3,961,474 323,000 33,941,000 (5,429,000) (174,000)
Net income 4,117,000
Sales through employee stock
option and purchase plans 26,293 3,000 165,000
Common stock warrants exercised 42,000 4,000 195,000
Equity adjustments from
foreign currency translation 100,000
--------- -------- ----------- ---------- ----------
Balance, September 30, 1994 4,029,767 330,000 34,301,000 (1,312,000) (74,000)
Net income 5,090,000
Sales through employee stock
option and purchase plans 27,023 3,000 189,000
Common stock warrants exercised 15,000 1,000 115,000
Conversion of convertible debt 25,806 3,000 397,000
Three-for-two stock split 2,048,739 205,000 (205,000)
Tax benefits associated with
exercise of stock options 125,000
Equity adjustments from
foreign currency translation (59,000)
--------- -------- ----------- ---------- ----------
Balance, September 30, 1995 6,146,335 $542,000 $34,922,000 $3,778,000 ($133,000)
========= ======== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Guest Supply, Inc. and Subsidiaries
BUSINESS DESCRIPTION The Company operates principally as a manufacturer,
packager and distributor of personal care guest amenities, housekeeping
supplies, room accessories and textiles to the lodging industry. The Company
also manufactures and packages products for major consumer products and retail
companies.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation - The
consolidated financial statements include the accounts of Guest Supply, Inc. and
all of its subsidiaries ("the Company"), each of which is wholly owned. All
significant intercompany transactions and balances are eliminated in
consolidation.
Foreign Currency Translation - Foreign currency transactions and financial
statements are translated into U.S. dollars at current exchange rates except
revenues, costs and expenses which are translated at average exchange rates
during each reporting period. Exchange gains and losses resulting from foreign
currency transactions are included in the Consolidated Statements of Operations
currently, whereas, adjustments resulting from translations of financial
statements are reflected as a separate component of shareholders' equity.
Inventories - Inventories are stated at the lower of cost or market. Cost is
determined by using the weighted-average and first-in, first-out methods.
Equipment and leasehold improvements - Equipment and leasehold improvements are
carried at cost. Depreciation and amortization is computed using the straight-
line method over the life of the related asset or, for improvements, over the
life of the related lease, if shorter. When assets are retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is recognized in income for the period. The cost
of maintenance and repairs is charged to income as incurred; significant
renewals and betterments are capitalized.
Excess of cost over net assets acquired - Excess of cost over net assets
acquired is being amortized using the straight-line method over 25 years. The
Company continually evaluates the amortization period of its intangible assets.
Estimates of useful lives are revised when circumstances or events indicate that
the original estimate is no longer appropriate.
Revenue - Revenues are recognized at the time goods are shipped and title has
passed. Credit is generally extended to customers within these industries on an
uncollateralized basis.
Concentration of Credit Risk - Concentration of credit risk consists principally
of accounts receivable. At September 30, 1995, two customers' accounts
receivable balances aggregate approximately 36% of the Company's total accounts
receivable. For the year ended September 30, 1995, sales to two customers
totaled 11.3% and 10.8% of the Company's total sales. No single customer
accounted for 10% or greater of the Company's total sales for the years ended
September 30, 1994 and 1993.
Income taxes - In February 1992, the Financial Accounting Standards Board
issued Statement No. 109 "Accounting for Income Taxes". Statement No. 109
requires a change from the deferred method of accounting for income taxes to the
asset and liability method of accounting for income taxes. Under the asset and
liability method, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amount of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
Statement No. 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date. Effective October 1, 1993 the Company adopted Statement No. 109. This
change in the method of accounting for income taxes had no effect on the
Company's 1994 consolidated statement of operations. Under the deferred method
of accounting for income taxes, which was applied in 1993 and prior years,
deferred taxes were provided to recognize the effect of timing differences
between financial statement and income tax reporting
<PAGE>
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
purposes using the tax rate in the year of the tax calculation.
Statements of Cash Flows - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand and certificates of deposit with a maturity at
time of purchase of three months or less.
Reclassifications - Certain amounts in the 1994 and 1993 Consolidated Financial
Statements have been reclassified to conform to the 1995 presentation.
<PAGE>
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Inventories
1995 1994
----------- -----------
<S> <C> <C>
Finished goods $19,508,000 $15,976,000
Work in progress 8,761,000 6,156,000
----------- -----------
$28,269,000 $22,132,000
=========== ===========
</TABLE>
Costs included in inventories are comprised of raw materials, direct labor
and overhead related to the manufacturing process.
<TABLE>
<CAPTION>
Equipment and Leasehold Improvements
1995 1994 Useful Lives
----------- ----------- -------------
<S> <C> <C> <C>
Computers $ 1,832,000 $ 1,606,000 5 to 10 years
Furniture and fixtures 1,590,000 1,429,000 3 to 8 years
Machinery and equipment 28,599,000 18,934,000 3 to 15 years
Molds 4,092,000 3,529,000 5 to 7 years
Automobiles 133,000 133,000 2 to 5 years
Leasehold improvements 2,630,000 2,127,000 Life of lease
Construction in progress 5,318,000 6,483,000
----------- -----------
44,194,000 $34,241,000
Less accumulated depreciation
and amortization 15,687,000 13,255,000
----------- -----------
$28,507,000 $20,986,000
=========== ===========
</TABLE>
Depreciation and amortization of equipment and leasehold improvements
charged to income was $2,432,000, $2,031,000 and $1,996,000 for the years ended
September 30, 1995, 1994 and 1993, respectively.
Income Taxes
Income tax expense is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- ----------
<S> <C> <C> <C>
Federal - Current $1,981,000 $533,000 $100,000
- Deferred 356,000
---------- -------- ----------
Total Federal income taxes 2,337,000 $533,000 $100,000
---------- -------- ----------
State - Current 344,000 242,000 82,000
- Deferred 86,000
Charge in lieu of income taxes 1,242,000
---------- -------- ----------
Total State income taxes 430,000 242,000 1,324,000
---------- -------- ----------
Total income tax provision $2,767,000 $775,000 $1,424,000
========== ======== ==========
</TABLE>
The following is a reconciliation of Federal income tax expense computed
using the statutory rate of 34% to the Company's effective income tax rate:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Computed "expected" income tax expense $2,671,000 $1,663,000
Increase (reduction) in tax expense resulting from:
State income taxes, net of Federal income tax benefit 284,000 160,000
Amortization of goodwill 125,000 131,000
Utilization of net operating loss carryforwards (293,000) (1,466,000)
Alternative minimum tax 130,000
Other, net (20,000) 157,000
---------- ----------
$2,767,000 $ 775,000
========== ==========
</TABLE>
<PAGE>
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
The difference between the Federal statutory rate of 34% and the Company's
effective income tax rates in 1993 is due principally to the amortization of
goodwill which is not deductible for income tax purposes. The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and liabilities at September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 259,000 $ 476,000
Inventory obsolescence reserve and uniform capitalization 868,000 909,000
Net operating loss carryforwards 150,000 98,000
Tax credit carryforwards 195,000
Alternative minimum tax credit carryforwards 792,000 263,000
Other 157,000 85,000
---------- ----------
2,226,000 2,026,000
Less: Valuation allowance (27,000)
---------- ----------
Net deferred tax asset 2,226,000 1,999,000
Deferred tax liability - excess of tax over financial statement depreciation (2,668,000) (1,999,000)
---------- ----------
Net deferred taxes ($442,000) $ 0
========== ==========
</TABLE>
In 1995, 1994 and 1993, net operating loss carryforwards were utilized to
eliminate Federal and state income taxes which would otherwise have been
payable. The benefit of this reduction has been shown as an extraordinary credit
in the accompanying 1993 consolidated statement of operations. In 1994 and 1993,
the Company also utilized the purchased net operating loss carryforwards of a
subsidiary. The benefit resulting from the utilization of these carryforward
losses resulted in a reduction of excess of cost over net assets acquired of
$184,000 and $411,000 in 1994 and 1993, respectively.
At September 30, 1995, the Company has net operating loss carryforwards for
state income tax purposes of approximately $2,500,000 which are available to
reduce future state income taxes, if any, through the year 1999. In addition,
the Company has alternative minimum tax credit carryforwards of approximately
$792,000 which are available to reduce future Federal regular income taxes, if
any, over an indefinite period.
<PAGE>
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
CONVERTIBLE DEBT In November 1985, the Company issued a $400,000 non-interest
bearing ten-year convertible subordinated note in connection with the
acquisition of Technair Packaging, Inc. The note, which was discounted for
imputed interest at 10% over a two-year period, was convertible into shares of
the Company's common stock at a conversion price equal to $15.50 per share
($10.33 per share, adjusted for the three-for-two stock split). In June 1995,
this note was converted into 25,806 shares (38,709 shares, adjusted for the
three-for-two stock split) of the Companys' common stock.
<TABLE>
<CAPTION>
LONG-TERM DEBT
1995 1994
----------- -----------
<S> <C> <C>
Revolving credit facility $15,430,000 $6,675,000
Term loans 7,687,000 9,417,000
Capital lease obligations 279,000 458,000
----------- -----------
23,396,000 16,550,000
Less: Current maturities 2,406,000 1,908,000
----------- -----------
$20,990,000 $14,642,000
=========== ===========
</TABLE>
In January 1994, the Company entered into a credit agreement with a bank
for a five-year $5,000,000 term loan (the "first term loan") and a three-year
$13,000,000 revolving credit facility. The first term loan is payable in equal
monthly installments of $83,333, which commenced in March 1994, and bears
interest at a rate equal to 6.45% per annum. The revolving credit facility bears
interest at a rate equal to LIBOR plus 1.5%, the bank's prime rate or a fixed
rate, as selected by the Company. At September 30, 1995, $5,430,000 of the
revolving credit facility carried an interest rate of 8.25% and the remaining
amount was at interest rates ranging from 7.06% to 7.625%. Availability under
this facility is based upon agreed levels of eligible accounts receivable. The
unused amount available to the Company at September 30, 1995 was $1,970,000. In
July and September, 1994, the Company amended and restated its credit agreement
with its bank dated January, 1994. Under the amended agreements, the Company
entered into a $5,000,000 term loan (the "second term loan") and modified
certain financial covenants. This term loan is payable in 48 equal monthly
installments of $104,167, commencing March 1, 1995 and bears interest at a rate
equal to 8.25% per annum. In July 1995, the Company amended its agreement
increasing the amount of the revolving credit facility to $18,000,000.
On October 31, 1995, the Company entered into a credit facility with two
banks for a seven-year $10,500,000 term loan and a two-year $22,000,000
revolving credit facility. The term loan is payable in equal monthly
installments of $125,000 which will commence in December, 1995, and bears
interest at a rate equal to 7.0% per annum. The revolving credit loans under the
credit facility bear interest at a rate equal to LIBOR plus 1.0%, the bank's
prime rate or a fixed rate, as selected by the Company. The proceeds under this
credit facility were used to repay the outstanding balance under the existing
revolving credit facility and for future working capital needs. Under this
agreement, the first and second term loans remain outstanding.
All of the Company's loans with the banks are secured by substantially all
of its assets and are subject to certain financial covenants.
Long-term debt at September 30, 1995 matures as follows:
1996 $2,406,000
1997 17,803,000
1998 2,250,000
1999 937,000
<PAGE>
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
LEASES The Company leases its office, warehouse facilities and vehicles
under long-term lease agreements. These leases are classified as operating
leases and expire in various years through 2006. In addition, certain equipment
is leased under capital lease agreements. The leases generally provide that the
Company pay the insurance and maintenance expenses related to the leased assets.
An analysis of assets under capital lease is as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Computers $235,000 $235,000
Equipment 607,000 607,000
-------- --------
842,000 842,000
Less: Accumulated amortization 302,000 208,000
-------- --------
$540,000 $634,000
======== ========
</TABLE>
Future minimum lease payments under non-cancellable operating leases and
future capital lease payments as of September 30, 1995 are:
<TABLE>
<CAPTION>
Capital Operating
September 30, Leases Leases
-------- -----------
<S> <C> <C>
1996 $176,000 $2,933,000
1997 129,000 2,443,000
1998 1,931,000
1999 1,414,000
2000 1,165,000
Thereafter 6,783,000
-------- -----------
Total minimum lease payments 305,000 $16,669,000
===========
Less amount representing interest 26,000
--------
Present value of minimum capital lease payments $279,000
========
</TABLE>
Rent expense under operating leases was $3,421,000, $2,826,000 and
$2,433,000 for the years ended September 30, 1995, 1994 and 1993, respectively.
LITIGATION From time to time, the Company is a party to legal actions
arising in the ordinary course of business. Management believes that such
litigation and claims will be resolved without material effects on the Company's
financial position.
EARNINGS PER COMMON SHARE Primary and fully diluted earnings per common share
are based on the weighted average number of common and common share equivalents
outstanding during each year. When stock options and warrants are dilutive, they
are included as share equivalents using the treasury stock method. Where the
effect of the assumed exercise on net income would be anti-dilutive, primary and
fully diluted earnings per common share are stated the same. On September 18,
1995, the Board of Directors of the Company declared a three-for-two stock split
to be paid in the form of a 50% stock dividend. The additional 2,048,739 shares
of common stock were issued on October 24, 1995 to the shareholders of record on
October 3, 1995. Distribution of fractional shares was paid in cash based on the
closing price of the stock on the record date. The par value of the new shares
issued totaled $205,000 which was transferred from additional paid-in capital to
common stock. Weighted average shares for computing primary earnings per share
were 7,293,000, 7,041,000 and 6,470,000 for the years ended September 30, 1995,
1994 and 1993, respectively. Weighted average shares for computing fully diluted
earnings per share were 7,433,000, 7,160,000 and 6,689,000 for the years ended
September 30, 1995, 1994 and 1993, respectively.
Share amounts in the notes to the financial statements, weighted average
shares outstanding and earnings per share have been retroactively adjusted to
reflect the stock split.
<PAGE>
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
EMPLOYEE STOCK OPTION AND PURCHASE PLANS The Company has a 1983 Stock Option
Plan and 1983 Employee Stock Purchase Plan. Under the 1983 Stock Option Plan, as
amended in May 1987, options to purchase up to 750,000 shares of common stock
were granted to key employees including directors and officers at exercise
prices not less than market value at the date of the grant. Options granted are
for ten years and are generally exercisable in cumulative increments over four
years commencing one year from the date of the grant. This plan expired on May
31, 1993.
In May 1993, the shareholders of the Company adopted the 1993 Stock Option
Plan and 1993 Employee Stock Purchase Plan. Under the 1993 Stock Option Plan,
options to purchase up to 525,000 shares of common stock may be granted to key
employees including directors and officers at exercise prices not less than
market value at the date of the grant. Options granted are for ten years and
vest within a period fixed by the Stock Option Committee of the Board of
Directors.
Transactions relating to these Stock Option Plans, adjusted for the three-for-
two stock split, are summarized as follows:
<TABLE>
<CAPTION>
1993 Plan 1983 Plan
------------------------------ ------------------------------
Number of Number of
Options Price Range Options Price Range
--------- -------------- --------- -------------
<S> <C> <C> <C> <C>
Outstanding, September 30, 1992 480,300 $2.67 - $6.17
Granted 204,750 $4.67 - $5.75 75,000 $4.67
Exercised (5,250) $2.67 - $3.00
--------- -------------- --------- -------------
Outstanding, September 30, 1993 204,750 $4.67 - $5.75 550,050 $2.67 - $6.17
Granted 241,500 $9.83
Exercised (28,875) $2.67 - $6.17
--------- -------------- --------- -------------
Outstanding, September 30, 1994 446,250 $4.67 - $9.83 521,175 $2.67 - $5.92
Exercised (3,000) $4.67 (29,625) $2.67 - $5.92
--------- -------------- --------- -------------
Outstanding, September 30, 1995 443,250 $4.67 - $9.83 491,550 $2.67 - $4.67
========= ============== ========= =============
Exercisable , September 30, 1995 127,200 $4.67 - $9.83 446,550 $2.67 - $4.67
========= ============== ========= =============
</TABLE>
Under the 1983 Employee Stock Purchase Plan, 150,000 shares of common stock
have been reserved for eligible employees who may purchase a limited amount of
shares over successive six-month offering periods at 85% of fair market value on
either the first or last day of each six-month period, whichever is less. During
the years ended September 30, 1994 and 1993; 6,239 and 11,310 shares were issued
under the Employee Stock Purchase Plan. This plan expired on December 31, 1993.
Under the 1993 Employee Stock Purchase Plan, 112,500 shares of common stock
have been reserved for eligible employees who may purchase a limited amount of
shares over successive six-month offering periods at 85% of fair market value on
either the first or last day of each six-month period, whichever is less. During
the years ended September 30, 1995 and 1994, there were 7,910 and 4,326 shares
purchased under this plan, respectively.
<PAGE>
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
COMMON STOCK WARRANTS The Board of Directors may grant common stock
warrants to directors and officers of the Company at exercise prices not less
than market value at the date of grant. All outstanding warrants expire during
the fiscal years 1998 through 2000.
Transactions relating to common stock warrants, adjusted for the three-for-
two stock split, are summarized as follows:
<TABLE>
<CAPTION>
Number of
Warrants Price Range
--------- -------------
<S> <C> <C>
Outstanding, September 30, 1992 1,064,250 $2.67 - $5.17
Exercised (63,000) $2.67 - $3.17
Expired (172,500) $2.83 - $3.09
--------- -------------
Outstanding, September 30, 1993 828,750 $2.67 - $5.17
Exercised (63,000) $3.17
--------- -------------
Outstanding , September 30, 1994 765,750 $2.67 - $5.17
Exercised (22,500) $5.17
--------- -------------
Outstanding, September 30, 1995 743,250 $2.67 - $5.17
========= =============
Exercisable , September 30, 1995 743,250 $2.67 - $5.17
========= =============
</TABLE>
EMPLOYEE BENEFIT PLANS The Company has a 401(k) Savings Plan under which
the Company annually matches a portion of the amount of contributions made by
the employee. All domestic employees with one year of continuous service are
eligible for the plan. Prior to January 1994, Breckenridge employees were
ineligible for participation in the plan. Company matching contributions are
100% vested, as are any contributions made by the employee. The Company may also
make, in its sole discretion, annual discretionary contributions which vest over
a six-year period. The Company has not made any discretionary contributions.
Prior to January 1994, employees of Breckenridge with a minimum of one year of
service were eligible to participate in a separate 401(k) Savings Plan.
Breckenridge annually matched a portion of the amount of contributions made by
the employee. An employee's interest in any matching contributions vests
gradually over a six-year period.
Employer contributions relating to these plans were $130,000, $153,000 and
$156,000 for the years ended September 30, 1995, 1994 and 1993, respectively.
SHAREHOLDERS' PREFERRED PURCHASE RIGHTS On July 14, 1988, the Board of
Directors of the Company declared a dividend of one preferred share purchase
right for each outstanding share of Common Stock of the Company. The dividend
was payable on July 26, 1988 to the shareholders of record on that date. Each
right entitles the registered holder to purchase from the Company one one-
hundredth of a Preferred Share at a price of $20.00, subject to adjustment.
The rights agreement provides that, until the earlier to occur of (i) 10
days following a public announcement that a person or group of affiliated or
associated persons have acquired beneficial ownership of 20% or more of the
outstanding Common Stock, or (ii) 10 days following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of such outstanding Common Stock, the rights will be
transferred with and only with the Common Stock.
The rights are not exercisable until the earlier of such date described
above and will expire on July 15, 1998, unless the final expiration date is
extended or the rights are earlier redeemed by the Company at $.01 per right.
<PAGE>
40
GUEST SUPPLY, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------- ------------ ---------------------- ---------- ----------
Additions
---------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- --------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Reserve and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts
Year Ended September 30, 1995 $ 852,000 $223,000 $0 $383,000 $ 692,000
========== ======== == ======== ==========
Year Ended September 30, 1994 $1,051,000 $419,000 $0 $618,000 $ 852,000
========== ======== == ======== ==========
Year Ended September 30, 1993 $ 825,000 $720,000 $0 $494,000 $1,051,000
========== ======== == ======== ==========
</TABLE>
<PAGE>
41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
<PAGE>
42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information concerning this item, see "Item 1. - Business -
Executive Officers" and the table and text under the caption "Certain
Information Concerning Nominees and Directors" and "Compliance with Section
16(a) of the Securities Exchange Act of 1934" of the Proxy Statement to be filed
with respect to the 1996 Annual Meeting of Shareholders to be held on March 6,
1996 (the "Proxy Statement"), which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
For information concerning this item, see the table and text under the
captions "Executive Compensation," "Compensation of Directors," "Personnel and
Compensation Committee Interlocks and Insider Participation" and "Employment
Agreements" of the Proxy Statement, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
For information concerning this item, see the table and text under the
caption "Information Concerning Certain Shareholders" of the Proxy Statement,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For information concerning this item, see the text under the caption
"Personnel and Compensation Committee Interlocks and Insider Participation" of
the Proxy Statement, which information is incorporated herein by reference.
<PAGE>
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
Included in Part II of this report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Independent Auditors' Report......................................... 26
Consolidated Balance Sheets -- September 30
1995 and 1994........................................................ 27
Consolidated Statements of Operations --
Years Ended September 30, 1995, 1994
and 1993............................................................. 28
Consolidated Statements of Cash Flows
- -- Years Ended September 30, 1995, 1994
and 1993............................................................. 29
Consolidated Statements of Shareholders'
Equity -- Years Ended September 30,
1995, 1994 and 1993.................................................. 31
Notes to Consolidated Financial
Statements........................................................... 32
</TABLE>
2. Financial Statement Schedule:
Included in Part II of this report:
II - Valuation and Qualifying Accounts.......................... 40
All other schedules have been omitted because they are inapplicable or the
information is provided in the financial statements, including the notes
thereto.
<PAGE>
44
3. Exhibits:
The exhibits required to be filed as part of this Annual Report on
Form 10-K are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended
September 30, 1995.
<PAGE>
45
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
appoint Clifford W. Stanley and Thomas M. Haythe as attorneys-in-fact with full
power of substitution, severally, to execute in the name and on behalf of the
registrant and each such person, individually and in each capacity stated below,
one or more amendments to the annual report which amendments may make such
changes in the report as the attorney-in-fact acting in the premises deems
appropriate and to file any such amendment to the report with the Securities and
Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: December 27, 1995
GUEST SUPPLY, INC.
By /s/ Clifford W. Stanley
---------------------------
Clifford W. Stanley
President
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Dated: December 27, 1995 By /s/ Clifford W. Stanley
----------------------------
Clifford W. Stanley
President, Principal
Executive Officer and
Director
Dated: December 27, 1995 By /s/ Thomas M. Haythe
----------------------------
Thomas M. Haythe
Director
<PAGE>
46
Dated: December 27, 1995 By /s/ Peter L. Richard
----------------------------
Peter L. Richard
Director
Dated: December 27, 1995 By /s/ Teri E. Unsworth
----------------------------
Teri E. Unsworth
Vice President -
Market Development and
Director
Dated: December 27, 1995 By /s/ Edward J. Walsh
----------------------------
Edward J. Walsh
Director
Dated: December 27, 1995 By /s/ George S. Zabrycki
----------------------------
George S. Zabrycki
Director
Dated: December 27, 1995 By /s/ Paul T. Xenis
----------------------------
Paul T. Xenis
Vice President -
Finance and a
Principal Financial
and Accounting Officer
<PAGE>
Index to Exhibits
-----------------
Page
----
3(a) Amended and Restated Certificate of --
Incorporation of the Company (incorporated by
reference to Exhibit 3(a) to Registration Statement
on Form S-1 No. 33-7246).
3(b) Certificate of Amendment of the --
Amended and Restated Certificate of Incorporation of
the Company (incorporated by reference to Exhibit
3(b) to the Company's Annual Report on Form 10-K for
the year ended September 30, 1993).
3(c) Certificate of Amendment of the Amended --
and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3(c)
to the Company's Annual Report on Form 10-K for the
year ended September 30, 1993).
3(d) Certificate of Correction to the Certificate --
of Amendment of the Amended and Restated Certificate
of Incorporation of the Company, (incorporated by
reference to Exhibit 3(d) to the Company's Annual
Report on Form 10-K for the year ended September 30,
1993).
3(e) Certificate of Merger of Miraflores Designs, --
Inc. into the Company (incorporated by reference to
Exhibit 3(e) to the Company's Annual Report on Form
10-K for the year ended September 30, 1993).
3(f) Amended and Restated By-Laws of the Company --
(incorporated by references to Exhibit 3(f) to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1994).
4(a) Article THIRD of Certificate of Incorporation --
of the Company (incorporated by reference to Exhibit
3(a) to
<PAGE>
Registration Statement on Form S-1 No. 33-7246).
4(b) Form of Series W Warrant Certificate to --
purchase Common Stock of the Company (incorporated
by reference to Exhibit 4(b) to the Company's Annual
Report on Form 10-K for the year ended September 30,
1994).
4(c) Form of Series A Warrant Certificate to --
purchase Common Stock of the Company (incorporated
by reference to Exhibit 4(c) to the Company's Annual
Report on Form 10-K for the year ended September 30,
1994).
4(d) Form of Series B Warrant Certificate to --
purchase Common Stock of the Company (incorporated
by reference to Exhibit 4(d) to the Company's Annual
Report on Form 10-K for the year ended September 30,
1994).
4(e) Rights Agreement dated as of July 15, 1988 --
between the Company and First Fidelity Bank
(incorporated by reference to Exhibit 4(e) to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1993).
10(a) 1983 Stock Option Plan of the Company, --
as amended (incorporated by reference to Exhibit
10(a) to Company's Annual Report on Form 10-K for
the year ended September 30, 1993).
10(b) 1993 Employee Stock Purchase Plan -
(incorporated by reference to Exhibit 4.4 to
Registration Statement on Form S-8 No. 33-63352).
10(c) 1993 Stock Option Plan of the Company -
(incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-8 No. 33-63352).
10(d) Lease dated February 28, 1985 between -
the Company and The Benenson Capital Company
(incorporated by reference to
ii
<PAGE>
Exhibit 10(l) to Registration Statement on Form S-1
No. 2-98274).
10(e) Lease dated October 28, 1985 between the --
Company and Shore Point Distributors (incorporated
by reference to Exhibit 10(y) to Registration
Statement on Form S-1 No. 33-7246).
10(f) Employment Agreement dated as of January --
11, 1988 between the Company and Clifford W. Stanley
(incorporated by reference to Exhibit 10(g) to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1994).
10(g) Employment Agreement dated as of January 11, 1988 --
between the Company and James H. Riesenberg
(incorporated by reference to Exhibit 10(h) to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1994).
10(h) Employment Agreement dated as of January 11, 1988 --
between the Company and Teri E. Unsworth
(incorporated by reference to Exhibit 10(i) to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1994).
10(i) Guest Supply, Inc. 401(k) Plan & Trust --
(incorporated by reference to Exhibit 10(bb) to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1990).
10(j) Breckenridge-Remy Company Employee's --
Amended and Restated Profit-Sharing Plan and Trust
(incorporated by reference to Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1991).
10(k) Revolving Credit and Term Loan Agreement dated 52
October 31, 1995 among Guest Supply, Inc., Guest
Packaging, Inc. and Breckenridge-Remy Co., as the
Borrower, and PNC Bank, National Association and
First Fidelity Bank, N.A., as Lenders, and PNC Bank,
National Association, as Agent.
iii
<PAGE>
10(l) Term Note dated October 31, 1995 in the principal 228
amount of $3,749,996 executed by Guest Supply, Inc.,
Guest Packaging, Inc. and Breckenridge-Remy Co.
payable to PNC Bank, National Association.
10(m) Term Note dated October 31, 1995 in the principal 231
amount of $6,750,000 executed by Guest Supply, Inc.,
Guest Packaging, Inc. and Breckenridge-Remy Co.
payable to First Fidelity Bank, N.A.
10(n) Revolving Credit Note dated October 31, 1995 in 243
the principal amount of $13,750,000 executed by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. payable to PNC Bank, National
Association.
10(o) Revolving Credit Note dated October 31, 1995 in 237
the principal amount of $8,250,000 executed by Guest
Supply, Inc., Guest Packaging, Inc. and Breckenridge-
Remy Co. payable to First Fidelity Bank, N.A.
10(p) Existing Loan Note dated October 31, 1995 in the 240
principal amount of $3,333,340 executed by Guest
Supply, Inc., Guest Packaging, Inc. and Breckenridge-
Remy Co. payable to PNC Bank, National Association.
10(q) Existing New Term Loan Note dated October 31, 1995 243
in the principal amount of $4,166,664 executed by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. payable to PNC Bank, National
Association.
10(r) Security Agreement dated October 31, 1995 made by 246
Guest Supply, Inc. in favor of PNC Bank, National
Association, as Agent for the benefit of the
Lenders.
10(s) Security Agreement dated October 31, 1995 made by 275
Guest Packaging, Inc. in favor of PNC Bank, National
Association, as Agent for the benefit of the
Lenders.
iv
<PAGE>
10(t) Security Agreement dated October 31, 1995 302
made by Breckenridge-Remy Co. in favor of PNC Bank,
National Association, as Agent for the benefit of
the Lenders.
10(u) Employment Agreement dated as of July 29, 1988 --
between the Company and Paul T. Xenis (incorporated
by reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994).
10(v) Amendment No. 1 dated as of May 18, 1994 to the --
Employment Agreement dated as of July 29, 1988
between Company and Paul T. Xenis (incorporated by
reference to Exhibit 10(b) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994).
10(w) Lease dated March 16, 1995 between the Company --
and The Morris Company (incorporated by reference to
Exhibit 10(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995).
21 Subsidiaries of the Registrant. 334
23 Consent of KPMG Peat Marwick LLP. 335
24 Power of Attorney (see "Power of Attorney" 45
in Form 10-K).
27 Financial Data Schedule. 336
Copies of the exhibits filed with this Annual Report on Form 10-K or
incorporated by reference herein do not accompany copies hereof for distribution
to shareholders of the Company. The Company will furnish a copy of any of such
exhibits to any shareholder requesting the same.
v
<PAGE>
EXHIBIT 10(k)
WMDI08066.001
Execution
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
dated October 31, 1995
among
GUEST SUPPLY, INC.,
GUEST PACKAGING, INC., and
BRECKENRIDGE-REMY CO., as the Borrower
PNC BANK, NATIONAL ASSOCIATION
FIRST FIDELITY BANK, N.A., as Lenders
and
PNC BANK, NATIONAL ASSOCIATION, as Agent
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. DEFINITIONS.................................................... 1
Section 1.1 Defined Terms........................................... 1
Section 1.2 Other Definitional Provisions........................... 18
ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS................................ 18
Section 2.1 Revolving Credit Commitments............................ 18
Section 2.2 Revolving Credit Note................................... 19
Section 2.3 Procedure for Revolving Credit Borrowings............... 19
Section 2.4 Commitment Fees......................................... 20
Section 2.5 Termination or Reduction of Commitments................. 21
Section 2.6 Term Loans.............................................. 21
Section 2.7 Term Notes.............................................. 22
Section 2.8 Procedure for Term Loan Borrowing....................... 23
Section 2.9 Prepayments............................................. 23
Section 2.10 Conversion and Continuation Options..................... 25
Section 2.11 Minimum Amounts of Tranches............................. 26
Section 2.12 Interest Rates and Payment Dates........................ 26
Section 2.13 Inability to Determine Interest Rate.................... 27
Section 2.14 Payments/Funding........................................ 28
Section 2.15 Change in Legality...................................... 29
Section 2.16 Increased Costs......................................... 30
Section 2.17 Indemnity............................................... 33
Section 2.18 Letters of Credit....................................... 34
Section 2.19 Purpose of Loans........................................ 38
ARTICLE 3 REPRESENTATIONS AND WARRANTIES.................................. 38
Section 3.1 Financial Condition..................................... 38
Section 3.2 No Material Adverse Change.............................. 39
Section 3.3 Corporate Existence; Compliance with Law................ 39
Section 3.4 Corporate Power; Authorization; Enforceable Obligations. 39
Section 3.5 No Legal Bar............................................ 40
Section 3.6 No Material Litigation.................................. 40
Section 3.7 No Default.............................................. 40
Section 3.8 Ownership of Property; Liens............................ 41
Section 3.9 Intellectual Property................................... 41
Section 3.10 No Burdensome Restrictions.............................. 41
Section 3.11 Taxes................................................... 41
Section 3.12 Federal Regulations..................................... 42
Section 3.13 Investment Company Act; Public Utility Holding Company
Act; Other Regulations................................ 42
Section 3.14 Subsidiaries............................................ 42
Section 3.15 Security Interests...................................... 42
Section 3.16 Employee Grievances..................................... 42
Section 3.17 ERISA................................................... 43
ARTICLE 4 CONDITIONS PRECEDENT............................................ 44
Section 4.1 Conditions to Effective Date............................ 44
Section 4.2 Conditions to Each Loan................................. 45
<PAGE>
ARTICLE 5 AFFIRMATIVE COVENANTS........................................... 46
Section 5.1 Financial Statements.................................... 46
Section 5.2 Certificates; Other Information......................... 47
Section 5.3 Payment of Obligations.................................. 48
Section 5.4 Conduct of Business and Maintenance of Existence........ 48
Section 5.5 Maintenance of Property; Insurance...................... 49
Section 5.6 Inspection of Property; Books and Records; Discussions.. 49
Section 5.7 Notices................................................. 49
Section 5.8 ERISA Compliance........................................ 50
Section 5.9 Landlord Waivers and Consents........................... 50
Section 5.10 Foreign Subsidiaries.................................... 51
ARTICLE 6 NEGATIVE COVENANTS.............................................. 51
Section 6.1 Limitation on Indebtedness.............................. 51
Section 6.2 Limitation on Liens..................................... 52
Section 6.3 Limitation on Contingent Obligations.................... 53
Section 6.4 Limitations on Fundamental Changes...................... 53
Section 6.5 Limitation on Sale of Assets............................ 54
Section 6.6 Limitation on Investments, Loans and Advances........... 54
Section 6.7 Limitation on Optional Payments and Modifications of
Debt Instruments...................................... 55
Section 6.8 Transactions with Affiliates............................ 55
Section 6.9 Fiscal Year............................................. 55
Section 6.10 Limitation on Conduct of Business....................... 56
Section 6.11 Tangible Net Worth...................................... 56
Section 6.12 Liabilities/Tangible Net Worth.......................... 56
Section 6.13 Quick Ratio............................................. 56
Section 6.14 Cash Flow Test.......................................... 56
Section 6.15 ERISA Obligations....................................... 56
ARTICLE 7 EVENTS OF DEFAULT............................................... 56
Section 7.1 Events of Default....................................... 56
ARTICLE 8 THE AGENT....................................................... 60
Section 8.1 Actions................................................. 60
Section 8.2 Exculpation............................................. 61
Section 8.3 Successor............................................... 61
Section 8.4 Credit Decisions........................................ 62
Section 8.5 Notices, etc. from Agent................................ 62
Section 8.6 Security Documents...................................... 62
ARTICLE 9 PURCHASING LENDER............................................... 62
Section 9.1 Purchasing Lender....................................... 62
Section 9.2 Disclosure of Information............................... 64
Section 9.3 Pledges to Federal Reserve Bank......................... 64
ARTICLE 10 MISCELLANEOUS.................................................. 64
Section 10.1 Amendments and Waivers................................. 64
Section 10.2 Notices................................................ 67
Section 10.3 No Waiver; Cumulative Remedies......................... 68
Section 10.4 Survival of Representations and Warranties............. 68
Section 10.5 Payment of Expenses and Taxes.......................... 68
Section 10.6 Successors and Assigns................................. 69
<PAGE>
Section 10.7 Set-off/Sharing........................................ 70
Section 10.8 Original Agreement..................................... 71
Section 10.9 Counterparts........................................... 71
Section 10.10 Severability........................................... 71
Section 10.11 Integration............................................ 71
Section 10.12 Governing Law.......................................... 71
Section 10.13 Submission To Jurisdiction; Waivers.................... 71
Section 10.14 Acknowledgements....................................... 72
Section 10.15 Waivers of Jury Trial.................................. 72
Exhibits
- --------
Exhibit A Revolving Credit Note
Exhibit B Term Note
Exhibit C Borrowing Base Certificate
Exhibit D Issuance Request
Exhibit E Landlord's Waiver and Consent
Exhibit F Security Agreement
Exhibit G Form of Legal Opinion
Exhibit H Existing Loan Note, Existing New Term Loan Note
Exhibit I & J Forms of Letter of Credit
Schedules
- ---------
Schedule I Commitments
Schedule II Consents ((S) 3.4(b))
Schedule III Litigation ((S) 3.6)
Schedule IV Intellectual Property ((S) 3.9)
Schedule V Subsidiaries ((S) 3.14)
Schedule VI Filing Locations ((S) 3.15)
Schedule VII Employee Grievances ((S) 3.16)
Schedule VIII ERISA Plans ((S) 3.17)
Schedule IX Liens ((S) 6.2(g))
<PAGE>
WMDI08066.001
Execution
REVOLVING CREDIT AND TERM LOAN AGREEMENT
----------------------------------------
REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated October 31, 1995 among
Guest Supply, Inc. ("GSI"), a New Jersey corporation, Guest Packaging, Inc., a
New Jersey corporation and Breckenridge-Remy Co., a Delaware corporation,
jointly and severally as co-obligors (collectively, the "Borrower"), PNC Bank,
National Association and First Fidelity Bank, N.A. (each a "Lender" and,
collectively, the "Lenders") and PNC Bank, National Association as agent for
the Lenders (in such capacity, the "Agent").
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower and Chemical Bank New Jersey, National Association
(now PNC Bank, National Association) entered into an Amended and Restated
Credit Agreement (the "Original Agreement") dated as of January 26, 1994
pursuant to which Chemical Bank New Jersey, National Association (now PNC Bank,
National Association) agreed to make revolving loans to and issue letters of
credit for the account of the Borrower; and
WHEREAS, the Borrower has requested the Lenders to extend additional
credit to Borrower; and
WHEREAS, the Lenders have agreed, upon the terms and conditions set forth
herein, to extend such credit to the Borrower; and
WHEREAS, the Borrower and Lenders have agreed that the Original Agreement
will be terminated and certain amounts outstanding thereunder will be repaid
simultaneously with the making of the initial loan hereunder.
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Lenders, the Agent and the Borrower hereby agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following
-------------
terms shall have the following meanings:
"Adjustment Period" each of the following separate periods, (i) from the
date hereof until receipt by the Agent of the unaudited consolidated financial
statements of GSI for GSI's fiscal quarter ending December 31, 1995; (ii) from
and including the date the Agent receives the unaudited consolidated financial
<PAGE>
statements of GSI for GSI's fiscal quarter ending December 31, 1995 until
receipt by the Agent of the audited consolidated financial statements of GSI
for GSI's fiscal year ending September 30, 1996; and (iii) thereafter each
period beginning from and including the date the Agent receives the audited
consolidated financial statements of GSI for GSI's then most recent fiscal year
ended to the date of the Agent's receipt of the audited consolidated financial
statements of GSI for GSI's next succeeding fiscal year.
"Affiliate" as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person means
the power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (b) direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Agent" (a) PNC Bank, National Association; or (b) such other bank or
financial institution as shall have been subsequently appointed as successor
Agent pursuant to Section 8.3 of this Agreement.
"Agreement" this Revolving Credit and Term Loan Agreement, as amended,
supplemented or otherwise modified from time to time.
"Applicable Margin" for each Eurodollar Loan with an Interest Period
beginning during the initial Adjustment Period, 100 basis points for such
Interest Period and, for any Interest Period beginning in any Adjustment Period
thereafter, the amount set forth below opposite the applicable Cash Flow Test
Ratio (such ratio being determined for each Adjustment Period by reference to
the CFTR Report and consolidated financial statements of GSI, the delivery of
which marked the beginning of such Adjustment Period); provided, however, if
GSI shall fail to comply with the provisions of Section 5.1(a) or 5.1(d) or
5.2(a), a new Adjustment Period shall be deemed to have begun on the 105th day
following the end of GSI's most recent fiscal year or the 50th day following
the end of GSI's most recent fiscal quarter, as the case may be, and the Cash
Flow Test Ratio shall be deemed to be 1.49 until compliance by GSI with Section
5.1(a), 5.1(d) or 5.2(a); and provided, further, that the Cash Flow Test Ratio
for each Adjustment Period shall be calculated for the four consecutive fiscal
quarters ending with the most recent fiscal quarter reflected in the financial
statements the delivery of which marked the beginning of such Adjustment
Period:
2
<PAGE>
Cash Flow Test Ratio Applicable Margin
-------------------- -----------------
1.49 or less 150 basis points
1.50 to 2.24 100 basis points
2.25 to 2.99 75 basis points
3.00 and over 50 basis points
The Applicable Margin relating to a Eurodollar Loan (whether a new
Eurodollar Loan or outstanding Eurodollar Loan) with an Interest Period which
begins before and expires after the beginning of any particular Adjustment
Period shall be set on the first day of such Interest Period and shall not,
during the term of such Interest Period, change on the date of change, if any,
in the Applicable Margin; except in the case of a breach of Section 6.14, in
which case, the Applicable Margin shall immediately change to 150 basis points.
Thereafter, the Applicable Margin relating to a Eurodollar Loan (whether a new
Eurodollar Loan or existing Eurodollar Loan) shall be set on the first day of
each successive Interest Period for such Eurodollar Loan.
"Assignment and Acceptance" as defined in Section 9.1.
"Available Commitment" at any time with respect to Revolving Credit Loans
for each Lender, an amount equal to (i) the amount of such Lender's Commitment
at such time to make Revolving Credit Loans minus (ii) the sum of (a) the
-----
aggregate principal amount of all then outstanding Revolving Credit Loans
(including, without limitation, Capex Loans, whether or not repaid) made by
such Lender and (b) the amount of such Lender's Percentage of the Letter of
Credit Outstandings at such time.
"Board" the Board of Governors of the Federal Reserve System of the
United States.
"Borrowing Base" an amount equal to the sum of (x) 80% of the value of
Eligible Receivables for the most recent Calculation Period plus (y) 20% of the
aggregate amount of Letter of Credit Outstandings (less the then aggregate
amount of all unpaid and outstanding Reimbursement Obligations) during such
Calculation Period, provided, however, that if the value of "x" is less than
"y," then the Borrowing Base shall be equal to "x" only.
"Borrowing Base Certificate" a certificate in the form of Exhibit C
hereto to be delivered by the Borrower for each Calculation Period.
"Borrowing Date" any Business Day specified in a notice pursuant to
Sections 2.3 or 2.8 as a date on which a Borrower requests the Lenders to make
Loans.
"Business Day" a day other than Saturday, Sunday or other day on which
commercial banks in New Jersey are authorized or
3
<PAGE>
required by law to be closed and, in the case of Eurodollar Loans, a day which
is also a Working Day.
"CAPEX" for any period, the cost attributed in accordance with GAAP
consistent with those applied in preparation of the financial statements
referred to in Section 5.1 hereof to acquisitions during such period by GSI
and/or its consolidated Subsidiaries of any asset, tangible or intangible, or
replacements or substitutes therefor or additions thereto which are treated as
a non current asset on such financial statements, including, without
limitation, the acquisition or construction of assets having a useful life of
more than one year.
"Capex Loan" each Revolving Credit Loan (including, without limitation,
Designated Capex Loans), the proceeds of which are to be used for capital
expenditures of the type included in the definition of CAPEX.
"Calculation Period" each successive calendar month, beginning September
1, 1995.
"Capital Lease Obligations" of any Person for any period, the obligations
of such Person to pay rent and other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, for such period, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such
Person under GAAP.
"Capital Stock" any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Flow Test Ratio" the ratio, determined on a consolidated basis for
GSI and its consolidated Subsidiaries and calculated for the applicable
Adjustment Period or other period, of (x) the sum of Consolidated Net Income
plus, to the extent deducted in determining Consolidated Net Income,
- ----
charges for depreciation and amortization and Consolidated Interest Expense for
the applicable Adjustment Period less the sum of CAPEX not funded with the
----
proceeds of Loans, cash dividends paid on, and purchases by GSI or any of its
Subsidiaries of, Capital Stock of GSI and Taxes to (y) CPLTD plus
----
Consolidated Interest Expense.
"CFTR Report" as defined in Section 5.1(b).
"Change in Control" means any one or more of the following: (i) the
acquisition by any Person, or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of greater than
50% of the
4
<PAGE>
outstanding shares of voting stock of GSI, or (ii) during any 12-month period
more than two members of the current board of GSI cease to be members of such
board of directors, other than by reason of death, disability or voluntary
retirement (unless such retirement occurs in conjunction with the acquisition
by any Person, or two or more Persons acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of greater than 25% of
the outstanding shares of voting stock of GSI).
"Closing Date" the date on which the Lenders make the initial Loan or the
Issuer issues the initial Letter of Credit.
"Code" the Internal Revenue Code of 1986, as amended from time to time.
"Collateral Party" the pledgor, mortgagor or grantor of a security
interest for the benefit of the Agent and the Lenders under any Security
Document.
"Commitment" for each Lender (x) from and including the Effective Date to
but excluding the Termination Date the lesser of (i) the amount set forth
opposite such Lender's name in Schedule I under the heading "Commitment" as
such amount may be adjusted pursuant to Sections 2.5 or 9.1 and (ii) the
Borrowing Base for the then immediately preceding Calculation Period, in the
case of Revolving Credit Loans and Letters of Credit (subject to an aggregate
sublimit for all Lenders of $2,000,000 for Letters of Credit and $2,000,000 for
Capex Loans) and (y) for each Lender, the amount set forth opposite such
Lender's name in Schedule I under the heading "Commitment," in the case of Term
Loans.
"Consolidated Current Liabilities" at a particular date, the sum of (i)
all amounts which would, in conformity with GAAP, be included under current
liabilities on a consolidated balance sheet of GSI as at such date and (ii) the
then outstanding principal amount of Revolving Credit Loans and Reimbursement
Obligations.
"Consolidated Intangibles" at a particular date, all assets of GSI,
determined on a consolidated basis at such date, that would be classified as
intangible assets in accordance with GAAP, but in any event including, without
limitation, unamortized organization and reorganization expense, patents, trade
or service marks, franchises, trade names and goodwill.
"Consolidated Interest Expense" for any period, the total interest
expense for such period (including, without limitation, that attributable to
leases in accordance with GAAP) of GSI and its consolidated Subsidiaries with
respect to all outstanding Indebtedness of GSI and its consolidated
Subsidiaries.
5
<PAGE>
"Consolidated Net Income" for any period, the consolidated net income (or
net loss) of GSI and its consolidated Subsidiaries for such period, determined
in accordance with GAAP.
"Consolidated Quick Assets" at a particular date, the sum of cash,
marketable securities and receivables owned by GSI and its consolidated
Subsidiaries.
"Consolidated Tangible Net Worth" at a particular date, (a) the sum of
all amounts which would be included under shareholders' equity on a
consolidated balance sheet of GSI and its consolidated Subsidiaries determined
in accordance with GAAP as at such date minus (b) Consolidated Intangibles
-----
as at such date.
"Contingent Obligation" as to any Person any guarantee of payment,
collection or performance by such Person of any Indebtedness or other
obligation of any other Person, or any agreement to provide financial assurance
with respect to the financial condition, or the payment of the obligations of,
such other Person (including, without limitation, purchase or repurchase
agreements, reimbursement agreements with respect to letters of credit or
acceptances, indemnity arrangements, grants of security interests to support
the obligations of another Person, keepwell agreements and take-or-pay or
through-put arrangements) which has the effect of assuring or holding harmless
any third Person against loss with respect to one or more obligations of such
other Person; provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation of any Person shall
be deemed to be the lower of (a) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made and (b) the maximum amount for which such contingently liable Person
may be liable pursuant to the terms of the instrument embodying such Contingent
Obligation, unless such primary obligation and the maximum amount for which
such contingently liable Person may be liable are not stated or determinable,
in which case the amount of such Contingent Obligation shall be such
contingently liable Person's maximum reasonably anticipated liability in
respect thereof as determined by the contingently liable Person in good faith.
"Contractual Obligation" as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Controlled Group" as set forth in Section 1563(a) of the Code.
6
<PAGE>
"CPLTD" for any period, the sum of (i) the current portion of Capital
Lease Obligations of GSI and its consolidated Subsidiaries and any permitted
prepayments of Subordinated Debt of GSI and its consolidated Subsidiaries, and
(ii) all other amounts which were, or would be, in conformity with GAAP
included under current portion of long term debt on the consolidated balance
sheet of GSI for the relevant period then ended; provided that the calculation
of CPLTD shall not include the current portion of any Revolving Credit Loans.
"Default" any of the events specified in Section 7.1, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Designated Capex Loan" Capex Loans which have been designated by
Borrower pursuant to Section 2.19 by written notice to the Agent on any
anniversary of the Effective Date occurring on or prior to the Termination Date
as Capex Loans repayment of which will be made in 60 equal monthly installments
pursuant to Section 2.1(a). The aggregate outstanding principal amount of
Designated Capex Loans may not exceed $2,000,000. No Capex Loan which has
become a Designated Capex Loan may be so designated again on any anniversary of
the Effective Date occurring after the original date of its designation as a
Designated Capex Loan.
"Dollar" and "$" lawful currency of the United States of America.
"Effective Date" as set forth in Section 4.1.
"Eligible Receivables" all accounts receivable of the Borrower other than
accounts receivable (i) which have remained unpaid for more than 90 days after
the date of their creation; (ii) which are owed by any Person where 50% or more
of the receivables owed by such Person would be excluded by reason of clause
(i) of this definition (the "50% Rule"); (iii) which are owed by any Affiliate
of any Person constituting the Borrower to any Person constituting the Borrower
or another Affiliate; (iv) which are payable by any Person not incorporated in
a jurisdiction which is part of the United States of America or any state
thereof; (v) as to which the goods which gave rise to the receivable have been
or are being returned or as to which a credit has been claimed; (vi) as to
which (collectively, "Contras") the account party is or may set off against or
net out amounts due such account party by any Person constituting the Borrower;
(vii) as to which there are accrued and unpaid late charges, to the extent of
such late charges (provided, that this clause (vii) shall not derogate from the
provisions of clause (i) above); (viii) which are payable by any Person which
is the subject of any voluntary or involuntary bankruptcy or insolvency
proceeding (state or federal), which has made a general assignment for the
benefit of creditors or had a receiver,
7
<PAGE>
trustee or other similar official appointed with respect to all or a
substantial portion of its properties or which has ceased doing business; or
(ix) which Lender deems to be otherwise unacceptable in its reasonable
judgement.
"ERISA" means the Employee Retirement Income Security Act of 1974 (and
any sections of the Code amended by it), as the same from time to time may be
amended, supplemented or modified, and all regulations promulgated thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with any Person constituting the Borrower would be
deemed to be a single employer under Section 414 of the Code.
"Eurocurrency Reserve Requirements" for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements prescribed
for eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of the Board) maintained by a member bank of the Federal
Reserve System. Eurodollar Loans shall be deemed to constitute Eurocurrency
Liabilities and to be subject to such reserve requirements without benefit of
or credit for proration, exceptions or offsets which may be available from time
to time to Lender under Regulation D.
"Eurodollar Base Rate" with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at
which PNC or its Affiliate is offering Eurodollar deposit-based loans to prime
banks at or about 10:00 a.m., New Jersey time, two Business Days prior to the
beginning of such Interest Period,
(a) in the interbank eurodollar market where the eurodollar and
foreign currency exchange operations in respect of its Eurodollar Loans
then are being conducted,
(b) for delivery on the first day of such Interest Period,
(c) for the number of days contained therein and
(d) in an amount comparable to PNC's Percentage of the Eurodollar
Loan to be outstanding during such Interest Period.
"Eurodollar Loans" Loans whose rate of interest is based upon the
Eurodollar Rate.
8
<PAGE>
"Eurodollar Rate" with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum for such day (rounded upward
to the nearest 1/100 of 1%) obtained by dividing (x) the Eurodollar Base Rate
by (y) 1.00 minus the then current Eurocurrency Reserve Requirement.
"Event of Default" as defined in Section 7.1.
"Existing Loan" as defined in Section 2.6(b).
"Existing Loan Note" as defined in Section 2.7(b).
"Existing New Term Loan" as defined in Section 2.6(b).
"Existing New Term Loan Note" as defined in Section 2.7(b).
"Federal Funds Rate" for any period, a fluctuating interest rate per
annum (based on a 360 day year) equal for each day during such period to the
average of the rates of interest charged on overnight federal funds
transactions, with member banks of the Federal Reserve System only, as
published for any day which is a Business Day by the Federal Reserve Bank of
New York (or, in the absence of such publication, as reasonably determined by
the Agent).
"Fixed Rate" a fixed rate of interest determined by PNC in its sole
discretion for a Loan of a specified principal amount and accepted by the
Borrower and each Lender. PNC agrees, upon request by the Borrower, to provide
the Borrower with non binding indications of potential Fixed Rates from time to
time.
"Fixed Rate Loans" Loans whose interest rate is based on a Fixed Rate.
"GAAP" generally accepted accounting principles in the United States of
America consistent with those utilized in preparing the audited financial
statements referred to in Section 5.1(a).
"Governmental Authority" any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Indebtedness" of any Person at any date (without duplication):
(a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices),
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(b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument,
(c) all Capital Lease Obligations of such Person,
(d) all reimbursement and other obligations of such Person in
respect of letters of credit, acceptances and similar obligations issued
or created for the account of such Person,
(e) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become
liable for the payment thereof,
(f) net liabilities of such Person under interest rate cap
agreements, interest rate swap agreements, foreign currency exchange
agreements and other hedging agreements or arrangements,
(g) all Contingent Obligations of such Person, and
(h) withdrawal liabilities of such Person or any Commonly
Controlled Entity under a Plan.
The Indebtedness of any Person shall include any Indebtedness of any
partnership in which such Person is a general partner.
"indemnified liabilities" as defined in Section 10.5.
"Intellectual Property" has the meaning ascribed thereto in Section 3.9.
"Interest Payment Date" (a) as to any Loan, the first day of each
calendar month to occur while such Loan is outstanding, beginning on the first
day of the first full calendar month occurring after the date of such Loan, and
(b) in addition, as to any Eurodollar Loan or Fixed Rate Loan the last day of
each Interest Period with respect thereto. Interest shall accrue from and
including the first day of an Interest Period to but excluding the last day of
such Interest Period.
"Interest Period" with respect to any Eurodollar Loan or Fixed Rate Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan or Fixed
Rate Loan and ending one, two, three or six months thereafter, as
selected by the Borrower in its notice of borrowing or notice of
conversion, given with respect thereto, subject to availability (and
consented to by the Lenders, in the case of Fixed Rate Loans); and
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(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan or Fixed
Rate Loan and ending one, two, three or six months thereafter, as
selected by the Borrower by irrevocable notice to the Agent given not
less than three Business Days prior to the last day of the then current
Interest Period with respect thereto, subject to availability (and
consented to by the Lenders, in the case of Fixed Rate Loans);
provided that, the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period would end on a day other than a Business
Day such Interest Period shall be extended to the next Business Day
unless, in the case of a Eurodollar Loan, such next succeeding Business
Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day;
(2) in the case of a Eurodollar Loan, if an Interest Period
commences on the last day in a calendar month that is a Business Day,
such Interest Period shall end on the last day that is a Business Day in
the month that is the specified number of months after the month in which
such Interest Period commenced;
(3) an Interest Period that otherwise would extend beyond the
Termination Date or the Maturity Date for the relevant Loan shall end on
such Termination Date or the Maturity Date, as the case may be; and
(4) the Borrower shall select Interest Periods so as not to require
a payment or prepayment of any Eurodollar Loan or Fixed Rate Loan during
an Interest Period for such Loan.
"Issuance Request" a certificate duly executed by a Responsible Officer
of any Person constituting the Borrower in substantially the form of Exhibit D
hereto, and delivered to the Issuer (with a copy to the Agent) requesting the
issuance of a Letter of Credit described therein.
"Issuer" PNC.
"Landlord's Waiver and Consent" the Landlord's Waiver and Consent in the
form annexed hereto as Exhibit E.
"Lease Expense" for any Person for any period, the aggregate amount of
fixed and contingent rentals (other than Capital Lease Obligations) payable by
such Person for such period with respect to leases of real and personal
property.
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"Letter of Credit" has the meaning set forth in Section 2.18(a) hereof.
"Letter of Credit Availability" at any time, the lesser of (a) $2,000,000
minus any Letter of Credit Outstanding(s) and (b) the then Available Commitment
for Revolving Credit Loans and Letters of Credit.
"Letter of Credit Outstandings" at any time, an amount equal to the sum
of (a) the aggregate undrawn, available amount at such time of all Letters of
Credit then outstanding plus (b) the then aggregate amount of all unpaid and
outstanding Reimbursement Obligations.
"Lien" any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or security
interest; or any preference, priority or other agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement, any Capital Lease
Obligations having substantially the same economic effect as any of the
foregoing).
"Loan" any loan made by the Lenders pursuant to this Agreement (whether
denominated as a Revolving Credit Loan, Term Loan, Capex Loan, Designated Capex
Loan, Prime Rate Loan, Eurodollar Loan, Fixed Rate Loan or otherwise) and the
Existing Loan and Existing New Term Loan.
"Loan Documents" this Agreement, the Notes and the Security Documents.
"Material Adverse Effect" a material adverse effect on (a) the business,
operations, property or condition (financial or otherwise) of GSI and the
Subsidiary Borrowers, taken as a whole, or (b) the validity or enforceability
of (i) this Agreement, any of the Notes or the other Loan Documents or (ii) the
rights or remedies of the Lender hereunder or thereunder.
"Maturity Date" (i) in the case of Revolving Credit Loans other than
Designated Capex Loans, the Termination Date, (ii) in the case of each
Designated Capex Loan, the fifth anniversary of the date on which such Loan
becomes a Designated Capex Loan, (iii) in the case of the Term Loans, October
31, 2002, (iv) in the case of the Existing Loan, February 1, 1999, and (v) in
the case of the Existing New Term Loan, February 1, 1999.
"Multiemployer Plan" a Plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Notes" the collective reference to the Revolving Credit Notes, the Term
Notes and the Existing Loan Note and Existing New Term Loan Note.
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"Obligations" all obligations (monetary or otherwise) of the Borrower to
the Lenders and/or the Agent arising under or in connection with this Agreement
(including, without limitation, the Reimbursement Obligations and the Letters
of Credit), the Notes and the other Loan Documents.
"Payment Office" as specified in Section 2.14.
"PBGC" the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA, and any entity succeeding to any or all of its
functions under ERISA.
"Percentage" of any Lender means, at any time, with respect to Revolving
Credit Loans or Term Loans, the percentage set forth opposite such Lender's
name on Schedule I hereto under the heading "Revolving Credit Loans" or "Term
Loans," as the case may be, and with respect to a determination whether a group
of Lenders constitute "Required Lenders," or a Lender's obligation to indemnity
the Agent pursuant to Section 8.1(a), the percentage set forth opposite such
Lender's names on Schedule I under the heading "Total Percentage" as the same
may be adjusted pursuant to Sections 2.5 or 9.1 hereof.
"Permitted Investments"
(a) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any agency
thereof and backed by the full faith and credit of the United States of
America, in each case maturing within six months from the date of
acquisition thereof;
(b) marketable general obligations issued by any state of the
United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within six months from the
date of acquisition thereof and, at the time of acquisition, having one
of the two highest ratings generally obtainable from either Standard &
Poor's Corporation or Moody's Investors Service, Inc.;
(c) without limiting the provisions of subsection (d) of this
definition, commercial paper maturing no more than six months from the
date of acquisition thereof and, at the time of acquisition, having a
rating of A-1 (or the equivalent) or higher from Standard & Poor's
Corporation and P-1 (or the equivalent) or higher from Moody's Investors
Service, Inc.;
(d) commercial paper maturing no more than six months from the date
of acquisition thereof and issued by (i) the holding company of any
Lender or (ii) the holding company of any other bank that has (A)
combined capital, surplus and
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undivided profits (less any undivided losses) of not less than $250
million, (B) a Keefe Bank Watch Rating of C or better and (C) commercial
paper having a rating of A-2 (or the equivalent) from Standard & Poor's
Corporation or P-2 (or the equivalent) or higher from Moody's Investors
Service, Inc.;
(e) domestic and Eurodollar certificates of deposit, time or
demand deposits or bankers' acceptances maturing within six months from
the date of acquisition issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by:
(i) any Lender,
(ii) any other commercial bank organized under the laws of
the United States of America or any state thereof or the
District of Columbia having combined capital, surplus and
undivided profits (less any undivided losses) of not less
than $500 million,
(iii) any branch located in the United States of America of a
commercial bank organized under the laws of the United
Kingdom or Canada having combined capital, surplus and
undivided profits (less any undivided losses) of not less
than $500 million or
(iv) any domestic commercial bank the deposits of which are
guaranteed by the Federal Deposit Insurance Corporation,
provided that (A) the full amount of the deposits of the
Person making such Permitted Investment are so guaranteed and
(B) the aggregate amount of all Permitted Investments under
this clause (iv) does not exceed $500,000; and
(f) fully collateralized repurchase agreements with a term of not
more than 30 days for underlying securities of the type described in
subsections (a) and (b) of this definition, entered into with any
institution meeting the qualifications specified in clause (d) or
subclauses (i) through (iii) of clause (e) of this definition; provided,
in each case, that such obligations are payable in Dollars.
"Person" an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan" any employee benefit plan which is subject to ERISA and which
covers the employees or former employees of any Person
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constituting the Borrower or an ERISA Affiliate, under which any Person
constituting the Borrower or an ERISA Affiliate has any obligation or liability
or under which such Person or an ERISA Affiliate has made contributions within
the preceding five years. References herein to a Plan shall include any
Multiemployer Plan.
"PNC" PNC Bank, National Association.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by PNC as its prime rate in effect at its principal office in
Moorestown, New Jersey. The Prime Rate is not intended to be the lowest rate
of interest charged by PNC in connection with extensions of credit to debtors.
"Prime Rate Loans" Loans whose interest rate is based on the Prime Rate.
"Purchasing Lender" as defined in Section 9.1.
"Regulation U" Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Reimbursement Obligation" as defined in Section 2.18(h) hereof.
"Reportable Event" any event set forth in Section 4043(b) of ERISA or the
regulations thereunder.
"Required Lenders" Lenders holding 66 2/3% of the aggregate Commitments,
if no Loans are outstanding and there are no Letter of Credit Outstandings,
and, otherwise, Lenders holding 66 2/3% of outstanding Loans and Letter of
Credit Outstandings.
"Requirement of Law" as to any Person, the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer" in such Person's capacity as such, the chief
executive officer of any Person constituting the Borrower and the president of
such Person (if not the chief executive officer) and, with respect to financial
matters, the chief financial officer or corporate controller of such Person.
"Revolving Commitment Period" the period from and including the Effective
Date to but not including the Termination Date or such earlier date on which
the Revolving Loan Commitments shall terminate as provided herein.
"Revolving Credit Loans" as defined in Section 2.1(a).
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"Revolving Credit Note" as defined in Section 2.2.
"Revolving Loan Commitment" as to any Lender, the obligation of such
Lender to make Revolving Credit Loans to the Borrower hereunder.
"Security Agreements" collectively, each Security Agreement in the form
of Exhibit F attached hereto, to be executed and delivered by each Person
constituting the Borrower to the Agent, as the same may be amended,
supplemented or otherwise modified from time to time.
"Security Documents" the collective reference to the Security Agreements
and any guarantee delivered pursuant to Section 6.6.
"Subordinated Debt" any unsecured Indebtedness of any Person constituting
the Borrower (a) no part of the principal of which is stated to be payable or
is required to be paid (whether by way of mandatory sinking fund, mandatory
redemption, mandatory prepayment or otherwise) prior to October 31, 2002, and
the payment of the principal of and interest on which and other obligations of
the Borrower in respect thereof are subordinated to the prior payment in full
of the principal of and interest (including post-petition interest) on the
Notes and all other Obligations hereunder on terms and conditions approved in
writing by the Required Lenders and (b) otherwise containing terms, covenants
and conditions satisfactory in form and substance to the Required Lenders, as
evidenced by their prior written approval thereof.
"Subsidiary" as to any Person (a "Parent") (a) any other Person in which
the Parent owns or controls, directly or indirectly, more than 50% of the
Capital Stock of such Person, (b) any other Person of which such percentage of
Capital Stock shall at the time be owned or controlled by the Parent or one or
more of its Subsidiaries as defined in clause (a) or by one or more such
Subsidiaries, or (c) any other Person of which Capital Stock having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such Person are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Parent.
"Subsidiary Borrower" Guest Packaging, Inc. or Breckenridge-Remy Co., as
the case may be, and, collectively, the "Subsidiary Borrowers."
"Taxes" for any period, the amount of taxes on income which would, in
conformity with GAAP, be set forth on the income statements of GSI and its
consolidated Subsidiaries net of the
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amount of any net operating losses used in determining the amount of such
Taxes.
"Term Loan" as defined in Section 2.6.
"Term Note" as defined in Section 2.7.
"Termination Date" October 31, 1997; provided, the Termination Date shall
be automatically extended on each of the first three anniversaries of the
Effective Date for a one year period unless the Borrower, by written notice to
the Agent delivered not more than 60 days and not less 30 days prior to the
Termination Date then in effect, elects not to extend the then Termination
Date; and provided, that, no extension of the Termination Date shall be
effective if, on the relevant anniversary of the Effective Date, an Event of
Default has occurred and is continuing and provided, further, that the
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Termination Date shall not extend beyond October 31, 2000, in any event.
"Tranche" the collective reference to Eurodollar Loans or Fixed Rate
Loans, as the case may be, whose Interest Periods begin on the same date and
end on the same later date (whether or not such Loans originally were made on
the same day).
"Type" as to any Loan, its nature as a Prime Rate Loan, a Eurodollar Loan
or a Fixed Rate Loan.
"Working Day" any Business Day on which dealings in foreign currencies
and exchange between banks may be carried on in London, England.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the other Loan Documents
or any certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to GSI
and its Subsidiaries not defined in Section 1.1 and accounting terms partly
defined in Section 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
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(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS
Section 2.1 Revolving Credit Commitments.
----------------------------
(a) Subject to the terms and conditions of this Agreement, each
Lender severally agrees to make revolving credit loans ("Revolving Credit
Loans") to the Borrower from time to time during the Revolving Commitment
Period in an aggregate principal amount at any one time outstanding for the
Borrower not to exceed the then Available Commitment of such Lender. During
the Revolving Commitment Period the Borrower may borrow and prepay the
Revolving Credit Loans in whole or in part, and (except in the case of Capex
Loans) reborrow Revolving Credit Loans, all in accordance with the terms and
conditions hereof. All Revolving Credit Loans (including, without limitation,
Designated Capex Loans) shall be paid in full on the relevant Maturity Date.
Without derogating from the foregoing, the principal amount of each Designated
Capex Loan shall be repaid in 60 equal, consecutive monthly installments on the
first Business Day of each calendar month commencing with the first full
calendar month following the date of such Loan's designation as a Designated
Capex Loan.
(b) The Revolving Credit Loans may from time to time be Eurodollar
Loans, Prime Rate Loans or a combination thereof, as determined by the Borrower
and notified to the Agent in accordance with Section 2.3 and Section 2.10,
provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after
the day that is one month prior to the Termination Date.
Section 2.2 Revolving Credit Note. The Revolving Credit Loans made
---------------------
by each Lender shall be evidenced by a promissory note of the Borrower,
substantially in the form of Exhibit A, with appropriate insertions as to date
and principal amount (each a "Revolving Credit Note"), payable to the order of
such Lender and in a principal amount equal to such Lender's Revolving Loan
Commitment. Each Lender is hereby authorized to record the date, Type and
amount of each Revolving Credit Loan, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and amount of
each payment or prepayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period with respect thereto, on the schedule
annexed to and constituting a part of each Revolving Credit Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. Each Revolving Credit Note shall (x) be dated the
Closing Date, (y) be stated to mature on the Maturity Date and (z) provide for
the payment of interest in accordance with Section 2.12.
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Section 2.3 Procedure for Revolving Credit Borrowings.
-----------------------------------------
(a) The Borrower may borrow under the Commitment for Revolving
Credit Loans during the Revolving Commitment Period on any Business Day. The
Borrower shall give the Agent irrevocable notice (which notice must be received
by the Agent prior to 10:00 a.m., New Jersey time, three Business Days prior to
the requested Borrowing Date, if all or any part of the requested Revolving
Credit Loans are to be initially Eurodollar Loans and one Business Day prior to
the requested Borrowing Date in the case of the initial Prime Rate Loan and
otherwise by 10:00 a.m. on the date of the requested Prime Rate Loan),
specifying (1) the amount to be borrowed, (2) the requested Borrowing Date, (3)
whether the borrowing is to be of Eurodollar Loans or Prime Rate Loans or a
combination thereof and (4) if the borrowing is to be entirely or partly of
Eurodollar Loans, the amount of such Loans and the length of the initial
Interest Period therefor. Each Revolving Credit Loan shall be in an amount
equal to (x) in the case of Prime Rate Loans, $100,000 or a whole multiple
thereof (or, if less, the then Available Commitment) and (y) in the case of
Eurodollar Loans $500,000 or a whole multiple of $10,000 in excess thereof.
The Agent shall promptly notify the Lenders of its receipt of any such
irrevocable notice of borrowing from the Borrower.
(b) On or before 12:00 p.m. New Jersey time on the Business Day
specified in the Borrower's notice of borrowing, each Lender shall provide the
Agent with funds at the Payment Office in an amount equal to such Lender's
Percentage of the requested borrowing. The proceeds of each borrowing shall be
made available by the Agent to the Borrower pursuant to Section 2.14(c). No
Lender's obligation to make any Loan shall be affected by any other Lender's
failure to make any Loan. Neither the Agent nor any Lender shall have any
liability for the failure of any Lender (other than itself) to fund a Loan.
(c) With respect to any Loan, unless the Agent shall have been
notified in writing by any Lender prior to the date of making such Loan that
such Lender does not intend to make available to the Agent such Lender's
portion of the Loan to be made on such date, the Agent may (but shall not be
obligated to) assume that such Lender has made such amount available to the
Agent on that date and, in reliance on such assumption, the Agent may make
available to the Borrower a corresponding amount. If such amount is not made
available by such Lender to the Agent on the date of making such Loan, such
Lender shall be obligated to pay such amount to the Agent and shall pay to the
Agent on demand interest on such amount at the Federal Funds Rate for the
number of days from and including the date of making such Loan to the date on
which such Lender's portion of the Loan becomes immediately available to the
Agent. The Agent shall also be entitled to recover such amount, with interest
thereon at the rate per annum then applicable to the Loans comprising such
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borrowing, upon demand, from the Borrower. A statement of the Agent submitted
to any Lender with respect to any amounts owing under this Section 2.3(c) shall
be conclusive and binding in the absence of demonstrable error. Nothing in
this Section 2.3(c) shall be deemed to relieve any Lender from its obligation
to fulfill its Commitments hereunder.
Section 2.4 Commitment Fees. The Borrower agrees to pay to the
---------------
Agent for the benefit of and disbursement to the Lenders a commitment fee in
respect of the Commitments to make Revolving Credit Loans, for the period from
and including the first day of the Revolving Commitment Period to the
Termination Date (as the same may be extended), computed at the rate of 1/8%
per annum, calculated on the basis of a 360-day year for the actual days
elapsed, on the average daily amount of the aggregate Available Commitments
during the period for which payment is made, payable quarterly in arrears on
the last day of each March, June, September and December and on the Termination
Date or such earlier date as the Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the date hereof.
Section 2.5 Termination or Reduction of Commitments.
---------------------------------------
(a) GSI shall have the right, upon not less than five Business
Days' written notice to the Agent, to terminate the Revolving Loan Commitments
or, from time to time, to reduce the amount of such Commitments, provided that
at no time may the Revolving Loan Commitments be reduced by the Borrower to an
amount less than the sum of the outstanding principal amount of Revolving
Credit Loans and the Letter of Credit Outstandings. Any such reduction shall
be in an amount equal to $100,000 or a whole multiple thereof and shall reduce
permanently the Revolving Loan Commitments then in effect. Any such reduction
in the Revolving Loan Commitment shall be binding on the Subsidiary Borrowers
whether or not they have notice thereof.
(b) Each reduction in the Revolving Loan Commitments, whether
voluntary or automatic, shall be permanent and irrevocable. All reductions in
the Revolving Loan Commitments shall be made pro rata to the Revolving
----
Loan Commitments of the Lenders. The Agent shall promptly notify each Lender
of the amount of any reduction of its Revolving Loan Commitment.
Section 2.6 Term Loans.
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(a) Subject to the terms and conditions hereof, each Lender
severally agrees to make a term loan (each a "Term Loan") to the Borrower on
the Closing Date in an amount not to exceed the amount of the Commitment of
such Lender for Term Loans. The Term Loans may from time to time be Prime Rate
Loans, Fixed Rate Loans or a combination thereof, as determined by the Borrower
and notified to the Agent in accordance with Sections 2.8 and 2.10.
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(b) Subject to the terms and conditions hereof, PNC agrees to
maintain the existing term loan (the "Existing Loan") extended to the Borrower
pursuant to the Original Agreement in the original principal amount of
$5,000,000. The Existing Loan shall be a Fixed Rate Loan with an single
Interest Period ending on the Maturity Date, an interest rate of 6.45% per
annum and shall be governed by the terms hereof and the Existing Loan Note.
(c) Subject to the terms and conditions hereof, PNC agrees to
maintain the existing new term loan (the "Existing New Term Loan") extended to
the Borrower pursuant to the Original Agreement in the original principal
amount of $5,000,000. The Existing New Term Loan shall be a Fixed Rate Loan
with an single Interest Period ending on the Maturity Date, an interest rate of
8.25% per annum and shall be governed by the terms hereof and the Existing New
Term Loan Note.
Section 2.7 Term Notes.
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(a) The Term Loan made by each Lender shall be evidenced by a
promissory note of the Borrower substantially in the form of Exhibit B (each a
"Term Note"), with appropriate insertions therein as to date and principal
amount, payable to the order of such Lender and in a principal amount equal to
such Lender's Term Loan. Each Lender is hereby authorized to record the date
and amount of each payment or prepayment of principal of its Term Loan, each
continuation thereof, each conversion of all or a portion thereof to another
Type and, in the case of Fixed Rate Loans, the length of each Interest Period
with respect thereto, on the schedule annexed to and constituting a part of the
Term Note, and any such recordation shall constitute prima facie evidence of
the accuracy of the information so recorded. Each Term Note shall (a) be dated
the Closing Date, (b) be stated to mature in 83 equal consecutive monthly
principal installments payable on the first Business Day of each calendar
month, commencing on December 1, 1995 with a final principal payment in the
then outstanding principal amount of such Term Loan payable on the Maturity
Date, and (c) provide for the payment of interest in accordance with Section
2.12. The then outstanding principal amount of the Term Loan shall be paid in
full on the Maturity Date.
(b) The Existing Loan shall be evidenced by a promissory note of
the Borrower substantially in the form of Exhibit H (the "Existing Loan Note"),
with appropriate insertions therein as to date and principal amount, payable to
the order of PNC and in a principal amount equal to the Existing Loan. PNC is
hereby authorized to record the date and amount of each payment or prepayment
of principal of the Existing Loan on the schedule annexed to and constituting a
part of the Existing Loan Note, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded. The Existing
Loan Note shall (a) be dated the Effective Date, (b) be stated to mature in
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41 equal consecutive monthly principal installments, each of which shall be an
amount equal to $83,333, payable on the first Business Day of each calendar
month, commencing on November 1, 1995 with a final principal payment in the
then outstanding principal amount of the Existing Loan payable on the Maturity
Date, and (c) provide for the payment of interest in accordance with Section
2.12. The then outstanding principal amount of the Existing Loan shall be paid
in full on the Maturity Date.
(c) The Existing New Term Loan shall be evidenced by a promissory
note of the Borrower substantially in the form of Exhibit H (the "Existing New
Term Loan Note"), with appropriate insertions therein as to date and principal
amount, payable to the order of PNC and in a principal amount equal to the
Existing New Term Loan. PNC is hereby authorized to record the date and amount
of each payment or prepayment of principal of the Existing New Term Loan on the
schedule annexed to and constituting a part of the Existing New Term Loan Note,
and any such recordation shall constitute prima facie evidence of the accuracy
of the information so recorded. The Existing New Term Loan Note shall (a) be
dated the Effective Date, (b) be stated to mature in 40 equal consecutive
monthly principal installments, each of which shall be an amount equal to
$104,167, payable on the first Business Day of each calendar month, commencing
on November 1, 1995 with a final principal payment in the then outstanding
principal amount of the Existing New Term Loan payable on the Maturity Date,
and (c) provide for the payment of interest in accordance with Section 2.12.
The then outstanding principal amount of the Existing New Term Loan shall be
paid in full on the Maturity Date.
Section 2.8 Procedure for Term Loan Borrowing. The Borrower shall
---------------------------------
give the Agent irrevocable notice (which notice must be received by the Agent
prior to 10:00 a.m., New Jersey time, one Business Day prior to the Closing
Date) requesting that the Lenders make the Term Loan on the Closing Date and
specifying (1)the amount to be borrowed, (2) whether the Term Loan is to be
initially a Fixed Rate Loan or Prime Rate Loan or a combination thereof, and
(3) if the Term Loan is to be entirely or partly a Fixed Rate Loan, the amount
of such Loan and the length of the initial Interest Period therefor. Each
portion of the Term Loan which is maintained as a Prime Rate Loan shall be in a
principal amount of $100,000 or a whole multiple thereof (or, if less, the then
outstanding principal amount of the Term Loan). Each portion of the Term Loan
which is maintained as a Fixed Rate Loan shall be in a principal amount of
$500,000 or a multiple of $10,000 in excess thereof. The Agent shall promptly
notify the Lenders of its receipt of any notice from the Borrower pursuant to
this Section.
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Section 2.9 Prepayments.
-----------
(a) From time to time the Borrower may prepay the Loans, in whole
or in part, subject to the provisions of Section 2.17 but otherwise without
premium or penalty, upon at least four Business Days' irrevocable notice to the
Agent (except in the case of prepayments required pursuant to Section 2.9(e)
for which no notice is required), specifying the date and amount of prepayment.
Prepayments of Eurodollar Loans or Fixed Rate Loans shall be subject to the
provisions of Section 2.17. Partial prepayments shall be in an aggregate
principal amount of $100,000 or a whole multiple of $10,000 in excess thereof in
the case of Prime Rate Loans and $500,000 or a whole multiple thereof in the
case of Fixed Rate Loans or Eurodollar Loans or if such prepayment would reduce
the principal amount of such Fixed Rate Tranche or Eurodollar Tranche below
$500,000, in an aggregate principal amount equal to the outstanding principal
amount of such Tranche. All prepayments shall be allocated to the Lenders based
on their respective Total Percentages (as such term is used in the definition of
"Percentage"). The Borrower shall further instruct the Lenders whether to apply
such prepayment to Revolving Loans or Term Loans (and, in the case of PNC Bank,
National Association, Existing Term Loan and/or Existing New Term Loan) or both;
provided such instructions shall require the same pro rata allocation by each
Lender among the Revolving Loans and Term Loans (and/or Existing Term Loan
and/or Existing New Term Loan in the case of PNC Bank, National Association)
held by them.
(b) If any notice of prepayment is given, the amount specified in
such notice shall be due and payable on the date specified therein.
Prepayments of the Loans shall be accompanied by payment of accrued interest to
the payment date on the principal amount prepaid.
(c) Partial prepayments of the Term Loans, the Existing Loan and
Existing New Term Loan shall be applied to the installments of principal under
the Term Loans, Existing Loan and Existing New Term Loan in the inverse order
of their respective scheduled maturities.
(d) Amounts prepaid on account of the Term Loans, Existing Loan or
Existing New Term Loan may not be reborrowed.
(e) In the event (i) the aggregate outstanding principal amount of
the Revolving Credit Loans and Reimbursement Obligations and (ii) Letter of
Credit Outstandings (excluding Reimbursement Obligations) exceeds the Revolving
Loan Commitments at the end of any Calculation Period, the Borrower shall, on
or before 3:00 p.m. on the first Business Day after such excess is established
by the Agent in writing, prepay the Revolving Credit Loans and Reimbursement
Obligations in an amount equal to such excess (together with interest on the
amount prepaid to the date of prepayment). If such excess is greater than the
outstanding
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principal amount of Revolving Credit Loans and Reimbursement Obligations, the
Borrower shall, in addition, post cash collateral with the Agent to secure
repayment of the Letter of Credit Outstandings in an amount equal to the
balance of such excess. Any such prepayments shall be made on or before 3:00
p.m. on the first Business Day after any excess is established pursuant to this
Section 2.9(e) and shall be subject to the provisions of Section 2.17.
(f) The Agent shall disburse all prepayments of the Loans to the
Lenders on a pro rata basis, except in the case of prepayments of the Existing
Loan and Existing New Term Loan, which shall be disbursed to PNC alone.
Section 2.10 Conversion and Continuation Options. The Borrower
-----------------------------------
shall have the right at any time upon prior irrevocable notice to the Agent (i)
not later than 12:00 noon, New Jersey time, on any Business Day, to convert any
Eurodollar Loan or Fixed Rate Loan to a Prime Rate Loan, (ii) not later than
10:00 a.m., New Jersey time, three Business Days prior to conversion or
continuation, to convert any Prime Rate Loan or Fixed Rate Loan into a
Eurodollar Loan or to continue any Eurodollar Loan or Fixed Rate Loan as a
Eurodollar Loan or Fixed Rate Loan for any additional Interest Period, (iii)
not later than 12:00 noon, New Jersey time, on any Business Day, to convert any
Eurodollar Loan or Prime Rate Loan to a Fixed Rate Loan and (iv) not later than
10:00 a.m., New Jersey time, three Business Days prior to conversion, to
convert the Interest Period with respect to any Eurodollar Loan or Fixed Rate
Loan to another permissible Interest Period, subject in each case to the
following:
(a) Revolving Credit Loans may only be maintained as Prime Rate
Loans or Eurodollar Loans, and Term Loans may only be maintained as Prime Rate
Loans or Fixed Rate Loans.
(b) a Eurodollar Loan or Fixed Rate Loan may not be converted at a
time other than the last day of the Interest Period applicable thereto;
(c) any portion of a Loan maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar Loan
or Fixed Rate Loan;
(d) No Eurodollar Loan or Fixed Rate Loan may be continued as such
and no Prime Rate Loan may be converted to a Eurodollar Loan or Fixed Rate Loan
when any Event of Default has occurred and is continuing;
(e) any portion of a Eurodollar Loan that cannot be converted into
or continued as a Eurodollar Loan or Fixed Rate Loan by reason of Section
2.10(c) or 2.10(d) or otherwise automatically shall be converted at the end of
the Interest Period in effect for such Loan to a Prime Rate Loan;
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(f) on the last day of any Interest Period for Eurodollar Loans or
Fixed Rate Loans, if the Borrower has failed to give notice of conversion or
continuation as described in this subsection or if such conversion or
continuation is not permitted pursuant to Section 2.10(e) or otherwise, such
Loans shall be converted to Prime Rate Loans on the last day of such then
expiring Interest Period;
(g) the Existing Loan and Existing New Term Loan shall be
maintained as a Fixed Rate Loan only; and
(h) accrued interest on a Loan (or portion thereof) being
converted shall be paid by the Borrower at the time of conversion.
Section 2.11 Minimum Amounts of Tranches. All borrowings,
---------------------------
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections that, after giving effect thereto, the aggregate principal amount of
the Loans comprising each Eurodollar Tranche or Fixed Rate Tranche shall be
equal to $500,000 or a whole multiple of $10,000 in excess thereof.
Section 2.12 Interest Rates and Payment Dates.
--------------------------------
(a) Subject to the provisions of Section 2.12(d), each Prime Rate
Loan shall bear interest at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days and twelve 30-day months)
equal to the Prime Rate.
(b) Subject to the provisions of Section 2.12(d), each Eurodollar
Loan shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 360 days) at a rate per annum equal to the Eurodollar
Rate for the Interest Period in effect for such Eurodollar Loan plus the
Applicable Margin in effect for such Interest Period.
(c) Subject to the provisions of Section 2.12(d), each Fixed Rate
Loan shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 360 days) at the Fixed Rate established for such Loan
during each Interest Period established with respect thereto. The Fixed Rate
established for the Existing Loan is 6.45% per annum and the Interest Period
established for the Existing Loan shall begin on the Effective Date and end on
the Maturity Date. The Fixed Rate established for the Existing New Term Loan
is 8.25% per annum and the Interest Period established for the Existing New
Term Loan shall begin on the Effective Date and end on the Maturity Date.
(d) If all or a portion of (A) the principal amount of any Loan,
(B) any interest payable thereon or (C) any commitment fee or other amount
payable hereunder shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise),
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such overdue amount shall bear interest at a rate per annum which is
(1) in the case of overdue principal, the rate that
otherwise would be applicable thereto pursuant to the foregoing
provisions of this subsection plus 3% per annum, or
(2) in the case of overdue interest or fees or other
amounts, the Prime Rate plus 3%,
in each case from the date of such nonpayment until such amount is paid in full
(as well as after, to the extent permitted by law, as before judgment). In no
event shall any interest to be paid pursuant to this Agreement exceed the
maximum rate permitted by law.
(e) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing on overdue amounts pursuant to Section
2.12(d) shall be payable on demand.
(f) As soon as practicable the Agent shall notify the Borrower and
the Lenders of (A) each determination of a Eurodollar Rate and Applicable
Margin and (B) the effective date and the amount of each change in the interest
rate on a Loan. Each determination of an interest rate by the Agent pursuant
to any provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of clearly demonstrable error. At the
request of the Borrower, the Agent shall deliver to the Borrower a statement
showing the quotations used by the Agent in determining any interest rate
pursuant to Sections 2.12(a), (b), (c) or (d).
Section 2.13 Inability to Determine Interest Rate. If prior to the
------------------------------------
first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
(b) a Lender notifies the Agent and Borrower that the Eurodollar
Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Lender of making or maintaining
the Eurodollar Loans during such Interest Period, or
(c) The Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that Dollar deposits in the principal
amounts of the Eurodollars Loans to which such Interest Period is to be
applicable are not generally available in the London Interbank Market,
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<PAGE>
the Agent shall give notice thereof to the Borrower by fax or telephone as soon
as practicable thereafter. If such notice is given (A) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Prime Rate Loans, and (B) any Loans that were to have been converted to or
continued as Eurodollar Loans on the first day of such Interest Period shall be
converted to or continued as Prime Rate Loans. Until such notice has been
withdrawn by the Agent, no Loans shall be made as or converted to or continued
as Eurodollar Loans.
Section 2.14 Payments/Funding.
----------------
(a) All payments (including prepayments) made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees,
Reimbursement Obligations or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 noon, New Jersey time, on the due
date thereof to the Agent, for the account of the Lenders in Dollars and in
immediately available funds to the Agent's account at such address as the Agent
shall give notice to the Borrower and the Lenders (the "Payment Office").
Except for payments received by the Agent for the account of the Agent in its
capacity as such, or for the account of a specific Lender in accordance with
the provisions of this Agreement, the Agent shall, within one Business Day of
funds collection, distribute like funds relating to the payment of principal,
interest or fees pro rata to the Lenders (based on their Percentages)
----
to which such payment is due and payable for their accounts and at the
addresses as each such Lender shall specify in its notice to the Agent made in
accordance with Section 10.2 of this Agreement. If the Agent fails to so
distribute funds within the time set forth in the preceding sentence, the Agent
shall pay interest on the amount to be distributed at a rate equal to the
Federal Funds Rate from the date such funds were to be distributed to the date
of distribution.
Unless the Agent shall have received notice from the Borrower prior
to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may (but shall not be
obligated to) assume that the Borrower has made such payment in full to the
Agent on such date, and the Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand the amount distributed to such Lender together with
interest thereon, at the rate equal to the Federal Funds Rate, for each day
from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent.
(b) If any principal payment hereunder (other than payments on
Eurodollar Loans) becomes due and payable on a day
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<PAGE>
other than a Business Day, such payment date shall be extended to the next
succeeding Business Day, and interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a Eurodollar Loan
becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day (and interest
shall accrue during such extension of time) unless the result of such extension
would be to extend such payment into another calendar month, in which event
such payment shall be made on the immediately preceding Business Day.
(c) If on any date a payment is due hereunder, the Borrower shall
pay less than the amount stated to be due or on any date the Agent shall
receive proceeds of any collateral under any Security Document or pursuant to
any foreclosure or other proceeding to enforce the Obligations of any Person
constituting the Borrower, such proceeds shall be distributed to the Lenders
pro rata based on their respective Total Percentages and shall be applied first
to costs of collection incurred by each Lender, second to accrued and unpaid
interest, third to principal and then to the payment of any other amounts due
hereunder or the other Loan Documents.
(d) The Agent shall fund each Loan by depositing the amount
thereof in the joint account (the "Account") of GSI and the Subsidiary
Borrowers (account no. 8002751648) at the Agent's office at Two Tower Center
Boulevard, East Brunswick, New Jersey 08817; provided that the proceeds of each
Loan shall first be applied to principal prepayments or payments due on the
date of such Loan (without derogating from the Borrower's obligation to repay)
and proceeds of any conversion or continuation of a Loan to or as a particular
Type shall be applied by the Agent solely to effect such conversion or
continuation. Each Lender is hereby authorized to debit the accounts of each
Person constituting the Borrower for all payments due hereunder; provided the
foregoing shall not derogate from the Borrower's obligation to pay or restrict
any Lender's recourse to any particular fund or source of monies; and provided
further, each Lender agrees not to debit such accounts for amounts payable
pursuant to Sections 2.16, 2.17 or 10.5 unless an Event of Default has occurred
and is continuing. The Borrower agrees to maintain its primary depository
accounts with PNC's office at Two Tower Center Boulevard, East Brunswick, New
Jersey 08817.
Section 2.15 Change in Legality. Notwithstanding any other
------------------
provision herein, if any change in any Requirement of Law or in the
interpretation or application thereof by a Governmental Authority shall make it
unlawful for a Lender to make or maintain Eurodollar Loans as contemplated by
this Agreement, (a) the Commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert Loans to Eurodollar Loans
forthwith shall be cancelled and (b) such Loans then outstanding as Eurodollar
Loans, if any, automatically shall be
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<PAGE>
converted to Prime Rate Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 2.17.
Section 2.16 Increased Costs.
---------------
(a) If the adoption of, or any change in, any Requirement of Law
or in the interpretation or application thereof by a Governmental Authority or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(1) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note or any
Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for changes in
the rate of tax on the overall net income of the Lender);
(2) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account
of, advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of a Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder, including, without limitation, the imposition of any
reserves with respect to Eurocurrency Liabilities under Regulation
D of the Board; or
(3) shall impose on a Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans hereunder or to reduce any
amount receivable hereunder in respect thereof then, in any such case, the
Borrower shall promptly pay such Lender, upon its demand, any additional
amounts necessary to compensate such Lender for such increased cost or reduced
amount receivable. If a Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Agent and the
Borrower of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this subsection
submitted by a Lender to the Borrower and Agent shall be conclusive in the
absence of clearly demonstrable error. This covenant shall
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<PAGE>
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
(b) In the event that a Lender shall have determined that any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such
Lender or such corporation could have achieved but for such change or
compliance (taking into consideration Lender's or such corporation's policies
with respect to capital adequacy) by an amount deemed by such Lender to be
material, then from time to time, after submission by such Lender to the
Borrower (with a copy to the Agent) of a written request therefore, the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
(c) In the event that by reason of any change in any Requirement
of Law (including, without limitation, the lapse or termination of any treaty)
or in the interpretation thereof, or the adoption of any new law, regulation or
requirement by any Governmental Authority, or the imposition of any requirement
of any central bank whether or not having the force of law, (i) the Agent or
any Lender shall, with respect to this Agreement, the Loans, the Letters of
Credit (or risk participations therein), the Reimbursement Obligations (or risk
participations therein), the Notes or its obligation to make Loans or issue
and/or own risk participations in Letters of Credit under this Agreement, be
subjected to any withholding or other tax, levy, impost, charge, fee, duty or
deduction of any kind whatsoever (other than franchise taxes imposed by the
jurisdiction in which the Agent or such Lender is domiciled and other than any
tax generally imposed or based upon the net income or branch profits of the
Agent or such Lender) (collectively, "Taxes") or (ii) any change shall occur in
the taxation of the Agent or such Lender with respect to any Loan, any
Reimbursement Obligation (or any risk participation therein), the interest
payable thereon or any fees payable hereunder or referred to herein (other than
franchise taxes imposed by the jurisdiction in which the Agent or such Lender
is domiciled and other than any change which affects, and to the extent that it
affects, the taxation of the net income or branch profits of the Agent or such
Lender), and if any such measures or any other similar measure shall result in
an increase in the cost to the Agent or such Lender of making or maintaining
any Loan or any Letter of Credit or a reduction in the amount of principal,
interest or fees receivable by the Agent or such Lender in respect thereof, the
Agent or such Lender promptly after learning of the imposition of such cost or
reduction in any amount shall
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<PAGE>
notify the Borrower and the Agent (if applicable) stating the reasons therefor.
The Borrower shall thereafter pay to the Agent or such Lender, upon demand from
time to time, as additional consideration hereunder, such additional amounts as
will fully compensate the Agent or such Lender for such increased costs or
reduced amounts and shall promptly provide the Agent or such Lender, as the case
may be, with official tax receipts or other evidence of the payment of any taxes
paid by the Borrower. A certificate as to the increased costs or reduced amounts
setting forth the calculations therefor, shall be submitted promptly by the
Agent or such Lender to the Borrower and the Agent (if applicable) and, in the
absence of demonstrable error, shall be conclusive and binding as to the amount
thereof. If the Agent or Lender receives any additional amounts from the
Borrower pursuant to this subsection (c) the Agent or such Lender shall (at the
Borrower's expense) use its best efforts to obtain a refund, reduction,
deduction or credit for any Taxes with respect to the additional amounts paid
under this subsection (c). If the Agent or such Lender actually receives or
enjoys the benefit of any such refund, reduction, deduction or credit for any
such Taxes, the Agent or such Lender shall reimburse the Borrower if and to the
extent, but only the extent, that the Agent or such Lender determines that it
has actually received (i) a refund of taxes or other amounts (together with any
interest actually received thereon from the respective Governmental Authority)
which refund is attributable to the Taxes with respect to which such additional
amounts were paid; or (ii) an effective net reduction (through a reduction,
deduction, credit or otherwise) in any taxes or other amounts otherwise payable
by the Agent or such Lender (including any taxes imposed on or measured by the
net income of the Agent or such Lender), which reduction is attributable to the
Taxes with respect to such additional amounts were paid. If, at any time after
the Agent or such Lender makes a payment to the Borrower pursuant to the
preceding sentence, the Agent or such Lender determines that it was not entitled
to the full amount of any refund (together with the interest thereon) reimbursed
to the Borrower as aforesaid or that its taxes are not reduced by a credit or
deduction for the full amount of Taxes reimbursed to the Borrower as aforesaid,
the Borrower upon the demand of the Agent or such Lender will promptly pay to
the Agent or such Lender the amounts so refunded to which the Agent or such
Lender was not so entitled, or the amount by which the taxes of the Agent or
such Lender were not so reduced, as the case may be.
Section 2.17 Indemnity.
---------
(a) The Borrower agrees to indemnify each Lender and to hold each
Lender harmless from any loss or expense which such Lender may sustain or incur
as a consequence of
(1) default by the Borrower in payment when due of any
portion of the principal amount of or interest on any Eurodollar
Loan or Fixed Rate Loan,
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(2) default by Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans or Fixed Rate Loans after
Borrower has given a notice requesting the same in accordance with
the provisions of this Agreement,
(3) default by Borrower in making any prepayment after
Borrower has given a notice thereof in accordance with the
provisions of this Agreement, or
(4) the making of a payment (other than scheduled
repayments) or a prepayment of Eurodollar Loans or Fixed Rate Loans
on a day which is not the last day of an Interest Period with
respect thereto,
including, without limitation, in each case, any such loss (including, without
limitation, loss of margin on any Fixed Rate Loan) or expense arising from the
reemployment of funds obtained by such Lender or from fees payable to terminate
the deposits from which such funds were obtained. If the Borrower prepays all
or any part of any advance which is accruing interest at a fixed rate on other
than the last day of the applicable interest period, the Borrower shall also
pay to the Lender, on demand therefor, the Cost of Prepayment. "Cost of
Prepayment" means an amount equal to the present value, if positive, of the
product of (a) the difference between (i) the yield, on the beginning date of
the applicable interest period minus (ii) the yield, on the prepayment
-----
date, of a U.S. Treasury obligation with a maturity similar to the remaining
maturity of the applicable interest period, and (b) the principal amount to be
prepaid, and (c) the number of years, including fractional years from the
prepayment date to the end of the applicable interest period. The yield on any
U.S. Treasury obligation shall be determined by reference to Federal Reserve
Statistical Release H.15(519) "Selected Interest Rates." For purposes of
making present value calculations, the yield to maturity of a similar maturity
U.S. Treasury obligation on the prepayment date shall be deemed the discount
rate. The Cost of Prepayment shall also apply to any payments made after
acceleration of the maturity of this Note.
(b) For the purpose of calculation of all amounts payable to a
Lender under this subsection such Lender shall be deemed to have actually
funded its relevant Eurodollar Loan or Fixed Rate Loan through the purchase of
a deposit bearing interest at the Eurodollar Rate in an amount equal to the
amount of that Eurodollar Loan or purchase of other funds bearing interest at
the Fixed Rate and having a maturity comparable to the relevant Interest
Period; provided, however, that each Lender may fund each of its
-------- -------
Eurodollar Loans and Fixed Rate Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this subsection. This covenant shall survive the termination of
this
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Agreement and the payment of the Notes and all other amounts payable hereunder.
Section 2.18 Letters of Credit.
-----------------
(a) By delivering to the Agent an Issuance Request on a Business
Day, prior to the Termination Date and not less than three Business Days prior
to the requested date of issuance, Borrower may request that the Issuer issue
an irrevocable letter of credit or a documentary letter of credit each in
substantially the form of Exhibits I and J, respectively, attached hereto, with
such insertions with respect to required presentation of documentation or
certifications upon a draw as may be requested by the Borrower and approved by
the Issuer, or in such other form as may be requested by the Borrower and
approved by the Issuer and the Required Lenders (each a "Letter of Credit"), in
support of financial obligations of the Borrower incurred in the ordinary
course of business and which are described in such Issuance Request. Upon
receipt of each Issuance Request, the Agent shall promptly notify the Lenders
thereof. The stated amount of any Letter of Credit requested to be issued
pursuant to an Issuance Request shall be denominated in Dollars.
(b) Each Letter of Credit shall by its terms: (i) be issued in a
stated amount which (A) is at least $10,000, and (B) when added to the Letter
of Credit Outstandings does not exceed (or would not exceed) the then Letter of
Credit Availability and (C) when added to all Revolving Credit Loans and Letter
of Credit Outstandings does not exceed the amount of the then Revolving Loan
Commitment; (ii) be stated to expire on a date (its "Stated Expiry Date") no
later than the earlier of 12 months from its date of issuance or the then
Termination Date, whichever occurs first; and (iii) on or prior to its Stated
Expiry Date (A) terminate immediately upon notice to the Issuer from the
beneficiary thereunder that all obligations covered thereby have been
terminated, paid, or otherwise satisfied in full, or (B) reduce in part
immediately and to the extent the beneficiary thereunder has notified the
Issuer that the obligations covered thereby have been paid or otherwise
satisfied in part.
(c) Subject to the terms and conditions of this Agreement, the
Issuer shall issue Letters of Credit in accordance with the Issuance Requests
made therefor. The Issuer will make available the original of each Letter of
Credit which it issues in accordance with the Issuance Request therefor to the
beneficiary thereof.
(d) The Borrower agrees to pay to the Agent for the account of the
Issuer, with respect to each Letter of Credit, the following fees: (i) an
issuance fee of $75 for manual Letters of Credit and $45 for automated Letters
of Credit; (ii) $45 for each amendment to a Letter of Credit; (iii) an amount
equal to 1/4 of 1% ($50 minimum) of the amount of each draw under a Letter of
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Credit; (iv) a processing fee of $30 and (v) $75 in the case of each draw which
the Borrower authorizes the Issuer to honor notwithstanding the failure of the
beneficiary of a Letter of Credit to present any or all documents required by
such Letter of Credit (it being agreed that the Borrower shall be required to
reimburse the Issuer for any draws so authorized). It is understood that the
foregoing charges are currently the Issuer's standard charges relating to
Letters of Credit of the type contemplated hereby and that such charges may be
changed by the Issuer from time to time. Any changes in such fees and charges
shall be binding on the Borrower on the date each change therein is established
by the Issuer.
(e) To the extent of its Percentage, each Lender agrees to and
shall be deemed to have irrevocably purchased a participation in each Letter of
Credit on the date of issuance thereof. Each Lender shall make available to
the Issuer, regardless of whether any Default or Event of Default shall have
occurred and is continuing, an amount equal to its respective Percentage of
each drawing on each Letter of Credit in same day or immediately available
funds not later than 4:00 p.m. New Jersey time on each Disbursement Date (as
hereinafter defined) for each such drawing provided such Lender has received
notice pursuant to Section 2.18(g) by 11:00 a.m. New Jersey time; and by 10:00
a.m. on the next Business Day if such notice is not received by 11:00 a.m. In
the event that any Lender fails to make available to the Issuer the amount of
such Lender's Percentage of any drawing on a Letter of Credit as provided
herein, the Issuer shall be entitled to recover such amount on demand from such
Lender together with interest at the daily average Federal Funds Rate for the
first three Business Days after the Disbursement Date (together with such other
compensatory amounts as may be required to be paid by such Lender to the Issuer
pursuant to the Rules for Interbank Compensation of the Council on
International Lending or of the New York Clearing House Compensation Committee,
as the case may be, as in effect from time to time) and thereafter at the Prime
Rate.
(f) The Agent shall distribute to each Lender that has paid all
amounts payable by it under this Section 2.18 with respect to any Letter of
Credit issued by Issuer such Lender's Percentage of all payments received by
the Agent from the Borrower in reimbursement of drawings honored by Issuer
under such Letter of Credit promptly after such payments are received.
(g) The Issuer will notify the Borrower and the Agent promptly of
the presentment for payment of any Letter of Credit (on the date of
presentment, if possible, and otherwise on the next Business Day, it being
agreed that such notice may be made by phone), together with notice of the date
(the "Disbursement Date") such payment shall be made and the Agent will
promptly notify the Lenders of such matters. Subject to the terms and
provisions of such Letter of Credit, the Issuer shall make such
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payment to the beneficiary (or its designee) of such Letter of Credit. Prior
to 3:00 p.m. New Jersey time on the Disbursement Date, the Borrower shall (by
payment to the Payment Office for distribution by the Agent) reimburse the
Issuer for all amounts which have been disbursed under such Letter of Credit.
To the extent the Issuer and the Lenders are not reimbursed in full in
accordance with this Section 2.18(g), the Reimbursement Obligation shall accrue
interest at a rate per annum equal to the Prime Rate, payable on demand.
(h) The Borrower's obligation (a "Reimbursement Obligation") under
Section 2.18(g) to reimburse the Lenders with respect to each drawing under
each Letter of Credit (including interest thereon), and each Lender's
obligation to fund each drawing, shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or defense
to payment which any Person constituting the Borrower or any Lender may have or
have had against any Lender or any beneficiary of a Letter of Credit,
including, without limitation, any defense based upon the occurrence of any
Default or Event of Default, any draft, demand or certificate or other document
presented under a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient, or any failure to apply or misapplication by the beneficiary of
the proceeds of any disbursement, or the legality, validity, form, regularity,
or enforceability of such Letter of Credit.
(i) The Borrower assumes all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. Except to the
extent of its own gross negligence or wilful misconduct, the Issuer shall not
be responsible for:
(1) the form, validity, sufficiency, accuracy, genuineness,
or legal effect of any Letter of Credit or any document submitted
by any party in connection with the application for and issuance of
a Letter of Credit, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or
forged;
(2) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof in whole or in part;
(3) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of
Credit;
(4) errors, omissions, interruptions or delays in
transmission or delivery of any information or
35
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messages, by mail, cable, telegraph, telex or otherwise;
(5) any loss or delay in the transmission or otherwise of
any document or draft required in order to make a disbursement
under a Letter of Credit or of the proceeds thereof;
(6) errors in interpretation of technical terms;
(7) any misapplication by a beneficiary of the proceeds of
any disbursement under any Letter of Credit; and
(8) any consequences arising from causes beyond the control
of the Issuer including, without limitation, acts of any
Governmental Authority.
None of the foregoing shall affect, impair or prevent the vesting
of any of the rights or powers granted to the Issuer hereunder.
(j) In addition to amounts payable as elsewhere provided in this
Section 2.18, the Borrower hereby agrees to protect, indemnify, pay and save
the Issuer harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys'
fees) which the Issuer may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of the Letters of Credit, other than as a result
of the gross negligence or wilful misconduct of the Issuer as determined by a
court of proper jurisdiction, or (ii) the failure of the Issuer to honor a
drawing under any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Governmental
--------
Authority.
Section 2.19 Purpose of Loans. The proceeds of the Revolving Credit
----------------
Loans and Term Loans shall be used first to repay all amounts outstanding under
the Original Agreement except the principal amount of the Existing Loan and
Existing New Term Loan. After repayment of all such amounts, proceeds of
Revolving Credit Loans may be used to finance working capital needs of the
Borrower, including, without limitation, payment of Reimbursement Obligations
and to finance the purchase of property of the type described in the definition
of "CAPEX," provided that the aggregate principal amount of Capex Loans made
during the term hereof shall not exceed $2,000,000. Each notice of borrowing
delivered pursuant to Section 2.3 shall specify which Loans will constitute
Capex Loans. On each anniversary of the Effective Date prior to the
Termination Date, the Borrower may, by notice in writing delivered to the Agent
designate all or any portion of the then outstanding principal amount of Capex
Loans (which have not been previously so designated) as Designated Capex Loans
and
36
<PAGE>
the relevant Maturity Date for such Loans shall be established effective with
such designation. Capex Loans may not be used to finance more than 75% of the
purchase price of any asset or the purchase of any intangibles or real
property.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and to
make and/or maintain the Loans and issue Letters of Credit, the Borrower hereby
represents and warrants to the Agent and the Lenders that as of the Effective
Date:
Section 3.1 Financial Condition.
-------------------
(a) The consolidated balance sheets of GSI and its consolidated
Subsidiaries as at September 30, 1994 and the related consolidated statements
of income and of cash flows for the fiscal years ended on each such date,
reported on by KPMG Peat Marwick & Co., copies of which have heretofore been
furnished to Lender, are complete and correct and present fairly in all
material respects the consolidated financial condition of GSI and its
consolidated Subsidiaries as at such dates, and the consolidated results of
their operations and their consolidated cash flows for the fiscal years then
ended.
(b) All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants and as disclosed therein).
(c) Neither GSI nor any of its consolidated Subsidiaries had, at
the date of the most recent balance sheet referred to above, any material
Contingent Obligation, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other financial derivative, which is not reflected in the foregoing
statements or in the notes thereto.
(d) During the period from September 30, 1994, to and including
the Effective Date hereof there has been no sale, transfer or other disposition
by GSI or any of its consolidated Subsidiaries of any material part of its
business or property (other than in the ordinary course of business) and no
purchase or other acquisition of any business or property (including any
Capital Stock of any other Person, in any case, other than in the ordinary
course of business) material in relation to the consolidated financial
condition of the Borrower and its consolidated Subsidiaries at September 30,
1994.
37
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Section 3.2 No Material Adverse Change. Since September 30, 1994,
--------------------------
there has been no development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
Section 3.3 Corporate Existence; Compliance with Law. Each of GSI
----------------------------------------
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except where the failure to so qualify or be in
good standing therewith would not have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except where the failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.
Section 3.4 Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
(a) Each Person constituting the Borrower has the corporate power
and authority, and the legal right, to make, deliver and perform this
Agreement, the Notes and each other Loan Document to which it is a party and to
borrow hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement, the Notes and each
other Loan Document to which it is a party and to authorize the execution,
delivery and performance of this Agreement, the Notes and each other Loan
Document to which it is a party.
(b) Except for consents, authorizations, approvals, notices and
filings described on Schedule II, all of which have been obtained, made or
waived, no consent or authorization of, approval by, notice to, filing with or
other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of this Agreement or the
Notes or any other Loan Document except filings of Uniform Commercial Code
financing statements.
(c) This Agreement has been, and each Note and each other Loan
Document to which it is a party will be, duly executed and delivered on behalf
of each Person constituting the Borrower.
(d) This Agreement constitutes, and each Note and each other Loan
Document when executed and delivered will constitute, a legal, valid and
binding obligation of each Person constituting the Borrower enforceable against
each such Person in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
38
<PAGE>
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
Section 3.5 No Legal Bar. The execution, delivery and performance
------------
of this Agreement and the Notes, the borrowings hereunder and the use of the
proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of any Person constituting the Borrower or of any of their
respective Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
Section 3.6 No Material Litigation. Except as set forth on Schedule
----------------------
III, no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the any Person
constituting the Borrower, threatened by or against any Person constituting the
Borrower or any of their respective Subsidiaries or against any of its or their
respective properties or revenues (a) with respect to this Agreement or the
Notes or any of the transactions contemplated hereby, or (b) which if adversely
determined would have a Material Adverse Effect.
Section 3.7 No Default. No Person constituting the Borrower nor any
----------
of their respective Subsidiaries is in default under or with respect to any of
their respective Contractual Obligations in any respect which could reasonably
be expected to have a Material Adverse Effect. No Default or Event of Default
has occurred and is continuing.
Section 3.8 Ownership of Property; Liens. Each Person constituting
----------------------------
the Borrower and their respective Subsidiaries has good record and marketable
title in fee simple to, or a valid leasehold interest in, all its real
property, and good title to, or a valid leasehold interest in, all its other
property, and none of such property is subject to any Lien except as permitted
by Section 6.2.
Section 3.9 Intellectual Property. Each Person constituting the
---------------------
Borrower and each of their respective Subsidiaries owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents, technology, know-how and
processes necessary for the conduct of its business as currently conducted
(collectively, the "Intellectual Property"). No claim has been asserted in
writing and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Person constituting the Borrower know of
any valid basis for any such claim. To the best of the knowledge of the
Borrower, the use of such Intellectual Property by each Person constituting the
Borrower and their
39
<PAGE>
respective Subsidiaries does not infringe the rights of any Person. Each item
of Intellectual Property used by one or more Person constituting the Borrower
or their Subsidiaries is listed on Schedule IV hereto which Schedule shows the
owner of such Intellectual Property, the nature thereof (e.g., copyright,
trademark or patent), whether or not ownership of such Intellectual Property is
publicly recorded, and whether the same is licensed to or by a Borrower or any
Subsidiary or Affiliate of such Borrower.
Section 3.10 No Burdensome Restrictions. No Requirement of Law or
--------------------------
Contractual Obligation of any Person constituting the Borrower or any of their
respective Subsidiaries has a Material Adverse Effect.
Section 3.11 Taxes. Each Person constituting the Borrower and their
-----
respective Subsidiaries has filed or caused to be filed all tax returns which,
to the knowledge of such Person, are required to be filed and has paid all
taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity
with GAAP have been provided on the books of such Person constituting the
Borrower or its respective Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of such Person, no claim is being asserted,
with respect to any such tax, fee or other charge.
Section 3.12 Federal Regulations. No part of the proceeds of any
-------------------
Loans will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U of the Board
as now and from time to time hereafter in effect or for any purpose which
violates the provisions of any Regulations of the Board. If requested by any
Lender at any time, each Person constituting the Borrower will furnish to such
Lender a statement in conformity with the requirements of FR Form U-1 referred
to in Regulation U.
Section 3.13 Investment Company Act; Public Utility Holding Company
-------------------------------------------------------
Act; Other Regulations. No Person constituting the Borrower is (a) an
- ----------------------
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended, or (b) a
"holding company" as defined in, or otherwise subject to regulation under, the
Public Utility Holding Company Act of 1935. No Person constituting the
Borrower is subject to regulation under any federal or state statute or
regulation which limits its ability to incur Indebtedness.
40
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Section 3.14 Subsidiaries. All the Subsidiaries of GSI as of the
------------
Effective Date are listed on Schedule V to this Agreement. None of the Capital
Stock of any such Subsidiary is subject to a Lien in favor of any Person
(except Liens permitted by Section 6.2(b) and (i)).
Section 3.15 Security Interests. At all times after execution and
------------------
delivery of the Security Documents by the Collateral Parties thereto and
completion of the filings and recordings listed on Schedule VI, the security
interests created for the benefit of the Agent and the Lenders pursuant to the
Security Documents will constitute valid, perfected security interests in the
collateral subject thereto, subject to no other Liens whatsoever, except for
Liens permitted by Section 6.2 hereof.
Section 3.16 Employee Grievances. Except as set forth on Schedule
-------------------
VII hereof, no Person constituting the Borrower nor any of their Subsidiaries
is a party to any collective bargaining agreement or, to the best knowledge of
such Person, subject to any current effort to organize, and there are no
actions or proceedings pending or, to the best of the knowledge of such Person,
threatened against it or its Subsidiaries, by or on behalf of, or with, its
employees, other than employee grievances arising in the ordinary course of
business which are not, in the aggregate, material.
Section 3.17 ERISA.
-----
(a) Except as set forth in Schedule VIII hereof, no Person
constituting the Borrower nor any of their Subsidiaries have any Plan
(including without limitation any Multiemployer Plan) or have made or make any
payments to any Plan.
(b) Each Person constituting the Borrower and each Subsidiary of
such Person is and has at all times been in substantial compliance with all
applicable provisions of ERISA.
(c) No Person constituting the Borrower has engaged in a
transaction in connection with which such Person or any ERISA Affiliate could
be subject to a material liability for either a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code.
(d) There has been no termination of a Plan or trust created under
any Plan that would give rise to liability to the PBGC on the part of any
Person constituting the Borrower or any ERISA Affiliate. No liability to the
PBGC has been or is expected to be incurred with respect to any Plan by any
Person constituting the Borrower or any ERISA Affiliate. The PBGC has not
instituted proceedings to terminate any Plan. There exists no condition or set
of circumstances which presents a material risk of termination or partial
termination of any Plan by the
41
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PBGC. Each Person constituting the Borrower and each ERISA Affiliate have paid
all premiums to the PBGC when due.
(e) Full payment has been made of all amounts which are required
under the terms of each Plan to have been paid as contributions to such Plan as
of the last day of the most recent fiscal year of such Plan ended on or before
the date of this Agreement, and no accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the Code), whether or not waived,
exists with respect to any Plan. No Person constituting the Borrower nor any
ERISA Affiliate has failed to make a required installment under Section 412(m)
of the Code or any other payment required under Section 412 of the Code on or
before the due date.
(f) The value of the benefit liabilities (as defined in Section
4001(a)(16) of ERISA) of each Plan (based on the actuarial assumptions
contained in Title IV of ERISA) does not exceed the fair market value of the
assets of such Plan. No Person constituting the Borrower nor any ERISA
Affiliate is required to provide security to a Plan under Section 401(a)(29) of
the Code.
(g) No Person constituting the Borrower nor any ERISA Affiliate
has made a complete or partial withdrawal from a Multiemployer Plan. To the
best knowledge of each Person constituting the Borrower the liability to which
such Person or any ERISA Affiliate would become subject under ERISA if such
Person and all ERISA Affiliates were to withdraw completely from all
Multiemployer Plans as of the most recent valuation date, together with any
secondary liability for withdrawal liability such Person and any ERISA
Affiliate may have as of the date hereof, would not have a Material Adverse
Effect. To the best knowledge of each Person constituting the Borrower no such
Multiemployer Plan is in reorganization (as such term is defined in Section
4241 of ERISA) or is insolvent (as such term is defined in Section 4245 of
ERISA).
ARTICLE 4 CONDITIONS PRECEDENT
Section 4.1 Conditions to Effective Date. This Agreement shall
----------------------------
become effective on the date (the "Effective Date") on which each condition
listed in Section 4.2 is satisfied and each of the following shall have
occurred:
(a) The Agent shall have received counterparts of this Agreement,
executed and delivered by a duly authorized officer of each Person constituting
the Borrower and each Lender. Each Lender shall have received a Revolving
Credit Note and Term Loan Note conforming to the requirements hereof and
executed by a duly authorized officer of each Person constituting the Borrower
and PNC shall have received the Existing Loan Note and Existing New Term Loan
Note executed by a duly authorized officer of each
42
<PAGE>
Person constituting the Borrower. The Agent shall have received the Security
Agreements executed and delivered by a duly authorized officer of each Person
constituting the Borrower.
(b) The Agent shall have received a certificate of the Secretary
or an Assistant Secretary of each Person constituting the Borrower dated as of
the Effective Date and certifying (1) that attached thereto is a true, complete
and correct copy of resolutions duly adopted by the Board of Directors of such
Person authorizing (x) the execution, delivery and performance of this
Agreement and the Notes and the other Loan Documents and (y) the borrowings
contemplated hereunder and that such resolutions have not been amended,
modified, revoked or rescinded and (2) as to the incumbency and specimen
signature of each officer executing any Loan Documents on behalf of such Person
constituting the Borrower; and such certificate and the resolutions attached
thereto shall be in form and substance satisfactory to the Agent.
(c) The Agent shall have received the executed legal opinion of
Haythe & Curley, counsel to the Persons constituting the Borrower,
substantially in the form of Exhibit G. Such legal opinion shall cover such
matters incident to the transactions contemplated by this Agreement as the
Agent and the Lenders reasonably may require.
(d) The Borrower shall have paid to the Agent, for distribution to
the Lenders, a non-refundable structuring fee of $25,000. Such fee shall be
distributed as follows: $9,375 to First Fidelity Bank, N.A. and $15,625 to PNC
Bank, National Association.
(e) The Borrower shall have paid to the Agent, for its account,
the annual fee payable to the Agent pursuant to the letter agreement between
the Agent and the Borrower dated October 31, 1995.
(f) The Borrower shall have paid all fees of counsel to the Agent
submitted on the date hereof. This condition precedent does not derogate from
the Borrower's continuing obligations under Section 10.5.
(g) All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Lenders, and the Agent and the
Lenders shall have received such other documents and legal opinions in respect
of any aspect or consequence of the transactions contemplated hereby or thereby
as they may reasonably request.
Section 4.2 Conditions to Each Loan. The obligation of the Lenders
-----------------------
to make any Loan requested to be made on any date (including, without
limitation, the initial Loan) or to issue any
43
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Letter of Credit (including, without limitation, the initial Letter of Credit)
is subject to the satisfaction of the following conditions precedent:
(a) Each of the representations and warranties made by each Person
constituting the Borrower in or pursuant to the Loan Documents shall be true
and correct in all material respects on and as of such date as if made on and
as of such date.
(b) No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the Loans or Letters of
Credit requested to be made or issued on such date.
(c) The Agent shall have received a Borrowing Base Certificate for
the then most recently ended Calculation Period.
(d) The Agent and the Lenders shall have received all fees due and
owing pursuant to Sections 2.4 and the Issuer shall have received all fees due
and owing pursuant to Section 2.18(c).
(e) No notice of, or any other document or instrument creating,
any federal tax Lien or Lien under Section 412 of the Code or Section 4068 of
ERISA shall have been issued, recorded or filed with respect to the assets of
the Borrower or any of its Subsidiaries and no Lender shall have informed the
Agent or the Borrower that such Lender has processed any such Lien or has
notice thereof.
Each borrowing hereunder shall constitute a representation and warranty
by the Borrower as of the date of such Loan that the conditions contained in
subsections (a) through (e) of this Section 4.2 have been satisfied.
ARTICLE 5 AFFIRMATIVE COVENANTS
Each Person constituting the Borrower hereby agrees that, so long as the
Commitments remain in effect, any Note remains outstanding and unpaid or any
other amount is owing to the Agent or any Lender hereunder, each Person
constituting the Borrower shall (except the Subsidiary Borrowers in the case of
delivery of financial information, reports and notices, other than Borrowing
Base Certificates):
Section 5.1 Financial Statements. Furnish to the Agent (with
--------------------
sufficient copies for each Lender):
(a) as soon as available, but in any event within 105 days after
the end of each fiscal year of GSI, a copy of the consolidated balance sheet of
GSI and its consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income and retained earnings and of cash
flows for such year, setting forth in each case in
44
<PAGE>
comparative form the figures for the previous year, certified by and reported
on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by KPMG Peat Marwick & Co.
or other independent certified public accountants of nationally recognized
standing reasonably acceptable to the Required Lenders;
(b) [Intentionally Deleted].
(c) as soon as available, but in any event within 50 days after
the end of each second fiscal quarter of GSI, a copy of the management letter
prepared by the accountants certifying the financial statements delivered
pursuant to Section 5.1(a) in conjunction with such financial statements; and
(d) as soon as available, but in any event not later than 50 days
after the end of each of the first three quarterly periods of each fiscal year
of GSI, the unaudited consolidated and consolidating balance sheet of GSI and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained earnings and of cash
flows of GSI and its consolidated Subsidiaries for such quarter and the portion
of the fiscal year through the end of such quarter, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects when
considered in relation to the consolidated financial statements of GSI and its
consolidated Subsidiaries (subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
Section 5.2 Certificates; Other Information. Furnish to the Agent
-------------------------------
(with sufficient copies for each Lender):
(a) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and 5.1(d), the following:
(i) a certificate (the "CFTR Report") certified by a Responsible Officer
setting forth the calculation of the Cash Flow Test Ratio for such fiscal
quarter and year based on the financials delivered pursuant to Sections
5.1(a) and (d) (which calculation shall be binding on the Agent and
Lenders unless objected to by the Required Lenders in writing within 30
days of the Agent's and the Lenders' receipt thereof); and
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(ii) a copy of the consolidating balance sheet of GSI and its
consolidated Subsidiaries as at the end of such quarter and year, setting
forth in comparative form the figures for the previous quarter and year,
certified by a Responsible Officer as being fairly stated in all material
respects when considered in relation to the consolidated financial
statements of GSI and its consolidated Subsidiaries; and
(iii) a certificate of a Responsible Officer of GSI stating that, to the
best of such Officer's knowledge, each Person constituting the Borrower
during such period have observed or performed all of their respective
covenants and other agreements, and satisfied every condition, contained
in this Agreement and in the Notes and the other Loan Documents to which
they are a party to be observed, performed or satisfied by them, and that
such Officer has obtained no knowledge of any Default or Event of
Default, except as specified in such certificate.
(b) not later than 30 days after the end of each fiscal year of
GSI, a copy of the quarter to quarter projections by GSI of the operating
budget and cash flow budget of GSI and its Subsidiaries for the current fiscal
year, such projections to be accompanied by a certificate of a Responsible
Officer of GSI to the effect that such projections have been prepared on the
basis of sound financial planning practice and that such Officer has no reason
to believe they are incorrect or misleading in any material respect;
(c) within five days after the same are sent, copies of all
financial statements and reports which GSI sends to its stockholders generally,
and within five days after the same are filed, copies of all financial
statements and reports which GSI may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental Authority;
(d) within seven days after the end of each Calculation Period, a
Borrowing Base Certificate for such Calculation Period which certificate shall
include, inter alia, an accounts receivable aging report for each
----
Person constituting the Borrower as of the end of the Calculation Period
covered by such certificate; and
(e) promptly, such additional financial and other information as
the Agent from time to time reasonably may request.
Section 5.3 Payment of Obligations. Pay, discharge or otherwise
----------------------
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been
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provided on the books of the relevant Person constituting the Borrower or its
Subsidiaries, as the case may be.
Section 5.4 Conduct of Business and Maintenance of Existence.
------------------------------------------------
Continue to engage in businesses related to the businesses now conducted by it
and preserve, renew and keep in full force and effect its corporate existence
and take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business except
as otherwise permitted pursuant to Section 6.4; comply with all Contractual
Obligations and Requirements of Law (excluding, for purposes of this
subsection, Requirements of Law specifically addressed in other subsections of
this Article 5) except to the extent that failure to comply therewith would
not, in the aggregate, have a Material Adverse Effect.
Section 5.5 Maintenance of Property; Insurance. Keep all property
----------------------------------
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted; maintain with financially sound and reputable
insurance companies (rated A or better by A.M. Best & Co.) insurance on all its
property in at least such amounts and against at least such risks (but
including in any event general liability, product liability and business
interruption) as is maintained by the Borrower on the date hereof; and furnish
to the Agent proof reasonably satisfactory to the Agent of the annual renewal
thereof (within 30 days of such renewal) and, upon written request, such other
information as to the insurance carried as Agent may request.
Section 5.6 Inspection of Property; Books and Records; Discussions.
------------------------------------------------------
Keep proper books of record and account in which full, true and correct entries
in conformity with prudent business practices and all Requirements of Law shall
be made of all dealings and transactions in relation to its business and
activities; and permit representatives of the Agent and each Lender during
normal business hours and upon reasonable notice (unless an Event of Default
has occurred and is continuing, in which case no such notice from the Agent or
any Lender shall be required) to visit and inspect any of its properties,
examine and make abstracts from any of its books and records and conduct
asset/system reviews and/or appraisals of the Collateral (such asset/system
reviews and appraisals to be at the Lenders' expense if no Default or Event of
Default exists and otherwise at the Borrower's sole cost and expense; provided
that the Borrower shall not be required to pay for more than two appraisals
during the term hereof) at any reasonable time and as often as may reasonably
be desired and to discuss the business, operations, properties and financial
and other condition of any Person constituting the Borrower and its
Subsidiaries with officers and employees of such Person and its Subsidiaries
and with its independent certified public accountants.
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Section 5.7 Notices. Promptly give notice to the Agent of:
-------
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of any Person constituting the Borrower or any of its Subsidiaries
or (ii) litigation, investigation or proceeding which may exist at any time
between any Person constituting the Borrower or any of its Subsidiaries and any
Governmental Authority, which in either case, if not cured or if adversely
determined, as the case may be, would have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Person constituting
the Borrower or any of its Subsidiaries in which the amount involved is
$500,000 or more and not covered by insurance or in which injunctive or similar
relief is sought; and
(d) the occurrence of any event having a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a
statement of a Responsible Officer of the relevant Person constituting the
Borrower setting forth details of the occurrence referred to therein and
stating what action such Person proposes to take with respect thereto.
Section 5.8 ERISA Compliance. Comply with all the applicable
----------------
provisions of ERISA now or hereafter in effect with respect to each of its
Plans except where the failure to comply would not have a Material Adverse
Effect. Notify the Lender of the following events, as soon as possible and in
any event within thirty days after the Borrower knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to any Plan;
(ii) the occurrence of a prohibited transaction (as defined in Section 406 of
ERISA or Section 4975 of the Code) with respect to any Plan, (iii) the
institution of proceedings or the taking or expected taking of any other action
by the PBGC or any Person constituting the Borrower or any ERISA Affiliate to
terminate or withdraw or partially withdraw from any Plan and, with respect to
a Multiemployer Plan, the Reorganization or Insolvency of such Plan (as such
terms are defined in ERISA), (iv) the failure of any Person constituting the
Borrower or any ERISA Affiliate to make a required installment under Section
412 (m) of the Code or any other payment required under Section 412 of the Code
on or before the due date or (v) the adoption of an amendment with respect to a
Plan so that any Person constituting the Borrower or any ERISA Affiliate is
required to provide security to the Plan under Section 401(a)(29) of the Code,
and in addition to such notice, deliver to the Lender a certificate signed by a
Responsible Officer setting forth the details relating thereto, and the action
that such Person and the ERISA Affiliate propose to take with respect thereto
and when known,
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any action taken or threatened by the Internal Revenue Service or the PBGC,
together wit a copy of any notice to the PBGC or the Internal Revenue Service
or any notice delivered by the PBGC or the Internal Revenue Service.
Section 5.9 Landlord Waivers and Consents. In order to obtain a
-----------------------------
Landlord's Waiver and Consent from each lessor of each location at which any
Person constituting the Borrower maintains any Collateral (as defined in the
Security Agreements) on the date hereof, GSI will make two written requests of
each lessor and, additionally, two follow-up telephone calls (the first such
written request to be made within 30 days from the date hereof). If such
efforts do not result in the receipt of a Landlord's Waiver and Consent, GSI
shall be under no obligation to obtain any such Landlord's Waiver and Consent,
provided, however, that nothing in this subsection shall diminish or waive any
of GSI's obligations to obtain Landlord's Waivers and Consents from existing or
future lessors pursuant to the terms and conditions of the Security Agreement.
Section 5.10 Foreign Subsidiaries. If at any time the tangible
--------------------
assets of any one or more of the foreign Subsidiaries of GSI are equal to or
exceed five percent (5%) of the aggregate tangible assets of GSI and all of its
Subsidiaries, GSI will pledge, or cause to be pledged, to the Agent and the
Lenders, within 60 days of the Required Lenders' request (delivered to the
Agent and the Borrower), 65% of the Capital Stock of such foreign Subsidiary or
Subsidiaries pursuant to a stock pledge agreement in form and substance
reasonably satisfactory to the Required Lenders, and deliver the stock
certificates so pledged and related stock powers (or take such other action as
is required to effect and perfect such pledge) and a favorable opinion of
counsel to such foreign Subsidiary addressed (and in form and substance
reasonably satisfactory) to the Agent and Required Lenders.
ARTICLE 6 NEGATIVE COVENANTS
Each Person constituting the Borrower hereby agrees that, so long as the
Commitments remain in effect, any Note remains outstanding and unpaid or any
other amount is owing to the Agent or any Lender hereunder, it shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly (except as
to the Subsidiary Borrowers, the covenants set forth in Sections 6.11, 6.12,
6.13 and 6.14):
Section 6.1 Limitation on Indebtedness. Create, incur, assume or
--------------------------
suffer to exist any Indebtedness, except:
(a) Indebtedness in respect of the Loans, the Notes and other
obligations of such Person constituting the Borrower under this Agreement;
49
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(b) Indebtedness of any Person constituting the Borrower owing to
any Subsidiary of GSI and of any Subsidiary of GSI to any Person constituting
the Borrower;
(c) Subordinated Debt;
(d) Indebtedness of a Person which becomes a Subsidiary after the
date hereof, provided that such Indebtedness existed at the time such Person
became a Subsidiary and was not created in anticipation thereof;
(e) Capital Lease Obligations plus purchase money indebtedness, in
an aggregate principal amount outstanding not exceeding $1,500,000 from the
date hereof until September 30, 1996, and not permit Capital Lease Obligations
and purchase money indebtedness to increase in any subsequent fiscal year
during the term of this Agreement by more than $500,000 over the amount thereof
in the prior fiscal year; and
(f) Contingent Obligations in accordance with Section 6.3 of this
Agreement.
Section 6.2 Limitation on Liens. Create, incur, assume or suffer to
-------------------
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens created pursuant to the Security Documents and Liens
securing Indebtedness permitted by Section 6.1(a), (e) and (f); provided, that,
in the case of Liens securing Indebtedness permitted by Section 6.1(f) such
Liens shall not encumber any property not financed by such Indebtedness, and in
the case of any Liens permitted by Section 6.1(e), such Liens shall not
encumber any property not encumbered by such Lien at the time it was created;
(b) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the relevant Person constituting
the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlords' or other like Liens arising in the ordinary course of
business which secure amounts not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(d) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
50
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(e) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the relevant Person
constituting the Borrower or such Subsidiary;
(g) Liens listed on Schedule IX, provided that no such Lien is
amended after the date of this Agreement to cover any additional property or to
secure additional Indebtedness;
(h) Liens on the property or assets of a Person which becomes a
Subsidiary after the date hereof securing Indebtedness permitted by Section
6.1, provided that (A) such Liens existed at the time such Person became a
Subsidiary and were not created in anticipation of the acquisition, (B) any
such Lien does not by its terms cover any property or assets after the time
such Person becomes a Subsidiary which were not covered immediately prior
thereto and (3) any such Lien does not by its terms secure any Indebtedness
other than Indebtedness existing immediately prior to the time such Person
becomes a Subsidiary; and
(i) Liens on Capital Stock of any Foreign Subsidiary contemplated
by Section 5.10.
Section 6.3 Limitation on Contingent Obligations. Create, incur,
------------------------------------
assume or suffer to exist any Contingent Obligation except guarantees made in
the ordinary course of its business by any Borrower of obligations of a
Borrower or any of its Subsidiaries, provided those obligations are not
otherwise prohibited under this Agreement.
Section 6.4 Limitations on Fundamental Changes. Enter into any
----------------------------------
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets, or make any material change in its present method of
conducting business, except:
(a) any Subsidiary of GSI may be merged or consolidated with or
into GSI (provided that GSI shall be the continuing or surviving corporation)
or with or into any one or more wholly owned Subsidiaries of GSI (provided that
the wholly owned Subsidiary or Subsidiaries or the Subsidiary Borrower, if it
is a party to such merger or consolidation, shall be the
51
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continuing or surviving corporation) and after giving effect to any of such
transactions, no Default or Event of Default shall exist; and
(b) any wholly owned Subsidiary of GSI may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to GSI or any wholly-owned Subsidiary of GSI and GSI may sell,
lease, transfer or otherwise dispose of any or all of its assets to any Person
constituting the Borrower; and
(c) sales of assets in accordance with Section 6.5 of this
Agreement.
Section 6.5 Limitation on Sale of Assets. Convey, sell, lease,
----------------------------
assign, transfer or otherwise dispose of any of its property, business or
assets (including, without limitation, Capital Stock of any Person constituting
the Borrower (other than GSI), receivables and leasehold interests), whether
now owned or hereafter acquired, except:
(a) obsolete or worn out property disposed of in the ordinary
course of business;
(b) the sale or other disposition of any property (other than
inventory) provided, that, the aggregate book value of all assets so sold or
disposed of in any period of twelve consecutive months shall not exceed 2% of
Consolidated Tangible Net Worth as at the beginning of such twelve-month
period;
(c) the sale of inventory in the ordinary course of business;
(d) the sale or discount without recourse of accounts receivable
only in connection with the compromise thereof or the assignment of past-due
accounts receivable for collection; and
(e) as otherwise contemplated by Section 6.4 of this Agreement.
Section 6.6 Limitation on Investments, Loans and Advances.
---------------------------------------------
Purchase, hold or acquire beneficially any Capital Stock, other securities or
evidences of indebtedness of, make or permit to exist any loans or advances to,
or make or permit to exist any investment or acquire any interest whatsoever
in, any other Person, except:
(a) extensions of trade credit to customers in the ordinary course
of business;
(b) Permitted Investments;
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(c) loans and advances by any Person constituting the Borrower or
any Subsidiary of GSI to any Person constituting the Borrower or a domestic
Subsidiary of GSI and loans and advances by any foreign Subsidiary of GSI to
any other foreign Subsidiary of GSI;
(d) loans and advances in the form of cash by any Person
constituting the Borrower to the foreign Subsidiaries of GSI in an aggregate
amount not to exceed $100,000 in outstanding principal amount at any time;
(e) so long as no Default or Event of Default has occurred and is
continuing, GSI or any wholly-owned Subsidiary of GSI may purchase Capital
Stock of any Person not a Subsidiary for a purchase price not exceeding
$2,000,000 in the aggregate for all such purchases; provided GSI has given the
Agent 15 days prior written notice of the consummation of the proposed
purchase;
(f) GSI may create, or acquire any Capital Stock of, a Person not
a Subsidiary on the date hereof (if, in the case of the acquisition of Capital
Stock, such acquisition would constitute such Person a Subsidiary); provided
that simultaneously with such creation or acquisition, the Person becoming a
domestic Subsidiary guarantees payment of the obligations of the Borrower
hereunder pursuant to a written agreement in favor of, and otherwise in form
and substance satisfactory to, the Lenders; and
(g) loans and advances to employees or directors of any Person
constituting the Borrower not to exceed $100,000 in aggregate principal amount
outstanding at any time.
Section 6.7 Limitation on Optional Payments and Modifications of Debt
----------------------------------------------------------
Instruments. Make any optional payment or prepayment on or redemption,
- -----------
defeasance or purchase of any Subordinated Debt, or amend, modify or change, or
consent or agree to any amendment, modification or change to any of the terms
relating to the payment or prepayment or principal of or interest on, any such
Indebtedness, other than any amendment, modification or change which would
extend the maturity or reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment of interest thereon.
Section 6.8 Transactions with Affiliates. Enter into any
----------------------------
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) not otherwise prohibited under this Agreement, and (b)
upon fair and reasonable terms no less favorable to the relevant Person
constituting the Borrower or such Affiliate, as the case may be, than it would
53
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obtain in a comparable arm's length transaction with a Person which is not an
Affiliate.
Section 6.9 Fiscal Year. Permit the fiscal year of the Borrower to
-----------
end on a day other than September 30.
Section 6.10 Limitation on Conduct of Business. Enter into any
---------------------------------
business either directly or through any Subsidiary except for businesses in
which GSI and its Subsidiaries are engaged on the date of this Agreement and
business related to such existing businesses.
Section 6.11 Tangible Net Worth. Permit Consolidated Tangible Net
------------------
Worth at the end of any fiscal year of GSI to increase over the Consolidated
Tangible Net Worth of GSI at the end of the prior fiscal year by less than
$4,000,000.
The Borrower acknowledges and confirms that GSI's Consolidated Tangible Net
Worth for fiscal year 1994 was $26,981,000.
Section 6.12 Liabilities/Tangible Net Worth. Permit the ratio of
------------------------------
liabilities (other than Subordinated Debt) of GSI and its consolidated
Subsidiaries to Consolidated Tangible Net Worth at the end of any fiscal
quarter of GSI to be greater than 1.75 for any fiscal quarter ending prior to
GSI's fiscal quarter ending September 30, 1995; greater than 1.65 for any
fiscal quarter ending prior to GSI's fiscal quarter ending September 30, 1997;
greater than 1.50 for any fiscal quarter ending prior to GSI's fiscal quarter
ending September 30, 1998; or greater than 1.20 for any fiscal quarter
thereafter.
Section 6.13 Quick Ratio. Permit the ratio of Consolidated Quick
-----------
Assets to Consolidated Current Liabilities to be less than .60 at the end of
any fiscal quarter of GSI.
Section 6.14 Cash Flow Test. Permit the Cash Flow Test Ratio to be
--------------
less than 1.50 at the end of any period of four consecutive fiscal quarters of
GSI.
Section 6.15 ERISA Obligations. Be or become obligated to the PBGC,
-----------------
other than in respect of annual premium payments.
ARTICLE 7 EVENTS OF DEFAULT
Section 7.1 Events of Default. If any of the following events
-----------------
(each, an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note or
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Note or
Reimbursement Obligation, or any other amount payable hereunder, within five
days after any such
54
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interest or other amount becomes due in accordance with the terms thereof or
hereof; or
(b) Any representation or warranty made or deemed made by any
Person constituting the Borrower or any Collateral Party herein or in any other
Loan Document or which is contained in any certificate, document or financial
or other statement furnished at any time under or in connection with this
Agreement shall prove to have been incorrect in any material respect on or as
of the date made or deemed made; or
(c) Any Person constituting the Borrower or any Collateral Party
shall default in the observance or performance of any agreement contained in
Article 6; or
(d) Any Person constituting the Borrower or any Collateral Party
shall default in the observance or performance of any other agreement contained
in this Agreement (other than as provided in Sections 7.1(a), (b) or (c)) or
any other Loan Document, and such default shall continue unremedied for a
period of 30 days; or
(e) GSI or any of its Subsidiaries shall:
(1) default in any payment of principal of or interest on
any Indebtedness (other than the Notes or Reimbursement
Obligations) or in the payment of any Contingent Obligation in
either case in excess of $500,000, beyond the period of grace, if
any, provided in the instrument or agreement under which such
Indebtedness or Contingent Obligation was created; or
(2) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or
Contingent Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such
Contingent Obligation (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Contingent Obligation to
become payable; or
(f) (1) GSI or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt
or
55
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insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial part
of its assets, or GSI or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (2) there shall be commenced
against GSI or any of its Subsidiaries any case, proceeding or other action of
a nature referred to in clause (1) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (3) there
shall be commenced against GSI or any of its Subsidiaries any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (4) GSI or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (1), (2) or (3) above; or
(5) GSI or any of its Subsidiaries shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they become due;
or
(g) One or more judgments or decrees shall be entered against GSI
or any of its Subsidiaries involving in the aggregate a liability (not paid or
fully covered by insurance) of $500,000 or more and all such judgments or
decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within 60 days from the entry thereof; or
(h) (i) Any Reportable Event, which the Required Lenders determine
in good faith (which determination shall be final and conclusive) constitutes
grounds for the termination of any Plan or Plans by PBGC or for the appointment
by the appropriate United States District Court of a trustee to administer or
liquidate any Plan or Plans, shall have occurred and be continuing thirty (30)
days after written or telegraphic or telephonic notice to such effect shall
have been given to the Borrower by the Lender; or (ii) a decision shall have
been made by the Board of Directors (or any committee thereof), any authorized
officer or other employee of any Person constituting the Borrower, or any
trustee or trustees of any Plan or Plans to terminate any Plan or Plans or to
file a termination notice with respect to any Plan or Plans; or (iii) a trustee
shall be appointed by the appropriate United States District Court to
administer any Plan or Plans, or any Plan or Plans shall be terminated; or (iv)
PBGC shall institute proceedings to terminate any Plan or Plans or to appoint a
trustee to administer any Plan or Plans; or (v) any Person constituting the
Borrower or any ERISA Affiliate shall fail with respect to any Plan or Plans to
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meet the minimum funding standards established in the Code, or shall obtain a
waiver of such minimum funding standards; or (vi) any Person constituting the
Borrower or any ERISA Affiliate shall completely or partially withdraw from a
Plan; or (vii) any Person constituting the Borrower or any ERISA Affiliate
shall make a decision to cease operations at a facility or facilities where
such cessation would result in a separation from employment of more than 20% of
the total number of employees who are participants under a Plan; where in the
case of any one or more of the events described in the preceding clauses (i)
through (vii) the aggregate outstanding amount of unfunded vested liabilities
under such Plan if a single employer plan (including unfunded vested
liabilities which arise or might arise as a result of the termination of or
withdrawal from such Plan) or the allocable portion of such outstanding
unfunded vested liabilities under a Multiemployer Plan shall exceed (either
singly or in the aggregate in the case of any such liability arising out of one
or more of the events described in the preceding clauses (i) through (vii)
under more than one such Plan) 2% of the Consolidated Tangible Net Worth of GSI
and shall in good faith be determined by the Required Lenders (which
determination shall be final and conclusive) to have a Material Adverse Effect;
or
(i) a Change in Control shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (1) or (2) of Section 7.1(f) above with respect to any Person
constituting the Borrower, automatically the Commitments shall immediately
terminate and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or
both of the following actions may be taken: (i) the Agent may (with the
consent of the Required Lenders) and shall (upon the request of the Required
Lenders), by written notice to the Borrower, declare the Commitments to be
terminated forthwith, whereupon the Commitments shall immediately terminate;
(ii) the Agent may (with the consent of the Required Lenders) and shall (upon
the request of the Required Lenders), by written notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes to be due and payable
forthwith, whereupon the same shall immediately become due and payable and
(iii) the Agent may (with the consent of the Required Lenders) and shall (upon
the request of the Required Lenders but subject to the provisions of Article
8), proceed to enforce the rights and remedies of the Secured Party under the
Security Documents. Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
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ARTICLE 8 THE AGENT
Section 8.1 Actions. Each Lender authorizes the Agent to act on
-------
behalf of such Lender under this Agreement, the other Loan Documents and any
other related instruments and, in the absence of other written instructions
from the Lenders received from time to time by the Agent (with respect to which
the Agent agrees that it will, subject to the last two sentences of this
Section 8.1, comply in good faith except as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Lender agrees (which
agreement shall survive any termination of this Agreement) to indemnify the
Agent, pro rata according to such Lender's Percentage, from and against
--- ----
any and all liabilities, obligations, damages, penalties, actions, judgements,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may at any time be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement, the Revolving Notes, the
Letters of Credit, any of the other Loan Documents and any other related
instruments, including, without limitation, the reimbursement of the Agent for
all reasonable out-of-pocket expenses (including, without limitation,
syndication costs and attorneys' fees) incurred by the Agent hereunder or in
connection herewith or in enforcing the obligations of the Borrower or any
Lender under this Agreement, under any of the other Loan Documents or any other
related instruments, in all cases as to which the Agent is not reimbursed by
the Borrower; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, damages, penalties, actions,
judgements, suits, costs, expenses or disbursements determined by a court of
proper jurisdiction in a final proceeding to have resulted solely from the
Agent's gross negligence or willful misconduct. The Agent shall not be
required to take any action hereunder or under any other related instruments,
or to prosecute or defend any suit in respect of this Agreement or any such
instrument, unless indemnified to its satisfaction by the Lenders against
costs, liability, and expense. If any indemnity in favor of the Agent shall
become impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given. The Agent may
delegate its duties hereunder to affiliates, agents or attorneys-in-fact
selected in good faith by the Agent. Each Lender's obligation to indemnify the
Agent as set forth above shall be unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which such
Lender may have or have had against the Agent, any other Lender, the Borrower,
any Subsidiary or any other Person.
Section 8.2 Exculpation. The Agent shall have no duties or
-----------
responsibilities except those expressly set forth in this Agreement. Neither
the Agent nor any of its directors, officers,
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employees, or agents (collectively, the "Related Parties") shall be liable to
any Lender for any action taken or omitted to be taken by it under this
Agreement, the other Loan Documents or any other related instrument, or in
connection herewith or therewith, except for its own willful misconduct or
gross negligence, nor shall the Agent or any Related Parties be responsible for
any recitals or representations or warranties herein or therein, or for the
effectiveness, enforceability, validity or due execution of this Agreement, the
other Loan Documents or any other related instruments, nor shall the Agent or
any Related Parties be obligated to make any inquiry respecting the performance
by the Borrower of its obligations hereunder or thereunder. The Agent shall be
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which it believes to be
genuine and to have been presented by a proper Person. The Agent may at any
time request instructions from the Lenders with respect to any actions or
approvals which, by the terms of this Agreement, the Agent is permitted or
required to take or grant, and the Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any
action or withholding any approval under this Agreement or any of the other
Loan Documents until it has received instructions from the Required Lenders.
No Lender shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder or under any of
the other Loan Documents in accordance with instructions from the (i) Required
Lenders, or (ii) all of the Lenders to the extent required hereunder.
Section 8.3 Successor. The Agent may resign as such at any time
---------
upon at least ten days' prior notice to the Borrower and all Lenders, and the
Agent may be removed at any time by written notice from the Required Lenders.
If the Agent at any time shall resign or be removed, the Required Lenders may
appoint another Lender as a successor Agent. If the Required Lenders do not
make such appointment within thirty days, the resigning or removed Agent shall
appoint a new Agent from among the Lenders or, if no Lender accepts such
appointment, from among commercial banking institutions or trust institutions
generally; provided such successor agent shall be a domestic commercial bank
having a combined capital and surplus in excess of $500,000,000. Upon the
acceptance of any appointment as Agent by a successor Agent, such successor
Agent shall thereupon become the Agent hereunder and shall be entitled to
receive from the prior Agent such documents of transfer and assignment as such
successor Agent may reasonably request, and the resigning or removed Agent
shall (i) be discharged from its duties and obligations under this Agreement
and the other related instruments and (ii) entitled to the continued benefit of
this Article 8 with respect to all actions taken by it prior to its removal or
resignation.
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Section 8.4 Credit Decisions. Each Lender represents and
----------------
acknowledges to the Agent that it has, independently of the Agent and each
other Lender, and based on the financial information referred to in this
Agreement and the other Loan Documents and such other documents, information
and investigations as it has deemed appropriate, made its own credit decision
to enter into this Agreement. Each Lender also acknowledges that it will,
independently of the Agent and each Lender, and based on such documents,
information and investigations as it shall deem appropriate at any time,
continue to make its own credit decisions as to exercising or not exercising
from time to time any rights and privileges available to it under this
Agreement, the Loan Documents or any other related instruments.
Section 8.5 Notices, etc. from Agent. The Agent shall give prompt
------------------------
notice to each Lender of each notice or request given to the Agent by the
Borrower or by the Agent to the Borrower pursuant to the terms of this
Agreement. The Agent will promptly distribute to each Lender each instrument
received for its account and copies of all other communications received by the
Agent from the Borrower for distribution to the Lenders by the Agent in
accordance with the terms of this Agreement.
Section 8.6 Security Documents. Each Lender hereby authorizes the
------------------
Agent to enter into the Security Documents and to take all action contemplated
thereby. Each Lender agrees that no Lender shall have any right individually
to seek to realize upon the collateral granted for the benefit of the Lenders
pursuant to any of the Security Documents, it being understood and agreed that
such rights and remedies may be exercised by the Agent for the benefit of the
Agent and the Lenders upon the terms of the Security Documents.
ARTICLE 9 PURCHASING LENDER
Section 9.1 Purchasing Lender. (a) Each Lender, in the ordinary
-----------------
course of its commercial banking business and in accordance with applicable
law, at any time may sell, assign and delegate to any Affiliate of such Lender
and/or, with the consent of the Agent and the Borrower (which in each case
shall not be unreasonably withheld), to one or more additional banks or
financial institutions (each, a "Purchasing Lender") all or any part of such
Lender's rights and obligations under this Agreement, the Notes and the other
Loan Documents (provided, that any such sale, assignment and delegation shall
be made with respect to each Loan and Commitment of such Lender hereunder)
pursuant to an agreement ("Assignment and Acceptance"), executed by the
Purchasing Lender, and such Lender. Such Assignment and Acceptance shall
specify an effective date which is not less than five Business Days after the
date of execution thereof. Upon such execution, delivery, and acceptance, from
and after the effective date determined pursuant to such Assignment and
Acceptance, (A) the Purchasing Lender thereunder shall be a party hereto and,
to
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the extent of the Commitments assigned and Loans sold pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (B)the assigning Lender
thereunder shall, to the extent of the Commitments assigned pursuant to such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto). Such
Assignment and Acceptance shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender as a Lender and the resulting adjustment of Commitments
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such assigning Lender under this Agreement and the
Notes. On or prior to the effective date determined pursuant to such
Assignment and Acceptance, the Borrower, at its own expense, shall execute and
deliver to the assigning Lender and Purchasing Lender in exchange for the
surrendered Term Note, Revolving Credit Note and Existing Note, as the case may
be, a new Term Note, Revolving Credit Note and Existing Note, as the case may
be, to the order of such Purchasing Lender in an amount equal to the Commitment
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained a Commitment hereunder, a new Note or Notes to the order of
the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be dated the Closing Date and
otherwise shall be in the form of the Note or Notes replaced thereby. The Note
or Notes surrendered by the assigning Lender shall be returned to the Borrower
marked "replaced." The assigning Lender shall provide the Agent with a copy of
each Assignment and Acceptance.
(b) If, pursuant to this Agreement, any interest in this Agreement
or any other Loan Documents is assigned to any transferee which is organized
under the laws of any jurisdiction other than the United States or any State
thereof, the transferor Lender shall cause such transferee, concurrently with
the effectiveness of such transfer, (i) to represent to the transferor Lender
(for the benefit of the transferor Lender, the Agent and the Borrower) that
under applicable law and treaties no taxes will be required to be withheld by
the Agent, the Borrower or the transferor Lender with respect to any payments
to be made to such transferee in respect of the Loans, (ii) to furnish to the
transferor Lender, the Agent and the Borrower either Form 4224 or Form 1001
(Ownership Exemption or Reduced Rate Certificate) (wherein such transferee
claims entitlement to complete exemption from U.S. federal withholding tax on
all interest payments hereunder) and (iii) to agree (for the benefit of the
transferor Lender, the Agent and the Borrower) to provide the transferor
Lender, the Agent and the Borrower a new Form 4224 or Form 1001 upon the
expiration or obsolescence of any previously delivered form and comparable
statements in accordance
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with applicable U.S. laws and regulations and amendments duly executed and
completed by such transferee, and to comply from time to time with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
Section 9.2 Disclosure of Information. Each Person constituting the
-------------------------
Borrower authorizes the Lenders to disclose to any Purchasing Lender and any
prospective Purchasing Lender any and all information relating to each Person
constituting the Borrower and its Affiliates which has been furnished to the
Agent and the Lenders by or on behalf of each Person constituting the Borrower;
provided that any such Purchasing Lender agrees to keep any information
relating to any Person constituting the Borrower received hereunder
confidential except as may be required by any Requirement of Law.
Section 9.3 Pledges to Federal Reserve Bank. Nothing herein shall
-------------------------------
prohibit any Lender from pledging or assigning any Note to any Federal Reserve
Bank in accordance with applicable law.
ARTICLE 10 MISCELLANEOUS
Section 10.1 Amendments and Waivers. (a) No amendment or waiver of
----------------------
any provision of this Agreement, or any of the other Loan Documents, nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Required
Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent, unless in writing and signed by
all the Lenders, shall do any of the following: (A) waive any of the conditions
specified in Section 4.1 (though the Agent alone may defer the fulfillment of
such conditions until the date of the applicable borrowing), (B) increase the
amount or extend the term of the Commitments of the Lenders or subject the
Lenders to any additional obligations, (C) reduce the principal of, or interest
on, the Loans or any of the Notes or Reimbursement Obligations, or reduce any
fees payable hereunder, (D) postpone any date fixed for any payment in respect
of principal of, or interest on, the Loans, the Reimbursement Obligations or
any of the Notes, as the case may be, or fees payable hereunder, (E) change any
of the components which shall be required for the Lenders or any Lender to take
any action hereunder, (i.e., the Percentage of the Commitments, or the
aggregate unpaid principal amount of the Loans, or the number of Lenders), (F)
amend this Section 10.1, or (G) release all or any substantial portion of the
collateral pledged for repayment of the Loans (except releases in connection
with the permitted sale of assets pursuant to the terms hereof); and provided,
further, that no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Lenders hereinabove required to take
such action, affect the rights or duties of the
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Agent under this Agreement. Without derogating from the foregoing, no
amendment to this Agreement shall be effective unless signed by each Person
constituting the Borrower.
(b) The liability of the Person constituting the Borrower
hereunder shall be absolute and unconditional irrespective of:
(1) any change in the time, manner, or place of payment or
in any other term of, or any other amendment or waiver of, or any consent to
departure from any of the Loan Agreement, any of the Loan Documents or any
Obligations;
(2) any change in the name, capital stock, Certificate of
Incorporation or by-laws, as the case may be, of any Person constituting the
Borrower;
(3) the insolvency of, or the voluntary or involuntary
bankruptcy, assignment for the benefit of creditors, reorganization or other
similar proceedings affecting any Person constituting the Borrower or any of
their respective assets; or
(4) any other circumstance or claim which might otherwise
constitute a defense available to, or a discharge of, any Person constituting
the Borrower in respect of the Obligations.
(c) No payment made by any Person constituting the Borrower, or
received or collected by the Agent or any of the Lenders, from any Person
constituting the Borrower by virtue of any action or proceeding or set-off or
application at any time in reduction of or in payment of the Obligations shall
be deemed to modify, release or otherwise affect the liability of any Person
constituting the Borrower under the Loan Documents. Notwithstanding any such
payments received or collected by the Agent or any of the Lenders in connection
with the Obligations, each Person constituting the Borrower shall remain liable
for the Obligations until all Obligations are paid in full. The joint and
several obligation of each Person constituting the Borrower shall continue to
be effective or be reinstated, as the case may be, if at any time any payment
of any of the Obligations is rescinded or must otherwise be returned by the
Agent or the Lenders upon the insolvency, bankruptcy or reorganization of any
Person constituting the Borrower or otherwise, all as though such payment had
not been made.
(d) The obligations and liabilities of each Person constituting
the Borrower hereunder shall not be released, discharged, limited or in any way
affected by anything done, suffered or permitted by the Agent or Lenders in
connection with any monies or credit advanced by the Agent or Lenders to any
Person constituting the Borrower or any security therefor, including, without
limitation, any loss of, or in respect of, any
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security received by the Agent or any of the Lenders from any Person
constituting the Borrower. It is agreed that the Lenders and/or the Agent,
without releasing, discharging, limiting or otherwise affecting in whole or in
part the obligations and liabilities of any Person constituting the Borrower
hereunder, may, without limiting the generality of the foregoing:
(A) grant time, renewals, extensions, indulgences, releases and
discharges to any Person constituting the Borrower;
(B) take or abstain from taking security or collateral for the
Obligations or from perfecting security or collateral for the
Obligations;
(C) release, discharge, compromise or otherwise deal with (with or
without consideration) any and all collateral, mortgages, indemnities,
guaranties or other security given by any Person constituting the
Borrower with respect to the Obligations;
(D) accept compromises from any Person constituting the Borrower;
(E) after an Event of Default, apply all monies at any time
received from any Person constituting the Borrower or from any
guaranties, indemnities or any collateral upon such part of the
Obligations as the Lenders and/or Agent may see fit or change any such
application in whole or in part from time to time as the Agent or such
Lenders may see fit; or
(F) otherwise deal with each Person constituting the Borrower and
all other Persons and collateral as the Lenders and/or Agent may see fit;
(e) neither the Agent nor any of the Lenders shall be bound or
obligated to exhaust recourse against any Person constituting the Borrower or
other Persons or any security, guarantee, indemnity, mortgage or collateral it
may hold or take any other action before being entitled to payment from each
Person constituting the Borrower hereunder and each Person constituting the
Borrower hereby waives any requirement that would otherwise compel the Agent or
the Lenders to do any of the foregoing.
Section 10.2 Notices. All notices, requests and demands to or upon
-------
the respective parties hereto to be effective shall be in writing (or by telex,
fax or similar electronic transfer confirmed in writing), and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made (a)
when delivered by hand or (b) if given by mail, three days after deposited in
the mails by certified mail, return receipt requested, postage prepaid, or (c)
if by telex, fax or similar
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electronic transfer, when sent and receipt has been confirmed, addressed as
follows. Notwithstanding the foregoing, any notice, demand or request to or
upon the Agent pursuant to Section 2.3, Section 2.8, Section 2.10 or Section
2.18(a) may be given to the Agent by telephone, provided that the Borrower
immediately follows such telephone instructions with a delivery of written
notice received by the Agent prior to the extension of Credit requested by one
of the methods of delivery otherwise authorized herein.
If to the Borrower:
Guest Supply, Inc.
P.O. Box 6018, 720 US Highway #1
North Brunswick, New Jersey 08902
Attention: Paul Xenis
Phone: 908-246-3011
Fax: 908-828-2342
If to the Agent:
PNC Bank, National Association
P.O. Box 294
2 Tower Center Boulevard
East Brunswick, New Jersey 08902
Attention: Kevin Drew
Phone: 908-220-3215
Fax: 908-220-3629
If to the Lenders:
PNC Bank, National Association
P.O. Box 294
2 Tower Center Boulevard
East Brunswick, New Jersey 08902
Attention: Kevin Drew
Phone: 908-220-3215
Fax: 908-220-3629
and
First Fidelity Bank, N.A.
550 Broad Street
Newark, New Jersey 07102
Attention: Margaret Lanning
Phone: 201-565-1744
Fax: 201-565-1749
provided that any notice, request or demand to or upon the Agent pursuant
- --------
to Section 2.3, Section 2.5, Section 2.8, Section 2.9(a), Section 2.10 or
Section 2.18(a) shall not be effective until received. Any party may change
its address for notices by notice to the other parties hereto in the manner
provided in this subsection. Any notice to the Borrower or given by the
Borrower shall be binding upon, and deemed received or given by, all Persons
constituting the Borrower if given by any Person
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constituting the Borrower (in the case of notices from the Borrower) or
delivered to any Person constituting the Borrower at the address set forth
herein (or such other address noticed to the Lender as provided herein) and no
separate notice to or by any other Person constituting the Borrower shall be
necessary for the binding effect or deemed receipt of a notice to or by the
Borrower.
Section 10.3 No Waiver; Cumulative Remedies.
------------------------------
(a) No failure to exercise and no delay in exercising, on the part
of the Agent or any Lender, any right, remedy, power or privilege hereunder
shall operate as a waiver thereof.
(b) No single or partial exercise of any right, remedy, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
(c) The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
Section 10.4 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the Notes.
Section 10.5 Payment of Expenses and Taxes. The Borrower agrees
-----------------------------
jointly and severally:
(a) to pay or reimburse the Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the negotiation,
preparation and execution of, and any proposed or effective amendment,
supplement or modification to, this Agreement and the Notes and the other Loan
Documents and any other documents prepared in connection herewith or therewith
(including, without limitation, documents prepared pursuant to Section 5.10
hereof or any Security Agreement), and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent;
(b) to pay or reimburse the Agent and each Lender for all
reasonable costs and expenses incurred by each of them in connection with the
enforcement or preservation of any rights under this Agreement, the Notes, the
other Loan Documents and any such other documents, including, without
limitation, reasonable fees and disbursements of counsel to the Agent and each
Lender;
(c) to pay, indemnify, and hold the Agent and each Lender harmless
from, any and all recording and filing fees and
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any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes, the other Loan Documents and any such other documents;
and
(d) to pay, indemnify, and hold the Agent and each Lender harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions (whether sounding in contract, in tort or on any other
ground), judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of, or in any other way arising out of or
relating to, this Agreement, the Notes, the other Loan Documents or any other
documents contemplated by or referred to herein or therein or any action taken
or omitted to be taken by the Agent or any Lender with respect to any of the
foregoing
(all the foregoing, collectively, the "indemnified liabilities"), provided,
that the Borrower shall have no obligation hereunder to the Agent or any Lender
with respect to indemnified liabilities arising from the gross negligence or
willful misconduct of the Agent or such Lender. The agreements in this
subsection shall survive repayment of the Notes and all other amounts payable
hereunder.
Section 10.6 Successors and Assigns. This Agreement shall be
----------------------
binding upon and inure to the benefit of the Borrower, the Agent, the Lenders,
all future holders of the Notes and their respective successors and assigns,
except that no Person constituting the Borrower may assign, transfer or
delegate any of their rights or obligations under this Agreement without the
prior written consent of the Lenders other than pursuant to the operation of
law by reason of a transaction permitted by Section 6.4.
Section 10.7 Set-off/Sharing.
---------------
(a) In addition to any rights and remedies of the Agent and
Lenders provided by law, each Lender shall have the right, without prior notice
to any Person constituting the Borrower, any such notice being expressly waived
by each Person constituting the Borrower to the extent permitted by applicable
law, upon any amount becoming due and payable by any Person constituting the
Borrower hereunder or under the Notes or the other Loan Documents (whether at
the stated maturity, by acceleration or otherwise) to set-off and appropriate
and apply against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each
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case whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by such Lender or any branch or agency of such Lender
to or for the credit or the account of any Person constituting the Borrower.
Each Lender agrees promptly to notify the Borrower and Agent after any such
set-off and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and application.
(b) Each of the Lenders agree among themselves that with respect
to all amounts received by them which are applicable to the payment or
satisfaction of all or part of the Loans or Reimbursement Obligations, interest
thereon, any fees or any other amount payable hereunder or under the other Loan
Documents, equitable adjustment will be made so that, in effect, all such
amounts will be shared among the Lenders in proportion to their respective
Percentages, whether received by voluntary payment, by the exercise of the
right of setoff or banker's lien, by counterclaim or by the enforcement of
their rights hereunder or under the other Loan Documents.
(c) If any Lender shall, through the exercise of any right of
counterclaim, setoff, banker's lien or otherwise, receive payment or reduction
of a proportion of the aggregate amount of the Loans or Reimbursement
Obligations or interest thereon due to such Lender, or any other amount payable
hereunder, as the case may be, which is greater than the proportion received by
any other Lender or Lenders in respect to the aggregate amount of any Loan or
Reimbursement Obligation and interest thereon due such Lender, or with respect
to any other amount payable hereunder, that Lender receiving such
proportionately greater payment shall notify the other Lenders and the Agent of
such receipt and purchase participations (which it shall be deemed to have done
simultaneously upon the receipt of such excess payment) in the Loans and
Reimbursement Obligations held by the other Lender or Lenders so that all such
recoveries of principal and interest with respect to the Loans and
Reimbursement Obligations shall be proportionate to each Lender's respective
Percentage; provided that if all or part of such proportionately greater
payment received by such purchasing Lender is thereafter recovered from such
Lender, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to the purchasing Lender to the extent of
such recovery, but without interest.
(d) The Borrower expressly consents to the arrangement described
in this Section 10.7.
Section 10.8 Original Agreement. The commitment of PNC Bank,
------------------
National Association (as successor to Chemical Bank New Jersey, National
Association) under the Original Agreement to extend credit to the Borrower has
terminated.
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Section 10.9 Counterparts. This Agreement may be executed by one or
------------
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
Section 10.10 Severability. 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 10.11 Integration. This Agreement represents the agreement
-----------
of the Borrower, the Agent and the Lenders with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Agent or any Lender relative to subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
Section 10.12 Governing Law. This Agreement and the Notes and the
-------------
rights and obligations of the parties under this Agreement and the Notes shall
be governed by, and construed and interpreted in accordance with, the law of
the State of New Jersey.
Section 10.13 Submission To Jurisdiction; Waivers. Each Person
-----------------------------------
constituting the Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to or arising out of this Agreement and the other Loan
Documents to which it is a party, or the conduct of any party with respect
thereto, or for recognition and enforcement of any judgement in respect
thereof, to the nonexclusive general jurisdiction of the Courts of the State of
New Jersey, the courts of the United States of America for the District of New
Jersey, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives to the fullest extent permitted by law any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at the address set
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forth in Section 10.1 or at such other address of which the Lender shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent permitted by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
Section 10.14 Acknowledgements. Each Person constituting the
----------------
Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the Notes and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary
relationship to any Person constituting the Borrower, and the relationship
between the Agent and the Lenders, on one hand, and each Person constituting
the Borrower, on the other hand, is solely that of debtor and creditor; and
(c) no joint venture exists among any Person constituting the
Borrower, the Agent or any Lender.
Section 10.15 Waivers of Jury Trial. EACH PERSON CONSTITUTING THE
---------------------
BORROWER, THE AGENT AND EACH LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
Borrowers:
---------
GUEST SUPPLY, INC.
By:______________________
Name:
Title:
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GUEST PACKAGING, INC.
By:______________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:______________________
Name:
Title:
Lenders:
-------
PNC BANK, NATIONAL ASSOCIATION
By:______________________
Name:
Title:
FIRST FIDELITY BANK, N.A.
By:______________________
Name:
Title:
Agent:
-----
PNC BANK, NATIONAL ASSOCIATION
By:______________________
Name:
Title:
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Exhibit A
REVOLVING CREDIT NOTE
New Brunswick, New Jersey
$13,750,000 October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and
BRECKENRIDGE-REMY CO., a Delaware corporation, (collectively, the "Borrower"),
hereby jointly and severally, unconditionally promise to pay to the order of
PNC Bank, National Association ("PNC") at the Payment Office, in lawful money
of the United States of America and in immediately available funds, the
principal amount of THIRTEEN MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100
($13,750,000) DOLLARS, or, if less, the aggregate unpaid principal amount of
all Revolving Credit Loans (including, without limitation, Capex Loans) made by
PNC to the Borrower pursuant to Section 2.1 of the Credit Agreement on the
dates and in the amounts specified in the Credit Agreement. The Borrower
further agrees to pay interest on the unpaid principal amount outstanding
hereunder from time to time from and including the date hereof in like money at
such office at the rates and on the dates specified in the Credit Agreement.
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the date, Type and amount
of each Revolving Credit Loan made pursuant to the Credit Agreement, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto, which endorsement shall constitute rebuttable presumptive
evidence of the accuracy of the information endorsed; provided,
--------
however, that the failure to make any such endorsement shall not affect the
- -------
obligations of the Borrower in respect of such Revolving Credit Loan.
This Note is one of the Revolving Credit Notes referred to in the
Revolving Credit and Term Loan Agreement dated the date hereof among the
Borrower, PNC, First Fidelity Bank, N.A., as Lenders, and PNC, as Agent (as the
same may hereafter be amended, modified or supplemented from time to time, the
"Credit Agreement") is entitled to the benefits thereof, is secured as provided
therein and is subject to optional and mandatory prepayment as set forth
therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:____________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Revolving Credit Note
dated October 31, 1995 made by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co., as joint and several
obligors to PNC Bank, National Association
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit A
REVOLVING CREDIT NOTE
New Brunswick, New Jersey
$8,250,000 October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and
BRECKENRIDGE-REMY CO., a Delaware corporation, (collectively, the "Borrower"),
hereby jointly and severally, unconditionally promise to pay to the order of
First Fidelity Bank, N.A. ("FFB") at the Payment Office, in lawful money of the
United States of America and in immediately available funds, the principal
amount of EIGHT MILLION TWO HUNDRED FIFTY THOUSAND AND 00/100 ($8,250,000)
DOLLARS, or, if less, the aggregate unpaid principal amount of all Revolving
Credit Loans (including, without limitation, Capex Loans) made by FFB to the
Borrower pursuant to Section 2.1 of the Credit Agreement on the dates and in
the amounts specified in the Credit Agreement. The Borrower further agrees to
pay interest on the unpaid principal amount outstanding hereunder from time to
time from and including the date hereof in like money at such office at the
rates and on the dates specified in the Credit Agreement.
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the date, Type and amount
of each Revolving Credit Loan made pursuant to the Credit Agreement, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto, which endorsement shall constitute rebuttable presumptive
evidence of the accuracy of the information endorsed; provided,
--------
however, that the failure to make any such endorsement shall not affect the
- -------
obligations of the Borrower in respect of such Revolving Credit Loan.
This Note is one of the Revolving Credit Notes referred to in the
Revolving Credit and Term Loan Agreement dated the date hereof among the
Borrower, FFB, PNC Bank, National Association, as Lenders, and PNC Bank,
National Association, as Agent (as the same may hereafter be amended, modified
or supplemented from time to time, the "Credit Agreement") is entitled to the
benefits thereof, is secured as provided therein and is subject to optional and
mandatory prepayment as set forth therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:____________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Revolving Credit Note
dated October 31, 1995 made by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co., as joint and several
obligors to First Fidelity Bank, N.A.
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
TERM NOTE
$3,749,996 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and
BRECKENRIDGE-REMY CO., a Delaware corporation (collectively, the "Borrower"),
hereby jointly and severally, unconditionally promise to pay to the order of
PNC BANK, NATIONAL ASSOCIATION ("PNC") at the Payment Office, in lawful money
of the United States of America and in immediately available funds, the
principal amount of THREE MILLION SEVEN HUNDRED FORTY-NINE THOUSAND NINE
HUNDRED NINETY-SIX AND 00/100 ($3,749,996) DOLLARS, in eighty-three (83)
installments of $44,642 each payable on the first Business Day of each calendar
month, commencing on December 1, 1995, with a final principal payment in the
then outstanding principal amount of the Term Loan payable on the Maturity
Date. The Borrower further agrees to pay interest on the unpaid principal
amount outstanding hereunder from time to time from and including the date
hereof in like money at such office at the rates and on the dates specified in
the Credit Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount and Type of Term
Loan made pursuant to the Credit Agreement (defined below), each conversion of
all or a portion thereof to another Type, the date and amount of each payment
or prepayment of principal thereof, and, in the case of Fixed Rate Loans, the
length of each Interest Period with respect thereto which endorsement shall
constitute rebuttable presumptive evidence of the accuracy of the information
endorsed; provided, however, that the failure to make any such
-------- -------
endorsement shall not affect the obligations of the Borrower in respect of the
Term Loan.
This Note is one of the Term Notes referred to in the Revolving Credit
and Term Loan Agreement dated October 31, 1995 among the Borrower, PNC and
First Fidelity Bank, N.A., as Lenders, and PNC, as Agent (as the same may
hereafter be amended, modified or supplemented from time to time, the "Credit
Agreement"), and is entitled to the benefits thereof, is secured as provided
therein and is subject to optional and mandatory prepayment as set forth
therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:____________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Term Note dated October 31, 1995 issued by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co.,
as joint and several obligors to
PNC Bank, National Association
LOAN AND PAYMENTS OF LOAN
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
TERM NOTE
$6,750,000 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and
BRECKENRIDGE-REMY CO., a Delaware corporation (collectively, the "Borrower"),
hereby jointly and severally, unconditionally promise to pay to the order of
FIRST FIDELITY BANK, N.A. ("FFB") at the Payment Office, in lawful money of the
United States of America and in immediately available funds, the principal
amount of SIX MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100 ($6,750,000)
DOLLARS, in eighty-three (83) installments of $80,357.14 each payable on the
first Business Day of each calendar month, commencing on December 1, 1995, with
a final principal payment in the then outstanding principal amount of the Term
Loan payable on the Maturity Date. The Borrower further agrees to pay interest
on the unpaid principal amount outstanding hereunder from time to time from and
including the date hereof in like money at such office at the rates and on the
dates specified in the Credit Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount and Type of Term
Loan made pursuant to the Credit Agreement (defined below), each conversion of
all or a portion thereof to another Type, the date and amount of each payment
or prepayment of principal thereof, and, in the case of Fixed Rate Loans, the
length of each Interest Period with respect thereto which endorsement shall
constitute rebuttable presumptive evidence of the accuracy of the information
endorsed; provided, however, that the failure to make any such
-------- -------
endorsement shall not affect the obligations of the Borrower in respect of the
Term Loan.
This Note is one of the Term Notes referred to in the Revolving Credit
and Term Loan Agreement dated October 31, 1995 among the Borrower, FFB and PNC
Bank, National Association, as Lenders, and PNC Bank, National Association, as
Agent (as the same may hereafter be amended, modified or supplemented from time
to time, the "Credit Agreement"), and is entitled to the benefits thereof, is
secured as provided therein and is subject to optional and mandatory prepayment
as set forth therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:___________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Term Note dated October 31, 1995 issued by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co.,
as joint and several obligors to
First Fidelity Bank, N.A.
LOAN AND PAYMENTS OF LOAN
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit C
CHEMICAL BANK NEW JERSEY, NA
BORROWING BASE CERTIFICATE
Borrowers: Guest Supply, Inc., Guest Packaging, Inc., Breckenridge-Remy, Co.
Address: 720 U.S. Highway One, North Brunswick, New Jersey 08902
908-246-3011
<TABLE>
<S> <C> <C> <C> <C> <C>
Guest Supply, Inc. Gross Receivables _________ _________
Less Guest Suppply, Inc. Ineligibles
Receivables past 90 days _________
Contras _________
50% Rule _________
Foreign Receivables _________ Intercompany _________ _________
Credits _________ Late Charges _________ _________
TOTAL GSI Ineligibles _________
Guest Packaging, Inc. Gross Receivables _________
Less Guest Packaging, Inc. Ineligibles
Receivables past 90 days _________
_________
_________
Contras _________
50% Rule _________
Foreign Receivables _________ Intercompany _________ _________
Credits _________ Late Charges _________ _________
TOTAL GPI Ineligibles _________
Breckenridge-Remy Co. Gross Receivables _________ _________
Less Breckenridge-Remy Co. Ineligibles
Receivables past 90 days _________
Contras _________
50% Rule _________
Foreign Receivables _________ Intercompany _________ _________
Credits _________ Late Charges _________ _________
TOTAL BRC Ineligibles _________
SUMMARY PERIOD ENDING:
Gross GSI, GPI and BRC Receivables _________ _________
Less Total Ineligibles _________
Net Receivables
=========
TOTAL AVAILABILITY (Net Receivables X 80%) _________
L/C's X 20% _________ _________
Current Outstanding Revolver Debt _________
Current OUtstanding Letters of Credit _________ _________
=========
</TABLE>
Receivables aging attached for GSI, GPI and BRC for the same date as above.
The foregoing is hereby certified by me to be true and correct to the best of
my knowledge. The information contained herein is taken from the book and
records of the above listed companies.
Breckenridge-Remy Co. Guest Supply, Inc.
______________________________ ______________________________
Name, Title Name, Title
Guest Packaging, Inc.
______________________________
Name, Title
<PAGE>
Exhibit D
[Form of Issuance Request]
PNC Bank, National Association
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
__________ __, 199_
Attention: __________________
Request for Issuance of Letter of Credit
under Revolving Credit and Term Loan
Agreement dated October 31 1995
----------------------------------------
Dear Sirs:
Pursuant to Section 2.18 of that certain Credit Agreement dated
October 31, 1995 among Guest Supply, Inc., certain Subsidiaries PNC Bank,
National Association and First Fidelity Bank, N.A., as Lenders, and PNC Bank,
National Association, as Agent (as modified, amended or supplemented from time
to time, the "Agreement;" the terms defined in the Agreement being used herein
as therein defined), the undersigned requests that the Issuer issue a [Letter
of Credit/documentary Letter of Credit] on _____________, 199_, to
_________________, as beneficiary, for the account of the undersigned, in the
face amount of _______________ (U.S.$________), and with an expiration date of
_______________, 19__ [not more than earlier of 12 months or Termination Date].
The undersigned hereby certifies that (i) the Letter of Credit is
to be issued to support financial obligations of the undersigned incurred in
the ordinary course of business and relate to _______________; (ii) the face
amount of the Letter of Credit requested hereby when added to the Letter of
Credit Outstandings will not exceed the Letter of Credit Availability on the
requested issuance date; (iii) the face amount of the Letter of Credit
requested hereby when added to all Revolving Credit Loans and Letter of Credit
Outstandings does not exceed the aggregate amount of the Revolving Loan
Commitment; (iv) the representations and warranties made by the undersigned in
or in connection with the Agreement are true, correct and complete in all
material respects on and as of the date hereof to the same extent as though
made on and as of the date hereof; (v) no Default or Event of Default has
occurred and is continuing under the Agreement or will result from the issuance
of the Letter of Credit requested by this certificate; and (vi) the undersigned
has performed in all material respects all agreements and
<PAGE>
satisfied all conditions under the Agreement to be performed by the undersigned
on or before the date hereof.
[If the Letter of Credit requested is a documentary Letter Credit,
include the following:
Drafts To Be Drawn At: ____ Sight
____ Other: _____________________
Commercial Invoices: _____________________ Copies
Bills of Lading/1/:
Insurance/2/:
Other/3/:
Covering/4/:
_________________
1 Indicate whether "Ocean Bills of Lading," "Railway Bills of Lading,"
"Truck Bills of Lading," "Airway Bill," "Parcel Post," etc. Unless
indicated otherwise, Lender will require (a) Ocean Bills of Lading: a
full set of clean, on board Ocean Bills of Lading to shipper's order,
blank endorsed and marked notify (buyer's name and address) and "freight
collect" or "freight prepaid," (b) Air Way Bills: consigned to buyer, (c)
Railway or Truck Bills of Lading: consigned to buyer, or (d) Parcel Post
Receipt: addressed to buyer.
2 If insurance is to be covered by you, indicate "Insurance covered by
buyer;" if the insurance is to be covered by the beneficiary, indicate
"Insurance Policy or Certificate Required," and in addition, the risks
that are to be covered.
3 Indicate particulars of any other document that may be required including
the number of copies.
4 Indicate commodity to be shipped and quantity. Be as brief as possible.
If necessary, mention contract or sales or order number(s) indicating
whether they are your numbers or those of the beneficiary. Preferably,
details such as grades, quantity and base prices, etc. should be omitted.
Shipping terms should also be indicated here, i.e., "F.O.B. - vessel -
(Port of Shipment)" or "C.I.F. - (Port of Destination)." In addition,
the latest shipping date, a particular shipping line, or a particular
vessel may also be mentioned here.
2
<PAGE>
Shipment/5/: From: To:
In Transit To:
Partial Shipment: _____ Allowed
_____ Not Allowed
Transhipments: _____ Allowed
_____ Not Allowed
Special Conditions/6/:
Documents must be presented for negotiation _____ days after the
date of bills of lading.]
Capitalized terms used herein without definition shall have the
meanings set forth in the Agreement.
Dated: ___________ __, 199_.
[ ]*
By:______________________
Name:
Title:
___________________
5 Insert name of loading port, or name of city ( if unknown, name of
country). Indicate the name of the destination of the goods; if
destination is other than the port of entry, mention the port of entry,
e.g., "to New York in transit to Toronto." If port of entry is not
known, general terms such as "North American port" or "U.S. East Coast
Port," etc. may be used.
6 If the amount of the credit represents a percentage of the total cost of
the goods, so indicate, e.g., "representing 60% of invoice order," etc.
Any other special condition should also be listed.
* Insert corporate name of requesting entity.
3
<PAGE>
WMDI08066-001
Exhibit E
LANDLORD'S WAIVER AND CONSENT
LANDLORD'S WAIVER AND CONSENT dated as of the _____ day of November
1995, between _______________ having an office at (hereinafter called
"Landlord"), and PNC Bank, National Association having an office at 2 Tower
Center Boulevard, East Brunswick, New Jersey 08817 and First Fidelity Bank,
N.A. having an office at 550 Broad Street, Newark, New Jersey 07102
(hereinafter collectively called the "Secured Parties").
WHEREAS, the Secured Parties have made or are about to make one or
more loans, advances, and/or other financial accommodations to Guest Supply,
Inc., Guest Packaging, Inc., and Breckenridge-Remy Co. (hereinafter,
collectively, "Debtor"), to be secured in whole or in part by security
agreements covering, among other things, the personal property owned by
___________________ ____________________ (hereinafter called "Tenant"),
described in Schedule A attached hereto and made a part hereof (such personal
property, together with all other equipment, inventory and other goods now or
hereafter owned by the Debtor being hereinafter called the "Collateral"); and
WHEREAS, the Collateral is or may be installed or kept at the
premises known as __________________________ which premises are owned by
Landlord and leased to Tenant pursuant to a lease dated ______________, 19__
(the "Lease").
1. Landlord consents to the installation or location of the
Collateral in said premises, and agrees that any right, claim, title, interest
or security interest in or lien upon, any of the Collateral, which it may have
or acquire by reason of the installation in, attachment to or location of the
Collateral in said premises, or otherwise (including without limitation any
right of distraint), whether arising under any agreement, instrument or law now
or hereafter in effect, are subordinate to the right, claim, title and interest
or security interest or lien upon such Collateral in favor of the Secured
Parties to the full extent that the same secures or may hereafter secure any
and all obligations and indebtedness of every kind, now existing or hereafter
arising, of Debtor to Secured Parties.
2. Landlord hereby agrees that so long as this waiver and
consent is in effect, Landlord shall not exercise any rights, assert any claim,
lien, title, interest or security interest in, or lien upon, or take any action
or institute any proceedings, with respect to the Collateral.
<PAGE>
3. The Secured Parties and their agents and representatives may
upon notice to, but without the consent of, the Landlord enter said premises
and remove and take possession of the Collateral at any time in accordance with
said security agreements without the payment of any rent, use or occupation
charge. Secured Parties shall repair at their expense any physical damage to
said premises which such Secured Party directly causes in removing the
Collateral.
4. Should the Landlord intend to terminate the Lease or
otherwise take any action which would, if successful, terminate or otherwise
impair the rights of the Tenant or the Secured Parties in the Collateral or the
premises, the Landlord shall give not less than forty-five (45) days' written
notice of such intended action to the Secured Parties by certified mail to the
address set forth above or to such other address as the Secured Parties shall
have given notice of to the Landlord. The Secured Parties shall have not less
than forty-five (45) days after receipt of such notice to take such action with
respect to the Collateral as may be available to the Secured Parties to
preserve, protect or realize upon its interest therein. Nothing set forth
herein shall be construed to require the Secured Parties to remove the
Collateral from the premises or take any other action.
5. The provisions hereof shall be irrevocable and remain in full
force and effect until Debtor has fully paid and performed all of its
obligations to Secured Parties under all agreements, instruments and documents
evidencing such obligations, and under all security agreements present and
future, and any extensions, modifications and renewals thereof at any time
made, and until all obligations, if any, of Secured Parties to extend loans or
financial accommodations to Debtor shall have terminated.
6. This Waiver and Consent shall be binding upon and inure to
the benefit of the parties herein named and their respective assigns and
successors in interest.
IN WITNESS WHEREOF, the undersigned has duly executed this Waiver
and Consent as of the day and year first above written.
LANDLORD
By:___________________________
Name:
Title:
2
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:___________________________
Name:
Title:
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION
By:___________________________
Name:
Title:
3
<PAGE>
SCHEDULE A TO LANDLORD'S WAIVER AND CONSENT DATED
AS OF ________________, AMONG LANDLORD, PNC BANK,
NATIONAL ASSOCIATION AND FIRST FIDELITY BANK, N.A.
The property covered by this Landlord's Waiver and Consent consists
of:
All tangible personal property whether now owned or hereafter
acquired, wheresoever located, including, without limitation, all trade
fixtures, inventory and equipment presently or in the future located in or on
the premises described in the within instrument, including, without limitation,
compressors, scales, conveyors, racks, and marking guns located at or used in
the operation of the said premises, and all accessories, substitutions,
additions, replacements, parts and accessions affixed to or used in connection
with the collateral.
4
<PAGE>
WMDI08066.001
Exhibit F
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT, dated October 31, 1995, is made by Guest
Supply, Inc., a New Jersey corporation (the "Pledgor"), in favor of PNC Bank,
National Association (the "Secured Party") as agent for the benefit of the
Secured Party and the Lenders party to the Revolving Credit and Term Loan
Agreement (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement") dated October 31, 1995 among Guest Supply, Inc.,
Guest Packaging, Inc. and Breckenridge-Remy Co., as Borrower, PNC Bank,
National Association and First Fidelity Bank, N.A., as Lenders, and the Secured
Party, as Agent.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, all financial accommodations to be made to Guest Supply,
Inc., Guest Packaging, Inc. and Breckenridge-Remy Co., as joint and several
obligors, (collectively, the "Borrower") by the Lenders pursuant to the terms
and conditions of the Credit Agreement are to be secured by, among other
collateral, the assignment, grant and pledge by the Pledgor to the Secured
Party of a continuing security interest in all of the (i) Accounts, (ii)
Contracts and contract rights, (iii) Chattel Paper, (iv) Documents, (v)
Equipment, (vi) General Intangibles, (vii) Instruments, (viii) Inventory and
(ix) Fixtures of the Pledgor, whether now owned or hereafter acquired; and
WHEREAS, one of the conditions precedent to the obligation of the
Lenders to extend the credit facilities described in the Credit Agreement is
that the Pledgor execute and deliver this Security Agreement to the Secured
Party for the benefit of the Secured Party and the Lenders.
NOW, THEREFORE, in consideration of the premises, to induce the
Lenders to extend the credit facilities described in the Credit Agreement and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Pledgor hereby agrees with the Secured Party, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
-------------
which are defined in the Credit Agreement and used herein are used herein as
defined in the Credit Agreement.
(b) The following terms which are defined in the UCC (as
such term is defined below) on the date hereof are used
<PAGE>
herein as so defined: Accounts, Account Debtor, Chattel Paper, Documents,
Equipment, Fixtures, General Intangibles, Goods, Instruments, Inventory,
Proceeds and Products.
(c) The following terms shall have the following meanings:
(i) "Collateral" shall have the meaning assigned to
----------
it in Section 2 of this Security Agreement;
(ii) "Contracts" means all contracts to which the
---------
Pledgor is now or hereafter becomes a party, including, in each case, without
limitation, (a) all rights of the Pledgor to receive moneys due and to become
due to it thereunder or in connection therewith, (b) all rights of the Pledgor
to damages arising out of, or for, breach or default in respect thereof, (c)
all rights of the Pledgor to terminate the contracts, to perform thereunder and
to compel performance and to otherwise exercise all remedies thereunder, and
(d) any other rights or benefits arising under any other contract entered into
by the Pledgor; except, in the case of clauses (b), (c) and (d) only to the
extent that, in the case of any contract, the Pledgor's right, title and
interest therein is assignable without consent, or with consent and the consent
of all necessary parties to such contract has been obtained);
(iii) "Material Contract" means any Contract which
-----------------
represents 3% or more of the amount of sales of the Borrower;
(iv) "Security Agreement" means this Security
------------------
Agreement, as amended, supplemented or otherwise modified from time to time;
and
(v) "Obligations" means all indebtedness,
-----------
liabilities and obligations (whether denominated as principal, fees, interest
or otherwise including amounts that, but for the initiation of any proceeding
under any insolvency or bankruptcy law, would become due) of (i) any Person
constituting the Borrower to the Secured Party or any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with the
Credit Agreement or any other Loan Document, and (ii) the Pledgor to the
Secured Party or any Lender whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with this Security Agreement;
(vi) "UCC" means the Uniform Commercial Code as from
---
time to time in effect in the State of New Jersey; provided, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of any Lien on any
2
<PAGE>
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than New Jersey, "UCC" means the Uniform Commercial Code as
in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or the effect of perfection or non-perfection.
References to sections of the UCC shall be construed as necessary to refer to
any successor sections of the UCC.
2. Grant of Security Interest. As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
mortgages, pledges, assigns, hypothecates and grants to the Secured Party, for
the benefit of the Secured Party and the Lenders, a continuing security
interest in all of the following property now owned or at any time hereafter
acquired by the Pledgor or in which the Pledgor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"):
----------
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all General Intangibles, including, without limitation,
all trade secrets, tradenames, copyrights, copyright
applications, patent applications, patents, trademarks,
trademark registrations and applications therefor;
(vi) all Instruments;
(vii) all Equipment;
(viii) all Inventory;
(ix) to the extent not otherwise included in clause (vii) of
this Section 2, all other machinery, apparatus,
equipment, fittings, Fixtures, furniture and
furnishings now or hereafter located upon the real
property described in Schedule C hereto, or any part
thereof, and used or usable in connection with any
future occupancy or use of such property;
(x) any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured
but not including trust
3
<PAGE>
accounts) and any other Indebtedness at any time held
or owing by the Secured Party or any Lender to or for
the credit or the account of the Pledgor;
(xi) any and all claims or payments made under any insurance
policy;
(xii) all interest of the Pledgor in any goods the sale or
lease of which shall have given or shall give rise to,
and in all guaranties and other property securing the
payment of or performance under, any Accounts,
Contracts, General Intangibles or any Chattel Paper or
Instruments referred to above;
(xiii) any and all personal property of any Person of any kind
or description subject to a separate mortgage, pledge
or security interest in favor of the Pledgor or in
which the Pledgor now or hereafter has or acquires a
security interest securing any indebtedness, pursuant
to any written agreement or instrument other than this
Security Agreement;
(xiv) all replacements, substitutions, additions or
accessions to or for any of the foregoing;
(xv) to the extent related to the property described above,
all books, correspondence, credit files, records,
invoices and other papers and documents, including,
without limitation, to the extent so related, all
tapes, cards, computer runs, computer programs and
electronic, magnetic or other archival systems or
papers and documents in the possession or control of
the Pledgor or any computer or service bureau from time
to time acting for the Pledgor;
(xvi) all property or interests in property of the Pledgor
which now may be owned or hereafter may come into the
possession, custody or control of the Secured Party or
any Lender, or any agent or affiliate of the Secured
Party or any Lender (whether for safekeeping, deposit,
custody, pledge, transmission, collection or
otherwise), including, without limitation, all rights
and interests of the Pledgor in respect of any and all
(a) notes, drafts, letters of credit, stocks, bonds,
and debt and equity securities, whether or not
4
<PAGE>
certificated, and warrants, options, puts, calls and
other rights to acquire or otherwise relating to the
same, (b) cash, and (c) proceeds of loans, advances and
other financial accommodations, including, without
limitation, loans, advances and other financial
accommodations made or extended under the Loan
Documents; and
(xvii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Rights of Secured Party; Limitations on Secured Party's
--------------------------------------------------------
Obligations.
- -----------
(a) Pledgor Remains Liable under Accounts and Contracts.
---------------------------------------------------
Anything herein to the contrary notwithstanding, the Pledgor shall remain
liable under each of the Accounts and Contracts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all
in accordance with the terms of any agreement giving rise to each such Account
and in accordance with and pursuant to the terms and provisions of each such
Contract. Neither the Secured Party nor any Lender shall have any obligation
or liability under any Account (or any agreement giving rise thereto) or
Contract by reason of or arising out of this Security Agreement or the receipt
by the Secured Party or any Lender of any payment relating to such Account or
Contract pursuant hereto, nor shall the Secured Party or any Lender be
obligated in any manner to perform any of the obligations of the Pledgor under
or pursuant to any Account (or any agreement giving rise thereto) or under or
pursuant to any Contract, to make any payment, to make any inquiry as to the
nature or the sufficiency of any payment received by any of them or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto) or under any Contract, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to them or to which they may be entitled
at any time or times.
(b) Notice to Account Debtors and Contracting
------------------------------------------
Parties. After the occurrence and during the continuance of an Event of
Default, upon the request of the Secured Party at any time, the Pledgor shall
notify Account debtors on the Accounts and the parties to the Contracts that
the Accounts and the Contracts have been assigned to the Secured Party and that
payments in respect thereof shall be made directly to the Secured Party. After
the occurrence and during the continuance of an Event of Default, the Secured
Party may, at any time in its own name or in the names of others communicate
with Account debtors on the Accounts and the parties to the Contracts to verify
with them to its satisfaction the existence, amount and terms of any
5
<PAGE>
Accounts or Contracts. The costs relating to the foregoing matters, including
reasonable attorneys' fees and out of pocket expenses shall be borne solely by
the Pledgor whether incurred by the Secured Party or the Pledgor.
(c) Analysis of Accounts. Upon reasonable notice to the
--------------------
Pledgor, the Secured Party shall have the right to make test verifications of
the Accounts in any manner and through any medium that it reasonably considers
advisable, and the Pledgor shall furnish all such assistance and information as
the Secured Party may require in connection therewith; provided, however, that,
prior to the occurrence and continuance of an Event of Default, Secured Party
shall obtain Pledgor's written consent (which shall not be unreasonably
withheld or delayed) prior to communicating with Account Debtors. At any time
and from time to time, upon the Secured Party's request and at the expense of
the Pledgor, the Pledgor shall furnish to the Secured Party reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts.
4. Representations and Warranties. The Pledgor hereby
------------------------------
represents and warrants that:
(a) Title; No Other Liens. The Pledgor has good and
---------------------
marketable title to the Collateral, subject only to Liens permitted by the
Credit Agreement (hereinafter, the "Permitted Encumbrances"). Other than with
respect to Permitted Encumbrances, no security agreement, financing statement
or other public notice with respect to all or any part of the Collateral is on
file or of record in any public office except such as may have been filed
pursuant to the Credit Agreement or as to which UCC-3 termination statements
have been received and filed or which have expired and not been renewed.
(b) Perfected First Priority Liens. When appropriate
------------------------------
financing statements have been filed by the Secured Party in the jurisdictions
listed on Schedule A hereto against the Pledgor, the Liens granted pursuant to
this Security Agreement will constitute perfected Liens (to the extent such
Liens can be perfected by filing) on the Collateral in favor of the Secured
Party, which are prior to all other Liens on the Collateral and in existence on
the date hereof other than Permitted Encumbrances, and which are enforceable as
such against all creditors of the Pledgor.
(c) Accounts. The amount represented by the Pledgor to
--------
the Secured Party from time to time as owing by each Account Debtor or by all
Account Debtors in respect of the Accounts will at such time be the correct
amount actually owing by such Account Debtor or Debtors thereunder. The
place(s) where the Pledgor keeps its books and records concerning the Accounts
is as set forth on Schedule B hereto.
6
<PAGE>
(d) Contracts. No consent of any Person (other than the
---------
Pledgor), including, without limitation, any Governmental Authority, to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Security Agreement. To the best
knowledge of the Pledgor each Contract is in full force and effect and
constitutes a valid and legally enforceable obligation of the parties thereto,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting that enforcement of
creditor's rights generally. No consent or authorization of, filing with or
other act by or in respect of any Governmental Authority is required in
connection with the execution, delivery, performance, validity or
enforceability of any of the Contracts by any party thereto other than those
which have been duly obtained, made or performed, are in full force and effect
and do not subject the scope of any such Contract to any adverse limitation,
either specific or general in nature. Neither the Pledgor nor (to the best of
the Pledgor's knowledge) any other party to any Contract is in default or is
likely to become in default in the performance or observance of any of the
terms thereof. The Pledgor has fully performed all its obligations under each
Contract required to be performed as of the date hereof. To the best knowledge
of the Pledgor the right, title and interest of the Pledgor in, to and under
each Contract are not subject to any defense, offset, counterclaim or claim
which would materially adversely affect the value of such Contract as
Collateral, nor have any of the foregoing been asserted or alleged against the
Pledgor as to any Contract. The Pledgor has delivered to the Secured Party a
complete and correct copy of each Material Contract, including all amendments,
supplements and other modifications thereto.
(e) Inventory and Equipment. The Inventory and
-----------------------
Equipment is kept, from time to time, at the locations listed on Schedule C
hereto.
(f) Chief Executive Office. The Pledgor's chief
----------------------
executive office is as set forth on Schedule B annexed hereto.
(g) Other Places of Business. The Pledgor's other
------------------------
places of business are as set forth on Schedule B annexed hereto, and if no
other places of business are set forth on Schedule B then Pledgor has no other
place of business other than its chief executive office as set forth in Section
4(f) above.
(h) Trade Names. Certain Accounts may be and/or certain
-----------
of the Pledgor's invoices may be, from time to time, rendered to customers
under the trade names listed on Schedule B (which together with any new trade
names used after the date hereof are referred to collectively, as the "Trade
------
Names" and each individually, as a "Trade Name"). As to such Trade Names
----------
and the related Accounts, the Pledgor hereby warrants and agrees that:
7
<PAGE>
(i) each Trade Name is a trade name and style (and not
the name of an independent corporation or other legal entity) by which the
Pledgor may identify and sell certain of its goods or services and conduct a
portion of its business and Pledgor has filed or made all public or other
notices in any jurisdiction required to lawfully operate under such Trade
Names;
(ii) all Accounts, Chattel Paper, Instruments and
Proceeds thereof and returned merchandise which arise from the sale of goods
invoiced under the Trade Names are and shall be (x) owned solely by the Pledgor
and (y) subject to the security interest and other terms of this Security
Agreement;
(iii) new Trade Names may only be used by the Pledgor
after the Secured Party is given fifteen (15) days prior written notice of the
use of any such new Trade Name, which notice shall set forth the name of such
new Trade Name; and
(iv) the Pledgor does not use any Trade Name other than
the Trade Names listed on Schedule B hereto.
(i) Rolling Stock. The Pledgor does not own any
-------------
railroad cars, locomotives or other rolling stock used or intended for use in
interstate commerce.
(j) Patents, Trademarks, Copyrights. Except as set
-------------------------------
forth on Schedule D, the Pledgor does not own, license or have rights in or to
any trademark, patent or copyright and has not filed and is not in the process
of filing any application with any Governmental Authority to obtain any of the
foregoing. Except as set forth on Schedule D, the Pledgor does not need or
require a license or right to use any patent, copyright, trademark or service
mark to conduct its business.
5. Covenants. The Pledgor covenants and agrees that, from and
---------
after the date of this Security Agreement until the Obligations are paid in
full:
(a) Further Documentation; Pledge of Instruments and
-------------------------------------------------
Chattel Paper. At any time and from time to time, upon the written request
- -------------
of the Secured Party and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents
and take such further action as the Secured Party may reasonably request for
the purpose of obtaining or preserving the full benefits of this Security
Agreement and the rights and powers herein granted, including, without
limitation, the filing of documents with the Office of Patents and Trademarks
and the filing of any financing or continuation statements under the UCC in
effect in any jurisdiction with respect to the Liens created hereby. The
Pledgor also hereby authorizes the Secured Party, or any agent acting for the
benefit and on behalf of the Secured Party to file any such financing or
continuation statement without the
8
<PAGE>
signature of the Pledgor to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Security Agreement shall be
sufficient as a financing statement for filing in any jurisdiction. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel
Paper shall, after the occurrence and during the continuance of an Event of
Default, be immediately delivered to the Secured Party, duly endorsed in a
manner satisfactory to the Secured Party to be held as Collateral pursuant to
this Security Agreement.
(b) Indemnification. The Pledgor agrees to pay, and to
---------------
save the Secured Party harmless from, any and all liabilities, costs and
expenses (including without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any Requirement of Law applicable to any of the
Collateral, (iii) with respect to fees, taxes or other costs incurred with
respect to recording UCC financing statements or other public recordings or
notices of security interests, or (iv) in connection with any of the
transactions contemplated by this Security Agreement or the enforcement of the
Secured Party's rights hereunder, except those liabilities, costs and expenses
arising out of the Secured Party's gross negligence or willful misconduct. In
any suit, proceeding or action brought by the Secured Party under any Account
for any sum owing thereunder or to enforce any provisions of any Account or
Contract the Pledgor will save, indemnify and keep the Secured Party harmless
from and against all expense, loss or damage suffered by the Secured Party in
such action commenced in connection with the enforcement of any provision of
any Account or Contract except for expenses, loss or damage arising out of the
gross negligence or willful misconduct of the Secured Party.
(c) Maintenance of Records. The Pledgor will keep and
----------------------
maintain at its own cost and expense, complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral. The Pledgor will mark its
books and records pertaining to the Collateral to evidence this Security
Agreement and the security interests granted hereby. For the Secured Party's
further security, the Secured Party shall have a security interest in all of
the Pledgor's books and records pertaining to the Collateral. Upon reasonable
notice from Secured Party to Pledgor prior to an Event of Default and upon
demand thereafter, the Pledgor shall make available all such books and records
to the Secured Party or to its representatives during normal business hours at
the request of the Secured Party.
9
<PAGE>
(d) Right of Inspection. The Secured Party and the
-------------------
Lenders shall at all times have full and free access during normal business
hours, upon reasonable prior notice, to all the books, correspondence and
records of the Pledgor and the Secured Party or its representatives may examine
the same and make photocopies thereof, and the Pledgor agrees to render to the
Secured Party such clerical and other assistance as may be reasonably requested
with regard thereto. The Secured Party and the Lenders shall also have the
right, during normal business hours, to enter into and upon any premises where
any of the Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.
(e) Compliance with Laws, etc. The Pledgor will comply
--------------------------
with all Requirements of Law applicable to the Collateral or any part thereof.
(f) Compliance with Terms of Contracts, etc. The
----------------------------------------
Pledgor will perform and comply in all material respects with all its
obligations under any agreements, documents and other instruments relating to
the Collateral except where the failure to so perform will not have a Material
Adverse Effect.
(g) Payment of Obligations. The Pledgor will pay, as
----------------------
the same become due, all obligations (including without limitation, any and all
lease obligations and warehouse charges), taxes and governmental fees, charges
or levies imposed upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral; provided, that it may protest the payment of, and withhold payment
during such protest of, any such obligations, taxes, fees, charges or levies or
claims if it is acting in good faith and reserves in conformity with GAAP with
respect thereto have been provided on its books unless such protest violates
Section 5(h) below.
(h) Limitation on Liens on Collateral. The Pledgor will
---------------------------------
not create, incur or permit to exist, will defend the Collateral against, and
will take such other action as is necessary to remove, any Lien or claim on or
to the Collateral, other than the Liens created hereby and Permitted
Encumbrances and will defend the right, title and interest of the Secured Party
in and to any of the Collateral against the claims and demands of all Persons
whomsoever except Persons claiming under this Security Agreement.
(i) Limitations on Dispositions of Collateral. Except
-----------------------------------------
for disposal of obsolete items, the Pledgor will not sell, transfer, lease or
otherwise dispose of any Collateral, except as permitted by the Credit
Agreement.
10
<PAGE>
(j) Limitations on Modifications, Waivers and Extensions
-----------------------------------------------------
of Contracts and Agreements Giving Rise to Accounts. The Pledgor will not
- ---------------------------------------------------
(i) amend, modify, terminate or waive any provision of any Contract or any
agreement giving rise to an Account in any manner which could reasonably be
expected to materially adversely affect the value of such Contract or Account
as Collateral, (ii) fail to exercise promptly and diligently each and every
right which it may have under each Contract, or agreement giving rise to an
Account or (iii) fail to deliver to the Secured Party a copy of each material
demand, notice or document received by it relating in any way to any Material
Contract or any agreement constituting a Material Contract.
(k) Limitation on Discounts, Compromises and Extensions of
-------------------------------------------------------
Accounts and Contracts. Other than in the ordinary course of business as
- ----------------------
generally conducted by the Pledgor over a period of time, and in any event,
after the occurrence and during the continuance of an Event of Default, the
Pledgor will not grant any extension of the time of payment of any of the
Accounts or payments of any amounts due under any Contract, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
(l) Maintenance of Equipment. The Pledgor will maintain
------------------------
each item of Equipment in good operating condition, ordinary wear and tear and
immaterial impairments of value and damage by the elements excepted, and will
provide all maintenance, service and repairs necessary for such purpose.
(m) Maintenance of Insurance. The Pledgor will
------------------------
maintain, with financially sound and reputable companies, insurance policies
(i) insuring the Inventory and Equipment against loss by fire, explosion,
theft, such other casualties as may be reasonably satisfactory to the Secured
Party and (ii) insuring the Pledgor and the Secured Party against liability for
personal injury and property damage relating to such Inventory and Equipment,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Secured Party, with losses payable to the
Pledgor and the Secured Party, provided, that with the written consent of the
Secured Party all payments to be made to the Secured Party under such policies
may be used to repair or replace damaged or destroyed Inventory or Equipment.
The Secured Party shall be provided all evidence and documents necessary to
demonstrate the use of such insurance proceeds. All such insurance shall (i)
provide that no cancellation, material reduction in amount or material change
in coverage thereof shall be effective until at least 15 days after receipt by
the Secured Party of written notice thereof, (ii) name the Secured Party as
loss payee, (iii) provide that the Secured Party shall have the right, but not
the obligation, to pay premiums thereon, and (iv) be reasonably satisfactory in
all
11
<PAGE>
other respects to the Secured Party. Upon the request of the Secured Party,
the Pledgor shall deliver to the Secured Party a report of a reputable
insurance broker with respect to such insurance during each calendar year and
such supplemental reports with respect thereto as the Secured Party may from
time to time reasonably request.
(n) Further Identification of Collateral. The Pledgor
------------------------------------
will furnish to the Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may reasonably request, all
in reasonable detail.
(o) Notices. The Pledgor will advise the Secured Party
-------
promptly, in reasonable detail, by written notice (i) of any Lien (other than
Liens created or permitted hereby) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which could reasonably
be expected to have any material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder.
(p) Changes in Locations, Name, etc. The Pledgor will
-------------------------------
not (i) change the location of its chief executive office or other places of
business from that specified in Sections 4(f) and 4(g), respectively, or remove
its books and records from the location specified in Section 4(c), (ii) permit
any of the Inventory to be kept at a location other than that listed in
Schedule C hereto, or (iii) change its name, taxpayer identification number,
identity or corporate structure to such an extent that any financing statement
filed by the Secured Party, or any agent acting for the benefit and on behalf
of the Secured Party, in connection with this Security Agreement would become
misleading, unless it shall have given the Secured Party at least 30 days prior
written notice thereof.
(q) Limitation on Assignments. Pledgor will not,
-------------------------
without the consent of Secured Party, agree to any provision in any Contract or
other agreement constituting Collateral, which purports (or is so broad in
scope so as) to limit Pledgor's rights to pledge or assign the right to payment
of monies due or to become due thereunder.
6. Appointment as Attorney-in-Fact.
-------------------------------
(a) Powers. The Pledgor hereby irrevocably constitutes
------
and appoints the Secured Party, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Pledgor and in the name of the Pledgor or in its own
name, from time to time in the Secured Party's discretion, for the purpose of
carrying out the terms of this Security Agreement, to execute UCC-1 Financing
Statements in the Pledgor's name as debtor and,
12
<PAGE>
upon the occurrence and during the continuance of any Event of Default, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement, and without limiting the generality of the foregoing,
the Pledgor hereby gives the Secured Party the power and right (but not the
obligation), on behalf of the Pledgor, without notice to or assent by the
Pledgor, to do the following:
(i) in the case of any Collateral, at any time when any
Event of Default shall have occurred and be continuing, in the name of the
Pledgor or its own name, or otherwise, to open mail addressed to the Pledgor,
to take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, General Intangible or Contract or contract right or with
respect to any other Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Secured Party for the purpose of collecting any and all such
moneys due under any such Account, Instrument, General Intangible or contract
right or with respect to any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed
on or threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Security Agreement and to pay all or any part
of the premiums therefor and the costs thereof; and
(iii) upon the occurrence and during the continuance of
any Event of Default, (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral; (C) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action or proceeding brought against
the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust
any suit, action or proceeding described in clause (E) above and in connection
therewith, to give such discharges or releases as the Secured Party may deem
appropriate; and (G) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party was the absolute owner
13
<PAGE>
thereof for all purposes, and to do at the Secured Party's option and the
Pledgor's expense, at any time, or from time to time, all acts and things which
the Secured Party deems necessary to protect, preserve or realize upon the
Collateral and the Liens granted hereunder and to effect the intent of this
Security Agreement, all as fully and effectively as the Pledgor might do.
The Pledgor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Pledgor also authorizes the
------------
Secured Party, at any time and from time to time, to execute, in connection
with the sale provided for in Section 9 hereof, any endorsements, assignments
or other instruments of conveyance or transfer with respect to the Collateral.
(c) No Duty on Secured Party's Part. The powers
-------------------------------
conferred on the Secured Party hereunder are solely to protect its interests in
the Collateral and shall not impose any duty upon the Secured Party to exercise
any such powers. The Secured Party shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers. None of the
Secured Party's officers, directors, employees or agents shall be responsible
to the Pledgor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
(d) Trademarks and Licenses. The Pledgor further grants
-----------------------
to the Secured Party an irrevocable, non-exclusive license at no charge to use
the trademarks, patents, copyrights and licenses used in connection with the
sale of goods including, without limitation, those listed on Schedule D annexed
hereto associated with the Collateral in connection with any foreclosure or
liquidation together with the right to grant a nonexclusive sublicense without
charge to any buyer of such Collateral for the purpose of resale. All such
licenses and rights to sublicense include all computer programs, and other
Collateral used in connection with such trademarks.
7. Performance by Secured Party of Pledgor's Obligations. If
-----------------------------------------------------
the Pledgor fails to perform or comply with any of its agreements contained
herein and the Secured Party shall perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the Secured
Party incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the highest interest rate
prescribed in the Credit Agreement, shall be payable by the Pledgor to the
Secured Party on demand and shall constitute Obligations secured hereby.
8. Proceeds. It is agreed that if an Event of Default shall
--------
occur and be continuing (a) all proceeds of Collateral
14
<PAGE>
received by the Pledgor consisting of cash, checks and cash equivalents shall
be held by the Pledgor in trust for the Secured Party segregated from other
funds of the Pledgor, and shall, forthwith upon receipt by the Pledgor, be
turned over to the Secured Party in the exact form received by the Pledgor
(duly endorsed by the Pledgor to the Secured Party, if required), and (b) any
and all such proceeds of Collateral received by the Secured Party (whether from
the Pledgor or otherwise) may, in the sole discretion of the Secured Party, be
held by the Secured Party as collateral security for, and/or then or at any
time thereafter may be applied by the Secured Party against, the Obligations
then due and payable, such application to be in such order as the Secured Party
shall elect. Any balance of such proceeds remaining after the Obligations
shall have been paid in full shall be paid over to the Pledgor or to whomsoever
may be lawfully entitled to receive the same.
9. Remedies. If an Event of Default shall occur and be
--------
continuing, the Secured Party may exercise, in addition to all other rights and
remedies granted to the Secured Party in this Security Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable laws. Without limiting the generality of the foregoing, the
Secured Party, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by
law) to or upon the Pledgor or any other Person (all and each of which demands,
presentments, protests, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing) in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and
conditions as they may deem advisable and at such prices as they may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold. The
Pledgor further agrees, at the Secured Party's request, to assemble the
Collateral and make it available to the Secured Party at places which the
Secured Party shall reasonably select, whether at the Pledgor's premises or
elsewhere. The Secured Party shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the
15
<PAGE>
payment in whole or in part of the Obligations, in such order as the Secured
Party may elect, and only after such application and after the payment to the
Secured Party of any other amount required by any provision of law, including,
without limitation, any provision of the UCC, need the Secured Party account
for the surplus, if any, to the Pledgor. To the extent permitted by applicable
law, the Pledgor waives all claims, damages and demands it may acquire against
the Secured Party arising out of the exercise by the Secured Party of any of
its rights hereunder except any arising out of its gross negligence or willful
misconduct. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition. The
Pledgor shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Obligations and
the reasonable fees and disbursements of any attorneys employed by the Secured
Party to collect such deficiency.
10. Limitation on Duties Regarding Preservation of Collateral.
---------------------------------------------------------
The Secured Party's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under the UCC or
otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account. Neither the Secured Party nor
any of its directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
11. Powers Coupled with an Interest. All authorizations and
-------------------------------
agencies herein contained with respect to the Collateral are coupled with an
interest and are irrevocable.
12. Severability. Any provision of this Security 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
13. Section Headings. The section headings used in this
----------------
Security Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
14. No Waiver; Cumulative Remedies. The Secured Party shall
------------------------------
not by any act (except by a written instrument pursuant to Section 15 hereof),
delay, indulgence, omission or otherwise be
16
<PAGE>
deemed to have waived any right or remedy hereunder or to have acquiesced in
any Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of
the Secured Party, of any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Secured Party would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
15. Waivers and Amendments; Successors and Assigns; Governing
----------------------------------------------------------
Law. (a) None of the terms or provisions of this Security Agreement may be
- ---
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Secured Party.
(b) This Security Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Secured Party, the Lenders and their respective successors and assigns. This
Security Agreement shall be governed by, and be construed and interpreted in
accordance with, the laws of the State of New Jersey (without regard to
conflicts of law principles thereof), except to the extent that the validity,
perfection or enforcement of the security interests hereunder, or remedies
hereunder, in respect of any particular Collateral located outside the
boundaries of the State of New Jersey are governed by the laws of a
jurisdiction other than the State of New Jersey.
16. Notices. Notices hereunder may be given as provided in
-------
the Credit Agreement and the Pledgor agrees to be bound by the notice
provisions of the Credit Agreement.
17. Jurisdiction. The Pledgor hereby irrevocably submits to
------------
the jurisdiction of any court of the State of New Jersey or Federal court
sitting in the State of New Jersey in any action or proceeding arising out of
or relating to this Agreement and the Pledgor hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such court of the State of New Jersey, or to the extent permitted by law, in
such Federal court. The Pledgor hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Pledgor also irrevocably
consents to the service of any and all process in any such action or proceeding
arising out of or in connection with this Agreement by the mailing of copies of
such process to the Pledgor at the address and in the manner specified in
Section 16 hereof. The
17
<PAGE>
Pledgor agrees that a final and non-appealable judgment (or a judgment whose
time to appeal has expired) in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. THE PLEDGOR AND SECURED PARTY HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) IN
ANY COURT ARISING ON, OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY
AMENDMENT OR SUPPLEMENT HERETO OR THERETO OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
18. Pledge and Assignment Absolute. All rights of the Secured
------------------------------
Party, the pledge and assignment hereunder and all obligations of the Pledgor
hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, any other document or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations or any
other amendment or waiver of or any consent to any departure from
the Credit Agreement;
(iii) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to
departure from this Agreement or any other Collateral Document; or
(iv) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Pledgor.
19. Indemnity and Expenses. (a) The Pledgor agrees to
----------------------
indemnify the Secured Party from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from the Secured Party's gross negligence or willful
misconduct.
(b) The Pledgor will upon demand pay to the Secured Party the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and disbursements of its counsel and of any experts and agents,
which the Secured Party may incur in connection with (i) the administration of
this Agreement, (ii) the custody, preservation, or use 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.
18
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
GUEST SUPPLY, INC.
[corporate seal]
By:
------------------------
Name:
Title:
19
<PAGE>
CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF __________ )
: ss.:
COUNTY OF _________ )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 31st day of October 1995, personally appeared Paul Xenis to
me known personally, and who, being by me duly sworn, deposes and says that he
is the Vice President, Finance of Guest Supply, Inc. and that the seal affixed
to the foregoing instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said Paul Xenis acknowledged said
instrument to be the free act and deed of said corporation.
------------------------------
Notary Public
<PAGE>
Schedule A
----------
Jurisdictions for filing UCC-1's (Section 4(b))
-----------------------------------------------
Secretary of State, New Jersey
County Recording Office, F4 County, New Jersey
<PAGE>
Schedule B
----------
a) Location of Pledgor's books and records concerning Accounts:
b) Location of Pledgor's chief executive office:
c) Location of Pledgor's other places of business:
F2
F3
d) List of Tradenames.
<PAGE>
Schedule C
----------
Location(s) of the Pledgor's Inventory:
F3
Locations of Equipment:
F3
<PAGE>
Schedule D
----------
Trademarks, Patents, Copyrights, License Agreements:
<PAGE>
Exhibit G
October 31, 1995
PNC Bank, National Association, as Agent
P.O. Box 1032
Moorestown, New Jersey 08057
Re: Revolving Credit and Term Loan Agreement dated October 31,
1995 among Guest Supply, Inc. ("GSI"), Guest Packaging, Inc.
("GPI") and Breckenridge-Remy Co. ("BR"; GSI, GPI and BR
hereinafter collectively referred to as the "Company"), PNC
Bank, National Association, First Fidelity Bank, N.A., and
PNC Bank, National Association, as Agent (the "Agent") (the
"Credit Agreement")
-----------------------------------------------------------
Dear Sirs:
We have acted as counsel for GSI, GPI and BR in connection with the
execution and delivery of the Credit Agreement and each of the Loan Documents.
Terms used herein which are defined in the Credit Agreement shall
have the meanings set forth therein, unless otherwise defined herein.
This opinion is delivered to you pursuant to subsection 4.1(c) of
the Credit Agreement.
In connection with this opinion, we have examined (i) executed
copies or originals of the Loan Documents to which GSI, GPI and/or BR is a
party and (ii) executed originals of financing
<PAGE>
PNC Bank, National Association, as Agent
October 31, 1995
Page 2
statements (the "Financing Statements") under the Uniform Commercial Code of
the State of New Jersey (the "UCC") naming GSI, GPI or BR, as the case may be,
as debtor and the Agent as secured party, which are to be filed in the filing
offices in the State of New Jersey listed on Schedule I hereto; and such
corporate documents and records of the Company and such other agreements,
records, certificates of public officials and such other documents as we have
deemed necessary for the purposes of this opinion. In stating our opinion, we
have assumed the genuineness of all signatures of, and authority of Persons
executing the Loan Documents on behalf of the signatories thereto other than
the Company, the authenticity of documents submitted to us as originals and the
conformity to authentic originals of documents submitted to us as certified,
conformed or photostatic copies. As to questions of fact material to this
opinion, we have relied, with your permission and without independent
investigation, upon the certificates of the Secretary of State of the State of
New Jersey and the State of Delaware, as applicable, with respect to the
continued corporate existence and good standing of each of GSI, GPI and BR and
other certificates or other comparable documents of officers and
representatives of each of GSI, GPI and BR and of public officials and upon the
representations and warranties of each of GSI, GPI and BR contained in the Loan
Documents.
In rendering this opinion, we advise you that we are members of the
bar of the State of New York and we do not hold ourselves out as experts in nor
do we opine or purport to opine on any laws other than the laws of the State of
New York, the General Corporation Law of the State of Delaware and the Federal
laws of the United States. To the extent the laws of the State of New Jersey
do or would apply (except with respect to the due organization of GSI and GPI),
we have relied solely, with your permission and without independent
investigation, subject to all of the terms and limitations therein contained,
upon all matters set forth in the opinion of Jamieson, Moore, Peskin & Spicer
(the "Opinion") attached as Schedule II hereto.
Based upon the foregoing, and subject to the qualifications
contained herein and in the Opinion, we are of the opinion that:
1. GSI (a) is a duly organized and validly existing New Jersey
corporation, (b) has the corporate power and authority to own, lease and
operate its assets and to conduct the business in which it is currently
engaged, and (c) is duly qualified as a foreign corporation and is in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of
<PAGE>
PNC Bank, National Association, as Agent
October 31, 1995
Page 3
property or the conduct of its business requires such qualification except
where the failure to so qualify or be in good standing therewith would not have
a Material Adverse Effect. GPI (a) is a duly organized and validly existing
New Jersey corporation, (b) has the corporate power and authority to own, lease
and operate its assets and to conduct the business in which it is currently
engaged, and (c) is duly qualified as a foreign corporation and is in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification except where the failure to so qualify or be in good standing
therewith would not have a Material Adverse Effect. BR (a) is a duly organized
and validly existing Delaware corporation, (b) has the corporate power and
authority to own, lease and operate its assets and to conduct the business in
which it is currently engaged, and (c) is duly qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business
requires such qualification except where the failure to so qualify or be in
good standing therewith would not have a Material Adverse Effect.
2. Each of GSI, GPI and BR has all requisite corporate power and
authority to enter into and perform each of the Loan Documents to which each of
them is, respectively, a party.
3. The execution, delivery and performance by GSI, GPI or BR, as
the case may be, of each Loan Document to which each of them is, respectively,
a party, the borrowings under the Credit Agreement and the proposed use of the
proceeds, and the creation by GSI, GPI or BR, as the case may be, of all Liens
provided for in the Loan Documents (a) have been duly authorized by all
necessary action, (b) do not breach or contravene (i) any Requirement of Law or
Contractual Obligation known to us applicable to any of them or any of their
respective assets, or (ii) to the best of our knowledge any order, writ,
judgment, decree or award binding on or affecting any of them, and (c) do not
result in or require the creation of any Lien (other than pursuant to the Loan
Documents) upon or with respect to any of their respective assets.
4. Each Loan Document to which GSI, GPI or BR is a party has
been duly executed and delivered by GSI, GPI or BR, as the case may be.
5. Each Loan Document to which GSI, GPI or BR, as the case may
be, is a party is the legal, valid and binding
<PAGE>
PNC Bank, National Association, as Agent
October 31, 1995
Page 4
obligation of GSI, GPI or BR, as the case may be, enforceable against GSI, GPI
or BR, as the case may be, in accordance with its terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity (whether
enforcement is sought by proceedings in equity or at law) and the qualification
that certain provisions of the Loan Documents may be unenforceable in whole or
in part, but the inclusion of such provisions does not affect the validity of
each of the Loan Documents as a whole and each such document contains adequate
provisions for the practical realization of the rights and benefits afforded
thereby.
Our opinion above as to enforceability is also subject to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law). Such principles of
equity are of general application, and in applying such principles a court,
among other things, might not allow a creditor to accelerate the maturity of a
debt, or to realize upon any security for the payment of such debt, upon the
occurrence of a default deemed immaterial, or might decline to order any of
GSI, GPI and BR to perform covenants. Further, pursuant to such equitable
principles, sections of the Loan Documents providing that any liability of any
of GSI, GPI and BR or grant of a Lien thereunder shall not be affected by
changes in or amendments to the Loan Documents might be enforceable only to the
extent that such changes or amendments were not so material as to constitute a
new contract among the parties.
In addition, the foregoing opinion as to enforceability is subject
to the following further qualifications that:
(a) No opinion is expressed herein with respect to any provisions
in the Loan Documents authorizing the exercise of "self-help" remedies,
to any provisions therein constituting a waiver of statutory rights
(including, but not limited to, waivers of redemption rights, rights to
contest the appointment of a receiver, and rights to notice and a
hearing) by any of GSI, GPI and BR or to any provisions therein
exculpating any person or entity from liability for negligence or other
misconduct.
(b) No opinion is expressed herein as to the priority of the
Liens effected by any of the Security Documents, or as to title to the
personal, real or other property covered thereby.
<PAGE>
PNC Bank, National Association, as Agent
October 31, 1995
Page 5
(c) No opinion is expressed herein as to the enforceability of
the Loan Document provisions for delinquency, default and premium charges
to the extent any such charges may constitute a penalty.
6. The Company is not a "investment company" or a company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as amended.
7. No authorization, consent or approval, or any other action by
or notice to or filing with, any court or other Governmental Authority is or
will be required for (i) the due execution, delivery and performance by GSI,
GPI or BR of any Loan Documents, (ii) the grant of Liens contemplated by the
Loan Documents, or (iii) the exercise by the Agent of its rights or remedies
under the Loan Documents except for the filing of the Financing Statements
referred to in paragraph 8 below and subject to the exceptions contained
therein.
8. Each Security Agreement creates a valid security interest in
favor of the Agent, for the benefit of the Lenders, in the collateral covered
thereby, to the extent that the UCC is applicable thereto, as security for the
payment of the obligations to be secured by each such Loan Document. The
Financing Statements are in appropriate form for filing and when properly filed
in the filing offices listed on Schedule I hereto will have been duly filed in
the State of New Jersey pursuant to the UCC resulting in the perfection of such
security interests in such of the collateral as to which a security interest
may only be perfected by filing financing statements except as follows:
(a) in the case of instruments (as such term is defined in
Article 9 of the UCC) not constituting part of chattel paper (as such
term is defined in Article 9 of the UCC), the security interests of the
Agent therein cannot be perfected by the filing of the Financing
Statements but will be perfected if possession thereof is obtained and
maintained in accordance with the provisions of Article 9 of the UCC;
(b) in the case of motor vehicles for which certificates of title
have been issued and for which the exclusive manner of perfecting a
security interest is by noting the Agent's security interest on the
certificate of title in accordance with state statutes, the Agent's
security interest therein cannot be perfected by the filing of the
Financing Statements but will be perfected if the Agent's security
interest is so noted;
<PAGE>
PNC Bank, National Association, as Agent
October 31, 1995
Page 6
(c) in the case of non-identifiable cash proceeds, continuation
of perfection of the Agent's security interest therein is limited to the
extent set forth in section 9-306 of the UCC;
(d) in the case of all collateral covered by the Loan Documents,
Article 9 of the UCC requires the filing of continuation statements
within the period of six months prior to the expiration of five years
from the date of the original filings, in order to maintain the
effectiveness of such filings;
(e) in the case of property which becomes collateral covered by
the Loan Documents after the date hereof, section 552 of the Federal
Bankruptcy Code limits the extent to which property acquired by a debtor
after the commencement of a case under the Federal Bankruptcy Code may be
subject to a security interest arising from a security agreement entered
into by the debtor before the commencement of such case;
(f) in the case of any fixture filings, the security interests of
the Agent in the fixtures are subject to the rights and claims of any
encumbrancer or owner of any real estate described therein, to the extent
provided in section 9-313 of the UCC and to the extent not waived; and
(g) in the case of registered trademarks, tradenames, letters
patent, copyrights and similar general intangibles, perfection of a
security interest therein must be made by appropriate filing in the
United States Patent and Trademark Offices.
The foregoing opinion in paragraph 8 is subject to the additional
qualifications that we express no opinion herein as to:
(i) any of GSI's, GPI's and BR's title to any collateral under
the Loan Documents or priority of the liens created by the Security
Documents;
(ii) the perfection of a security interest in any collateral
under the Loan Documents (other than accounts, general intangibles and
mobile goods governed by section 9-103(2) of the UCC) located or situated
outside of any jurisdiction or geographic area for which effective
Financing Statement filings have been or will be made; and
<PAGE>
PNC Bank, National Association, as Agent
October 31, 1995
Page 7
(iii) the perfection of a security interest in any collateral
under the Loan Documents that is not personal property (as such term is
used in the UCC).
We call to your attention that the perfection of the above security interests
will be terminated (i) as to any collateral under the Loan Documents acquired
by any of GSI, GPI and BR more than four months after such person so changes
its name, identity or corporate structure as to make the Financing Statements
seriously misleading, unless new appropriate financing statements indicating
the new name, identity or corporate structure of such person are properly filed
before the expiration of such four months and (ii) as to any collateral under
the Loan Documents consisting of accounts receivables, four months after any of
GSI, GPI and BR changes its chief executive office to a new jurisdiction
outside the state where such chief executive office is presently located (or,
if earlier, when perfection under the laws of such state would have ceased as
set forth in subparagraph (d) above) unless such security interests are
perfected in such new jurisdiction before that termination.
We undertake no responsibility to advise you of any changes in the
law or the facts after the date hereof that would alter the scope or substance
of the opinion expressed herein.
The opinion rendered herein is being furnished to you solely in
connection with the transactions referred to herein, and is solely for the
benefit of the Agent and the Lenders. Accordingly, without our prior written
consent, this letter may not be quoted in whole or in part or otherwise
referred to in any report or document or otherwise circulated or referred to in
connection with any transaction other than those expressed herein.
Very truly yours,
<PAGE>
SCHEDULE I
----------
Secretary of State of New Jersey
Middlesex County, New Jersey
Union County, New Jersey
<PAGE>
Schedule II
October 31, 1995
Haythe & Curley
237 Park Avenue
New York, New York 10017-3142
RE: PNC Bank, National Association and First Fidelity Bank, N.A.
(collectively, the "Banks") Loan to Guest Supply, Inc., Guest
Packaging, Inc., and Breckenridge-Remy Co.
Ladies and Gentlemen:
We have acted as special counsel in the State of New Jersey (the
"State") to Guest Supply, Inc., a New Jersey corporation ("GSI"), Guest
Packaging, Inc., a New Jersey corporation ("GPI"), and Breckenridge-Remy Co., a
Delaware corporation ("BRC") (each a "Company" and collectively the
"Companies"), solely in connection with the New Jersey legal issues regarding
the transactions contemplated by the following documents and instruments:
1. The Revolving Credit and Term Loan Agreement of even date
herewith (the "Credit Agreement"; unless otherwise defined herein, capitalized
terms used herein have the meanings assigned to them in the Credit Agreement),
among the Companies and the Banks; and
2. The three Security Agreements of even date herewith
(collectively, the "Security Agreements") by and between each of the Companies
and Banks; and
3. The form of Revolving Credit Note (the "Credit Note") by and
between the Companies and Banks; and
<PAGE>
Haythe & Curley
October 31, 1995
Page 2
4. The form of Term Note (the "Term Note") by and between the
Companies and Banks: and
5. The form of Existing Loan Note (the "Existing Loan Note") by
and between the Companies and Banks; and
6. The form of Existing New Term Loan Note (the "Existing New
Term Loan Note") by and between the Companies and Banks; and
7. UCC-1 financing statements relating to the Security Agreement
(collectively, the "Financing Statements").
There has been furnished to us for review the final forms of (i)
the Credit Agreement, (ii) the Security Agreements, (iii) the Revolving Credit
Note, (iv) the Term Note, (v) the form of Existing Loan Note, (vi) the form of
Existing New Term Loan Note, and (vii) the Financing Statements (collectively,
the "Loan Documents").
In rendering the opinions hereinafter set forth, we have assumed,
without further investigation or inquiry,:
(a) that, based solely upon copies of the certificate of good
standing dated October 10, 1995, issued by the New Jersey Secretary of State
and provided to us for review, GSI is incorporated and in good standing under
the laws of New Jersey, being all the jurisdictions where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and that
(i) based solely upon copies of the certificate, dated
October 11, 1995, issued by the California Secretary of State and provided to
us for review, GSI is authorized to transact business as a foreign corporation
under the laws of California and
(b) that, based solely upon copies of the certificate of good
standing dated October 10, 1995, issued by the New Jersey Secretary of State
and provided to us for review, GPI is incorporated and in good standing under
the laws of New Jersey, being all the jurisdictions where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and
(c) that, based solely upon copies of the certificate of good
standing dated October 10, 1995, issued by the Delaware
<PAGE>
Haythe & Curley
October 31, 1995
Page 3
Secretary of State and provided to us for review, BRC is incorporated and in
good standing under the laws of Delaware, and
(d) that
(i) based solely upon copies of the certificate of
existence, dated October 11, 1995, issued by the Georgia Secretary of State and
provided to us for review, BRC is in good standing as a foreign corporation
authorized to transact business under the laws of Georgia;
(ii) based solely upon copies of the certification, dated
October 10, 1995, issued by the Director of the Michigan Department of Commerce
Corporation & Securities Bureau and provided to us for review, BRC is in good
standing as a foreign corporation authorized to transact business under the
laws of Michigan; and
(iii) based solely upon copies of a certificate of
authorization, dated October 10, 1995, from the Indiana Secretary of State and
provided to us for review, BRC is in good standing as a foreign corporation
authorized to transact business under the laws of Indiana: and
(iv) based solely upon copies of the certificate, dated
October 10, 1995, issued by the Texas Secretary of State and provided to us for
review, BRC is in good standing as a foreign corporation authorized to transact
business under the laws of Texas; and
(v) based solely upon copies of the certificate, dated
October 10, 1995, issued by the Florida Secretary of State and provided to us
for review, BRC is in good standing as a foreign corporation authorized to
transact business under the laws of Florida; and
(vi) based solely upon copies of the certificate, dated
October 10, 1995, issued by the California Secretary of State and provided to
us for review, BRC is authorized to transact business as a foreign corporation
under the laws of California; and
(vii) based solely upon copies of the certificate, dated
October 11, 1995, issued by the Ohio Secretary of State and provided to us for
review, BRC is in good standing as a foreign corporation authorized to transact
business under the laws of Ohio: and
<PAGE>
Haythe & Curley
October 31, 1995
Page 4
further, that those jurisdictions are all the jurisdictions where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except that, according to representatives of BRC,
BRC is not in good standing in the states of Illinois and Maryland, but has
filed the appropriate forms to restore its good standing in such jurisdictions.
(e) that the Companies own and possess all legal, equitable, and
beneficial title to the Collateral (as defined in the Security Agreement); and
(f) the genuineness of all signatures, the authenticity of all
documents tendered to us as originals and the conformity to original documents
of all documents submitted to us as copies.
In rendering the opinion set forth herein, we have, with your
consent, relied only upon an examination of the foregoing Loan Documents and
have made no independent verification or investigation of the factual matters
set forth in such Loan Documents. We have relied, with your permission and
without independent investigation, upon the certificates referred to above with
respect to the corporate existence and good standing of each of the Companies
and other certificates or other comparable documents of officers and
representatives of each of the Companies and of public officials and we have
relied upon the representations and warranties of each of the Companies
contained in the Loan Documents. Whenever our opinion refers to the existence
or absence of facts based on our knowledge or awareness, it is intended to
signify that during our representation of the Companies, no information has
come to our attention that would give us actual knowledge of the existence or
absence of such facts. No inference as to our knowledge should be drawn from
our representation of the Companies, which representation has generally been
limited to this particular transaction and the rendering of this opinion.
In rendering this opinion, we have further assumed that each of the
representationS made by the officers, agents and employees of the Banks in the
Loan Documents are true and we have relied upon those representations in
rendering this opinion; that the Banks have been duly authorized to enter into
this transaction by their respective Board of Directors; and that the persons
acting in the behalf of the Banks are duly authorized to bind the Banks to this
transaction.
<PAGE>
Haythe & Curley
October 31, 1995
Page 5
The opinions hereinafter expressed are subject to the following
qualifications and limitations imposed:
(a) by laws in the State of New Jersey relating to appointment of
receivers, powers and methods of sale, waivers of defenses and rights of
redemption, and
(b) by the powers of the Federal Deposit Insurance Corporation
(the "FDIC") to void contracts-and commitments to lend, and disapprove oral
agreements following seizure of a banking institution, and
(c) by general principles of law and equity upon specific
enforceability of any of the remedies, covenants, or other provisions of the
Loan Documents and upon the availability of injunctive relief or other
equitable remedies, and the application of principles of equity (regardless of
whether enforcement is considered in proceedings in law or in equity) in regard
to certain covenants and provisions of agreements which may prohibit the
exercise of rights and remedies without due process, where self-help or where
(i) the breach of such covenants or provisions imposes
restrictions or burdens upon the Companies, including the acceleration of
indebtedness due under debt instruments, and it cannot be demonstrated that the
enforcement of such restrictions or burdens is reasonably necessary for the
protection of the Bank; or
(ii) the Bank's enforcement of such covenants or provisions
under the circumstances, or in the manner allowed under the Loan Documents,
would violate the Bank's implied covenants of good faith and fair dealing, or
would be commercially unreasonable or unconscionable.
The enforceability of the Loan Documents is also subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity), except to the extent that rights to indemnification thereunder may be
limited by federal or state securities laws or public policy relating thereto,
and subject to the qualification that we express no opinion to the effect of
the Loan Documents under the laws of any jurisdiction other than the
<PAGE>
Haythe & Curley
October 31, 1995
Page 6
State of New Jersey, including laws which limit the rates of interest legally
chargeable or collectable.
Based on the foregoing, and subject to the qualifications stated
herein, it is our opinion that:
1. Each of the Loan Documents has been duly and validly executed
and delivered by each of the Companies, to the extent a party thereto. Each
Loan Document constitutes the legal, valid and binding obligation of each such
Company, enforceable against it in accordance with its respective terms, except
for the qualification that certain provisions of the Loan Documents may be
unenforceable in whole or in part, but the inclusion of such provisions does
not affect the validity of each of the Loan Documents as a whole and each such
document contains adequate provisions for the practical realization of the
rights and benefits afforded thereby.
In addition,
(a) No opinion is expressed herein with respect to any
provisions in the Loan Documents authorizing the exercise of "self-help"
remedies, to any provisions therein constituting a waiver of statutory rights
(including, but not limited to, waivers of redemption rights, rights to contest
the appointment of a receiver, and rights to notice and a hearing) by any of
the Companies, or to any provisions therein exculpating any person or entity
from liability for negligence or other misconduct.
(b) No opinion is expressed herein as to the priority of
the Liens provided by any of the Loan Documents, or as to title to the
personal, real or other property covered thereby .
(c) No opinion is expressed herein as to the
enforceability of the Loan Document provisions for delinquency, default and
premium charges to the extent any such charges may constitute a penalty.
2. The execution, delivery and performance of the Loan Documents
by the Companies, as applicable, and the consummation of all transactions
required thereby have been duly authorized by all necessary action, and do not
(i) breach or contravene any provision of law, rule, regulation or order of any
court or New Jersey agency of government, or any provision of any indenture,
agreement or other instrument to which the Companies are a party or by which
any Company is bound, known to us; (ii)
<PAGE>
Haythe & Curley
October 31, 1995
Page 7
result in the creation or imposition of any lien other than the liens created
thereby; or (iii) require any authorization, consent, approval, license,
exemption of or filing or registration with any court, New Jersey governmental
authority, or other third party known to us.
3. Each Security Agreement creates a valid security interest in
favor of the Banks in the Collateral covered thereby, to the extent that the
Uniform Commercial Code as adopted in the State of New Jersey (the "UCC") is
applicable thereto, as security for the payment of the obligations to be
secured by the Agreements. The Financing Statements are in appropriate form for
filing and, when properly filed in the Office of the New Jersey Secretary of
State and in the respective offices of the County Clerk, will have been duly
filed in the State of New Jersey pursuant to the UCC, resulting in the
perfection of such security interests in such collateral as to which a security
interest may only be perfected by filing financing statements, except as
follows:
(a) in the case of instruments not constituting part of chattel
paper (both as defined in Article 9 of the UCC), the security interests of the
Banks therein cannot be perfected by the filing of the Financing Statements,
but will be perfected if possession thereof is obtained and maintained in
accordance with the provisions of Article 9 of the UCC;
(b) in the case of motor vehicles for which certificates of title
have been issued and for which the exclusive manner of perfecting a security
interest is by noting the Banks' security interest on the certificate of title
in accordance with state statutes, the Banks' security interest therein cannot
be perfected by the filing of the Financing Statements but will be perfected if
the Bank's security interest is so noted on the certificate of title;
(c) in the case of non-identifiable cash proceeds, continuation
of perfection of the Bank's security interest therein is limited to the extent
set forth in Article 9 of the UCC;
(d) in the case of property which becomes collateral covered by
the Loan Documents after the date hereof, the Federal Bankruptcy Code limits
the extent to which property acquired by a debtor after the commencement of a
case under the Federal Bankruptcy Code may be subject to a security interest
arising
<PAGE>
Haythe & Curley
October 31, 1995
Page 8
from a security agreement entered into by the debtor before the commencement of
such case;
(e) in the case of any fixture filings, the security interests of
the Bank in the fixtures are subject to the rights and claims of any
encumbrancer or owner of any real estate described therein, to the extent
provided in Section 9-313 of the UCC and to the extent not waived; and
(f) in the case of registered trademarks, tradenames, letters
patent, copyrights and similar general intangibles, perfection of a security
interest therein must be made by appropriate filing in the United States Patent
and Trademark Office.
The foregoing opinion is subject to the additional qualification
that we express no opinion herein as to:
(i) any of the Companies' title to any collateral under the
Loan Documents or priority of the liens created by the Loan Documents;
(ii) the perfection of a security interest in any collateral
under the Loan Documents (other than accounts, general intangibles and mobile
goods governed by Article 9 of the UCC) located or situated outside of any
jurisdiction or geographic areas for which effective Financing Statement
filings have or will be made; and
(iii) the perfection of a security interest in any collateral
under the Loan Documents that is not personal property (as such term is used in
the UCC).
By rendering this opinion, we are under no obligation to advise
Bank: of any changes, revisions or updates in the existing law; of the
necessity to file such continuation statements as may be required by law; or to
notify Bank of the discontinuance or termination of any such Financing
Statements.
4. GSI (a) is a duly organized and validly existing New Jersey
corporation and (b) has the corporate power and authority to own, lease and
operate its assets and to conduct the business in which it is currentlY
engaged.
5. GPI (a) is a duly organized and validly existing New Jersey
corporation and (b) has the corporate power and
<PAGE>
Haythe & Curley
October 31, 1995
Page 9
authority to own, lease and operate its assets and to conduct the business in
which it is currently engaged.
6. BRC (a) is a duly organized and validly existing Delaware
corporation, (b) has the corporate power and authority to own, lease and
operate its assets and to conduct the business in which it is currently
engaged, and (c) is duly qualified as a foreign corporation and is in good
standing under the laws of the jurisdictions described in Paragraph (d), above,
being all the jurisdictions where its ownership, lease or operation of property
or the conduct of its business requires such qualification, except that,
according to representatives of BRC, the Company is not in good standing as a
foreign corporation in the states of Illinois and Maryland, but is in the
process of restoring its good standing.
7. Each of the Companies has all requisite corporate power and
authority to enter into and perform each of the Loan Documents to which each of
them is, respectively, a party.
8. The Companies are not an "investment company" or a company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as amended .
9. No authorization, consent or approval, or any other action by
or notice to or filing with, any court or other Governmental Authority is or
will be required for (i) the due execution, delivery and performance by the
Companies of any Loan Document, or (ii) the grant of the Liens contemplated by
the Loan Documents, or (iii) the exercise by the Bank of its rights or remedies
under the Loan Documents, except for the filing of the Financing Statements
referred to herein and subject to the exceptions contained therein.
The opinions herein are limited to the laws of the State of New
Jersey in effect as of the date hereof. We have no obligation to update this
opinion letter for changes in the law occurring after the date of this opinion
letter. We express no opinion as to the effect of the laws of any other
jurisdiction on the matters covered by this opinion.
This opinion is being rendered, at the request and direction of our
client, solely for the benefit of Haythe & Curley, PNC Bank, N.A. and First
Fidelity Bank, N.A., in connection with the transaction described above. This
opinion may not be used or relied upon by any other person and may not be
<PAGE>
Haythe & Curley
October 31, 1995
Page 10
disclosed, quoted, filed with a governmental agency or otherwise referred to
without our prior written consent.
Very truly yours,
JAMIESON, MOORE, PESKIN & SPICER
<PAGE>
EXHIBIT H
EXISTING LOAN NOTE
$3,333,340.00 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and
BRECKENRIDGE-REMY CO., a Delaware corporation (collectively, the "Borrower"),
hereby jointly and severally, unconditionally promise to pay to the order of
PNC BANK, NATIONAL ASSOCIATION (the "Bank") at the Payment Office, in lawful
money of the United States of America and in immediately available funds, the
principal amount of THREE MILLION THREE HUNDRED THIRTY THREE THOUSAND THREE
HUNDRED FORTY AND 00/100 ($3,333,340.00) DOLLARS, in forty (40) installments of
$83,333.00 each payable on the first Business Day of each calendar month,
commencing on November 1, 1995, with a final principal payment in the then
outstanding principal amount of the Existing Loan payable on the Maturity Date.
The Borrower further agrees to pay interest on the unpaid principal amount
outstanding hereunder from time to time from and including the date hereof in
like money at such office at the rates and on the dates specified in the Credit
Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount of the Existing
Loan maintained pursuant to the Credit Agreement (defined below) and the date
and amount of each payment or prepayment of principal thereof which endorsement
shall constitute rebuttable presumptive evidence of the accuracy of the
information endorsed; provided, however, that the failure to make any
-------- -------
such endorsement shall not affect the obligations of the Borrower in respect of
the Existing Loan.
This Note is the Existing Loan Note referred to in the Revolving Credit
and Term Loan Agreement dated October 31, 1995 (as the same may hereafter be
amended, modified or supplemented from time to time, the "Credit Agreement")
among the Borrower, the Bank and First Fidelity Bank, N.A., as Lenders, and the
Bank, as Agent and is entitled to the benefits thereof, is secured as provided
therein and is subject to optional and mandatory prepayment as set forth
therein.
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement,
<PAGE>
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
This Note replaces that certain note dated January 26, 1994, 1994, in the
original principal amount of $5,000,000, issued by the Borrower and payable to
the order of Chemical Bank New Jersey, National Association (now PNC Bank,
National Association).
GUEST SUPPLY, INC.
BY: ____________________________
Name:
Title:
GUEST PACKAGING, INC.
BY: ____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
BY: ____________________________
Name:
Title:
<PAGE>
Schedule 1
To Existing Note dated October 31, 1995 issued by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co.,
as joint and several obligors to
PNC Bank, National Association
LOAN AND PAYMENTS OF LOAN
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Principal Notation
Date Loan Repaid Balance of Loans Made By
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT H
EXISTING NEW TERM LOAN NOTE
$4,166,664.00 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and
BRECKENRIDGE-REMY CO., a Delaware corporation (collectively, the "Borrower"),
hereby jointly and severally, unconditionally promise to pay to the order of
PNC BANK, National Association (the "Bank") at the Payment Office, in lawful
money of the United States of America and in immediately available funds, the
principal amount of FOUR MILLION ONE HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED
SIXTY-FOUR AND 00/100 ($4,166,664.00) DOLLARS, in forty (40) installments of
$104,167.00 each payable on the first Business Day of each calendar month,
commencing on November 1, 1995, with a final principal payment in the then
outstanding principal amount of the Existing Loan payable on the Maturity Date.
The Borrower further agrees to pay interest on the unpaid principal amount
outstanding hereunder from time to time from and including the date hereof in
like money at such office at the rates and on the dates specified in the Credit
Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount of the Existing
New Term Loan maintained pursuant to the Credit Agreement (defined below) and
the date and amount of each payment or prepayment of principal thereof which
endorsement shall constitute rebuttable presumptive evidence of the accuracy of
the information endorsed; provided, however, that the failure to make
-------- -------
any such endorsement shall not affect the obligations of the Borrower in
respect of the Existing Loan.
This Note is the Existing New Term Loan Note referred to in the Revolving
Credit and Term Loan Agreement dated October 31, 1995 (as the same may
hereafter be amended, modified or supplemented from time to time, the "Credit
Agreement") among the Borrower, the Bank and First Fidelity Bank, N.A., as
Lenders, and the Bank, as Agent and is entitled to the benefits thereof, is
secured as provided therein and is subject to optional and mandatory prepayment
as set forth therein.
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement,
<PAGE>
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
This Note replaces that certain note dated January 26, 1994, 1994, in the
original principal amount of $5,000,000, issued by the Borrower and payable to
the order of Chemical Bank New Jersey, National Association (now PNC Bank,
National Association).
GUEST SUPPLY, INC.
BY: ____________________________
Name:
Title:
GUEST PACKAGING, INC.
BY: ____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
BY: ____________________________
Name:
Title:
<PAGE>
Schedule 1
To Existing New Term Loan Note dated October 31, 1995
issued by Guest Supply, Inc., Guest Packaging, Inc.
and Breckenridge-Remy Co., as joint and several
obligors to PNC Bank, National Association
LOAN AND PAYMENTS OF LOAN
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Principal Notation
Date Loan Repaid Balance of Loans Made By
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit I
[Form of Standby Letter of Credit]
___________ __, 199_
IRREVOCABLE LETTER OF CREDIT
PNC Bank, National Association
______________________________
______________________________
IRREVOCABLE LETTER OF CREDIT NO. ______________
[Addressee Beneficiary]
Attention: ____________
Gentlemen:
We hereby establish, effective immediately, by order of and for the
account of [_____________][*] , our irrevocable standby Letter of Credit No.
_____________ ("Letter of Credit") in the aggregate amount of U.S.
_________________ and _____/100 Dollars (U.S. $_____________.__) (such amount
being herein called the "Stated Amount") in your favor.
You may demand payment under this Letter of Credit one time only
and such demand will be duly honored by us upon your presentation to us of your
certificate in the form of Annex A attached hereto marked "Drawn under PNC
Bank, National Association Irrevocable Letter of Credit No. _________________
dated __________ __, 19__" and purportedly signed by your duly authorized
officer, together with the original of this Letter of Credit and all
amendments, if any, thereto, at our office located at __________________,
Attention: ______________, on or before the earlier of (x) _________ __, 19__
and (y) the date you notify us in writing that the obligations covered by this
Letter of Credit have been terminated, paid or otherwise satisfied in full (the
earlier of such dates, the "Expiration Date"). The Stated Amount shall also be
irrevocably reduced in part upon your written notice to us that the obligations
covered by this Letter of Credit have been paid or otherwise satisfied in part
(such reduction being in the amount set forth in your notice).
- ----------
* Insert corporate name of account party.
<PAGE>
Your demand for payment under this Letter of Credit may be made by
you on or prior to the Expiration Date hereof at any time during our business
hours at our address set forth above on a Business Day. As used herein, the
term "Business Day" shall mean a day on which we are open for the purpose of
conducting a banking business at the above address.
If your demand for payment is presented to us by you on a Business
Day on or prior to the Expiration Date in accordance with the terms of this
Letter of Credit (i) after 10:00 a.m. but before 1:00 p.m. New Jersey time,
payment shall be made to you of the amount specified in your demand for payment
(which specified amount shall not exceed the Stated Amount) in immediately
available funds, not later than 10:00 a.m. New Jersey time on the next Business
Day, or (ii) after 1:00 p.m. New Jersey time on a Business Day but prior to our
close of business on that Business Day, payment shall be made to you of the
amount specified in your demand for payment (which specified amount shall not
exceed the Stated Amount) in immediately available funds, not later than 3:00
p.m. New Jersey time on the next Business Day.
If a demand for payment made by you hereunder does not, in any
instance, conform to the terms and conditions of this Letter of Credit, we
shall give you prompt notice that your demand for payment was not effected in
accordance with the terms and conditions of this Letter of Credit, stating the
reasons therefor, and that we will upon you instructions hold any documents at
your disposal or return the same to you. Upon your being notified by us that
your demand for payment was not effected in conformity with this Letter of
Credit, you may correct any such nonconforming demand for payment hereunder to
the extent that you are entitled to do so.
Only you may make a drawing under this Letter of Credit. Upon our
payment to you or to your account as you have demanded hereunder, we shall be
fully discharged of our obligation under this Letter of Credit with respect to
such demand for payment and we shall not thereafter be obligated to make any
further payment to you or any other person. By paying to you the amount
demanded in accordance herewith, we make no representation as to the
correctness of the amount demanded. This Letter of Credit may not be
transferred or assigned. This Letter of Credit shall be promptly surrendered
to us by you on the Expiration Date if no demand for payment has been made
hereunder.
This Letter of Credit sets forth in full our entire undertaking,
and such undertaking shall not in any way be modified, amended, amplified or
limited by reference to any other document, instrument or agreement referred to
herein or otherwise, except only the certificate referred to herein in the form
of Annex A hereto and the Uniform Customs referred to below, and-any such
reference shall not be deemed to incorporate herein
2
<PAGE>
by reference any document, instrument or agreement except for such certificate
and the Uniform Customs.
[This Letter of Credit is subject to the Uniform Customs and
Practices for Documentary Credits, 1993 Revision, International Chamber of
Commerce Publication No. 500, (the "Uniform Customs"), which is incorporated
herein by reference.] This Letter of Credit shall be deemed to be a contract
made under the laws of the State of New Jersey and shall [, as to matters not
governed by the Uniform Customs,] be governed by and construed in accordance
with the laws of said State.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By:___________________________
Name:
Title:
3
<PAGE>
CERTIFICATE FOR DRAWING
Annex A to PNC Bank, National Association
Irrevocable Letter of Credit No. ________
DRAWN UNDER
PNC BANK, NATIONAL ASSOCIATION
IRREVOCABLE LETTER OF CREDIT
NO. ________ DATED___________, 19__
PNC Bank, National Association
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Attention: _________________
The undersigned, [name] , [title] , a duly authorized
-------- ---------
officer acting on behalf of ___________________ (the "Beneficiary"), hereby
certifies to PNC Bank, National Association (the "Issuer"), with reference to
Irrevocable Letter of Credit No. _____________ (the "Letter of Credit") issued
by the Issuer in favor of the Beneficiary, as follows:
1. Payment to the Beneficiary under the Letter of Credit is
demanded in an amount equal to U.S. $
2. The amount requested hereby does not exceed the Stated Amount
under the Letter of Credit.
3. The Letter of Credit has not terminated or expired.
4. Payment of the amount demanded hereby should be made by [wire
transfer on the Federal Reserve wire system in immediately available
funds/certified or bank check] to account number _____________ located at
_____________. Said [wire transfer/check] shall be made payable to the order of
the Beneficiary.
IN WITNESS WHEREOF, the Beneficiary has executed and
delivered this certificate this ____ day of __________, 19__.
[Beneficiary]
By:_______________________
Name:
Title:
<PAGE>
Exhibit J
[Form of Documentary Letter of Credit]
___________ __, 19__
IRREVOCABLE DOCUMENTARY LETTER OF CREDIT
PNC Bank, National Association
LETTER OF CREDIT NO. ________
[Addressee Beneficiary]
Attention: ______________
Gentlemen:
We hereby issue this Documentary Letter of Credit No. __________
("Letter of Credit") at the request of and for the account of
[_______________][*], in the aggregate amount of U.S. _______________ and
_____/100 Dollars (U.S.$_____________.__), (the "Stated Amount") which is
available to you by your draft[s] (in the form of Annex A attached hereto) when
presented and accompanied by the original of this Documentary Letter of Credit
and the following documents:
Commercial Invoices: ___________________ Copies
Bills of Lading:
Insurance:
Other:
Covering:
- ---------
* Insert corporate name of account party.
<PAGE>
Shipment: From: To:
In Transit To:
Partial Shipment: ____ Allowed
____ Not Allowed
[The/All] draft[s] must be marked "Drawn under PNC Bank, National
Association Documentary Bank Letter of Credit No. ________ dated __________ __,
19__" and purportedly signed by your duly authorized officer. Such draft[s]
together with the required documentation must be presented to us at our office
located at ___________________________, Attention: _______________, on or
before the earlier of (x) _____________, 19__, and (y) the date you notify us
in writing that the obligations covered by this Letter of Credit have been
terminated, paid or otherwise satisfied in full (the earlier of such dates, the
"Expiration Date"). The Stated Amount shall also be irrevocably reduced in
part upon your written notice to us that the obligations covered by this
Documentary Letter of Credit have been paid or otherwise satisfied in part
(such reduction being in the amount set forth in your notice).
Your draft[s] for payment under this Documentary Letter of Credit
may be made by you on or prior to the Expiration Date hereof at any time during
our business hours at our aforesaid address on a Business Day. As used herein,
the term "Business Day" shall mean a day on which we are open for the purpose
of conducting a banking business at our above address.
If your draft is presented to us by you on a Business Day on-or
prior to the Expiration Date in accordance with the terms of this Documentary
Letter of Credit (i) after 10:00 a.m. but before 1:00 p.m. New Jersey time
payment shall be made to you of the amount specified in your draft (which
specified amount shall not exceed the Stated Amount) in immediately available
funds, not later than 10:00 a.m. New Jersey time on the next Business Day, or
(ii) after 1:00 p.m. New Jersey time but prior to our close of business on that
Business Day, payment shall be made to you of the amount specified in your
draft (which specified amount shall not exceed the Stated Amount) in
immediately available funds, not later than 3:00 p.m. New Jersey time on the
next Business Day.
If a draft made by you hereunder does not conform, in any instance,
to the terms and conditions of this Documentary, Letter of Credit, we shall
give you prompt notice that your demand for payment was not effected in
accordance with the terms and conditions of this Documentary Letter of Credit
and that we will upon your instructions hold any documents at your disposal or
return the same to you. Upon your being notified by us that
2
<PAGE>
your demand for payment was not effected in conformity with this Documentary
Letter of Credit, you may correct any such nonconforming demand for payment
hereunder to the extent that you are entitled to do so. You shall be assessed
a handling charge of $__________ for each set of documents presented to us for
payment under this Documentary Letter of Credit in which discrepancies are
noted by us after our examination thereof and it becomes necessary for us to
send documents to or otherwise communicate with [name of account party] for
approval of payment under this Documentary Letter of Credit. The handling
charge shall be deducted from any remittance made by us to you under this
Documentary Letter of Credit.
Only you may make a drawing under this Documentary Letter of
Credit. Upon our payment to you or to your account as you have demanded
hereunder, we shall be fully discharged of our obligation under this
Documentary Letter of Credit with respect to such draft. By paying to you the
amount demanded in accordance herewith, we make no representation as to the
correctness of the amount demanded. This Documentary Letter of Credit may not
be transferred or assigned. This Documentary Letter of Credit shall be
promptly surrendered to us by you on the Expiration Date if no demand for
payment has been made hereunder.
This Documentary Letter of Credit sets forth in full our entire
undertaking, and such undertaking shall not in any way be modified, amended,
amplified or limited by reference to any other document, instrument or
agreement referred to herein or otherwise, except only the draft referred to
herein in the form of Annex A hereto and the Uniform Customs referred to below,
and any such reference shall not be deemed to incorporate herein by reference
any document, instrument or agreement except for such draft and the Uniform
Customs.
[This Documentary Letter of Credit is subject to the Uniform
Customs and Practices for Documentary Credits, 1993 Revision, International
Chamber of Commerce Publication No. 500, (the "Uniform Customs") which is
incorporated herein by reference.] This Documentary Letter of Credit shall be
deemed to be a contract made under the laws of the State of New York and shall
[, as to matters not governed by the Uniform Customs,] be governed by and
construed in accordance with the laws of said State.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By:___________________________
Name:
Title:
3
<PAGE>
CERTIFICATE FOR DRAWING
Annex A to PNC Bank, National
Association Documentary
Letter of Credit No._________
DRAWN UNDER
PNC BANK, NATIONAL ASSOCIATION
DOCUMENTARY LETTER OF CREDIT
NO. ___________ DATED _________, 19 __.
PNC Bank, National Association
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Attention: ________________
The undersigned, [Name], [Title], a duly authorized officer acting
on behalf of ______________________ (the "Beneficiary"), hereby certifies to
PNC Bank, National Association (the "Issuer"), with reference to Documentary
Letter of Credit No. ___________________ (the "Letter of Credit") issued by the
Issuer in favor of the Beneficiary, as follows:
1. Payment to the Beneficiary under the Letter of Credit is
requested in an amount equal to U.S. $___________.
2. The amount requested hereby does not exceed the Stated Amount
under the Letter of Credit.
3. The Letter of Credit has not terminated or expired.
4. Payment of the amount demanded hereby should be made by [wire
transfer on the Federal Reserve wire system in immediately available
funds/certified or bank check] to account number ________ located at
_____________. Said [wire transfer/check] shall be made payable to the order
of the Beneficiary.
IN WITNESS WHEREOF, the Beneficiary has executed and delivered this
certificate this ____ day of ___________, 1995.
[Beneficiary]
By:_______________________
Name:
Title:
<PAGE>
Schedule I
Lender Facility Percentage Commitment
- ------ --------- ---------- ----------
PNC Revolving Credit .625 $13,750,000
FFB Revolving Credit .375 8.250.000
-----------
Total $22,000,000
Lender Facility Percentage Commitment
- ------ --------- ---------- ----------
PNC Term Loan .345 $ 3,749,996
FFB Term Loan .655 6.750.000
Total $10,499,996
Lender Facility Percentage Commitment
- ------ --------- ---------- ----------
PNC Existing Loan 100% $3,333,340
Lender Facility Percentage Commitment
- ------ --------- ---------- ----------
PNC Existing New Term Loan 100% $4,166,664
Total Amount/Percentage
- -----------------------
PNC: $25,000,000 / 62.5%
FFB: $15,000,000 / 37.5%
The Total Percentage of any Lender as of any date shall be equal to
a fraction (expressed as a decimal) the numerator of which shall be, in the
case of outstanding Loans, the outstanding principal amount of Loans and Letter
of Credit Outstandings held by such Lender and the denominator of which shall
be the aggregate outstanding principal amount of all Loans and Letter of Credit
Outstandings held by all Lenders. If no Loans are outstanding, the Total
Percentage of any Lender as of any date shall be equal to a fraction (expressed
as a decimal) the numerator of which shall be the aggregate principal amount of
Loans such Lender is committed to fund and the numerator of which shall the
aggregate principal amount of Loans all Lenders are committed to fund.
<PAGE>
Schedule II
REQUIRED CONSENTS
-----------------
None.
<PAGE>
Schedule III
LITIGATION
----------
1. Stern v. Guest Supply
Court: Superior Court, Law Division, Middlesex County, New Jersey
Filed: December 12, 1992
Case No.: MID-L12749-92
Car Accident
The Borrower is a defendant in suits relating to auto
accidents, all of which are being handled by the Borrowerns insurance
company.
2. Intercargo Insurance Co. v. Guest Supply, Inc.
Court: Superior Court, Law Division, Middlesex County, New Jersey
Filed: November 17, 1993
Case No.: MID-L11343-93
Suit for $2,900 claimed to be owed by Miraflores since 1987.
Settled April, 1994.
3. DiPasquale, Trustee for AAA Trucking Corp. v. The Childrens Place[*]
Court: U.S. District Court, Newark, New Jersey
Filed: July 8, 1991
Case No.: 2: 91-CV-2932
Dismissed with prejudice in May 1992
4. Olympia Holding Co., f/k/a P-I-E Nationwide v. Guest Supply Inc.
Court: U.S. Bankruptcy Court - Middle District of Florida,
Jacksonville Division
Filed: 4/9/92
Case No.: 90-4223-BCK-3P7
- ----------
* On January 22, 1992, DiPasquale, Trustee for AAA Trucking Corp. v. Guest
Supply, Inc. was consolidated into this action.
<PAGE>
Schedule IV
INTELLECTUAL PROPERTY[**]
---------------------
TRADEMARKS
----------
<TABLE>
<CAPTION>
Owner Trademark Registration Date Registration No.
- ------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C>
Guest Supply, Inc. MIRAFLORES July 14, 1987 1,447,045
Guest Supply, Inc. EVERGREEN December 29, 1992 1,742,633
Guest Supply, Inc. ALLIANCE CHEMICAL January 19, 1993 1,746,707
Guest Supply, Inc. GUEST SUPPLY October 13, 1992 1,723,157
Guest Supply, Inc. WHISPER MINT November 18, 1986 1,417,139
Guest Supply, Inc. INSTITUTE SWISS May 2, 1995 1,892,792
</TABLE>
SERVICE MARKS
-------------
<TABLE>
<CAPTION>
Owner Service Mark Registration Date Registration No.
- ------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C>
Guest Supply, Inc. GUEST SUPPLY
(in Script) November 5, 1985 1,369,530
Guest Supply, Inc. GUEST DESIGN
(in Script) October 29, 1985 1,368,272
</TABLE>
PATENTS
-------
<TABLE>
<CAPTION>
Owner Patent Date of Patent Patent No.
- ------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C>
Guest Supply, Inc. Bottle and cap June 27, 1989 301,838
Guest Supply, Inc. Bottle November 21, 1989 304,687
Guest Supply, Inc. Bottle November 21, 1989 304,688
Guest Supply, Inc. Bottle and cap March 12, 1991 315,299
Guest Supply, Inc. Bottle and cap September 3, 1991 319,585
Guest Supply, Inc. Bottle and cap March 10, 1992 324,496
Guest Supply, Inc. Bottle March 21, 1995 356,502
</TABLE>
- ----------
** None of the intellectual property owned by Guest Supply, Inc. or any of its
subsidiaries is licensed to any third party.
<PAGE>
2
COPYRIGHT
---------
<TABLE>
<CAPTION>
Design
Owner Description Date of Copyright Registration No.
- ------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C>
Guest Supply, Inc. * AmeriSuites 5/24/93 VA 570 224
Guest Supply, Inc. * Barcelo Hotels 09/08/93 VA 600 571
Guest Supply, Inc. Whispermint Mouthwash Label 11/20/90 VA 438 052
Guest Supply, Inc. 1.5 Chamomile PW Soap 11/20/90 VA 438 053
Guest Supply, Inc. Shower Cap Carton 11/20/90 VA 438 051
Guest Supply, Inc. 1.5 Facial Soap Carton 11/20/90 VA 438 049
Guest Supply, Inc. 2.5 Sandalwood Bath Sp Ctn 11/20/90 VA 438 048
Guest Supply, Inc. 1.5 Aloe Enriched Moisture Label 11/20/90 VA 438 054
Guest Supply, Inc. Mending Kit Carton 11/20/90 VA 438 050
Guest Supply, Inc. Floral 02/25/93 VA 548 279
Guest Supply, Inc. Flower - Leaf Design 06/22/92 VA 512 066
Guest Supply, Inc. Rose Design 11/26/91 VA 480 798
Guest Supply, Inc. * Costa Euro Lux Cruises 01/25/93 VA 548 280
Guest Supply, Inc. Floral 06/22/92 VA 512 073
Guest Supply, Inc. Match new Choice program 09/08/93 VA 600 566
Guest Supply, Inc. EBZ Coloring 01/21/92 VA 491 855
Guest Supply, Inc. Leaf Pattern 03/11/91 VA 457 442
Guest Supply, Inc. Bottles 07/30/90 VA 423 672
Guest Supply, Inc. Soap Carton (Mauve & Pink) 07/30/90 VA 423 669
Guest Supply, Inc. Soap Carton (Blue & Light Blue) 07/30/90 VA 423 667
Guest Supply, Inc. Soap Carton (Green & Ivory) 07/30/90 VA 423 668
Guest Supply, Inc. 3 oz. Carton (Mauve & Pink) 07/30/90 VA 423 666
Guest Supply, Inc. 3 oz. Carton (Blue & Light Blue) 07/30/90 VA 424 899
Guest Supply, Inc. 3 oz. Carton (Green & Ivory) 07/30/90 VA 423 665
Guest Supply, Inc. Shoe Mitt 07/30/90 VA 423 670
Guest Supply, Inc. Tissue Pleated Glycerine 07/30/90 VA 423 671
Guest Supply, Inc. Griffin 05/24/93 VA 570 223
Guest Supply, Inc. Marble - Feather Design 06/22/92 VA 512 067
Guest Supply, Inc. Leaf 10/15/92 VA 529 452
Guest Supply, Inc. Festive 01/06/94 VA 623 750
Guest Supply, Inc. Nautical Pattern 02/10/93 VA 554 216
Guest Supply, Inc. Leaf Design 06/22/92 VA 512 071
Guest Supply, Inc. Blue Swirl 05/23/91 VA 475 981
Guest Supply, Inc. Green 06/22/92 VA 512 072
Guest Supply, Inc. Basket & Flower Design 11/26/91 VA 430 796
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
Design
Owner Description Date of Copyright Registration No.
- ------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C>
Guest Supply, Inc. Floral & Leaf Dotted Design 01/13/92 VA 486 509
Guest Supply, Inc. Beach 11/20/90 VA 433 304
Guest Supply, Inc. Marble 11/19/92 VA 531 802
Guest Supply, Inc. Fish Design 01/13/92 VA 486 508
Guest Supply, Inc. Green (Photographs) 09/08/93 VA 600 570
Guest Supply, Inc. Marble - Granite 06/22/92 VA 512 065
Guest Supply, Inc. Watercolor 09/08/93 VA 600 569
Guest Supply, Inc. Abstract Column/Block-Dome 01/13/92 VA 486 507
Guest Supply, Inc. So West 06/22/92 VA 512 068
Guest Supply, Inc. Pink 11/26/91 VA 480 799
Guest Supply, Inc. * Sheraton Waikiki 06/22/92 VA 512 070
Guest Supply, Inc. Watercolor 06/22/92 VA 512 064
Guest Supply, Inc. * Stouffers Commercial 06/22/92 VA 512 607
Guest Supply, Inc. Floral Designs 11/26/91 VA 480 797
Guest Supply, Inc. * Hawthorn Suites 06/07/93 VA 613 317
Guest Supply, Inc. Photo on Map Background 06/07/93 VA 613 318
Guest Supply, Inc. * Homewood Suites 10/08/92 VA 527 401
Guest Supply, Inc. * Ilikai (New) 11/23/93 VA 610 591
Guest Supply, Inc. Latice Design 03/07/94 VA 627 755
Guest Supply, Inc. * Manhattan East Suites (New) 11/23/93 VA 610 592
Guest Supply, Inc. * Marriott Mountain Shadows 01/06/94 VA 623 751
Guest Supply, Inc. * Masters Inn 09/08/93 VA 600 568
Guest Supply, Inc. * Ocean Grand-Flowers 09/08/93 VA 600 567
</TABLE>
- ----------
* Design developed for hotel but not described
LICENSING AGREEMENTS
--------------------
1. Licensing Agreement dated as of January 1, 1993, by and between Guest
Supply, Inc. and Helene Curtis regarding Finesse shampoo.
2. Trademark Licensing Agreement dated June 16, 1995 by and between Guest
Supply, Inc. and Playtex Beauty Care, Inc. regarding Guest Supply, Inc.'s
use of the trademark "Jhirmack".
<PAGE>
Schedule V
SUBSIDIARIES OF GUEST SUPPLY, INC.
----------------------------------
1. Guest International, Ltd., an English corporation.
2. Guest Packaging, Inc., a New Jersey corporation.
3. Breckenridge-Remy Co., a Delaware corporation.
4. Guest International (Canada) Ltd., a Canadian corporation.
5. Guest International New Zealand Limited, a New Zealand corporation.
<PAGE>
Schedule VI
FILING AND RECORDING JURISDICTIONS
----------------------------------
GUEST SUPPLY, INC.
- ------------------
Secretary of State of New Jersey
Middlesex County, New Jersey
(720 US Highway One
North Brunswick, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(1280 Jersey Avenue
North Brunswick, NJ)
Secretary of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue
Rahway, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(5B Terminal Way
Avenel, NJ)
Fulton County, Georgia
Secretary of State of Illinois
Dupage County, Illinois
Secretary of State of California
Orange County, California
Secretary of State of Florida
Orange County, Florida
Secretary of State of Texas
Collin County, Texas
Secretary of State of Maryland
Howard County, Maryland
BRECKENRIDGE-REMY CO.
- ---------------------
Secretary of State of New Jersey
Middlesex County, New Jersey
(720 US Highway One
North Brunswick, NJ)
<PAGE>
2
Secretary of State of New Jersey
Middlesex County, New Jersey
(1280 Jersey Avenue,
North Brunswick, NJ)
Secretary of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue,
Rahway, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(5B Terminal Way
Avenel, NJ)
Fulton County, Georgia
Secretary of State of Illinois
Dupage County, Illinois
Secretary of State of California
Orange County, California
Secretary of State of Florida
Orange County, Florida
Secretary of State of Texas
Collin County, Texas
Secretary of State of Maryland
Howard County, Maryland
Secretary of State of Ohio
Franklin County, Ohio
Secretary of State of Ohio
Hamilton County, Ohio
Secretary of State of Ohio
Lorain County, Ohio
Secretary of State of Indiana
Marion County, Indiana
Secretary of State of Michigan
Wayne County, Michigan
<PAGE>
3
BRECKENRIDGE-REMY CO.
- ---------------------
D/B/A GUEST DISTRIBUTION, INC.
- ------------------------------
Secretary of State of New Jersey
Middlesex County, New Jersey
(720 US Highway One
North Brunswick, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(1280 Jersey Avenue,
North Brunswick, NJ)
Secretary of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue,
Rahway, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(5B Terminal Way
Avenel, NJ)
Fulton County, Georgia
Secretary of State of Illinois
Dupage County, Illinois
Secretary of State of California
Orange County, California
Secretary of State of Florida
Orange County, Florida
Secretary of State of Texas
Collin County, Texas
Secretary of State of Maryland
Howard County, Maryland
GUEST PACKAGING, INC.
- ---------------------
Secretary of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue
Rahway, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(5B Terminal Way
Avenel, NJ)
<PAGE>
Schedule VII
EMPLOYEE GRIEVANCES
-------------------
None.
<PAGE>
Schedule VIII
ERISA PLANS
-----------
Guest Supply, Inc. and Subsidiaries Hospitalization and Major Medical Plan
Guest Supply, Inc. and Subsidiaries Dental Plan
Guest Supply, Inc. and Subsidiaries Long Term Disability Plan
Guest Supply, Inc. and Subsidiaries Life Insurance and Accident Death and
Dismemberment Plan
Guest Supply, Inc. and Subsidiaries 401(k) Plan and Trust
Breckenridge-Remy Company 401(k) Plan[*]
- ----------
* Terminated 1/1/95 and funds transferred into Guest Supply, Inc. and
Subsidiaries 401(k) Plan and Trust.
<PAGE>
Schedule IX
PERMITTED LIENS AND UCC FILINGS - GUEST SUPPLY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
Breckenridge-Remy Co. CA GS Citicorp Dealer Finance #93037591 Forklift
dba Guest Supply ("GS") 2/22/93
Guest Supply, Inc. NJ GSI Dierckex Financial #1336454 Raymond Model, Pilot
("GSI") Services Corp. (Raymond 5/7/90 Battery, Battery
Leasing Corp.) Charger
GSI NJ GSI Raymond Handling #1358794 2 Raymond Models, 2
Technologies Inc. 9/4/90 Deka Batteries, 2
(Raymond Leasing Corp.) Hobart Chargers
GSI NJ GSI Raymond Handling #1387299 Raymond Model, Deka
Technologies Inc. 3/1/91 Battery, Hobart
(Raymond Leasing Corp.) Charger
GSI NJ GSI Sequa LCredit Corporation #1392108 Lift
4/1/91
GSI NJ GSI Wasco Funding Corp. #1463914 Certain Equipment
7/10/92
GSI NJ GSI Wasco Funding Corp. #1463914 Certain Equipment
1/13/93
(Amended)
GSI NJ GSI Wasco Funding Corp. (BLT #1463915 Certain Equipment
Leasing Corp) 7/10/92
GSI NJ GSI BLT Leasing Corp. #1463915 Certain Equipment
11/2/92
(Assign)
GSI NJ GSI Modern Handling #1473448 Forklift, Battery,
Equipment Charger
of N.J., Inc. (Citicorp
Dealer Finance)
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
GSI NJ GSI Sequa Credit Corporation #1392107 Lift and all
4/1/91 equipment, machinery,
inventory, accounts
receivable, goods,
furniture, fixtures,
property and assets
and proceeds thereof
Consignee: NJ GSI Consignor: The Proctor & #1252077 Goods pursuant to a
GSI Gamble Distributing 3/15/89 Consignment Agreement
Company
GSI NJ GSI Wasco Funding Corp. #1387676 Battery powered
3/5/91 Sweeper/Scrubber
GSI NJ GSI Wasco Funding Corp. #1387680 Certain Equipment
3/5/91
Consignee: NJ GSI Consignor: The Proctor & #1249746 Goods pursuant to a
GSI Gamble Distributing 3/7/89 Consignment Agreement
Company
Guest Packaging Inc. NJ GPI Polymerics, Incorporated #1469753 Machinery
("GPI") 8/19/92
GPI NJ GPI Modern Handling #1385124 Freelift, Curtis PMC
Equipment 2/20/91
of NJ, Inc. (Hyster
Credit Company)
Breckenridge-Remy Co. TX GDI Citicorp Dealer Finance #92-018072 Forklift Model
Div. Guest Distribution 1/29/92 FB 15MH-2
(Inc.) ("GDI")
GDI NJ GDI Dierckex Financial #1305938 Deka Battery, Hobart
Services Corp. (Raymond 11/29/89 Charger
Leasing Corp.)
GDI CA GDI Eaton Financial #90278873 Minolta Copier
Corporation 11/13/90
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
GDI CA GDI Citicorp Dealer Finance #93068848 Forklift
4/5/93
GDI Cobb GDI Crown Credit Company #917128 Deka Battery, Hobart
County, GA 8/9/91 Charger
GDI Cobb GDI Crown Credit Company #918176 Crown No. 305P42TT,
County, GA 9/13/91 Deka Battery, Hobart
Charger
GDI Cobb GDI Crown Credit Company #92855 Used 35RRTT GNB
County, GA 2/5/92 Battery, C&D Charger
GDI Cobb GDI Crown Credit Company #925109 Crown lift truck,
County, GA 6/29/92 Deka
Battery, Hobart
Charger
Breckenridge-Remy Co. CA BRC Citicorp Dealer Finance #93037591 Forklift
("BRC") 2/22/93
BRC CA BRC Citicorp Dealer Finance #93068848 Komatsu Forklift
4/5/93
BRC TX BRC Citicorp Dealer Finance #236098 Forklift
12/7/92
BRC IL BRC Caterpillar Financial #3059940 Caterpillar, Battery
Services Corporation 12/8/92 Charger
(Amendment to
#2987654)
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
BRC IL BRC Caterpillar Financial #2987654 Caterpillar, Battery
Services Corporation 5/20/92 Charger
BRC MI BRC Caterpillar Financial #C597986 Forklifts
Services Corporation 5/18/92
BRC MI BRC Caterpillar Financial #C662709 Forklifts
Services Corporation 12/4/92
Amendment to
#C597986
BRC OH BRC TEG Leasing, Inc. #03285E15 Forklift, Battery,
12/31/91 Charger
BRC FL BRC Florida Clarklift, Inc. #91-184259 Crown Stock Picker
8/26/91 Model
GDI Middlesex GDI Dierckex Financial #003515 Raymond, Deka
County, NJ Services Corp. (Raymond 11/20/89 Battery,
Leasing Corp.) (Continuation) Hobart Charger
GDI NJ GDI Citicorp Dealer Finance #1507682 Komatsu Forklift,
4/28/93 Charger
Lessee: NJ BRC Caterpillar Financial #1456878 Caterpillar, Charger,
BRC Services Corporation 5/29/92 Battery
BRC NJ BRC Caterpillar Financial #1456878 Caterpillar, Charger,
Services Corporation 12/15/92 Battery
(Amendment to
#1456878)
BRC OH BRC Citicorp Dealer Finance #AH0019933 Komatsu Forklift
1/28/92
BRC OH BRC Hillis Equipment Co., #AK53415 Truck, Batteries
Inc. 10/19/93
BRC OH BRC TEG Leasing, Inc. #AH0014843 Forklift, Battery,
1/3/92 Charger
BRC OH BRC Clarklift of Cleveland, #AE0066031 Forklift Truck
Inc. 4/29/91
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
GDI, BRC NJ GDI, Caterpillar Financial #1558969 Forklift
Breckenrige Services Corporation 3/11/94
- Remy
Co.
("BRC")
GDI NJ GDI, Caterpillar Financial #1611878 Forklift
BRC 1/4/95
GDI NJ GDI Citibank Dealer Finance #1605670 Forklift
11/30/94
GDI NJ GDI Citibank Dealer Finance #160571 Forklift
11/30/94
GDI NJ GDI Citibank Dealer Finance #1605673 Forklift
11/30/94
GDI NJ GDI Citibank Dealer Finance #1605675 Forklift
11/30/94
BRC NJ BRC Caterpillar Financial #1558993 Forklift
Services Corporation 3/11/94
BRC Marion BRC Commercial Bank, NJ, N.A. 001170 Forklift
County, IN 7/11/94
BRC IN BRC Commercial Bank, NJ #1894749 Forklift
2/10/94
BRC IN BRC TMCC #1975991 Forklift
3/29/95
BRC OH BRC Hills Equipment Co. #AK84077 Forklift
3/14/94
BRC FL BRC Florida Clarklift Inc. #94156506 Forklift
8/1/94
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
BRC FL BRC Florida Clarklift Inc. #94156507 Forklift
8/1/94
BRC FL BRC Florida Clarklift Inc. #94156509 Forklift
8/1/94
BRC FL BRC Florida Clarklift Inc. #94156495 Forklift
8/1/94
BRC FL BRC Florida Clarklift Inc. #94156498 Forklift
8/1/94
BRC FL BRC Florida Clarklift Inc. #94156499 Forklift
8/1/94
BRC FL BRC Florida Clarklift Inc. #95147585 Forklift
7/24/95
GDI MD GDI, Toyota Motor Credit Corp. #140688281 Forklift
BRC 3/9/94
BRC MI BRC Caterpillar Financial #474458 Forklift
Services Corp. 10/10/94
BRC Lorain BRC Gillis Equipment Co. #265420 Forklift
County, 9/14/94
Ohio
BRC Lorain BRC Gillis Equipment Co. #268050 Forklift
County, 10/18/93
Ohio
GDI TX GDI, CitiCorp Dealer Finance #94223242 Forklift
BRC 11/16/94
GDI TX GDI, CitiCorp Dealer Finance #9423243 Forklift
BRC 11/16/94
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
Breckenridge-Remy Co. TX Brecken CitiCorp Dealer Finance #92236098 Forklift
Division Guest ridge-Remy 12/7/92
Distribution Co.
Divisio n Guest
Distrib ution,
BRC
BRC TX BRC, CitiCorp Dealer Finance #94223242 Forklift
GDI 11/16/94
BRC TX BRC, CitiCorp Dealer Finance #94223243 Forklift
GDI 11/16/94
GDI IL GDI, Caterpillar Financial #003232392 Forklift
BRC Services Corp. 3/11/94
GDI IL GDI, Caterpillar Financial #003347104 Forklift
BRC Services Corp. 1/5/95
GDI CA GDI Eaton Financial Corp. #90278873 Forklift
11/13/90
GDI Cobb GDI Crown Credit Corp. #948786 Forklift
County, GA
BRC Cobb BRC Advance Leasing Corp. #946168 Freight Line Shipping
County, GA 7/11/94 System
BRC IL BRC Caterpillar Financial #003231357 Forklift
Services Corp. 2/11/94
BRC Howard BRC, Toyota Motors #14821 Forklift
County, MD GDI 3/10/94
BRC CA BRC Citicorp Dealer Finance 93088818 Forklift
04/03/93
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
BRC CA BRC Citicorp Dealer Finance 9434160512 Forklift
11/16/94
BRC CA BRC Citicorp Dealer Finance 9434180549 Forklift
11/16/94
GDI NJ GDI Chemical Bank New Jersey #1553272 *
NA 02/03/94
GDI NJ GDI Chemical Bank New Jersey #1553270 *
NA 02/03/94
BRC NJ BRC Chemical Bank New Jersey #1553272 *
NA 02/03/94
BRC NJ BRC Chemical Bank New Jersey #1553277 *
NA 02/03/94
BRC NJ BRC Chemical Bank New Jersey #1553270 *
NA #1553278
02/03/94
GSI NJ GSI Chemical Bank New Jersey #1553284 *
NA 02/03/94
GSI NJ GSI Chemical Bank New Jersey #1553287 *
NA 02/03/94
BRC CA BRC Chemical Bank New Jersey #93819, 93821 *
NA 02/08/94
GDI CA GDI Chemical Bank New Jersey #93819 *
NA 02/03/94
GSI CA GSI Chemical Bank New Jersey #93820 *
NA 02/08/94
GDI FL GDI Chemical Bank New Jersey #46974898 *
02/11/94
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
GSI FL GSI Chemical Bank New Jersey #46974895 *
02/11/94
BRC FL BRC Chemical Bank New Jersey #46974898 *
#46974901
02/11/94
BRC NJ BRC Chemical Bank #126 *
#139
02/04/94
GDI NJ GDI Chemical Bank #129 *
02/01/95
GSI NJ GSI Chemical Bank New Jersey #127 *
02/04/95
GPI NJ GPI Chemical Bank New Jersey #128 *
02/04/94
BRC MI BRC Chemical Bank New Jersey BS00280 *
02/04/94
GSI TX GSI Chemical Bank New Jersey #2398 *
02/11/94
BRC TX BRC Chemical Bank New Jersey #2397 *
#2396
02/11/94
GDI TX GDI Chemical Bank #2397 *
02/11/94
BRC OH BRC Chemical Bank New Jersey #4636 *
NA 02/09/94
BRC OH BRC Chemical Bank AK76554 *
AK76556
AK76555
02/07/94
</TABLE>
<PAGE>
10
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
BRC FL BRC Chemical Bank New Jersey #94025943 *
NA #94025945
02/07/95
GDI FL GDI Chemical Bank New #9425945 *
Jersey, 02/07/95
NA
GDI MD GDI Chemical Bank New #140418056 *
Jersey, #140418058
NA 02/09/94
GSI MD GSI Chemical Bank New #140418057 *
Jersey, 02/09/94
NA
BRC MD BRC Chemical Bank New #140418058 *
Jersey, 02/09/94
NA
BRC MI BRC Chemical Bank New Jersey #0808490 *
02/14/94
BRC OH BRC Chemical Bank New Jersey #764998 *
NA 02/16/94
BRC IL BCC Chemical Bank New Jersey #944562 *
#944563
02/14/94
GDI IL GDI Chemical Bank #940562 *
02/14/94
GSI NJ GSI Chemical Bank #1931298 *
#1933382
#1933304
02/04/94
GPI NJ GPI Chemical Bank New Jersey #1933819 *
02/04/94
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
BRC NJ BRC Chemical Bank New Jersey #1933305 *
#1933302
#1933301
#1933300
#1933299
#1933297
02/04/94
GDI NJ GDI Chemical Bank New Jersey #1933302 *
#1933299
#1933300
02/04/94
BRC OH BRC Chemical Bank DB6399P1583 *
BRC/GDI TX BRC/GDI Chemical Bank New Jersey #94022369 *
NA 02/08/94
BRC/GDI TX BRC/GDI Chemical Bank New Jersey #94154241 *
NA 08/09/94
GSI TX GSI Chemical Bank New Jersey #94022370 *
NA 02/08/94
BRC TX BRC/GDI Chemical Bank New Jersey #94022369 *
NA 02/08/94
BRC TX BRC Chemical Bank New Jersey #94023003 *
NA 02/08/94
BRC/GDI TX BRC/GDI Chemical Bank New Jersey #9415241 *
NA 08/09/94
GDI IL GDI Chemical Bank New Jersey 003219853 *
NA 02/09/94
GSI IL GSI Chemical Bank New Jersey 003219862 *
NA 02/07/94
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
BRC IL BRC Chemical Bank New Jersey 003219853 *
NA 003219863
02/07/94
GSI FL GSI Chemical Bank 423944 *
02/07/94
BRC MD BRC Chemical Bank 14689 *
14687
02/17/94
GDI MD GDI Chemical Bank #14680 *
02/17/94
GSI MD GSI Chemical Bank #14683143 *
02/17/94
GSI CA GSI IHHCIT/Broup Business 89031796 *
Credit Inc. 02/14/89
GSI CA GSI Chemical Bank New Jersey 94021908 *
02/07/94
GDI CA GDI Chemical Bank New Jersey 94021907 *
02/07/94
BRC CA BRC Chemical Bank New Jersey 94021905 *
02/07/94
BRC CA BRC Chemical Bank New Jersey 94021907 *
02/07/94
GDI GA GDI Chemical Bank 941426 *
02/04/94
BRC GA BRC Chemical Bank New Jersey 941427 *
NA 941426
02/17/94
</TABLE>
<PAGE>
13
<TABLE>
<CAPTION>
Secured Party UCC # and Date
Company State Debtor (Assignee) Filed Collateral Description
<S> <C> <C> <C> <C> <C>
GSI GA GSI Chemical Bank 941425 *
02/17/94
</TABLE>
* Collateral as defined in that certain Security Agreement dated as of January
25, 1994 made in favor of Chemical Bank New Jersey.
<PAGE>
EXHIBIT 10(l)
TERM NOTE
$3,749,996 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-
REMY CO., a Delaware corporation (collectively, the "Borrower"), hereby jointly
and severally, unconditionally promise to pay to the order of PNC BANK, NATIONAL
ASSOCIATION ("PNC") at the Payment Office, in lawful money of the United States
of America and in immediately available funds, the principal amount of THREE
MILLION SEVEN HUNDRED FORTY-NINE THOUSAND NINE HUNDRED NINETY-SIX AND 00/100
($3,749,996) DOLLARS, in eighty-three (83) installments of $44,642 each payable
on the first Business Day of each calendar month, commencing on December 1,
1995, with a final principal payment in the then outstanding principal amount of
the Term Loan payable on the Maturity Date. The Borrower further agrees to pay
interest on the unpaid principal amount outstanding hereunder from time to time
from and including the date hereof in like money at such office at the rates and
on the dates specified in the Credit Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount and Type of Term
Loan made pursuant to the Credit Agreement (defined below), each conversion of
all or a portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof, and, in the case of Fixed Rate Loans, the
length of each Interest Period with respect thereto which endorsement shall
constitute rebuttable presumptive evidence of the accuracy of the information
endorsed; provided, however, that the failure to make any such endorsement shall
-------- -------
not affect the obligations of the Borrower in respect of the Term Loan.
This Note is one of the Term Notes referred to in the Revolving Credit and
Term Loan Agreement dated October 31, 1995 among the Borrower, PNC and First
Fidelity Bank, N.A., as Lenders, and PNC, as Agent (as the same may hereafter be
amended, modified or supplemented from time to time, the "Credit Agreement"),
and is entitled to the benefits thereof, is secured as provided therein and is
subject to optional and mandatory prepayment as set forth therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:____________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Term Note dated October 31, 1995 issued by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co.,
as joint and several obligors to
PNC Bank, National Association
LOAN AND PAYMENTS OF LOAN
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10(m)
TERM NOTE
$6,750,000 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-
REMY CO., a Delaware corporation (collectively, the "Borrower"), hereby jointly
and severally, unconditionally promise to pay to the order of FIRST FIDELITY
BANK, N.A. ("FFB") at the Payment Office, in lawful money of the United States
of America and in immediately available funds, the principal amount of SIX
MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100 ($6,750,000) DOLLARS, in eighty-
three (83) installments of $80,357.14 each payable on the first Business Day of
each calendar month, commencing on December 1, 1995, with a final principal
payment in the then outstanding principal amount of the Term Loan payable on the
Maturity Date. The Borrower further agrees to pay interest on the unpaid
principal amount outstanding hereunder from time to time from and including the
date hereof in like money at such office at the rates and on the dates specified
in the Credit Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount and Type of Term
Loan made pursuant to the Credit Agreement (defined below), each conversion of
all or a portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof, and, in the case of Fixed Rate Loans, the
length of each Interest Period with respect thereto which endorsement shall
constitute rebuttable presumptive evidence of the accuracy of the information
endorsed; provided, however, that the failure to make any such endorsement shall
-------- -------
not affect the obligations of the Borrower in respect of the Term Loan.
This Note is one of the Term Notes referred to in the Revolving Credit and
Term Loan Agreement dated October 31, 1995 among the Borrower, FFB and PNC Bank,
National Association, as Lenders, and PNC Bank, National Association, as Agent
(as the same may hereafter be amended, modified or supplemented from time to
time, the "Credit Agreement"), and is entitled to the benefits thereof, is
secured as provided therein and is subject to optional and mandatory prepayment
as set forth therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:___________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Term Note dated October 31, 1995 issued by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co.,
as joint and several obligors to
First Fidelity Bank, N.A.
LOAN AND PAYMENTS OF LOAN
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10(n)
REVOLVING CREDIT NOTE
New Brunswick, New Jersey
$13,750,000 October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-
REMY CO., a Delaware corporation, (collectively, the "Borrower"), hereby jointly
and severally, unconditionally promise to pay to the order of PNC Bank, National
Association ("PNC") at the Payment Office, in lawful money of the United States
of America and in immediately available funds, the principal amount of THIRTEEN
MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100 ($13,750,000) DOLLARS, or, if
less, the aggregate unpaid principal amount of all Revolving Credit Loans
(including, without limitation, Capex Loans) made by PNC to the Borrower
pursuant to Section 2.1 of the Credit Agreement on the dates and in the amounts
specified in the Credit Agreement. The Borrower further agrees to pay interest
on the unpaid principal amount outstanding hereunder from time to time from and
including the date hereof in like money at such office at the rates and on the
dates specified in the Credit Agreement.
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the date, Type and amount of
each Revolving Credit Loan made pursuant to the Credit Agreement, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto, which endorsement shall constitute rebuttable presumptive
evidence of the accuracy of the information endorsed; provided, however, that
-------- -------
the failure to make any such endorsement shall not affect the obligations of the
Borrower in respect of such Revolving Credit Loan.
This Note is one of the Revolving Credit Notes referred to in the Revolving
Credit and Term Loan Agreement dated the date hereof among the Borrower, PNC,
First Fidelity Bank, N.A., as Lenders, and PNC, as Agent (as the same may
hereafter be amended, modified or supplemented from time to time, the "Credit
Agreement") is entitled to the benefits thereof, is secured as
<PAGE>
provided therein and is subject to optional and mandatory prepayment as set
forth therein.
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:____________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Revolving Credit Note
dated October 31, 1995 made by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co., as joint and several
obligors to PNC Bank, National Association
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10(o)
REVOLVING CREDIT NOTE
New Brunswick, New Jersey
$8,250,000 October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-
REMY CO., a Delaware corporation, (collectively, the "Borrower"), hereby jointly
and severally, unconditionally promise to pay to the order of First Fidelity
Bank, N.A. ("FFB") at the Payment Office, in lawful money of the United States
of America and in immediately available funds, the principal amount of EIGHT
MILLION TWO HUNDRED FIFTY THOUSAND AND 00/100 ($8,250,000) DOLLARS, or, if less,
the aggregate unpaid principal amount of all Revolving Credit Loans (including,
without limitation, Capex Loans) made by FFB to the Borrower pursuant to Section
2.1 of the Credit Agreement on the dates and in the amounts specified in the
Credit Agreement. The Borrower further agrees to pay interest on the unpaid
principal amount outstanding hereunder from time to time from and including the
date hereof in like money at such office at the rates and on the dates specified
in the Credit Agreement.
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the date, Type and amount of
each Revolving Credit Loan made pursuant to the Credit Agreement, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto, which endorsement shall constitute rebuttable presumptive
evidence of the accuracy of the information endorsed; provided, however, that
-------- -------
the failure to make any such endorsement shall not affect the obligations of the
Borrower in respect of such Revolving Credit Loan.
This Note is one of the Revolving Credit Notes referred to in the Revolving
Credit and Term Loan Agreement dated the date hereof among the Borrower, FFB,
PNC Bank, National Association, as Lenders, and PNC Bank, National Association,
as Agent (as the same may hereafter be amended, modified or supplemented from
time to time, the "Credit Agreement") is entitled to the benefits
<PAGE>
thereof, is secured as provided therein and is subject to optional and mandatory
prepayment as set forth therein.
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
GUEST SUPPLY, INC.
By:____________________________
Name:
Title:
GUEST PACKAGING, INC.
By:____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
By:____________________________
Name:
Title:
<PAGE>
Schedule 1
To Revolving Credit Note
dated October 31, 1995 made by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co., as joint and several
obligors to First Fidelity Bank, N.A.
Loans, Conversions and Payments of Loans
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Interest Interest Principal Notation
Date Loans Repaid Rate Period Balance of Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10(p)
EXISTING LOAN NOTE
$3,333,340.00 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-
REMY CO., a Delaware corporation (collectively, the "Borrower"), hereby jointly
and severally, unconditionally promise to pay to the order of PNC BANK, NATIONAL
ASSOCIATION (the "Bank") at the Payment Office, in lawful money of the United
States of America and in immediately available funds, the principal amount of
THREE MILLION THREE HUNDRED THIRTY THREE THOUSAND THREE HUNDRED FORTY AND 00/100
($3,333,340.00) DOLLARS, in forty (40) installments of $83,333.00 each payable
on the first Business Day of each calendar month, commencing on November 1,
1995, with a final principal payment in the then outstanding principal amount of
the Existing Loan payable on the Maturity Date. The Borrower further agrees to
pay interest on the unpaid principal amount outstanding hereunder from time to
time from and including the date hereof in like money at such office at the
rates and on the dates specified in the Credit Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount of the Existing
Loan maintained pursuant to the Credit Agreement (defined below) and the date
and amount of each payment or prepayment of principal thereof which endorsement
shall constitute rebuttable presumptive evidence of the accuracy of the
information endorsed; provided, however, that the failure to make any such
-------- -------
endorsement shall not affect the obligations of the Borrower in respect of the
Existing Loan.
This Note is the Existing Loan Note referred to in the Revolving Credit and
Term Loan Agreement dated October 31, 1995 (as the same may hereafter be
amended, modified or supplemented from time to time, the "Credit Agreement")
among the Borrower, the Bank and First Fidelity Bank, N.A., as Lenders, and the
Bank, as Agent and is entitled to the benefits thereof, is secured as provided
therein and is subject to optional and mandatory prepayment as set forth
therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
This Note replaces that certain note dated January 26, 1994, 1994, in the
original principal amount of $5,000,000, issued by the Borrower and payable to
the order of Chemical Bank New Jersey, National Association (now PNC Bank,
National Association).
GUEST SUPPLY, INC.
BY: ____________________________
Name:
Title:
GUEST PACKAGING, INC.
BY: ____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
BY: ____________________________
Name:
Title:
<PAGE>
Schedule 1
To Existing Note dated October 31, 1995 issued by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co.,
as joint and several obligors to
PNC Bank, National Association
LOAN AND PAYMENTS OF LOAN
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Principal Notation
Date Loan Repaid Balance of Loans Made By
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10(q)
EXISTING NEW TERM LOAN NOTE
$4,166,664.00 New Brunswick, New Jersey
October 31, 1995
FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey
corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-
REMY CO., a Delaware corporation (collectively, the "Borrower"), hereby jointly
and severally, unconditionally promise to pay to the order of PNC BANK, National
Association (the "Bank") at the Payment Office, in lawful money of the United
States of America and in immediately available funds, the principal amount of
FOUR MILLION ONE HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-FOUR AND 00/100
($4,166,664.00) DOLLARS, in forty (40) installments of $104,167.00 each payable
on the first Business Day of each calendar month, commencing on November 1,
1995, with a final principal payment in the then outstanding principal amount of
the Existing Loan payable on the Maturity Date. The Borrower further agrees to
pay interest on the unpaid principal amount outstanding hereunder from time to
time from and including the date hereof in like money at such office at the
rates and on the dates specified in the Credit Agreement (defined below).
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof (the "Grid") the amount of the Existing
New Term Loan maintained pursuant to the Credit Agreement (defined below) and
the date and amount of each payment or prepayment of principal thereof which
endorsement shall constitute rebuttable presumptive evidence of the accuracy of
the information endorsed; provided, however, that the failure to make any such
-------- -------
endorsement shall not affect the obligations of the Borrower in respect of the
Existing Loan.
This Note is the Existing New Term Loan Note referred to in the Revolving
Credit and Term Loan Agreement dated October 31, 1995 (as the same may hereafter
be amended, modified or supplemented from time to time, the "Credit Agreement")
among the Borrower, the Bank and First Fidelity Bank, N.A., as Lenders, and the
Bank, as Agent and is entitled to the benefits thereof, is secured as provided
therein and is subject to optional and mandatory prepayment as set forth
therein.
<PAGE>
Upon the occurrence and during the continuance of any one or more of the
Events of Default specified in the Credit Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Terms defined in the Credit Agreement are used herein with their defined
meanings unless otherwise defined herein. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
This Note replaces that certain note dated January 26, 1994, 1994, in the
original principal amount of $5,000,000, issued by the Borrower and payable to
the order of Chemical Bank New Jersey, National Association (now PNC Bank,
National Association).
GUEST SUPPLY, INC.
BY: ____________________________
Name:
Title:
GUEST PACKAGING, INC.
BY: ____________________________
Name:
Title:
BRECKENRIDGE-REMY CO.
BY: ____________________________
Name:
Title:
<PAGE>
Schedule 1
To Existing New Term Loan Note dated October 31, 1995
issued by Guest Supply, Inc., Guest Packaging, Inc.
and Breckenridge-Remy Co., as joint and several
obligors to PNC Bank, National Association
LOAN AND PAYMENTS OF LOAN
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Principal Notation
Date Loan Repaid Balance of Loans Made By
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10(r)
WMDI08066.001
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT, dated October 31, 1995, is made by Guest
Supply, Inc., a New Jersey corporation (the "Pledgor"), in favor of PNC Bank,
National Association (the "Secured Party") as agent for the benefit of the
Secured Party and the Lenders party to the Revolving Credit and Term Loan
Agreement (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement") dated October 31, 1995 among Guest Supply, Inc.,
Guest Packaging, Inc. and Breckenridge-Remy Co., as Borrower, PNC Bank,
National Association and First Fidelity Bank, N.A., as Lenders, and the Secured
Party, as Agent.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, all financial accommodations to be made to Guest Supply,
Inc., Guest Packaging, Inc. and Breckenridge-Remy Co., as joint and several
obligors, (collectively, the "Borrower") by the Lenders pursuant to the terms
and conditions of the Credit Agreement are to be secured by, among other
collateral, the assignment, grant and pledge by the Pledgor to the Secured
Party of a continuing security interest in all of the (i) Accounts, (ii)
Contracts and contract rights, (iii) Chattel Paper, (iv) Documents, (v)
Equipment, (vi) General Intangibles, (vii) Instruments, (viii) Inventory and
(ix) Fixtures of the Pledgor, whether now owned or hereafter acquired; and
WHEREAS, one of the conditions precedent to the obligation of the
Lenders to extend the credit facilities described in the Credit Agreement is
that the Pledgor execute and deliver this Security Agreement to the Secured
Party for the benefit of the Secured Party and the Lenders.
NOW, THEREFORE, in consideration of the premises, to induce the
Lenders to extend the credit facilities described in the Credit Agreement and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Pledgor hereby agrees with the Secured Party, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
-------------
which are defined in the Credit Agreement and used herein are used herein as
defined in the Credit Agreement.
<PAGE>
(b) The following terms which are defined in the UCC (as
such term is defined below) on the date hereof are used herein as so defined:
Accounts, Account Debtor, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments, Inventory, Proceeds and Products.
(c) The following terms shall have the following meanings:
(i) "Collateral" shall have the meaning assigned to
----------
it in Section 2 of this Security Agreement;
(ii) "Contracts" means all contracts to which the
---------
Pledgor is now or hereafter becomes a party, including, in each case, without
limitation, (a) all rights of the Pledgor to receive moneys due and to become
due to it thereunder or in connection therewith, (b) all rights of the Pledgor
to damages arising out of, or for, breach or default in respect thereof, (c)
all rights of the Pledgor to terminate the contracts, to perform thereunder and
to compel performance and to otherwise exercise all remedies thereunder, and
(d) any other rights or benefits arising under any other contract entered into
by the Pledgor; except, in the case of clauses (b), (c) and (d) only to the
extent that, in the case of any contract, the Pledgor's right, title and
interest therein is assignable without consent, or with consent and the consent
of all necessary parties to such contract has been obtained);
(iii) "Material Contract" means any Contract which
-----------------
represents 3% or more of the amount of sales of the Borrower;
(iv) "Security Agreement" means this Security
------------------
Agreement, as amended, supplemented or otherwise modified from time to time;
and
(v) "Obligations" means all indebtedness,
-----------
liabilities and obligations (whether denominated as principal, fees, interest
or otherwise including amounts that, but for the initiation of any proceeding
under any insolvency or bankruptcy law, would become due) of (i) any Person
constituting the Borrower to the Secured Party or any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with the
Credit Agreement or any other Loan Document, and (ii) the Pledgor to the
Secured Party or any Lender whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with this Security Agreement;
2
<PAGE>
(vi) "UCC" means the Uniform Commercial Code as from
---
time to time in effect in the State of New Jersey; provided, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of any Lien on any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New Jersey, "UCC"
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or the effect of
perfection or non-perfection. References to sections of the UCC shall be
construed as necessary to refer to any successor sections of the UCC.
2. Grant of Security Interest. As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
mortgages, pledges, assigns, hypothecates and grants to the Secured Party, for
the benefit of the Secured Party and the Lenders, a continuing security
interest in all of the following property now owned or at any time hereafter
acquired by the Pledgor or in which the Pledgor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"):
----------
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all General Intangibles, including, without limitation,
all trade secrets, tradenames, copyrights, copyright
applications, patent applications, patents, trademarks,
trademark registrations and applications therefor;
(vi) all Instruments;
(vii) all Equipment;
(viii) all Inventory;
(ix) to the extent not otherwise included in clause (vii) of
this Section 2, all other machinery, apparatus,
equipment, fittings, Fixtures, furniture and
furnishings now or hereafter located upon the real
property described in Schedule C hereto, or any part
thereof, and used or usable in connection
3
<PAGE>
with any future occupancy or use of such property;
(x) any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other
Indebtedness at any time held or owing by the Secured
Party or any Lender to or for the credit or the account
of the Pledgor;
(xi) any and all claims or payments made under any insurance
policy;
(xii) all interest of the Pledgor in any goods the sale or
lease of which shall have given or shall give rise to,
and in all guaranties and other property securing the
payment of or performance under, any Accounts,
Contracts, General Intangibles or any Chattel Paper or
Instruments referred to above;
(xiii) any and all personal property of any Person of any kind
or description subject to a separate mortgage, pledge
or security interest in favor of the Pledgor or in
which the Pledgor now or hereafter has or acquires a
security interest securing any indebtedness, pursuant
to any written agreement or instrument other than this
Security Agreement;
(xiv) all replacements, substitutions, additions or
accessions to or for any of the foregoing;
(xv) to the extent related to the property described above,
all books, correspondence, credit files, records,
invoices and other papers and documents, including,
without limitation, to the extent so related, all
tapes, cards, computer runs, computer programs and
electronic, magnetic or other archival systems or
papers and documents in the possession or control of
the Pledgor or any computer or service bureau from time
to time acting for the Pledgor;
(xvi) all property or interests in property of the Pledgor
which now may be owned or hereafter
4
<PAGE>
may come into the possession, custody or control of the
Secured Party or any Lender, or any agent or affiliate
of the Secured Party or any Lender (whether for
safekeeping, deposit, custody, pledge, transmission,
collection or otherwise), including, without
limitation, all rights and interests of the Pledgor in
respect of any and all (a) notes, drafts, letters of
credit, stocks, bonds, and debt and equity securities,
whether or not certificated, and warrants, options,
puts, calls and other rights to acquire or otherwise
relating to the same, (b) cash, and (c) proceeds of
loans, advances and other financial accommodations,
including, without limitation, loans, advances and
other financial accommodations made or extended under
the Loan Documents; and
(xvii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Rights of Secured Party; Limitations on Secured Party's
--------------------------------------------------------
Obligations.
- -----------
(a) Pledgor Remains Liable under Accounts and Contracts.
---------------------------------------------------
Anything herein to the contrary notwithstanding, the Pledgor shall remain
liable under each of the Accounts and Contracts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all
in accordance with the terms of any agreement giving rise to each such Account
and in accordance with and pursuant to the terms and provisions of each such
Contract. Neither the Secured Party nor any Lender shall have any obligation
or liability under any Account (or any agreement giving rise thereto) or
Contract by reason of or arising out of this Security Agreement or the receipt
by the Secured Party or any Lender of any payment relating to such Account or
Contract pursuant hereto, nor shall the Secured Party or any Lender be
obligated in any manner to perform any of the obligations of the Pledgor under
or pursuant to any Account (or any agreement giving rise thereto) or under or
pursuant to any Contract, to make any payment, to make any inquiry as to the
nature or the sufficiency of any payment received by any of them or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto) or under any Contract, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to them or to which they may be entitled
at any time or times.
5
<PAGE>
(b) Notice to Account Debtors and Contracting
------------------------------------------
Parties. After the occurrence and during the continuance of an Event of
Default, upon the request of the Secured Party at any time, the Pledgor shall
notify Account debtors on the Accounts and the parties to the Contracts that
the Accounts and the Contracts have been assigned to the Secured Party and that
payments in respect thereof shall be made directly to the Secured Party. After
the occurrence and during the continuance of an Event of Default, the Secured
Party may, at any time in its own name or in the names of others communicate
with Account debtors on the Accounts and the parties to the Contracts to verify
with them to its satisfaction the existence, amount and terms of any Accounts
or Contracts. The costs relating to the foregoing matters, including
reasonable attorneys' fees and out of pocket expenses shall be borne solely by
the Pledgor whether incurred by the Secured Party or the Pledgor.
(c) Analysis of Accounts. Upon reasonable notice to the
--------------------
Pledgor, the Secured Party shall have the right to make test verifications of
the Accounts in any manner and through any medium that it reasonably considers
advisable, and the Pledgor shall furnish all such assistance and information as
the Secured Party may require in connection therewith; provided, however, that,
prior to the occurrence and continuance of an Event of Default, Secured Party
shall obtain Pledgor's written consent (which shall not be unreasonably
withheld or delayed) prior to communicating with Account Debtors. At any time
and from time to time, upon the Secured Party's request and at the expense of
the Pledgor, the Pledgor shall furnish to the Secured Party reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts.
4. Representations and Warranties. The Pledgor hereby
------------------------------
represents and warrants that:
(a) Title; No Other Liens. The Pledgor has good and
---------------------
marketable title to the Collateral, subject only to Liens permitted by the
Credit Agreement (hereinafter, the "Permitted Encumbrances"). Other than with
respect to Permitted Encumbrances, no security agreement, financing statement
or other public notice with respect to all or any part of the Collateral is on
file or of record in any public office except such as may have been filed
pursuant to the Credit Agreement or as to which UCC-3 termination statements
have been received and filed or which have expired and not been renewed.
(b) Perfected First Priority Liens. When appropriate
------------------------------
financing statements have been filed by the Secured Party in the jurisdictions
listed on Schedule A hereto against the Pledgor, the Liens granted pursuant to
this Security
6
<PAGE>
Agreement will constitute perfected Liens (to the extent such Liens can be
perfected by filing) on the Collateral in favor of the Secured Party, which are
prior to all other Liens on the Collateral and in existence on the date hereof
other than Permitted Encumbrances, and which are enforceable as such against
all creditors of the Pledgor.
(c) Accounts. The amount represented by the Pledgor to
--------
the Secured Party from time to time as owing by each Account Debtor or by all
Account Debtors in respect of the Accounts will at such time be the correct
amount actually owing by such Account Debtor or Debtors thereunder. The
place(s) where the Pledgor keeps its books and records concerning the Accounts
is as set forth on Schedule B hereto.
(d) Contracts. No consent of any Person (other than the
---------
Pledgor), including, without limitation, any Governmental Authority, to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Security Agreement. To the best
knowledge of the Pledgor each Contract is in full force and effect and
constitutes a valid and legally enforceable obligation of the parties thereto,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting that enforcement of
creditor's rights generally. No consent or authorization of, filing with or
other act by or in respect of any Governmental Authority is required in
connection with the execution, delivery, performance, validity or
enforceability of any of the Contracts by any party thereto other than those
which have been duly obtained, made or performed, are in full force and effect
and do not subject the scope of any such Contract to any adverse limitation,
either specific or general in nature. Neither the Pledgor nor (to the best of
the Pledgor's knowledge) any other party to any Contract is in default or is
likely to become in default in the performance or observance of any of the
terms thereof. The Pledgor has fully performed all its obligations under each
Contract required to be performed as of the date hereof. To the best knowledge
of the Pledgor the right, title and interest of the Pledgor in, to and under
each Contract are not subject to any defense, offset, counterclaim or claim
which would materially adversely affect the value of such Contract as
Collateral, nor have any of the foregoing been asserted or alleged against the
Pledgor as to any Contract. The Pledgor has delivered to the Secured Party a
complete and correct copy of each Material Contract, including all amendments,
supplements and other modifications thereto.
(e) Inventory and Equipment. The Inventory and
-----------------------
Equipment is kept, from time to time, at the locations listed on Schedule C
hereto.
7
<PAGE>
(f) Chief Executive Office. The Pledgor's chief
----------------------
executive office is as set forth on Schedule B annexed hereto.
(g) Other Places of Business. The Pledgor's other
------------------------
places of business are as set forth on Schedule B annexed hereto, and if no
other places of business are set forth on Schedule B then Pledgor has no other
place of business other than its chief executive office as set forth in Section
4(f) above.
(h) Trade Names. Certain Accounts may be and/or certain
-----------
of the Pledgor's invoices may be, from time to time, rendered to customers
under the trade names listed on Schedule B (which together with any new trade
names used after the date hereof are referred to collectively, as the "Trade
------
Names" and each individually, as a "Trade Name"). As to such Trade Names
----------
and the related Accounts, the Pledgor hereby warrants and agrees that:
(i) each Trade Name is a trade name and style (and not
the name of an independent corporation or other legal entity) by which the
Pledgor may identify and sell certain of its goods or services and conduct a
portion of its business and Pledgor has filed or made all public or other
notices in any jurisdiction required to lawfully operate under such Trade
Names;
(ii) all Accounts, Chattel Paper, Instruments and
Proceeds thereof and returned merchandise which arise from the sale of goods
invoiced under the Trade Names are and shall be (x) owned solely by the Pledgor
and (y) subject to the security interest and other terms of this Security
Agreement;
(iii) new Trade Names may only be used by the Pledgor
after the Secured Party is given fifteen (15) days prior written notice of the
use of any such new Trade Name, which notice shall set forth the name of such
new Trade Name; and
(iv) the Pledgor does not use any Trade Name other than
the Trade Names listed on Schedule B hereto.
(i) Rolling Stock. The Pledgor does not own any
-------------
railroad cars, locomotives or other rolling stock used or intended for use in
interstate commerce.
(j) Patents, Trademarks, Copyrights. Except as set
-------------------------------
forth on Schedule D, the Pledgor does not own, license or have rights in or to
any trademark, patent or copyright and has not filed and is not in the process
of filing any application with any Governmental Authority to obtain any of the
foregoing. Except as set forth on Schedule D, the Pledgor does not need or
8
<PAGE>
require a license or right to use any patent, copyright, trademark or service
mark to conduct its business.
5. Covenants. The Pledgor covenants and agrees that, from and
---------
after the date of this Security Agreement until the Obligations are paid in
full:
(a) Further Documentation; Pledge of Instruments and
-------------------------------------------------
Chattel Paper. At any time and from time to time, upon the written request
- -------------
of the Secured Party and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents
and take such further action as the Secured Party may reasonably request for
the purpose of obtaining or preserving the full benefits of this Security
Agreement and the rights and powers herein granted, including, without
limitation, the filing of documents with the Office of Patents and Trademarks
and the filing of any financing or continuation statements under the UCC in
effect in any jurisdiction with respect to the Liens created hereby. The
Pledgor also hereby authorizes the Secured Party, or any agent acting for the
benefit and on behalf of the Secured Party to file any such financing or
continuation statement without the signature of the Pledgor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any Instrument or Chattel Paper,
such Instrument or Chattel Paper shall, after the occurrence and during the
continuance of an Event of Default, be immediately delivered to the Secured
Party, duly endorsed in a manner satisfactory to the Secured Party to be held
as Collateral pursuant to this Security Agreement.
(b) Indemnification. The Pledgor agrees to pay, and to
---------------
save the Secured Party harmless from, any and all liabilities, costs and
expenses (including without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any Requirement of Law applicable to any of the
Collateral, (iii) with respect to fees, taxes or other costs incurred with
respect to recording UCC financing statements or other public recordings or
notices of security interests, or (iv) in connection with any of the
transactions contemplated by this Security Agreement or the enforcement of the
Secured Party's rights hereunder, except those liabilities, costs and expenses
arising out of the Secured Party's gross negligence or willful misconduct. In
any suit,
9
<PAGE>
proceeding or action brought by the Secured Party under any Account for any sum
owing thereunder or to enforce any provisions of any Account or Contract the
Pledgor will save, indemnify and keep the Secured Party harmless from and
against all expense, loss or damage suffered by the Secured Party in such
action commenced in connection with the enforcement of any provision of any
Account or Contract except for expenses, loss or damage arising out of the
gross negligence or willful misconduct of the Secured Party.
(c) Maintenance of Records. The Pledgor will keep and
----------------------
maintain at its own cost and expense, complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral. The Pledgor will mark its
books and records pertaining to the Collateral to evidence this Security
Agreement and the security interests granted hereby. For the Secured Party's
further security, the Secured Party shall have a security interest in all of
the Pledgor's books and records pertaining to the Collateral. Upon reasonable
notice from Secured Party to Pledgor prior to an Event of Default and upon
demand thereafter, the Pledgor shall make available all such books and records
to the Secured Party or to its representatives during normal business hours at
the request of the Secured Party.
(d) Right of Inspection. The Secured Party and the
-------------------
Lenders shall at all times have full and free access during normal business
hours, upon reasonable prior notice, to all the books, correspondence and
records of the Pledgor and the Secured Party or its representatives may examine
the same and make photocopies thereof, and the Pledgor agrees to render to the
Secured Party such clerical and other assistance as may be reasonably requested
with regard thereto. The Secured Party and the Lenders shall also have the
right, during normal business hours, to enter into and upon any premises where
any of the Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.
(e) Compliance with Laws, etc. The Pledgor will comply
--------------------------
with all Requirements of Law applicable to the Collateral or any part thereof.
(f) Compliance with Terms of Contracts, etc. The
----------------------------------------
Pledgor will perform and comply in all material respects with all its
obligations under any agreements, documents and other instruments relating to
the Collateral except where the failure to so perform will not have a Material
Adverse Effect.
(g) Payment of Obligations. The Pledgor will pay, as
----------------------
the same become due, all obligations (including without
10
<PAGE>
limitation, any and all lease obligations and warehouse charges), taxes and
governmental fees, charges or levies imposed upon the Collateral or in respect
of its income or profits therefrom, as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral; provided, that it may protest the
payment of, and withhold payment during such protest of, any such obligations,
taxes, fees, charges or levies or claims if it is acting in good faith and
reserves in conformity with GAAP with respect thereto have been provided on its
books unless such protest violates Section 5(h) below.
(h) Limitation on Liens on Collateral. The Pledgor will
---------------------------------
not create, incur or permit to exist, will defend the Collateral against, and
will take such other action as is necessary to remove, any Lien or claim on or
to the Collateral, other than the Liens created hereby and Permitted
Encumbrances and will defend the right, title and interest of the Secured Party
in and to any of the Collateral against the claims and demands of all Persons
whomsoever except Persons claiming under this Security Agreement.
(i) Limitations on Dispositions of Collateral. Except
-----------------------------------------
for disposal of obsolete items, the Pledgor will not sell, transfer, lease or
otherwise dispose of any Collateral, except as permitted by the Credit
Agreement.
(j) Limitations on Modifications, Waivers and Extensions
-----------------------------------------------------
of Contracts and Agreements Giving Rise to Accounts. The Pledgor will not
- ---------------------------------------------------
(i) amend, modify, terminate or waive any provision of any Contract or any
agreement giving rise to an Account in any manner which could reasonably be
expected to materially adversely affect the value of such Contract or Account
as Collateral, (ii) fail to exercise promptly and diligently each and every
right which it may have under each Contract, or agreement giving rise to an
Account or (iii) fail to deliver to the Secured Party a copy of each material
demand, notice or document received by it relating in any way to any Material
Contract or any agreement constituting a Material Contract.
(k) Limitation on Discounts, Compromises and Extensions of
-------------------------------------------------------
Accounts and Contracts. Other than in the ordinary course of business as
- ----------------------
generally conducted by the Pledgor over a period of time, and in any event,
after the occurrence and during the continuance of an Event of Default, the
Pledgor will not grant any extension of the time of payment of any of the
Accounts or payments of any amounts due under any Contract, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the
11
<PAGE>
payment thereof, or allow any credit or discount whatsoever thereon.
(l) Maintenance of Equipment. The Pledgor will maintain
------------------------
each item of Equipment in good operating condition, ordinary wear and tear and
immaterial impairments of value and damage by the elements excepted, and will
provide all maintenance, service and repairs necessary for such purpose.
(m) Maintenance of Insurance. The Pledgor will
------------------------
maintain, with financially sound and reputable companies, insurance policies
(i) insuring the Inventory and Equipment against loss by fire, explosion,
theft, such other casualties as may be reasonably satisfactory to the Secured
Party and (ii) insuring the Pledgor and the Secured Party against liability for
personal injury and property damage relating to such Inventory and Equipment,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Secured Party, with losses payable to the
Pledgor and the Secured Party, provided, that with the written consent of the
Secured Party all payments to be made to the Secured Party under such policies
may be used to repair or replace damaged or destroyed Inventory or Equipment.
The Secured Party shall be provided all evidence and documents necessary to
demonstrate the use of such insurance proceeds. All such insurance shall (i)
provide that no cancellation, material reduction in amount or material change
in coverage thereof shall be effective until at least 15 days after receipt by
the Secured Party of written notice thereof, (ii) name the Secured Party as
loss payee, (iii) provide that the Secured Party shall have the right, but not
the obligation, to pay premiums thereon, and (iv) be reasonably satisfactory in
all other respects to the Secured Party. Upon the request of the Secured
Party, the Pledgor shall deliver to the Secured Party a report of a reputable
insurance broker with respect to such insurance during each calendar year and
such supplemental reports with respect thereto as the Secured Party may from
time to time reasonably request.
(n) Further Identification of Collateral. The Pledgor
------------------------------------
will furnish to the Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may reasonably request, all
in reasonable detail.
(o) Notices. The Pledgor will advise the Secured Party
-------
promptly, in reasonable detail, by written notice (i) of any Lien (other than
Liens created or permitted hereby) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which could reasonably
be expected
12
<PAGE>
to have any material adverse effect on the aggregate value of the Collateral or
on the Liens created hereunder.
(p) Changes in Locations, Name, etc. The Pledgor will
-------------------------------
not (i) change the location of its chief executive office or other places of
business from that specified in Sections 4(f) and 4(g), respectively, or remove
its books and records from the location specified in Section 4(c), (ii) permit
any of the Inventory to be kept at a location other than that listed in
Schedule C hereto, or (iii) change its name, taxpayer identification number,
identity or corporate structure to such an extent that any financing statement
filed by the Secured Party, or any agent acting for the benefit and on behalf
of the Secured Party, in connection with this Security Agreement would become
misleading, unless it shall have given the Secured Party at least 30 days prior
written notice thereof.
(q) Limitation on Assignments. Pledgor will not,
-------------------------
without the consent of Secured Party, agree to any provision in any Contract or
other agreement constituting Collateral, which purports (or is so broad in
scope so as) to limit Pledgor's rights to pledge or assign the right to payment
of monies due or to become due thereunder.
6. Appointment as Attorney-in-Fact.
-------------------------------
(a) Powers. The Pledgor hereby irrevocably constitutes
------
and appoints the Secured Party, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Pledgor and in the name of the Pledgor or in its own
name, from time to time in the Secured Party's discretion, for the purpose of
carrying out the terms of this Security Agreement, to execute UCC-1 Financing
Statements in the Pledgor's name as debtor and, upon the occurrence and during
the continuance of any Event of Default, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement, and without
limiting the generality of the foregoing, the Pledgor hereby gives the Secured
Party the power and right (but not the obligation), on behalf of the Pledgor,
without notice to or assent by the Pledgor, to do the following:
(i) in the case of any Collateral, at any time when any
Event of Default shall have occurred and be continuing, in the name of the
Pledgor or its own name, or otherwise, to open mail addressed to the Pledgor,
to take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, General Intangible or Contract or
13
<PAGE>
contract right or with respect to any other Collateral and to file any claim or
to take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Secured Party for the purpose of collecting
any and all such moneys due under any such Account, Instrument, General
Intangible or contract right or with respect to any other Collateral whenever
payable;
(ii) to pay or discharge taxes and Liens levied or placed
on or threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Security Agreement and to pay all or any part
of the premiums therefor and the costs thereof; and
(iii) upon the occurrence and during the continuance of
any Event of Default, (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral; (C) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action or proceeding brought against
the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust
any suit, action or proceeding described in clause (E) above and in connection
therewith, to give such discharges or releases as the Secured Party may deem
appropriate; and (G) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party was the absolute owner thereof for
all purposes, and to do at the Secured Party's option and the Pledgor's
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve or realize upon the
Collateral and the Liens granted hereunder and to effect the intent of this
Security Agreement, all as fully and effectively as the Pledgor might do.
The Pledgor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Pledgor also authorizes the
------------
Secured Party, at any time and from time to time, to execute,
14
<PAGE>
in connection with the sale provided for in Section 9 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
(c) No Duty on Secured Party's Part. The powers
-------------------------------
conferred on the Secured Party hereunder are solely to protect its interests in
the Collateral and shall not impose any duty upon the Secured Party to exercise
any such powers. The Secured Party shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers. None of the
Secured Party's officers, directors, employees or agents shall be responsible
to the Pledgor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
(d) Trademarks and Licenses. The Pledgor further grants
-----------------------
to the Secured Party an irrevocable, non-exclusive license at no charge to use
the trademarks, patents, copyrights and licenses used in connection with the
sale of goods including, without limitation, those listed on Schedule D annexed
hereto associated with the Collateral in connection with any foreclosure or
liquidation together with the right to grant a nonexclusive sublicense without
charge to any buyer of such Collateral for the purpose of resale. All such
licenses and rights to sublicense include all computer programs, and other
Collateral used in connection with such trademarks.
7. Performance by Secured Party of Pledgor's Obligations. If
-----------------------------------------------------
the Pledgor fails to perform or comply with any of its agreements contained
herein and the Secured Party shall perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the Secured
Party incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the highest interest rate
prescribed in the Credit Agreement, shall be payable by the Pledgor to the
Secured Party on demand and shall constitute Obligations secured hereby.
8. Proceeds. It is agreed that if an Event of Default shall
--------
occur and be continuing (a) all proceeds of Collateral received by the Pledgor
consisting of cash, checks and cash equivalents shall be held by the Pledgor in
trust for the Secured Party segregated from other funds of the Pledgor, and
shall, forthwith upon receipt by the Pledgor, be turned over to the Secured
Party in the exact form received by the Pledgor (duly endorsed by the Pledgor
to the Secured Party, if required), and (b) any and all such proceeds of
Collateral received by the Secured Party (whether from the Pledgor or
otherwise) may, in the sole discretion of the Secured Party, be held by the
Secured Party as collateral security for, and/or then or at any time
15
<PAGE>
thereafter may be applied by the Secured Party against, the Obligations then
due and payable, such application to be in such order as the Secured Party
shall elect. Any balance of such proceeds remaining after the Obligations
shall have been paid in full shall be paid over to the Pledgor or to whomsoever
may be lawfully entitled to receive the same.
9. Remedies. If an Event of Default shall occur and be
--------
continuing, the Secured Party may exercise, in addition to all other rights and
remedies granted to the Secured Party in this Security Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable laws. Without limiting the generality of the foregoing, the
Secured Party, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by
law) to or upon the Pledgor or any other Person (all and each of which demands,
presentments, protests, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing) in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and
conditions as they may deem advisable and at such prices as they may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold. The
Pledgor further agrees, at the Secured Party's request, to assemble the
Collateral and make it available to the Secured Party at places which the
Secured Party shall reasonably select, whether at the Pledgor's premises or
elsewhere. The Secured Party shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations, in such order as the
Secured Party may elect, and only after such application and after the payment
to the Secured Party of any other amount required by any provision of law,
including, without limitation, any provision of the UCC, need the Secured Party
account for the surplus, if any, to the Pledgor. To the extent permitted by
applicable law, the Pledgor waives all claims, damages and
16
<PAGE>
demands it may acquire against the Secured Party arising out of the exercise by
the Secured Party of any of its rights hereunder except any arising out of its
gross negligence or willful misconduct. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or
other disposition. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay the Obligations and the reasonable fees and disbursements of any attorneys
employed by the Secured Party to collect such deficiency.
10. Limitation on Duties Regarding Preservation of Collateral.
---------------------------------------------------------
The Secured Party's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under the UCC or
otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account. Neither the Secured Party nor
any of its directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
11. Powers Coupled with an Interest. All authorizations and
-------------------------------
agencies herein contained with respect to the Collateral are coupled with an
interest and are irrevocable.
12. Severability. Any provision of this Security 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
13. Section Headings. The section headings used in this
----------------
Security Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
14. No Waiver; Cumulative Remedies. The Secured Party shall
------------------------------
not by any act (except by a written instrument pursuant to Section 15 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Event of Default or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Secured Party, of any
17
<PAGE>
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Secured Party of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
15. Waivers and Amendments; Successors and Assigns; Governing
----------------------------------------------------------
Law. (a) None of the terms or provisions of this Security Agreement may be
- ---
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Secured Party.
(b) This Security Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Secured Party, the Lenders and their respective successors and assigns. This
Security Agreement shall be governed by, and be construed and interpreted in
accordance with, the laws of the State of New Jersey (without regard to
conflicts of law principles thereof), except to the extent that the validity,
perfection or enforcement of the security interests hereunder, or remedies
hereunder, in respect of any particular Collateral located outside the
boundaries of the State of New Jersey are governed by the laws of a
jurisdiction other than the State of New Jersey.
16. Notices. Notices hereunder may be given as provided in
-------
the Credit Agreement and the Pledgor agrees to be bound by the notice
provisions of the Credit Agreement.
17. Jurisdiction. The Pledgor hereby irrevocably submits to
------------
the jurisdiction of any court of the State of New Jersey or Federal court
sitting in the State of New Jersey in any action or proceeding arising out of
or relating to this Agreement and the Pledgor hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such court of the State of New Jersey, or to the extent permitted by law, in
such Federal court. The Pledgor hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Pledgor also irrevocably
consents to the service of any and all process in any such action or proceeding
arising out of or in connection with this Agreement by the mailing of copies of
such process to the Pledgor at the address and in the manner specified in
Section 16 hereof. The Pledgor agrees that a final and non-appealable judgment
(or a
18
<PAGE>
judgment whose time to appeal has expired) in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. THE PLEDGOR AND SECURED PARTY
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ANY
COUNTERCLAIM) IN ANY COURT ARISING ON, OUT OF, OR IN ANY WAY RELATING TO THIS
AGREEMENT OR ANY AMENDMENT OR SUPPLEMENT HERETO OR THERETO OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
18. Pledge and Assignment Absolute. All rights of the Secured
------------------------------
Party, the pledge and assignment hereunder and all obligations of the Pledgor
hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, any other document or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations or any
other amendment or waiver of or any consent to any departure from
the Credit Agreement;
(iii) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to
departure from this Agreement or any other Collateral Document; or
(iv) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Pledgor.
19. Indemnity and Expenses. (a) The Pledgor agrees to
----------------------
indemnify the Secured Party from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from the Secured Party's gross negligence or willful
misconduct.
(b) The Pledgor will upon demand pay to the Secured Party the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and disbursements of its counsel and of any experts and agents,
which the Secured Party may incur in connection with (i) the administration of
this Agreement, (ii) the custody, preservation, or use 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.
19
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
GUEST SUPPLY, INC.
[corporate seal]
By:
------------------------
Name:
Title:
20
<PAGE>
CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF __________ )
: ss.:
COUNTY OF _________ )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 31st day of October 1995, personally appeared Paul Xenis to
me known personally, and who, being by me duly sworn, deposes and says that he
is the Vice President, Finance of Guest Supply, Inc. and that the seal affixed
to the foregoing instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said Paul Xenis acknowledged said
instrument to be the free act and deed of said corporation.
------------------------------
Notary Public
<PAGE>
Guest Supply, Inc.
Schedules to Security Agreement
<PAGE>
Schedule A
Jurisdiction for Filing UCC-1's
-------------------------------
Secretary of State of New Jersey
Middlesex County, New Jersey
(720 US Highway One
North Brunswick, NJ)
Secretay of State of New Jersey
Middlesex County, New Jersey
(1280 Jersey Avenue
North Brunswick, NJ)
Secretay of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue
Rahway, NJ)
Secretay of State of New Jersey
Middlesex County, New Jersey
(5B Terminal Way
Avenal, NJ)
Fulton County, Georgia
Secretay of State of Illinois
Dupage County, Illinois
Secretary of State of California
Orange County, California
Secretary of State of Florida
Orange County, Florida
Secretary of State of Texas
Collin County, Texas
Secretary of State of Maryland
Howard County, Maryland
<PAGE>
Schedule B
----------
a) Location of Pledgor's books and records concerning Accounts:
720 U.S. Highway One
North Brunswick, NJ 08902
b) Location of Pledgor's chief executive office:
720 U.S. Highway One
North Brunswick, NJ 08902
c) Location of Pledgor's other places of business:
1150 Powis Road, Unit 5
West Chicago, IL 60185
7510 Presidents Drive
Orlando, FL 32809
190 West Crowtler Avenue
Unit B
Placentia, CA 92670
2800 Plano Parkway
Suite 200
Plano, TX 75074
6220 A Purdue Drive
Atlanta, GA 30336
5A, 5B & 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
1280 Jersey Avenue
North Brunswick, NJ 08902
d) List of tradenames:
Guest Distribution, Inc.
<PAGE>
Schedule C
----------
Location(s) of the Pledgor's Inventory:
5A, 5B & 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
1280 Jersey Avenue
North Brunswick, NJ 08902
In addition to the foregoing, Pledgor from time to time, maintains inventory at
its suppliers set forth on Exhibit A to Schedule C attached hereto.
Locations of Equipment:
1280 Jersey Avenue
North Brunswick, NJ 08902
5A, 5B & 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
720 U.S. Highway One
North Brunswick, NJ 08902
<PAGE>
Schedule D
----------
Trademarks, Patents, Copyrights, License Agreements:
TRADEMARKS
----------
Owner Trademark Registration Date Registration No.
- ------------------ ---------- ----------------- ---------------
Guest Supply, Inc. MIRAFLORES July 14, 1987 1,447,0
45
Guest Supply, Inc. EVERGREEN December 29, 1992 1,742,63
3
Guest Supply, Inc. ALLIANCE CHEMICAL January 19, 1993 1,746,70
7
Guest Supply, Inc. GUEST SUPPLY October 13, 1992 1,723,157
Guest Supply, Inc. WHISPER MINT November 18, 1986 1,417,1
39
Guest Supply, Inc. INSTITUTE SWISS May 2, 1995 1,892,792
SERVICE MARKS
-------------
Owner Service Mark Registration Date Registration No.
- ------------------ -------------- ----------------- ---------------
Guest Supply, Inc. GUEST SUPPLY November 5, 1985 1,369,530
(in Script)
Guest Supply, Inc. GUEST DESIGN October 29, 1985 1,368,272
(in Script)
PATENTS
-------
Owner Patent Date of Patent Patent No.
- ------------------ -------------- ----------------- ---------------
Guest Supply, Inc. Bottle and cap June 27, 1989 301,838
Guest Supply, Inc. Bottle November 21, 1989 304,687
Guest Supply, Inc. Bottle November 21, 1989 304,688
Guest Supply, Inc. Bottle and cap March 12, 1991 315,299
Guest Supply, Inc. Bottle and cap September 3, 1991 319,585
Guest Supply, Inc. Bottle and cap March 10, 1992 324,496
Guest Supply, Inc. Bottle March 21, 1995 356,502
<PAGE>
COPYRIGHT
---------
Owner Design Description Date of Copyright Registration
No.
- ----------------- ------------------------ ----------------- ------------
Guest Supply, Inc. * AmeriSuites 5/24/93 VA 570 224
Guest Supply, Inc. * Barcelo Hotels 09/08/93 VA 600 571
Guest Supply, Inc. Whispermint Mouthwash Label 11/20/90 VA 438 052
Guest Supply, Inc. 1.5 Chamomile PW Soap 11/20/90 VA 438 053
Guest Supply, Inc. Shower Cap Carton 11/20/90 VA 438 051
Guest Supply, Inc. 1.5 Facial Soap Carton 11/20/90 VA 438 049
Guest Supply, Inc. 2.5 Sandalwood Bath Sp Ctn 11/20/90 VA 438 048
Guest Supply, Inc. 1.5 Aloe Enriched Moisture 11/20/90 VA 438 054
Label
Guest Supply, Inc. Mending Kit Carton 11/20/90 VA 438 050
Guest Supply, Inc. Floral 02/25/93 VA 548 279
Guest Supply, Inc. Flower - Leaf Design 06/22/92 VA 512 066
Guest Supply, Inc. Rose Design 11/26/91 VA 480 798
Guest Supply, Inc. * Costa Euro Lux Cruises 01/25/93 VA 548 280
Guest Supply, Inc. Floral 06/22/92 VA 512 073
Guest Supply, Inc. Match new Choice program 09/08/93 VA 600 566
Guest Supply, Inc. EBZ Coloring 01/21/92 VA 491 855
Guest Supply, Inc. Leaf Pattern 03/11/91 VA 457 442
Guest Supply, Inc. Bottles 07/30/90 VA 423 672
Guest Supply, Inc. Soap Carton (Mauve & Pink) 07/30/90 VA 423 669
Guest Supply, Inc. Soap Carton (Blue & Light 07/30/90 VA 423 667
Blue)
Guest Supply, Inc. Soap Carton (Green & Ivory) 07/30/90 VA 423 668
Guest Supply, Inc. 3 oz. Carton (Mauve & Pink) 07/30/90 VA 423 666
Guest Supply, Inc. 3 oz. Carton (Blue & Light 07/30/90 VA 424 899
Blue)
Guest Supply, Inc. 3 oz. Carton (Green & Ivory) 07/30/90 VA 423 665
Guest Supply, Inc. Shoe Mitt 07/30/90 VA 423 670
Guest Supply, Inc. Tissue Pleated Glycerine 07/30/90 VA 423 671
Guest Supply, Inc. Griffin 05/24/93 VA 570 223
Guest Supply, Inc. Marble - Feather Design 06/22/92 VA 512 067
Guest Supply, Inc. Leaf 10/15/92 VA 529 452
Guest Supply, Inc. Festive 01/06/94 VA 623 750
Guest Supply, Inc. Nautical Pattern 02/10/93 VA 554 216
Guest Supply, Inc. Leaf Design 06/22/92 VA 512 071
Guest Supply, Inc. Blue Swirl 05/23/91 VA 475 981
Guest Supply, Inc. Green 06/22/92 VA 512 072
2
<PAGE>
COPYRIGHT
---------
Owner Design Description Date of Copyright Registration
No.
- ----------------- ------------------------ ----------------- ------------
Guest Supply, Inc. Basket & Flower Design 11/26/91 VA 430 796
Guest Supply, Inc. Floral & Leaf Dotted Design 01/13/92 VA 486 509
Guest Supply, Inc. Beach 11/20/90 VA 433 304
Guest Supply, Inc. Marble 11/19/92 VA 531 802
Guest Supply, Inc. Fish Design 01/13/92 VA 486 508
Guest Supply, Inc. Green (Photographs) 09/08/93 VA 600 570
Guest Supply, Inc. Marble - Granite 06/22/92 VA 512 065
Guest Supply, Inc. Watercolor 09/08/93 VA 600 569
Guest Supply, Inc. Abstract Column/Block-Dome 01/13/92 VA 486 507
Guest Supply, Inc. So West 06/22/92 VA 512 068
Guest Supply, Inc. Pink 11/26/91 VA 480 799
Guest Supply, Inc. * Sheraton Waikiki 06/22/92 VA 512 070
Guest Supply, Inc. Watercolor 06/22/92 VA 512 064
Guest Supply, Inc. * Stouffers Commercial 06/22/92 VA 512 607
Guest Supply, Inc. Floral Designs 11/26/91 VA 480 797
Guest Supply, Inc. * Hawthorn Suites 06/07/93 VA 613 317
Guest Supply, Inc. Photo on Map Background 06/07/93 VA 613 318
Guest Supply, Inc. * Homewood Suites 10/08/92 VA 527 401
Guest Supply, Inc. * Ilikai (New) 11/23/93 VA 610 591
Guest Supply, Inc. Latice Design 03/07/94 VA 627 755
Guest Supply, Inc. * Manhattan East Suites (New) 11/23/93 VA 610 592
Guest Supply, Inc. * Marriott Mountain Shadows 01/06/94 VA 623 751
Guest Supply, Inc. * Masters Inn 09/08/93 VA 600 568
Guest Supply, Inc. * Ocean Grand-Flowers 09/08/93 VA 600 567
___________
* Design developed for hotel but not described
LICENSING AGREEMENTS
--------------------
1. Licensing Agreement dated as of January 1, 1993, by and between
Guest Supply, Inc. and Helene Curtis regarding Finesse shampoo.
2. Trademark Licensing Agreement dated June 16, 1995 by and between
Guest Supply, Inc. and Playtex Beauty Care, Inc. regarding Guest
Supply, Inc.'s use of the trademark "Jhirmack".
3
<PAGE>
Schedule I
----------
Premises at:
720 U.S. Highway One
North Brusnwick, New Jersey 08902
1150 Powis Road, Unit 5
West Chicago, IL 60185
7510 Presidents Drive
Orlando, FL 32809
190 West Crowtler Avenue
Unit B
Placentia, CA 92670
2800 Plano Parkway
Suite 200
Plano, TX 75074
6220 A Purdue Drive
Atlanta, GA 30336
5A, 5B & 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
1280 Jersey Avenue
North Brunswick, NJ 08902
<PAGE>
EXHIBIT 10(s)
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT, dated October 31, 1995, is made by Guest
Packaging, Inc., a New Jersey corporation (the "Pledgor"), in favor of PNC
Bank, National Association (the "Secured Party") as agent for the benefit of
the Secured Party and the Lenders party to the Revolving Credit and Term Loan
Agreement (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement") dated October 31, 1995 among Guest Supply, Inc.,
Guest Packaging, Inc. and Breckenridge-Remy Co., as Borrower, PNC Bank,
National Association and First Fidelity Bank, N.A., as Lenders, and the Secured
Party, as Agent.
W I T N E S S E T H:
-------------------
WHEREAS, all financial accommodations to be made to Guest Supply,
Inc., Guest Packaging, Inc. and Breckenridge-Remy Co., as joint and several
obligors, (collectively, the "Borrower") by the Lenders pursuant to the terms
and conditions of the Credit Agreement are to be secured by, among other
collateral, the assignment, grant and pledge by the Pledgor to the Secured
Party of a continuing security interest in all of the (i) Accounts, (ii)
Contracts and contract rights, (iii) Chattel Paper, (iv) Documents, (v)
Equipment, (vi) General Intangibles, (vii) Instruments, (viii) Inventory and
(ix) Fixtures of the Pledgor, whether now owned or hereafter acquired; and
WHEREAS, one of the conditions precedent to the obligation of the
Lenders to extend the credit facilities described in the Credit Agreement is
that the Pledgor execute and deliver this Security Agreement to the Secured
Party for the benefit of the Secured Party and the Lenders.
NOW, THEREFORE, in consideration of the premises, to induce the
Lenders to extend the credit facilities described in the Credit Agreement and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Pledgor hereby agrees with the Secured Party, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein,
-------------
terms which are defined in the Credit Agreement and used herein are used herein
as defined in the Credit Agreement.
(b) The following terms which are defined in the UCC (as
such term is defined below) on the date hereof
<PAGE>
2
are used herein as so defined: Accounts, Account Debtor, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments,
Inventory, Proceeds and Products.
(c) The following terms shall have the following meanings:
(i) "Collateral" shall have the meaning assigned
----------
to it in Section 2 of this Security Agreement;
(ii) "Contracts" means all contracts to which the
---------
Pledgor is now or hereafter becomes a party, including, in each case, without
limitation, (a) all rights of the Pledgor to receive moneys due and to become
due to it thereunder or in connection therewith, (b) all rights of the Pledgor
to damages arising out of, or for, breach or default in respect thereof, (c)
all rights of the Pledgor to terminate the contracts, to perform thereunder and
to compel performance and to otherwise exercise all remedies thereunder, and
(d) any other rights or benefits arising under any other contract entered into
by the Pledgor; except, in the case of clauses (b), (c) and (d) only to the
extent that, in the case of any contract, the Pledgor's right, title and
interest therein is assignable without consent, or with consent and the consent
of all necessary parties to such contract has been obtained);
(iii) "Material Contract" means any Contract which
-----------------
represents 3% or more of the amount of sales of the Borrower:
(iv) "Security Agreement" means this Security
------------------
Agreement, as amended, supplemented or otherwise modified from time to time;
and
(v) "Obligations" means all indebtedness,
-----------
liabilities and obligations (whether denominated as principal, fees, interest
or otherwise including amounts that, but for the initiation of any proceeding
under any insolvency or bankruptcy law, would become due) of (i) any Person
constituting the Borrower to the Secured Party or any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with the
Credit Agreement or any other Loan Document, and (ii) the Pledgor to the
Secured Party or any Lender whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with this Security Agreement;
<PAGE>
3
(vi) "UCC" means the Uniform Commercial Code as from
time to time in effect in the State of New Jersey; provided, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of any Lien on any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New Jersey, "UCC"
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or the effect of
perfection or non-perfection. References to sections of the UCC shall be
construed as necessary to refer to any successor sections of the UCC.
2. Grant of Security Interest. As collateral security for
--------------------------
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
mortgages, pledges, assigns, hypothecates and grants to the Secured Party, for
the benefit of the Secured Party and the Lenders, a continuing security
interest in all of the following property now owned or at any time hereafter
acquired by the Pledgor or in which the Pledgor now has or at any time in the
future may acquire any right, title or interest (collectively, the
!'Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all General Intangibles, including, without limitation,
all trade secrets, tradenames, copyrights, copyright
applications, patent applications, patents, trademarks,
trademark registrations and applications therefor;
(vi) all Instruments;
(vii) all Equipment;
(viii) all Inventory;
(ix) to the extent not otherwise included in clause (vii) of
this Section 2, all other machinery, apparatus,
equipment, fittings, Fixtures, furniture and
furnishings now or hereafter located
<PAGE>
4
upon the real property described in Schedule C hereto,
or any part thereof, and used or usable in connection
with any future occupancy or use of such property;
(x) any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other
Indebtedness at any time held or owing by the Secured
Party or any Lender to or for the credit or the account
of the Pledgor;
(xi) any and all claims or payments made under any insurance
policy;
(xii) all interest of the Pledgor in any goods the sale or
lease of which shall have given or shall give rise to,
and in all guaranties and other property securing the
payment of or performance under, any Accounts,
Contracts, General Intangibles or any Chattel Paper or
Instruments referred to above;
(xiii) any and all personal property of any Person of any kind
or description subject to a separate mortgage, pledge
or security interest in favor of the Pledgor or in
which the Pledgor now or hereafter has or acquires a
security interest securing any indebtedness, pursuant
to any written agreement or instrument other than this
Security Agreement;
(xiv) all replacements, substitutions, additions or
accessions to or for any of the foregoing;
(xv) to the extent related to the property described above,
all books, correspondence, credit files, records,
invoices and other papers and documents, including,
without limitation, to the extent so related, all
tapes, cards, computer runs, computer programs and
electronic, magnetic or other archival
<PAGE>
5
systems or papers and documents in the possession or
control of the Pledgor or any computer or service
bureau from time to time acting for the Pledgor;
(xvi) all property or interests in property of the Pledgor
which now may be owned or hereafter may come into the
possession, custody or control of the Secured Party or
any Lender, or any agent or affiliate of the Secured
Party or any Lender (whether for safekeeping, deposit,
custody, pledge, transmission, collection or
otherwise), including, without limitation, all rights
and interests of the Pledgor in respect of any and all
(a) notes, drafts, letters of credit, stocks, bonds,
and debt and equity securities, whether or not
certificated, and warrants, options, puts, calls and
other rights to acquire or otherwise relating to the
same, (b) cash, and (c) proceeds of loans, advances and
other financial accommodations, including, without
limitation, loans, advances and other financial
accommodations made or extended under the Loan
Documents; and
(xvii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Rights of Secured Party: Limitations on Secured Party's
--------------------------------------------------------
Obligations.
- -----------
(a) Pledgor Remains Liable under Accounts and
-----------------------------------------
Contracts. Anything herein to the contrary notwithstanding, the Pledgor
- ---------
shall remain liable under each of the Accounts and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account and in accordance with and pursuant to the terms and
provisions of each such Contract. Neither the Secured Party nor any Lender
shall have any obligation or liability under any Account (or any agreement
giving rise thereto) or Contract by reason of or arising out of this Security
Agreement or the receipt by the Secured Party or any Lender of any payment
relating to such Account or Contract pursuant hereto, nor shall the Secured
Party or any Lender be obligated in any manner to perform
<PAGE>
6
any of the obligations of the Pledgor under or pursuant to any Account (or any
agreement giving rise thereto) or under or pursuant to any Contract, to make
any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by any of them or as to the sufficiency of any performance by
any party under any Account (or any agreement giving rise thereto) or under any
Contract, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to them or to which they may be entitled at any time or times.
(b) Notice to Account Debtors and Contracting
-----------------------------------------
Parties. After the occurrence and during the continuance of an Event of
- -------
Default, upon the request of the Secured Party at any time, the Pledgor shall
notify Account debtors on the Accounts and the parties to the Contracts that
the Accounts and the Contracts have been assigned to the Secured Party and that
payments in respect thereof shall be made directly to the Secured Party. After
the occurrence and during the continuance of an Event of Default, the Secured
Party may, at any time in its own name or in the names of others communicate
with Account debtors on the Accounts and the parties to the Contracts to verify
with them to its satisfaction the existence, amount and terms of any Accounts
or Contracts. The costs relating to the foregoing matters, including
reasonable attorneys' fees and out of pocket expenses shall be borne solely by
the Pledgor whether incurred by the Secured Party or the Pledgor.
(c) Analysis of Accounts. Upon reasonable notice to
--------------------
the Pledgor, the Secured Party shall have the right to make test verifications
of the Accounts in any manner and through any medium that it reasonably
considers advisable, and the Pledgor shall furnish all such assistance and
information as the Secured Party may require in connection therewith; provided,
however, that, prior to the occurrence and continuance of an Event of Default,
Secured Party shall obtain Pledgor's written consent (which shall not be
unreasonably withheld or delayed) prior to communicating with Account Debtors.
At any time and from time to time, upon the Secured Party's request and at the
expense of the Pledgor, the Pledgor shall furnish to the Secured Party reports
showing reconciliations, aging and test verifications of, and trial balances
for. the Accounts.
4. Representations and Warranties. The Pledgor hereby
------------------------------
represents and warrants that:
(a) Title: No Other Liens. The Pledgor has good and
---------------------
marketable title to the Collateral, subject only to
<PAGE>
7
Liens permitted by the Credit Agreement (hereinafter, the "Permitted
Encumbrances"). Other than with respect to Permitted Encumbrances, no security
agreement, financing statement or other public notice with respect to all or
any part of the Collateral is on file or of record in any public office except
such as may have been filed pursuant to the Credit Agreement or as to which
UCC-3 termination statements have been received and filed or which have expired
and not been renewed.
(b) Perfected First Priority Liens. When appropriate
------------------------------
financing statements have been filed by the Secured Party in the jurisdictions
listed on Schedule A hereto against the Pledgor, the Liens granted pursuant to
this Security Agreement will constitute perfected Liens (to the extent such
Liens can be perfected by filing) on the Collateral in favor of the Secured
Party, which are prior to all other Liens on the Collateral and in existence on
the date hereof other than Permitted Encumbrances, and which are enforceable as
such against all creditors of the Pledgor.
(c) Accounts. The amount represented by the Pledgor to
--------
the Secured Party from time to time as owing by each Account Debtor or by all
Account Debtors in respect of the Accounts will at such time be the correct
amount actually owing by such Account Debtor or Debtors thereunder. The
place(s) where the Pledgor keeps its books and records concerning the Accounts
is as set forth on Schedule B hereto.
(d) Contracts. No consent of any Person (other than
---------
the Pledgor), including, without limitation, any Governmental Authority, to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Security Agreement. To the best
knowledge of the Pledgor each Contract is in full force and effect and
constitutes a valid and legally enforceable obligation of the parties thereto,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting that enforcement of
creditor's rights generally. No consent or authorization of, filing with or
other act by or in respect of any Governmental Authority is required in
connection with the execution, delivery, performance, validity or
enforceability of any of the Contracts by any party thereto other than those
which have been duly obtained, made or performed, are in full force and effect
and do not subject the scope of any such Contract to any adverse limitation,
either specific or general in nature. Neither the Pledgor nor (to the best of
the Pledgor's knowledge) any other party to any Contract is in default or is
likely to become in default in the
<PAGE>
8
performance or observance of any of the terms thereof. The Pledgor has fully
performed all its obligations under each Contract required to be performed as
of the date hereof. To the best knowledge of the Pledgor the right, title and
interest of the Pledgor in, to and under each Contract are not subject to any
defense, offset, counterclaim or claim which would materially adversely affect
the value of such Contract as Collateral, nor have any of the foregoing been
asserted or alleged against the Pledgor as to any Contract. The Pledgor has
delivered to the Secured Party a complete and correct copy of each Material
Contract, including all amendments, supplements and other modifications
thereto.
(e) Inventory and Equipment. The Inventory and
-----------------------
Equipment is kept, from time to time, at the locations listed on Schedule C
hereto.
(f) Chief Executive Office. The Pledgor's chief
----------------------
executive office is as set forth on Schedule B annexed hereto.
(g) Other Places of Business. The Pledgor's other
------------------------
places of business are as set forth on Schedule B annexed hereto, and if no
other places of business are set forth on Schedule B then Pledgor has no other
place of business other than its chief executive office as set forth in Section
4(f) above.
(h) Trade Names. Certain Accounts may be and/or
-----------
certain of the Pledgor's invoices may be, from time to time, rendered to
customers under the trade names listed on Schedule B (which together with any
new trade names used after the date hereof are referred to collectively, as the
"Trade Names" and each individually, as a "Trade Name"). As to such Trade
-----------
Names and the related Accounts, the Pledgor hereby warrants and agrees that:
(i) each Trade Name is a trade name and style (and
not the name of an independent corporation or other legal entity) by which the
Pledgor may identify and sell certain of its goods or services and conduct a
portion of its business and Pledgor has filed or made all public or other
notices in any jurisdiction required to lawfully operate under such Trade
Names;
(ii) all Accounts, Chattel Paper, Instruments and
Proceeds thereof and returned merchandise which arise from the sale of goods
invoiced under the Trade Names are and shall be (x) owned solely by the Pledgor
and (y) subject to the security interest and other terms of this Security
Agreement;
<PAGE>
9
(iii) new Trade Names may only be used by the Pledgor
after the Secured Party is given fifteen (15) days prior written notice of the
use of any such new Trade Name, which notice shall set forth the name of such
new Trade Name; and
(iv) the Pledgor does not use any Trade Name other
than the Trade Names listed on Schedule B hereto.
(i) Rolling Stock. The Pledgor does not own any
-------------
railroad cars, locomotives or other rolling stock used or intended for use in
interstate commerce.
(j) Patents Trademarks. Copyrights. Except as set
-------------------------------
forth on Schedule D, the Pledgor does not own, license or have rights in or to
any trademark, patent or copyright and has not filed and is not in the process
of filing any application with any Governmental Authority to obtain any of the
foregoing. Except as set forth on Schedule D, the Pledgor does not need or
require a license or right to use any patent, copyright, trademark or service
mark to conduct its business.
5. Covenants. The Pledgor covenants and agrees that, from
---------
and after the date of this Security Agreement until the Obligations are paid in
full:
(a) Further Documentation; Pledge of Instruments and
----
Chattel Paper. At any time and from time to time, upon the written request
- -------------
of the Secured Party and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents
and take such further action as the Secured Party may reasonably request for
the purpose of obtaining or preserving the full benefits of this Security
Agreement and the rights and powers herein granted, including, without
limitation, the filing of documents with the Office of Patents and Trademarks
and the filing of any financing or continuation statements under the UCC in
effect in any jurisdiction with respect to the Liens created hereby. The
Pledgor also hereby authorizes the Secured Party, or any agent acting for the
benefit and on behalf of the Secured Party to file any such financing or
continuation statement without the signature of the Pledgor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any Instrument or Chattel Paper,
such Instrument or Chattel Paper shall, after the occurrence and during the
continuance of an Event of
<PAGE>
10
Default, be immediately delivered to the Secured Party, duly endorsed in a
manner satisfactory to the Secured Party to be held as Collateral pursuant to
this Security Agreement.
(b) Indemnification. The Pledgor agrees to pay, and to
---------------
save the Secured Party harmless from, any and all liabilities, costs and
expenses (including without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any Requirement of Law applicable to any of the
Collateral, (iii) with respect to fees, taxes or other costs incurred with
respect to recording UCC financing statements or other public recordings or
notices of security interests, or (iv) in connection with any of the
transactions contemplated by this Security Agreement or the enforcement of the
Secured Party's rights hereunder, except those liabilities, costs and expenses
arising out of the Secured Party's gross negligence or willful misconduct. In
any suit, proceeding or action brought by the Secured Party under any Account
for any sum owing thereunder or to enforce any provisions of any Account or
Contract the Pledgor will save, indemnify and keep the Secured Party harmless
from and against all expense, loss or damage suffered by the Secured Party in
such action commenced in connection with the enforcement of any provision of
any Account or Contract except for expenses, loss or damage arising out of the
gross negligence or willful misconduct of the Secured Party.
(c) Maintenance of Records. The Pledgor will keep and
----------------------
maintain at its own cost and expense, complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral. The Pledgor will mark its
books and records pertaining to the Collateral to evidence this Security
Agreement and the security interests granted hereby. For the Secured Party's
further security, the Secured Party shall have a security interest in all of
the Pledgor's books and records pertaining to the Collateral. Upon reasonable
notice from Secured Party to Pledgor prior to an Event of Default and upon
demand thereafter, the Pledgor shall make available all such books and records
to the Secured Party or to its representatives during normal business hours at
the request of the Secured Party.
(d) Right of Inspection. The Secured Party and the
-------------------
Lenders shall at all times have full and free access during normal business
hours, upon reasonable prior notice, to all the books, correspondence and
records of the Pledgor
<PAGE>
11
and the Secured Party or its representatives may examine the same and make
photocopies thereof, and the Pledgor agrees to render to the Secured Party such
clerical and other assistance as may be reasonably requested with regard
thereto. The Secured Party and the Lenders shall also have the right, during
normal business hours, to enter into and upon any premises where any of the
Inventory is located for the purpose of inspecting the same, observing its use
or otherwise protecting its interests therein.
(e) Compliance with Laws. etc. The Pledgor will comply
--------------------------
with all Requirements of Law applicable to the Collateral or any part thereof.
(f) Compliance with Terms of Contracts etc. The
----------------------------------------
Pledgor will perform and comply in all material respects with all its
obligations under any agreements, documents and other instruments relating to
the Collateral except where the failure to so perform will not have a Material
Adverse Effect.
(g) Payment of Obligations. The Pledgor will pay, as
----------------------
the same become due, all obligations (including without limitation, any and all
lease obligations and warehouse charges), taxes and governmental fees, charges
or levies imposed upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral; provided, that it may protest the payment of, and withhold payment
during such protest of, any such obligations, taxes, fees, charges or levies or
claims if it is acting in good faith and reserves in conformity with GAAP with
respect thereto have been provided on its books unless such protest violates
Section 5(h) below.
(h) Limitation on Liens on Collateral. The Pledgor
---------------------------------
will not create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is necessary to remove, any Lien or claim on
or to the Collateral, other than the Liens created hereby and Permitted
Encumbrances and will defend the right, title and interest of the Secured Party
in and to any of the Collateral against the claims and demands of all Persons
whomsoever except Persons claiming under this Security Agreement.
(i) Limitations on Dispositions of Collateral. Except
-----------------------------------------
for disposal of obsolete items, the Pledgor will not sell, transfer, lease or
otherwise dispose
<PAGE>
12
of any Collateral, except as permitted by the Credit Agreement.
(j) Limitations on Modifications Waivers and
-----------------------------------------
Extensions of Contracts and Agreements Giving Rise to Accounts. The Pledgor
- --------------------------------------------------------------
will not (i) amend, modify, terminate or waive any provision of any Contract or
any agreement giving rise to an Account in any manner which could reasonably be
expected to materially adversely affect the value of such Contract or Account
as Collateral, (ii) fail to exercise promptly and diligently each and every
right which it may have under each Contract, or agreement giving rise to an
Account or (iii) fail to deliver to the Secured Party a copy of each material
demand, notice or document received by it relating in any way to any Material
Contract or any agreement constituting a Material Contract.
(k) Limitation on Discounts. Compromises and
----------------------------------------
Extensions of Accounts and Contracts. Other than in the ordinary course of
- ------------------------------------
business as generally conducted by the Pledgor over a period of time, and in
any event, after the occurrence and during the continuance of an Event of
Default, the Pledgor will not grant any extension of the time of payment of any
of the Accounts or payments of any amounts due under any Contract, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
(l) Maintenance of Equipment. The Pledgor will
------------------------
maintain each item of Equipment in good operating condition, ordinary wear and
tear and immaterial impairments of value and damage by the elements excepted,
and will provide all maintenance, service and repairs necessary for such
purpose.
(m) Maintenance of Insurance. The Pledgor will
------------------------
maintain, with financially sound and reputable companies, insurance policies
(i) insuring the Inventory and Equipment against loss by fire, explosion,
theft, such other casualties as may be reasonably satisfactory to the Secured
Party and (ii) insuring the Pledgor and the Secured Party against liability for
personal injury and property damage relating to such Inventory and Equipment,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Secured Party, with losses payable to the
Pledgor and the Secured Party, provided, that with the written consent of the
Secured Party all payments to be made to the Secured Party under such policies
may be used to repair or replace damaged or destroyed Inventory or
<PAGE>
13
Equipment. The Secured Party shall be provided all evidence and documents
necessary to demonstrate the use of such insurance proceeds. All such
insurance shall (i) provide that no cancellation, material reduction in amount
or material change in coverage thereof shall be effective until at least 15
days after receipt by the Secured Party of written notice thereof, (ii) name
the Secured Party as loss payee, (iii) provide that the Secured Party shall
have the right, but not the obligation, to pay premiums thereon, and (iv) be
reasonably satisfactory in all other respects to the Secured Party. Upon the
request of the Secured Party, the Pledgor shall deliver to the Secured Party a
report of a reputable insurance broker with respect to such insurance during
each calendar year and such supplemental reports with respect thereto as the
Secured Party may from time to time reasonably request.
(n) Further Identification of Collateral. The Pledgor
------------------------------------
will furnish to the Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may reasonably request, all
in reasonable detail.
(o) Notices. The Pledgor will advise the Secured Party
-------
promptly, in reasonable detail, by written notice (i) of any Lien (other than
Liens created or permitted hereby) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which could reasonably
be expected to have any material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder.
(p) Changes in Locations. Name. etc. The Pledgor will
-------------------------------
not (i) change the location of its chief executive office or other places of
business from that specified in Sections 4(f) and 4(g), respectively, or remove
its books and records from the location specified in Section 4(c), (ii) permit
any of the Inventory to be kept at a location other than that listed in
Schedule C hereto, or (iii) change its name, taxpayer identification number,
identity or corporate structure to such an extent that any financing statement
filed by the Secured Party, or any agent acting for the benefit and on behalf
of the Secured Party, in connection with this Security Agreement would become
misleading, unless it shall have given the Secured Party at least 30 days prior
written notice thereof.
(q) Limitation on Assignments. Pledgor will not,
-------------------------
without the consent of Secured Party, agree to any provision in any Contract or
other agreement constituting
<PAGE>
14
Collateral, which purports (or is so broad in scope so as) to limit Pledgor's
rights to pledge or assign the right to payment of monies due or to become due
thereunder.
6. Appointment as Attorney-in-Fact.
-------------------------------
(a) Powers. The Pledgor hereby irrevocably constitutes
------
and appoints the Secured Party, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Pledgor and in the name of the Pledgor or in its own
name, from time to time in the Secured Party's discretion, for the purpose of
carrying out the terms of this Security Agreement, to execute UCC-1 Financing
Statements in the Pledgor's name as debtor and, upon the occurrence and during
the continuance of any Event of Default, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement, and without
limiting the generality of the foregoing, the Pledgor hereby gives the Secured
Party the power and right (but not the obligation), on behalf of the Pledgor,
without notice to or assent by the Pledgor, to do the following:
(i) in the case of any Collateral, at any time when
any Event of Default shall have occurred and be continuing, in the name of the
Pledgor or its own name, or otherwise, to open mail addressed to the Pledgor,
to take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, General Intangible or Contract or contract right or with
respect to any other Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Secured Party for the purpose of collecting any and all such
moneys due under any such Account, Instrument, General Intangible or contract
right or with respect to any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Security Agreement and to pay all or
any part of the premiums therefor and the costs thereof; and
(iii) upon the occurrence and during the continuance of
any Event of Default, (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party; (B) to ask or
<PAGE>
15
demand for, collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of-the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action or proceeding brought against
the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust
any suit, action or proceeding described in clause (E) above and in connection
therewith, to give such discharges or releases as the Secured Party may deem
appropriate; and (G) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party was the absolute owner thereof for
all purposes, and to do at the Secured Party's option and the Pledgor's
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve or realize upon the
Collateral and the Liens granted hereunder and to effect the intent of this
Security Agreement, all as fully and effectively as the Pledgor might do.
The Pledgor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Pledgor also authorizes the
------------
Secured Party, at any time and from time to time, to execute, in connection
with the sale provided for in Section 9 hereof, any endorsements, assignments
or other instruments of conveyance or transfer with respect to the Collateral.
(c) No DutY on Secured Party's Part. The powers
-------------------------------
conferred on the Secured Party hereunder are solely to protect its interests in
the Collateral and shall not impose any duty upon the Secured Party to exercise
any such powers. The Secured Party shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers. None of the
Secured Party's officers, directors, employees or agents shall be responsible
to the Pledgor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
<PAGE>
16
(d) Trademarks and Licenses. The Pledgor further
-----------------------
grants to the Secured Party an irrevocable, non-exclusive license at no charge
to use the trademarks, patents, copyrights and licenses used in connection with
the sale of goods including, without limitation, those listed on Schedule D
annexed hereto associated with the Collateral in connection with any
foreclosure or liquidation together with the right to grant a nonexclusive
sublicense without charge to any buyer of such Collateral for the purpose of
resale. All such licenses and rights to sublicense include all computer
programs, and other Collateral used in connection with such trademarks.
7. Performance by Secured Party of Pledgor's
-----------------------------------------
Obligations. If the Pledgor fails to perform or comply with any of its
- -----------
agreements contained herein and the Secured Party shall perform or comply, or
otherwise cause performance or compliance, with such agreement, the expenses of
the Secured Party incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to the highest
interest rate prescribed in the Credit Agreement, shall be payable by the
Pledgor to the Secured Party on demand and shall constitute Obligations secured
hereby.
8. Proceeds. It is agreed that if an Event of Default shall
--------
occur and be continuing (a) all proceeds of Collateral received by the Pledgor
consisting of cash, checks and cash equivalents shall be held by the Pledgor in
trust for the Secured Party segregated from other funds of the Pledgor, and
shall, forthwith upon receipt by the Pledgor, be turned over to the Secured
Party in the exact form received by the Pledgor (duly endorsed by the Pledgor
to the Secured Party, if required), and (b) any and all such proceeds of
Collateral received by the Secured Party (whether from the Pledgor or
otherwise) may, in the sole discretion of the Secured Party, be held by the
Secured Party as collateral security for, and/or then or at any time thereafter
may be applied by the Secured Party against, the Obligations then due and
payable, such application to be in such order as the Secured Party shall elect.
Any balance of such proceeds remaining after the Obligations shall have been
paid in full shall be paid over to the Pledgor or to whomsoever may be lawfully
entitled to receive the same.
9. Remedies. If an Event of Default shall occur and be
--------
continuing, the Secured Party may exercise, in addition to all other rights and
remedies granted to the Secured Party in this Security Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party
<PAGE>
17
under the UCC or any other applicable laws. Without limiting the generality of
the foregoing, the Secured Party, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law) to or upon the Pledgor or any other Person (all and
each of which demands, presentments, protests, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do
any of the foregoing) in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of the Secured Party or
elsewhere upon such terms and conditions as they may deem advisable and at such
prices as they may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Secured Party shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold. The Pledgor further agrees, at the Secured Party's
request, to assemble the Collateral and make it available to the Secured Party
at places which the Secured Party shall reasonably select, whether at the
Pledgor's premises or elsewhere. The Secured Party shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Secured Party hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Secured Party may elect, and only after such application
and after the payment to the Secured Party of any other amount required by any
provision of law, including, without limitation, any provision of the UCC, need
the Secured Party account for the surplus, if any, to the Pledgor. To the
extent permitted by applicable law, the Pledgor waives all claims, damages and
demands it may acquire against the Secured Party arising out of the exercise by
the Secured Party of any of its rights hereunder except any arising out of its
gross negligence or willful misconduct. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice . shall
be deemed reasonable and proper if given at least 10 days before such sale or
other disposition. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay the Obligations and the reasonable
<PAGE>
18
fees and disbursements of any attorneys employed by the Secured Party to
collect such deficiency.
10. Limitation on Duties Regarding Preservation of
----------------------------------------------
Collateral. The Secured Party's sole duty with respect to the custody,
- ----------
safekeeping and physical preservation of the Collateral in its possession,
under the UCC or otherwise, shall be to deal with it in the same manner as the
Secured Party deals with similar property for its own account. Neither the
Secured Party nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of the Pledgor or
otherwise.
11. Powers CouPled with an Interest. All authorizations and
-------------------------------
agencies herein contained with respect to the Collateral are coupled with an
interest and are irrevocable.
12. Severability. Any provision of this Security 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
13. Section Headings. The section headings used in this
----------------
Security Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interPretation
hereof.
14. No Waiver: Cumulative Remedies. The Secured Party shall
------------------------------
not by any act (except by a written instrument pursuant to Section 15 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Event of Default or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Secured Party, of any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided
<PAGE>
19
are cumulative, may be exercised singly or concurrently and are not exclusive
of any rights or remedies provided by law.
15. Waivers and Amendments: Successors and Assigns; Governing
----------------------------------------------------------
Law. (a) None of the terms or provisions of this Security Agreement may be
- ---
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Secured Party.
(b) This Security Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Secured Party, the Lenders and their respective successors and assigns. This
Security Agreement shall be governed by, and be construed and interpreted in
accordance with, the laws of the State of New Jersey (without regard to
conflicts of law principles thereof), except to the extent that the validity,
perfection or enforcement of the security interests hereunder, or remedies
hereunder, in respect of any particular Collateral located outside the
boundaries of the State of New Jersey are governed by the laws of a
jurisdiction other than the State of New Jersey.
16. Notices. Notices hereunder may be given as provided in
-------
the Credit Agreement and the Pledgor agrees to be bound by the notice
provisions of the Credit Agreement.
17. Jurisdiction. The Pledgor hereby irrevocably submits to
------------
the jurisdiction of any court of the State of New Jersey or Federal court
sitting in the State of New Jersey in any action or proceeding arising out of
or relating to this Agreement and the Pledgor hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such court of the State of New Jersey, or to the extent permitted by law, in
such Federal court. The Pledgor hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Pledgor also irrevocably
consents to the service of any and all process in any such action or proceeding
arising out of or in connection with this Agreement by the mailing of copies of
such process to the Pledgor at the address and in the manner specified in
Section 16 hereof. The Pledgor agrees that a final and non-appealable judgment
(or a judgment whose time to appeal has expired) in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. THE PLEDGOR AND
SECURED PARTY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING
ANY COUNTERCLAIM) IN ANY
<PAGE>
20
COURT ARISING ON, OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY
AMENDMENT OR SUPPLEMENT HERETO OR THERETO OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
18. Pledge and Assignment Absolute. All rights of the
------------------------------
Secured Party, the pledge and assignment hereunder and all obligations of the
Pledgor hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, any other document or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations or any other
amendment or waiver of or any consent to any departure from the
Credit Agreement;
(iii) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to
departure from this Agreement or any other Collateral Document; or
(iv) any other circumstance that might otherwise constitute
a defense available to, or a discharge of, the Pledgor.
19. Indemnity and Expenses. (a) The Pledgor agrees to
----------------------
indemnify the Secured Party from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from the Secured Party's gross negligence or willful
misconduct.
(b) The Pledgor will upon demand pay to the Secured Party
the amount of any and all reasonable expenses, including, without limitation,
the reasonable fees and disbursements of its counsel and of any experts and
agents, which the Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, or use 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.
<PAGE>
21
IN WITNESS WHEREOF, the Pledgor has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
GUEST PACKAGING, INC.
[corporate seal]
By:___________________________
Name:
Title:
<PAGE>
CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF NEW JERSEY )
: ss.:
COUNTY OF MIDDLESEX )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 31st day of October 1995, personally appeared Paul Xenis to
me known personally, and who, being by me duly sworn, deposes and says that he
is the Assistant Secretary of Guest Packaging, Inc. and that the seal affixed
to the foregoing instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said Paul Xenis acknowledged said
instrument to be the free act and deed of said corporation.
______________________________
Notary Public
<PAGE>
Guest Packaging, Inc.
Schedules to Security Agreement
<PAGE>
Schedule A
Jurisdictions for Filing UCC-1's
--------------------------------
Secretary of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue
Rahway, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(5B Terminal Way
Avenel, NJ)
<PAGE>
Schedule B
----------
a) Location of Pledgor's books and records concerning Accounts:
720 U.S. Highway One
North Brunswick, NJ 08902
b) Location of Pledgor's chief executive office:
720 U.S. Highway One
North Brunswick, NJ 08902
c) Location of Pledgor's other places of business:
5A, 5B & 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
d) List of tradenames:
None .
<PAGE>
Schedule C
----------
Location(s) of the Pledgor's Inventory:
5A, 5B and 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
720 U.S. Highway One
North Brunswick, New Jersey 08902
Locations of Equipment:
5A, 5B & 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
720 U.S. Highway One
North Brunswick, New Jersey 08902
<PAGE>
Schedule D
----------
Trademarks, Patents, Copyrights, License Agreements:
None.
<PAGE>
EXHIBIT 10(t)
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT, dated October 31, 1995, is made by
Breckenridge-Remy Co., a Delaware corporation (the "Pledgor"), in favor of PNC
Bank, National Association (the "Secured Party") as agent for the benefit of
the Secured Party and the Lenders party to the Revolving Credit and Term Loan
Agreement (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement") dated October 31, 1995 among Guest Supply, Inc.,
Guest Packaging, Inc. and Breckenridge-Remy Co., as Borrower, PNC Bank,
National Association and First Fidelity Bank, N.A., as Lenders, and the Secured
Party, as Agent.
W I T N E S S E T H:
-------------------
WHEREAS, all financial accommodations to be made to Guest Supply,
Inc., Guest Packaging, Inc. and Breckenridge-Remy Co., as joint and several
obligors, (collectively, the "Borrower") by the Lenders pursuant to the terms
and conditions of the Credit Agreement are to be secured by, among other
collateral, the assignment, grant and pledge by the Pledgor to the Secured
Party of a continuing security interest in all of the (i) Accounts, (ii)
Contracts and contract rights, (iii) Chattel Paper, (iv) Documents, (v)
Equipment, (vi) General Intangibles, (vii) Instruments, (viii) Inventory and
(ix) Fixtures of the Pledgor, whether now owned or hereafter acquired; and
WHEREAS, one of the conditions precedent to the obligation of the
Lenders to extend the credit facilities described in the Credit Agreement is
that the Pledgor execute and deliver this Security Agreement to the Secured
Party for the benefit of the Secured Party and the Lenders.
NOW, THEREFORE, in consideration of the premises, to induce the
Lenders to extend the credit facilities described in the Credit Agreement and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Pledgor hereby agrees with the Secured Party, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein,
-------------
terms which are defined in the Credit Agreement and used herein are used herein
as defined in the Credit Agreement.
(b) The following terms which are defined in the UCC (as
such term is defined below) on the date hereof
<PAGE>
2
are used herein as so defined: Accounts, Account Debtor, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments,
Inventory, Proceeds and Products.
(c) The following terms shall have the following meanings:
(i) "Collateral" shall have the meaning assigned
----------
to it in Section 2 of this Security Agreement;
(ii) "Contracts" means all contracts to which the
---------
Pledgor is now or hereafter becomes a party, including, in each case, without
limitation, (a) all rights of the Pledgor to receive moneys due and to become
due to it thereunder or in connection therewith, (b) all rights of the Pledgor
to damages arising out of, or for, breach or default in respect thereof, (c)
all rights of the Pledgor to terminate the contracts, to perform thereunder and
to compel performance and to otherwise exercise all remedies thereunder, and
(d) any other rights or benefits arising under any other contract entered into
by the Pledgor; except, in the case of clauses (b), (c) and (d) only to the
extent that, in the case of any contract, the Pledgor's right, title and
interest therein is assignable without consent, or with consent and the consent
of all necessary parties to such contract has been obtained);
(iii) "Material Contract" means any Contract which
-----------------
represents 3~ or more of the amount of sales of the Borrower;
(iv) "Security Agreement" means this Security
------------------
Agreement, as amended, supplemented or otherwise modified from time to time:
and
(v) "Obligations" means all indebtedness,
-----------
liabilities and obligations (whether denominated as principal, fees, interest
or otherwise including amounts that, but for the initiation of any proceeding
under any insolvency or bankruptcy law, would become due) of (i) any Person
constituting the Borrower to the Secured Party or any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with the
Credit Agreement or any other Loan Document, and (ii) the Pledgor to the
Secured Party or any Lender whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with this Security Agreement;
<PAGE>
3
(vi) "UCC" means the Uniform Commercial Code as from
time to time in effect in the State of New Jersey; provided, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of any Lien on any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New Jersey, "UCC"
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or the effect of
perfection or non-perfection. References to sections of the UCC shall be
construed as necessary to refer to any successor sections of the UCC.
2. Grant of Security Interest. As collateral security for
--------------------------
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
mortgages, pledges, assigns, hypothecates and grants to the Secured Party, for
the benefit of the Secured Party and the Lenders, a continuing security
interest in all of the following property now owned or at any time hereafter
acquired by the Pledgor or in which the Pledgor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"):
----------
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all General Intangibles, including, without limitation,
all trade secrets, tradenames, copyrights, copyright
applications, patent applications, patents, trademarks,
trademark registrations and applications therefor;
(vi) all Instruments;
(vii) all Equipment;
(viii) all Inventory;
(ix) to the extent not otherwise included in clause (vii) of
this Section 2, all other machinery, apparatus,
equipment, fittings, Fixtures, furniture and
furnishings now or hereafter located
<PAGE>
4
upon the real property described in Schedule C hereto,
or any part thereof, and used or usable in connection
with any future occupancy or use of such property;
(x) any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other
Indebtedness at any time held or owing by the Secured
Party or any Lender to or for the credit or the account
of the Pledgor;
(xi) any and all claims or payments made under any insurance
policy;
(xii) all interest of the Pledgor in any goods the sale or
lease of which shall have given or shall give rise to,
and in all guaranties and other property securing the
payment of or performance under, any Accounts,
Contracts, General Intangibles or any Chattel Paper or
-Instruments referred to above;
(xiii) any and all personal property of any Person of any kind
or description subject to a separate mortgage, pledge
or security interest in favor of the Pledgor or in
which the Pledgor now or hereafter has or acquires a
security interest securing any indebtedness, pursuant
to any written agreement or instrument other than this
Security Agreement;
(xiv) all replacements, substitutions, additions or
accessions to or for any of the foregoing;
(xv) to the extent related to the property described above,
all books, correspondence, credit files, records,
invoices and other papers and documents, including,
without limitation, to the extent so related, all
tapes, cards, computer runs, computer programs and
electronic, magnetic or other archival
<PAGE>
5
systems or papers and documents in the possession or
control of the Pledgor or any computer or service
bureau from time to time acting for the Pledgor;
(xvi) all property or interests in property of the Pledgor
which now may be owned or hereafter may come into the
possession, custody or control of the Secured Party or
any Lender, or any agent or affiliate of the Secured
Party or any Lender (whether for safekeeping, deposit,
custody, pledge, transmission, collection or
otherwise), including, without limitation, all rights
and interests of the Pledgor in respect of any and all
(a) notes, drafts, letters of credit, stocks, bonds,
and debt and equity securities, whether or not
certificated, and warrants, options, puts, calls and
other rights to acquire or otherwise relating to the
same, (b) cash, and (c) proceeds of loans, advances and
other financial accommodations, including, without
limitation, loans, advances and other financial
accommodations made or extended under the Loan
Documents; and
(xvii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Rights of Secured Party: Limitations on Secured Party's
--------------------------------------------------------
Obligations.
- -----------
(a) Pledgor Remains Liable under Accounts and
-----------------------------------------
Contracts. Anything herein to the contrary notwithstanding, the Pledgor
- ---------
shall remain liable under each of the Accounts and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account and in accordance with and pursuant to the terms and
provisions of each such Contract. Neither the Secured Party nor any Lender
shall have any obligation or liability under any Account (or any agreement
giving rise thereto) or Contract by reason of or arising out of this Security
Agreement or the receipt by the Secured Party or any Lender of any payment
relating to such Account or Contract pursuant hereto, nor shall the Secured
Party or any Lender be obligated in any manner to perform
<PAGE>
6
any of the obligations of the Pledgor under or pursuant to any Account (or any
agreement giving rise thereto) or under or pursuant to any Contract, to make
any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by any of them or as to the sufficiency of any performance by
any party under any Account (or any agreement giving rise thereto) or under any
Contract, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to them or to which they may be entitled at any time or times.
(b) Notice to Account Debtors and Contracting
-----------------------------------------
Parties. After the occurrence and during the continuance of an Event of
- -------
Default, upon the request of the Secured Party at any time, the Pledgor shall
notify Account debtors on the Accounts and the parties to the Contracts that
the Accounts and the ContraCtS have been assigned to the Secured Party and that
payments in respect thereof shall be made directly to the Secured Party. After
the occurrence and during the continuance of an Event of Default, the Secured
Party may, at any time in its own name or in the names of others communicate
with Account debtors on the Accounts and the parties to the Contracts to verify
with them to its satisfaction the existence, amount and terms of any Accounts
or Contracts. The costs relating to the foregoing matters, including
reasonable attorneys' fees and out of pocket expenses shall be borne solely by
the Pledgor whether incurred by the Secured Party or the Pledgor.
(c) AnalYsis of Accounts. Upon reasonable notice to
--------------------
the Pledgor, the Secured Party shall have the right to make test verifications
of the Accounts in any manner and through any medium that it reasonably
considers advisable, and the Pledgor shall furnish all such assistance and
information as the Secured Party may require in connection therewith; provided,
however, that, prior to the occurrence and continuance of an Event of Default,
Secured Party shall obtain Pledgor's written consent (which shall not be
unreasonably withheld or delayed) prior to communicating with Account Debtors.
At any time and from time to time, upon the Secured Party's request and at the
expense of the Pledgor, the Pledgor shall furnish to the Secured Party reports
showing reconciliations, aging and test verifications of, and trial balances
for, the Accounts.
4. RePresentations and Warranties. The Pledgor hereby
------------------------------
represents and warrants that:
(a) Title; No Other Liens. The Pledgor has good and
---------------------
marketable title to the Collateral, subject only to
<PAGE>
7
Liens permitted by the Credit Agreement (hereinafter, the "Permitted
Encumbrances"). Other than with respect to Permitted Encumbrances, no security
agreement, financing statement or other public notice with respect to all or
any part of the Collateral is on file or of record in any public office except
such as may have been filed pursuant to the Credit Agreement or as to which
UCC-3 termination statements have been received and filed or which have expired
and not been renewed.
(b) Perfected First PrioritY Liens. When appropriate
------------------------------
financing statements have been filed by the Secured Party in the jurisdictions
listed on Schedule A hereto against the Pledgor, the Liens granted pursuant to
this Security Agreement will constitute perfected Liens (to the extent such
Liens can be perfected by filing) on the Collateral in favor of the Secured
Party, which are prior to all other Liens on the Collateral and in existence on
the date hereof other than Permitted Encumbrances, and which are enforceable as
such against all creditors of the Pledgor.
(c) Accounts. The amount represented by the Pledgor to
--------
the Secured Party from time to time as owing by each Account Debtor or by all
Account Debtors in respect of the Accounts will at such time be the correct
amount actually owing by such Account Debtor or Debtors thereunder. The
place(s) where the Pledgor keeps its books and records concerning the Accounts
is as set forth on Schedule B hereto.
(d) Contracts. No consent of any Person (other than
---------
the Pledgor), including, without limitation, any Governmental Authority, to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Security Agreement. To the best
knowledge of the Pledgor each Contract is in full force and effect and
constitutes a valid and legally enforceable obligation of the parties thereto,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting that enforcement of
creditor's rights generally. No consent or authorization of, filing with or
other act by or in respect of any Governmental Authority is required in
connection with the execution, delivery, performance, validity or
enforceability of any of the Contracts by any party thereto other than those
which have been duly obtained, made or performed, are in full force and effect
and do not subject the scope of any such Contract to any adverse limitation,
either specific or general in nature. Neither the Pledgor nor (to the best of
the Pledgor's knowledge) any other party to any Contract is in default or is
likely to become in default in the
<PAGE>
8
performance or observance of any of the terms thereof. The Pledgor has fully
performed all its obligations under each Contract required to be performed as
of the date hereof. To the best knowledge of the Pledgor the right, title and
interest of the Pledgor in, to and under each Contract are not subject to any
defense, offset, counterclaim or claim which would materially adversely affect
the value of such Contract as Collateral, nor have any of the foregoing been
asserted or alleged against the Pledgor as to any Contract. The Pledgor has
delivered to the Secured Party a complete and correct copy of each Material
Contract, including all amendments, supplements and other modifications
thereto.
(e) InventorY and Equipment. The Inventory and
-----------------------
Equipment is kept, from time to time, at the locations listed on Schedule C
hereto.
(f) Chief Executive Office. The Pledgor's chief
----------------------
executive office is as set forth on Schedule B annexed hereto.
(g) Other Places of Business. The Pledgor's other
------------------------
places of business are as set forth on Schedule B annexed hereto, and if no
other places of business are set forth on Schedule B then Pledgor has no other
place of business other than its chief executive office as set forth in Section
4(f) above.
(h) Trade Names. Certain Accounts may be and/or
-----------
certain of the Pledgor's invoices may be, from time to time, rendered to
customers under the trade names listed on Schedule B (which together with any
new trade names used after the date hereof are referred to collectively, as the
"Trade Names" and each individually, as a "Trade Name"). As to such Trade
-----------
Names and the related Accounts, the Pledgor hereby warrants and agrees that:
(i) each Trade Name is a trade name and style (and
not the name of an independent corporation or other legal entity) by which the
Pledgor may identify and sell certain of its goods or services and conduct a
portion of its business and Pledgor has filed or made all public or other
notices in any jurisdiction required to lawfully operate under such Trade
Names;
(ii) all Accounts, Chattel Paper, Instruments and
Proceeds thereof and returned merchandise which arise from the sale of goods
invoiced under the Trade Names are and shall be (x) owned solely by the Pledgor
and (y) subject to the security interest and other terms of this Security
Agreement;
<PAGE>
9
(iii) new Trade Names may only be used by the Pledgor
after the Secured Party is given fifteen (15) days prior written notice of the
use of any such new Trade Name, which notice shall set forth the name of such
new Trade Name; and
(iv) the Pledgor does not use any Trade Name other
than the Trade Names listed on Schedule B hereto.
(i) Rolling Stock. The Pledgor does not own any
-------------
railroad cars, locomotives or other rolling stock used or intended for use in
interstate commerce.
(j) Patents Trademarks. Copyrights. Except as set
-------------------------------
forth on Schedule D, the Pledgor does not own, license or have rights in or to
any trademark, patent or copyright and has not filed and is not in the process
of filing any application with any Governmental Authority to obtain any of the
foregoing. Except as set forth on Schedule D, the Pledgor does not need or
require a license or right to use any patent, copyright, trademark or service
mark to conduct its business.
5. Covenants. The Pledgor covenants and agrees that, from
---------
and after the date of this Security Agreement until the Obligations are paid in
full:
(a) Further Documentation; Pledge of Instruments and
----
Chattel Paper. At any time and from time to time, upon the written request
- -------------
of the Secured Party and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents
and take such further action as the Secured Party may reasonably request for
the purpose of obtaining or preserving the full benefits of this Security
Agreement and the rights and powers herein granted, including, without
limitation, the filing of documents with the Office of Patents and Trademarks
and the filing of any financing or continuation statements under the UCC in
effect in any jurisdiction with respect to the Liens created hereby. The
Pledgor also hereby authorizes the Secured Party, or any agent acting for the
benefit and on behalf of the Secured Party to file any such financing or
continuation statement without the signature of the Pledgor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any Instrument or Chattel Paper,
such Instrument or Chattel Paper shall, after the occurrence and during the
continuance of an Event of
<PAGE>
10
Default, be immediately delivered to the Secured Party, duly endorsed in a
manner satisfactory to the Secured Party to be held as Collateral pursuant to
this Security Agreement.
(b) Indemnification. The Pledgor agrees to pay, and to
---------------
save the Secured Party harmless from, any and all liabilities, costs and
expenses (including without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any Requirement of Law applicable to any of the
Collateral, (iii) with respect to fees, taxes or other costs incurred with
respect to recording UCC financing statements or other public recordings or
notices of security interests, or (iv) in connection with any of the
transactions contemplated by this Security Agreement or the enforcement of the
Secured Party's rights hereunder, except those liabilities, costs and expenses
arising out of the Secured Party's gross negligence or willful misconduct. In
any suit, proceeding or action brought by the Secured Party under any Account
for any sum owing thereunder or to enforce any provisions of any Account or
Contract the Pledgor will save, indemnify and keep the Secured Party harmless
from and against all expense, loss or damage suffered by the Secured Party in
such action commenced in connection with the enforcement of any provision of
any Account or Contract except for expenses, loss or damage arising out of the
gross negligence or willful misconduct of the Secured Party.
(c) Maintenance of Records. The Pledgor will keep and
----------------------
maintain at its own cost and expense, complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral. The Pledgor will mark its
books and records pertaining to the Collateral to evidence this Security
Agreement and the security interests granted hereby. For the Secured Party's
further security, the Secured Party shall have a security interest in all of
the Pledgor's books and records pertaining to the Collateral. Upon reasonable
notice from Secured Party to Pledgor prior to an Event of Default and upon
demand thereafter, the Pledgor shall make available all such books and records
to the Secured Party or to its representatives during normal business hours at
the request of the Secured Party.
(d) Right of Inspection. The Secured Party and the
-------------------
Lenders shall at all times have full and free access during normal business
hours, upon reasonable prior notice, to all the books, correspondence and
records of the Pledgor
<PAGE>
11
and the Secured Party or its representatives may examine the same and make
photocopies thereof, and the Pledgor agrees to render to the Secured Party such
clerical and other assistance as may be reasonably requested with regard
thereto. The Secured Party and the Lenders shall also have the right, during
normal business hours, to enter into and upon any premises where any of the
Inventory is located for the purpose of inspecting the same, observing its use
or otherwise protecting its interests therein.
(e) Compliance with Laws. etc. The Pledgor will comply
--------------------------
with all Requirements of Law applicable to the Collateral or any part thereof.
(f) Compliance with Terms of Contracts. etc. The
----------------------------------------
Pledgor will perform and comply in all material respects with all its
obligations under any agreements, documents and other instruments relating to
the Collateral except where the failure to so perform will not have a Material
Adverse Effect.
(g) Payment of Obligations. The Pledgor will pay, as
----------------------
the same become due, all obligations (including without limitation, any and all
lease obligations and warehouse charges), taxes and governmental fees, charges
or levies imposed upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral; provided, that it may protest the payment of, and withhold payment
during such protest of, any such obligations, taxes, fees, charges or levies or
claims if it is acting in good faith and reserves in conformity with GAAP with
respect thereto have been provided on its books unless such protest violates
Section 5(h) below.
(h) Limitation on Liens on Collateral. The Pledgor
---------------------------------
will not create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is necessary to remove, any Lien or claim on
or to the Collateral, other than the Liens created hereby and Permitted
Encumbrances and will defend the right, title and interest of the Secured Party
in and to any of the Collateral against the claims and demands of all Persons
whomsoever except Persons claiming under this Security Agreement.
(i) Limitations on Dispositions of Collateral. Except
-----------------------------------------
for disposal of obsolete items, the Pledgor will not sell, transfer, lease or
otherwise dispose
<PAGE>
12
of any Collateral, except as permitted by the Credit Agreement.
(j) Limitations on Modifications. Waivers and
-----------------------------------------
Extensions of Contracts and Agreements Giving Rise to Accounts. The Pledgor
- --------------------------------------------------------------
will not (i) amend, modify, terminate or waive any provision of any Contract or
any agreement giving rise to an Account in any manner which could reasonably be
expected to materially adversely affect the value of such Contract or Account
as Collateral, (ii) fail to exercise promptly and diligently each and every
right which it may have under each Contract, or agreement giving rise to an
Account or (iii) fail to deliver to the Secured Party a copy of-each material
demand, notice or document received by it relating in any way to any Material
Contract or any agreement constituting a Material Contract.
(k) Limitation on Discounts. Compromises and
----------------------------------------
Extensions of Accounts and Contracts. Other than in the ordinary course of
- ------------------------------------
business as generally conducted by the Pledgor over a period of time, and in
any event, after the occurrence and during the continuance of an Event of
Default, the Pledgor will not grant any extension of the time of payment of any
of the Accounts or payments of any amounts due under any Contract, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
(l) Maintenance of EquiPment. The Pledgor will
------------------------
maintain each item of Equipment in good operating condition, ordinary wear and
tear and immaterial impairments of value and damage by the elements excepted,
and will provide all maintenance, service and repairs necessary for such
purpose.
(m) Maintenance of Insurance. The Pledgor will
------------------------
maintain, with financially sound and reputable companies, insurance policies
(i) insuring the Inventory and Equipment against loss by fire, explosion,
theft, such other casualties as may be reasonably satisfactory to the Secured
Party and (ii) insuring the Pledgor and the Secured Party against liability for
personal injury and property damage relating to such Inventory and Equipment,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the secured Party, with losses payable to the
Pledgor and the Secured Party, provided, that with the written consent of the
Secured Party all payments to be made to the Secured Party under such policies
may be used to repair or replace damaged or destroyed Inventory or
<PAGE>
13
Equipment. The Secured Party shall be provided all evidence and documents
necessary to demonstrate the use of such insurance proceeds. All such
insurance shall (i) provide that no cancellation, material reduction in amount
or material change in coverage thereof shall be effective until at least 15
days after receipt by the Secured Party of written notice thereof, (ii) name
the Secured Party as loss payee, (iii) provide that the Secured Party shall
have the right, but not the obligation, to pay premiums thereon, and (iv) be
reasonably satisfactory in all other respects to the Secured Party. Upon the
request of the Secured Party, the Pledgor shall deliver to the Secured Party a
report of a reputable insurance broker with respect to such insurance during
each calendar year and such supplemental reports with respect thereto as the
Secured Party may from time to time reasonably request.
(n) Further Identification of Collateral. The Pledgor
------------------------------------
will furnish to the Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may reasonably request, all
in reasonable detail.
(o) Notices. The Pledgor will advise the Secured Party
-------
promptly, in reasonable detail, by written notice (i) of any Lien (other than
Liens created or permitted hereby) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which could reasonably
be expected to have any material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder.
(p) Changes in Locations. Name, etc. The Pledgor will
-------------------------------
not (i) change the location of its chief executive office or other places of
business from that specified in Sections 4(f) and 4(g), respectively, or remove
its books and records from the location specified in Section 4(c), (ii) permit
any of the Inventory to be kept at a location other than that listed in
Schedule C hereto, or (iii) change its name, taxpayer identification number,
identity or corporate structure to such an extent that any financing statement
filed by the Secured Party, or any agent acting for the benefit and on behalf
of the Secured Party, in connection with this Security Agreement would become
misleading, unless it shall have given the Secured Party at least 30 days prior
written notice thereof.
(q) Limitation on Assignments. Pledgor will not,
-------------------------
without the consent of Secured Party, agree to any provision in any Contract or
other agreement constituting
<PAGE>
14
Collateral, which purports (or is so broad in scope so as) to limit Pledgor's
rights to pledge or assign the right to payment of monies due or to become due
thereunder.
6. Appointment as AttorneY-in-Fact.
-------------------------------
(a) Powers. The Pledgor hereby irrevocably constitutes
------
and appoints the Secured Party, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Pledgor and in the name of the Pledgor or in its own
name, from time to time in the Secured Party's discretion, for the purpose of
carrying out the terms of this Security Agreement, to execute UCC-1
Financing.Statements in the Pledgor's name as debtor and, upon the occurrence
and during the continuance of any Event of Default, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Security
Agreement, and without limiting the generality of the foregoing, the Pledgor
hereby gives the Secured Party the power and right (but not the obligation), on
behalf of the Pledgor, without notice to or assent by the Pledgor, to do the
following:
(i) in the case of any Collateral, at any time when
any Event of Default shall have occurred and be continuing, in the name of the
Pledgor or its own name, or otherwise, to open mail addressed to the Pledgor,
to take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, General Intangible or Contract or contract right or with
respect to any other Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Secured Party for the purpose of collecting any and all such
moneys due under any such Account, Instrument, General Intangible or contract
right or with respect to any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Security Agreement and to pay all or
any part of the premiums therefor and the costs thereof; and
(iii) upon the occurrence and during the continuance of
any Event of Default, (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party; (B) to ask or
<PAGE>
15
demand for, collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action or proceeding brought against
the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust
any suit, action or proceeding described in clause (E) above and in connection
therewith, to give such discharges or releases as the Secured Party may deem
appropriate; and (G) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party was the absolute owner thereof for
all purposes, and to do at the Secured Party's option and the Pledgor's
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve or realize upon the
Collateral and the Liens granted hereunder and to effect the intent of this
Security Agreement, all as fully and effectively as the Pledgor might do.
The Pledgor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Pledgor also authorizes the
------------
Secured Party, at any time and from time to time, to execute, in connection
with the sale provided for in Section 9 hereof, any endorsements, assignments
or other instruments of conveyance or transfer with respect to the Collateral.
(c) No Duty on Secured Party's Part. The powers
-------------------------------
conferred on the Secured Party hereunder are solely to protect its interests in
the Collateral and shall not impose any duty upon the Secured Party to exercise
any such powers. The Secured Party shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers. None of the
Secured Party's officers, directors, employees or agents shall be responsible
to the Pledgor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
<PAGE>
16
(d) Trademarks and Licenses. The Pledgor further
-----------------------
grants to the Secured Party an irrevocable, non-exclusive license at no charge
to use the trademarks, patents, copyrights and licenses used in connection with
the sale of goods including, without limitation, those listed on Schedule D
annexed hereto associated with the Collateral in connection with any
foreclosure or liquidation together with the right to grant a nonexclusive
sublicense without charge to any buyer of such Collateral for the purpose of
resale. All such licenses and rights to sublicense include all computer
programs, and other Collateral used in connection with such trademarks.
7. Performance by Secured Party of Pledgor's
-----------------------------------------
Obligations. If the Pledgor fails to perform or comply with any of its
- -----------
agreements contained herein and the Secured Party shall perform or comply, or
otherwise cause performance or compliance, with such agreement, the expenses of
the Secured Party incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to the highest
interest rate prescribed in the Credit Agreement, shall be payable by the
Pledgor to the Secured Party on demand and shall constitute Obligations secured
hereby.
8. Proceeds. It is agreed that if an Event of Default shall
--------
occur and be continuing (a) all proceeds of Collateral received by the Pledgor
consisting of cash, checks and cash equivalents shall be held by the Pledgor in
trust for the Secured Party segregated from other funds of the Pledgor, and
shall, forthwith upon receipt by the Pledgor, be turned over to the Secured
Party in the exact form received by the Pledgor (duly endorsed by the Pledgor
to the Secured Party, if required), and (b) any and all such proceeds of
Collateral received by the Secured Party (whether from the Pledgor or
otherwise) may, in the sole discretion of the Secured Party, be held by the
Secured Party as collateral security for, and/or then or at any time thereafter
may be applied by the Secured Party against, the Obligations then due and
payable, such application to be in such order as the Secured Party shall elect.
Any balance of such proceeds remaining after the Obligations shall have been
paid in full shall be paid over to the Pledgor or to whomsoever may be lawfully
entitled to receive the same.
9. Remedies. If an Event of Default shall occur and be
--------
continuing, the Secured Party may exercise, in addition to all other rights and
remedies granted to the Secured Party in this Security Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party
<PAGE>
17
under the UCC or any other applicable laws. Without limiting the generality of
the foregoing, the Secured Party, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law) to or upon the Pledgor or any other Person (all and
each of which demands, presentments, protests, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do
any of the foregoing) in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of the Secured Party or
elsewhere upon such terms and conditions as they may deem advisable and at such
prices as they may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Secured Party shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold. The Pledgor further agrees, at the Secured Party's
request, to assemble the Collateral and make it available to the Secured Party
at places which the Secured Party shall reasonably select, whether at the
Pledgor's premises or elsewhere. The Secured Party shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Secured Party hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Secured Party may elect, and only after such application
and after the payment to the Secured Party of any other amount required by any
provision of law, including, without limitation, any provision of the UCC, need
the Secured Party account for the surplus, if any, to the Pledgor. To the
extent permitted by applicable law, the Pledgor waives all claims, damages and
demands it may acquire against the Secured Party arising out of the exercise by
the Secured Party of any of its rights hereunder except any arising out of its
gross negligence or willful misconduct. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or
other disposition. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay the Obligations and the reasonable
<PAGE>
18
fees and disbursements of any attorneys employed by the Secured Party to
collect such deficiency.
10. Limitation on Duties Regarding Preservation of
----------------------------------------------
Collateral. The Secured Party's sole duty with respect to the custody,
- ----------
safekeeping and physical preservation of the Collateral in its possession,
under the UCC or otherwise, shall be to deal with it in the same manner as the
Secured Party deals with similar property for its own account. Neither the
Secured Party nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of the Pledgor or
otherwise.
11. Powers Coupled with an Interest. All authorizations and
-------------------------------
agencies herein contained with respect to the Collateral are coupled with an
interest and are irrevocable.
12. Severability. Any provision of this Security 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
13. Section Headings. The section headings used in this
----------------
Security Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
14. No Waiver: Cumulative Remedies. The Secured Party shall
------------------------------
not by any act (except by a written instrument pursuant to Section 15 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Event of Default or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Secured Party, of any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided
<PAGE>
19
are cumulative, may be exercised singly or concurrently and are not exclusive
of any rights or remedies provided by law.
15. Waivers and Amendments: Successors and Assigns:
-----------------------------------------------
Governing Law. (a) None of the terms or provisions of this Security
- -------------
Agreement may be waived, amended, supplemented or otherwise modified except by
a written instrument executed by the Pledgor and the Secured Party.
(b) This Security Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Secured Party, the Lenders and their respective successors and assigns. This
Security Agreement shall be governed by, and be construed and interpreted in
accordance with, the laws of the State of New Jersey (without regard to
conflicts of law principles thereof), except to the extent that the validity,
perfection or enforcement of the security interests hereunder, or remedies
hereunder, in respect of any particular Collateral located outside the
boundaries of the State of New Jersey are governed by the laws of a
jurisdiction other than the State of New Jersey.
16. Notices. Notices hereunder may be given as provided in
-------
the Credit Agreement and the Pledgor agrees to be bound by the notice
provisions of the Credit Agreement.
17. Jurisdiction. The Pledgor hereby irrevocably submits to
------------
the jurisdiction of any court of the State of New Jersey or Federal court
sitting in the State of New Jersey in any action or proceeding arising out of
or relating to this Agreement and the Pledgor hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such court of the State of New Jersey, or to the extent permitted by law, in
such Federal court. The Pledgor hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Pledgor also irrevocably
consents to the service of any and all process in any such action or proceeding
arising out of or in connection with this Agreement by the mailing of copies of
such process to the Pledgor at the address and in the manner specified in
Section 16 hereof. The Pledgor agrees that a final and non-appealable judgment
(or a judgment whose time to appeal has expired) in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. THE PLEDGOR AND
SECURED PARTY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING
ANY COUNTERCLAIM) IN ANY COURT ARISING ON, OUT OF, OR IN ANY WAY RELATING TO
THIS
<PAGE>
20
AGREEMENT OR ANY AMENDMENT OR SUPPLEMENT HERETO OR THERETO OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
18. Pledge and Assignment Absolute. All rights of the
------------------------------
Secured Party, the pledge and assignment hereunder and all obligations of the
Pledgor hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, any other document or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations or any other
amendment or waiver of or any consent to any departure from the
Credit Agreement;
(iii) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to
departure from this Agreement or any other Collateral Document; or
(iv) any other circumstance that might otherwise constitute
a defense available to, or a discharge of, the Pledgor.
19. Indemnity and Expenses. (a) The Pledgor agrees to
----------------------
indemnify the Secured Party from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from the Secured Party's gross negligence or willful
misconduct.
(b) The Pledgor will upon demand pay to the Secured Party
the amount of any and all reasonable expenses, including, without limitation,
the reasonable fees and disbursements of its counsel and of any experts and
agents, which the Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, or use 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.
IN WITNESS WHEREOF, the Pledgor has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
<PAGE>
21
BRECKENRIDGE-REMY CO.
[corporate seal]
By:___________________________
Name:
Title:
<PAGE>
CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF NEW JERSEY )
: ss.:
COUNTY OF MIDDLESEX )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 31st day of October 1995, personally appeared Paul Xenis to
me known personally, and who, being by me duly sworn, deposes and says that he
is the Assistant Secretary of Breckenridge-Remy Co. and that the seal affixed
to the foregoing instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said Paul Xenis acknowledged said
instrument to be the free act and deed of said corporation.
______________________________
Notary Public
<PAGE>
Breckenridge-Remy Co.
Schedules to Security Agreement
<PAGE>
CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF NEW JERSEY )
: ss.:
COUNTY OF MIDDLESEX )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 31st day of October 1995, personally appeared Paul Xenis to
me known personally, and who, being by me duly sworn, deposes and says that he
is the Assistant Secretary of Breckenridge-Remy Co. and that the seal affixed
to the foregoing instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said Paul Xenis acknowledged said
instrument to be the free act and deed of said corporation.
______________________________
Notary Public
<PAGE>
Breckenridge-Remy Co.
Schedules to Security Agreement
<PAGE>
Schedule A
Jurisdictions for Filing UCC-1's
--------------------------------
Secretary of State of New Jersey
Middlesex County, New Jersey
(720 US Highway One
North Brunswick, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(1280 Jersey Avenue,
North Brunswick, NJ)
Secretary of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue
Rahway, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(5B terminal Way
Avenel, NJ)
Fulton County, Georgia
Secretary of State of Illinois
Dupage County, Illinois
Secretary of State of California
Orange County, California
Secretary of State of Florida
Orange County, Florida
Secretary of State of Texas
Collin County, Texas
Secretary of State of Maryland
Howard County, Maryland
Secretary of State of Ohio
Franklin County, Ohio
Secretary of State of Ohio
Hamilton County, Ohio
Secretary of State of Ohio
<PAGE>
2
Lorain County, Ohio
Secretary of State of Indiana
Marion County, Indiana
Secretary of State of Michigan
Wayne County, Michigan
D/B/A GUEST DISTRIBUTION, INC.
Secretary of State of New Jersey
Middlesex County, New Jersey
(720 US Highway One
North Bruswick, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(1280 Jersey Avenue,
North Bruswick, NJ)
Secretary of State of New Jersey
Union County, New Jersey
(414 East Inman Avenue
Rahway, NJ)
Secretary of State of New Jersey
Middlesex County, New Jersey
(5B terminal Way
Avenel, NJ)
Fulton County, Georgia
Secretary of State of Illinois
Dupage County, Illinois
Secretary of State of California
Orange County, California
Secretary of State of Florida
Orange County, Florida
Secretary of State of Texas
Collin County, Texas
Secretary of State of Maryland
Howard County, Maryland
<PAGE>
Schedule B
----------
a) Location of Pledgor's books and records concerning Accounts:
720 U.S. Highway One
North Brunswick, NJ 08902
b) Location of Pledgor's chief executive office:
720 U.S. Highway One
North Brunswick, NJ 08902
c) Location of Pledgor's other places of business:
c) Location of Pledgor's other places of business:
7395 Industrial Parkway
Lorain, OH 44035
4612 Interstate Drive
Cincinnati, OH 45246
27110 Trolley Drive
Taylor, MI 48180
3791 Interchange Road
Columbus, OH 43204
8104 Woodland Drive
Indianapolis, IN 46278
1150 Powis Road, Unit 5
West Chicago, IL 60185
7510 Presidents Drive
Orlando, FL 32809
190 West Crowther Avenue
Unit B
Placentia, CA 92670
2800 Plano Parkway
Suite 200
Plano, TX 75074
9525 Berger Road, Suite A-C
Columbia, MD 21046
6220 A Purdue Drive
<PAGE>
2
Atlanta, GA 30336
5A, 5B and 4D Terminal Way
Avenel, NJ 07001
414 East Inman Avenue
Rahway, NJ 07065
d) List of tradenames:
Guest Distribution, Inc.
<PAGE>
Schedule C
----------
Location(s) of the Pledgor's Inventory:
7395 Industrial Parkway
Lorain, OH 44035
4612 Interstate Drive
Cincinnati, OH 45246
27110 Trolley Drive
Taylor, MI 48180
3791 Interchange Road
Columbus, OH 43204
8104 Woodland Drive
Indianapolis, IN 46278
1150 Powis Road, Unit 5
West Chicago, IL 60185
7510 Presidents Drive
Orlando, FL 32809
190 West Crowther Avenue
Unit B
Placentia, CA 92670
2800 Plano Parkway
Suite 200
Plano, TX 75074
9525 Berger Road, Suite A-C
Columbia, MD 21046
6220 A Purdue Drive
Atlanta, GA 30336
5A, 5B and 4D Terminal Way
Avenel, NJ 07001
414 East Inman
Avenue Rahway, NJ 07065
Locations of Equipment:
7395 Industrial Parkway
Lorain, OH 44053
<PAGE>
2
3791 Interchange Road
Columbus, OH 43204
4612 Interstate Drive
Cincinnati, OH 45246
810~ Woodland Drive
Indianapolis, IN
27110 Trolley Drive
Taylor, MI 48180
1150 Powis Road, Unit 5
West Chicago, IL 60185
2800 Plano Parkway, Suite 200
Plano, TX 75074
7510 Presidents Drive
Orlando, FL 32809
9525 Berger Road, Suite A-C
Columbia, MD 21046
190 West Crowther Avenue
Unit B
Placentia, CA 92670
6220 A Purdue Drive
Atlanta, GA 30336
720 U.S. Highway One
North Bruswick, NJ 08902
<PAGE>
Schedule D
----------
Trademarks, Patents, Copyrights, License Agreements:
None.
<PAGE>
Exhibit 21
Subsidiaries of Guest Supply, Inc.
----------------------------------
Guest Supply, Inc. has the following subsidiaries:
1. Guest International, Ltd., an English corporation.
2. Guest Packaging, Inc., a New Jersey corporation.
3. Breckenridge-Remy Co., a Delaware corporation.
4. Guest International (Canada) Ltd., a Canadian corporation.
5. Guest International New Zealand Limited, a New Zealand corporation.
<PAGE>
Exhibit 23
Independent Auditors' Consent
-----------------------------
The Board of Directors
Guest Supply, Inc.:
We consent to incorporation by reference in the Registration
Statements (File Nos. 2-89233, 2-89234, 33-22872 and 33-63352) on Form S-8 of
Guest Supply, Inc. of our report dated November 21, 1995 relating to the
consolidated balance sheets of Guest Supply, Inc. and subsidiaries as of
September 30, 1995 and 1994, and the related consolidated statements of
operations, cash flows, and shareholders' equity and related schedule for each
of the years in the three-year period ended September 30, 1995 which report
appears in the September 30, 1995 annual report on Form 10-K of Guest Supply,
Inc.
KPMG Peat Marwick LLP
Short Hills, New Jersey
December 27, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GUEST
SUPPLY'S 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 1,825,000
<SECURITIES> 0
<RECEIVABLES> 29,355,000
<ALLOWANCES> 692,000
<INVENTORY> 28,269,000
<CURRENT-ASSETS> 61,107,000
<PP&E> 28,507,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 95,607,000
<CURRENT-LIABILITIES> 33,632,000
<BONDS> 0
0
0
<COMMON> 542,000
<OTHER-SE> 38,567,000
<TOTAL-LIABILITY-AND-EQUITY> 95,607,000
<SALES> 0
<TOTAL-REVENUES> 159,450,000
<CGS> 0
<TOTAL-COSTS> 122,085,000
<OTHER-EXPENSES> 28,409,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,099,000
<INCOME-PRETAX> 7,857,000
<INCOME-TAX> 2,767,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,090,000
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.68
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GUEST
SUPPLY'S 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1993
<PERIOD-END> SEP-30-1994
<CASH> 1,782,000
<SECURITIES> 0
<RECEIVABLES> 20,102,000
<ALLOWANCES> 852,000
<INVENTORY> 22,132,000
<CURRENT-ASSETS> 45,633,000
<PP&E> 20,986,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 72,967,000
<CURRENT-LIABILITIES> 22,944,000
<BONDS> 0
0
0
<COMMON> 330,000
<OTHER-SE> 32,915,000
<TOTAL-LIABILITY-AND-EQUITY> 72,967,000
<SALES> 0
<TOTAL-REVENUES> 116,325,000
<CGS> 0
<TOTAL-COSTS> 85,574,000
<OTHER-EXPENSES> 24,858,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,001,000
<INCOME-PRETAX> 4,892,000
<INCOME-TAX> 775,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,117,000
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
