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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 30, 1998
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PVC CONTAINER CORPORATION
(Exact name of registrant as specified in charter)
Delaware 0-30067 13-2616435
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(State of other jurisdiction (Commission (IRS employer
of incorporation) file number) identification no.)
401 Industrial Way West, Eatontown, New Jersey 07724
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(Address of principal executive offices)
Registrant's telephone number, including area code: (732) 542-0060
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N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On March 30, 1998 pursuant to an Asset Purchase Agreement among the
Registrant as Purchaser and McKechnie Investments, Inc. and Charter Supply Co.,
Inc. as Sellers, the Registrant acquired in consideration of the payment of
$10,209,579 all of the assets and assumed certain liabilities of Charter Supply
Co.,Inc. The consideration was provided by Fleet Bank pursuant to a Loan and
Security Agreement among the Registrant and its wholly-owned subsidiaries and
Fleet Bank, N.A. dated as of March 31, 1998. Charter Supply Co.,Inc. is engaged
in Philmont, New York in the business of developing, manufacturing and selling
plastic blow molded bottles of various sizes and which is similar to the
business in which the Registrant is also primarily engaged.
Financial information relating to the acquisition required by Item 7 of
this Form will be filed as soon as practicable but in no event later than sixty
(60) days after the filing of this report.
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EXHIBITS
The following exhibit are filed herewith:
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Exhibit No. Description
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10.1 Asset Purchase Agreement
10.2 Loan and Security Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 14, 1998 PVC CONTAINER CORPORATION
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(Registrant)
By: /s/ Phillip L. Friedman
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Phillip L. Friedman,
President
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ASSET PURCHASE AGREEMENT
AMONG
PVC CONTAINER CORPORATION
AS PURCHASER
AND
MCKECHNIE INVESTMENTS, INC.
AND
CHARTER SUPPLY COMPANY, INC., TRADING
AS MCKECHNIE PLASTIC PACKAGING
AS SELLERS
AS OF MARCH 30, 1998
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TABLE OF CONTENTS
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Item Page
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ARTICLE I SALE AND PURCHASE...........................................................................1
SECTION 1.1 Assets to be Sold and Purchased..................................................1
SECTION 1.2 Assumed Liabilities..............................................................3
SECTION 1.3 Excluded Liabilities.............................................................4
SECTION 1.4 Purchase Price...................................................................5
SECTION 1.5 Allocation of the Purchase Price.................................................5
SECTION 1.6 Closing..........................................................................5
SECTION 1.7 Non-Assignable Contracts.........................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER....................................................7
SECTION 2.1 Organization of Seller...........................................................7
SECTION 2.2 Due Authorization................................................................8
SECTION 2.3 No Violation; Consents and Approvals.............................................8
SECTION 2.4 Financial Information............................................................9
SECTION 2.5 Absence of Certain Changes or Events.............................................9
SECTION 2.6 Certain Contracts and Commitments................................................9
SECTION 2.7 Employee Benefit Plans......................................................... 10
SECTION 2.8 Litigation..................................................................... 10
SECTION 2.9 Assets......................................................................... 10
SECTION 2.10 Intellectual Property.......................................................... 11
SECTION 2.11 Compliance with Laws........................................................... 12
SECTION 2.12 Permits........................................................................ 12
SECTION 2.13 Inventory...................................................................... 12
SECTION 2.14 Brokers and Finders............................................................ 13
SECTION 2.15 Insurance...................................................................... 13
SECTION 2.16 Labor Matters.................................................................. 13
SECTION 2.17 Customers and Suppliers........................................................ 14
SECTION 2.18 Disclosure..................................................................... 14
SECTION 2.19 Taxes.......................................................................... 14
SECTION 2.20 Environmental Matters.......................................................... 15
SECTION 2.21 Accounts Receivable............................................................ 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................... 17
SECTION 3.1 Organization of Purchaser...................................................... 17
SECTION 3.2 Execution and Binding Effect................................................... 17
SECTION 3.3 No Violation; Consents and Approvals........................................... 17
SECTION 3.4 Litigation..................................................................... 18
SECTION 3.5 Brokers and Finders............................................................ 18
ARTICLE IV COVENANTS................................................................................. 18
SECTION 4.1 Efforts; Further Assurances; Permits........................................... 18
SECTION 4.2 Employee Matters............................................................... 19
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SECTION 4.3 Transfer Taxes; Expenses....................................................... 21
SECTION 4.4 Access to Records.............................................................. 21
SECTION 4.5 Assets After Closing........................................................... 21
SECTION 4.6 Intellectual Property Cooperation.............................................. 22
ARTICLE V CONDITIONS TO PURCHASER'S OBLIGATIONS..................................................... 22
SECTION 5.1 Representations and Warranties of Sellers to be True;
Performance by Sellers; Certificates........................................... 22
SECTION 5.2 Agreements..................................................................... 22
SECTION 5.3 Survey and Title Insurance; Defects............................................ 22
SECTION 5.4 Consents....................................................................... 23
SECTION 5.5 No Proceeding or Litigation.................................................... 23
SECTION 5.6 Opinion of Counsel for Seller.................................................. 23
SECTION 5.7 Consent of Directors of Purchaser.............................................. 23
ARTICLE VI CONDITIONS TO SELLERS' OBLIGATIONS........................................................ 24
SECTION 6.1 Representations and Warranties of Purchaser to be True;
Performance by Purchaser; Certificate.......................................... 24
SECTION 6.2 Agreements..................................................................... 24
SECTION 6.3 Consents....................................................................... 24
SECTION 6.4 No Proceeding or Litigation.................................................... 24
SECTION 6.5 Opinion of Counsel for Purchaser............................................... 25
ARTICLE VII INDEMNIFICATION................................................................ 25
SECTION 7.1 Survival of Representations and Warranties..................................... 25
SECTION 7.2 Indemnification by Sellers..................................................... 25
SECTION 7.3 Indemnification by Purchaser................................................... 25
SECTION 7.4 General Indemnification Provisions............................................. 26
SECTION 7.5 Limits on Indemnification...................................................... 27
SECTION 7.6 Special Provisions Regarding Environmental Claims.............................. 27
ARTICLE VIII AMENDMENT AND WAIVER...................................................................... 27
SECTION 8.1 Amendment...................................................................... 27
SECTION 8.2 Waiver......................................................................... 27
ARTICLE IX NON-COMPETITION........................................................................... 28
SECTION 9.1 Non-Competition................................................................ 28
SECTION 9.2 Non Solicitation............................................................... 28
ARTICLE X MISCELLANEOUS............................................................................. 28
SECTION 10.1 Expenses....................................................................... 28
SECTION 10.2 Consents....................................................................... 28
SECTION 10.3 Assignment; Parties in Interest................................................ 28
SECTION 10.4 Further Assurances............................................................. 29
SECTION 10.5 Title and Risk of Loss......................................................... 29
SECTION 10.6 Entire Agreement............................................................... 29
SECTION 10.7 Headings....................................................................... 29
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SECTION 10.8 Notices........................................................................ 29
SECTION 10.9 Governing Law.................................................................. 30
SECTION 10.10 Bulk Sales Law................................................................. 30
SECTION 10.11 Counterparts................................................................... 30
SECTION 10.12 Certain Definitions............................................................ 31
SECTION 10.13 Publicity...................................................................... 31
SECTION 10.14 Closing Documents.............................................................. 31
SECTION 10.15 Designated Buyer............................................................... 31
SECTION 10.16 Definition of Knowledge........................................................ 31
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<TABLE>
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SCHEDULES
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Schedule 1.1(a)(i) Property
Schedule 1.1(a)(iii) Equipment
Schedule 1.1(a)(iv) Intellectual Property
Schedule 1.1(a)(vii) Assumed Contracts
Schedule 1.1(a)(viii) Inventory
Schedule 1.1(a)(ix) Permits
Schedule 1.2 Accounts Payable
Schedule 2.3 Consents and Approvals
Schedule 2.4 Financial Information
Schedule 2.5 Certain Changes
Schedule 2.7 Employee Benefit Plans
Schedule 2.8 Litigation
Schedule 2.9(a) Property Liens
Schedule 2.9(c) Assets
Schedule 2.11 Compliance With Laws
Schedule 2.13 Locations of Inventory
Schedule 2.15 Insurance
Schedule 2.16 Labor Matters
Schedule 2.17 Customers and Suppliers
Schedule 2.19 Taxes
Schedule 2.20 Environmental Matters
Schedule 2.21(a) Accounts Receivable
Schedule 2.21(b) Bill and Hold
Schedule 3.3 Consents and Approvals
Schedule 4.2 Employee Matters
Schedule 4.2(b) Purchaser Employee Benefits
EXHIBITS
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Exhibit A Bill of Sale, Assignment and Assumption
Agreement
Exhibit B Intellectual Property Assignments
Exhibit C Deed
Exhibit D Certificate of Seller
Exhibit E Certificate of Purchaser
Exhibit F Form of Opinion of Seller's Counsel
Exhibit G Form of Opinion of Purchaser's Counsel
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ASSET PURCHASE AGREEMENT, dated as of March 30, 1998 by and among
MCKECHNIE INVESTMENTS, INC., a Delaware corporation ("MII") and CHARTER SUPPLY
COMPANY, INC., a Rhode Island corporation trading as MCKECHNIE PLASTIC PACKAGING
("Seller"), jointly hereinafter referred to as the ("Sellers") and PVC CONTAINER
CORPORATION, a Delaware corporation, or a designated buyer as hereinafter
defined in Section 10.15 of this Agreement ("Purchaser").
WHEREAS, Seller is a subsidiary of MII; and
Seller is engaged in Philmont, New York in the business of developing,
manufacturing and selling plastic blow molded bottles of various sizes
("Products") utilizing primarily HDPE and PVC materials, blow molding machines
and silk-screening machinery (the "Business"); and
Seller desires to sell and assign and Purchaser desires to purchase the
assets and assume certain liabilities related to the Business upon and subject
to the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1 Assets to be Sold and Purchased.
(a) Subject to the Excluded Assets set forth in Section 1.1(b)
and the other terms and conditions hereof, Seller shall sell, assign, transfer,
convey and deliver to Purchaser on the Closing Date as hereinafter defined, and
Purchaser shall purchase from Seller, all of the property, assets and rights to
the extent that they are used in connection with the Business or the Products
(collectively, the "Assets"):
(i) all of Seller's rights in and to all real
property (and interests therein) owned by Seller and situated in Philmont, New
York, together with all buildings and improvements thereon (the "Property"), as
more particularly described in Schedule 1.1(a)(i);
(ii) all of Seller's accounts receivable and prepaid
expenses;
(iii) all of Seller's rights in and to the fixed
assets of the Business including but not limited to machinery, equipment, tools,
molds, supplies, spare parts, rolling stock, furniture and fixtures (the
"Equipment") and used in the Business on the Effective Date (as hereinafter
defined), a list of the Equipment (in the form customarily maintained by Seller)
on the Effective Date being annexed hereto as Schedule 1.1(a)(iii).
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(iv) all of Seller's rights in, to and under all
domestic and foreign patents, patent applications, trade names, trademarks,
copyrights, servicemarks, trademark and servicemark registrations and
applications which are listed on Schedule 1.1(a)(iv);
(v) to the extent that they relate to the Products,
all of Seller's rights in, to and under trade secrets, product formulations and
associated manufacturing and process know-how, whether currently being used or
under development, including product testing and quality control procedures,
product applications and associated know-how, unpatented inventions, research
developments and know-how, technology, technical information, engineering and
other drawings, engineering data, design and engineering specifications, product
literature and related materials, and supplier lists and files and similar
marketing data in writing (which together with the intellectual property
described in Section 1.1(a)(iv), the "Intellectual Property"), and all of
Seller's books, records and computer programs relating to the Intellectual
Property;
(vi) all of Seller's rights in, to and under the
goodwill of the Business including without limitation the name "Charter Supply
Company" and any logos and tradenames used in connection with he conduct of the
Business and the sale of the Products. However, Purchaser shall not acquire any
ownership rights in or right to use the name "McKechnie".
(vii) subject to Section 1.7, Seller's rights under
all contracts, agreements, leases, arrangements, or understandings entered into
with customers, suppliers, dealers, distributors, warehousers and other third
parties which relate to the Business or to the Products, whether or not there
are any written contracts with respect thereto (such contracts, agreements,
arrangements and understandings, the "Assumed Contracts"), a list of the Assumed
Contracts on the date of this Agreement being annexed hereto as Schedule
1.1(a)(vii);
(viii) Seller's rights to all raw materials,
work-in-process and finished goods inventories relating to the conduct of the
Business and Products as such exist on the Effective Date (the "Inventories"),
and as set forth in a list of the Inventory as of the Effective Date by the
categories of finished goods, HDPE and PVC compounds, color concentrates,
packaging supplies, regrinds, work in process and all other Inventory annexed
hereto as Schedule 1.1(a)(viii);
(ix) all of Seller's rights under all licenses,
permits, consents and approvals necessary to the lawful operation, ownership and
conduct of the Business and listed on Schedule 1.1(a)(ix) (the "Permits"), to
the extent such Permits are transferable; provided, however, to the extent any
Permit is not transferable, Seller shall so indicate on Schedule 1.1(a)(ix).
(x) all operating data and records of Seller relating
to the Business, including without limitation all files, records,
correspondence, customer lists and records, referral sources, research and
development reports and records, reports and materials prepared by Seller,
production reports and records, equipment logs, operating guides and
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manuals, projections, accounting and personnel records and correspondence and
other similar documents and records;
(xi) all claims, warranty rights, causes of action
and other similar rights arising in the conduct of the Business on and prior to
the Effective Date ("Acquired Claims").
(xii) cash in an amount equal to all condemnation
proceeds and all property and casualty insurance proceeds (excluding business
interruption insurance) plus an amount equal to any deductible received by
Seller from any Person (other than Seller or any of its Affiliates) with respect
to the loss, damage, destruction or condemnation of any of the tangible Assets
identified in the preceding clauses (i) through (xi) other than Inventories, but
only to the extent not applied by Seller to the repair, restoration or
replacement thereof on or prior to the Effective Date; and
(xiii) all claims to property and casualty insurance
proceeds and condemnation proceeds (excluding business interruption insurance)
from any Person (other than Seller or any of its Affiliates) with respect to the
loss, damage, destruction or condemnation of any tangible Assets identified in
clauses (i) through (xi) other than Inventories to the extent proceeds of such
claims are not covered in clause (xii) above, but only to the extent Seller has
not paid for the repair, restoration or replacement thereof as of the Effective
Date.
(b) The Assets shall exclude all property, assets and rights
of Seller (the "Excluded Assets") set forth below:
(i) except as otherwise provided in Section
1.1(a)(xii), cash on hand, cash equivalents, investments (including, without
limitation, stock, debt instruments, options and other instruments and
securities) and bank deposits of Seller;
(ii) tax refunds and recoveries and similar benefits
of Seller, and all of Seller's tax returns and records;
(iii) all corporate records of Seller including,
without limitation, the stock ledger of Seller and the minute books regarding
meetings of the stockholders, directors and director committees of Seller;
(iv) Seller's rights under any Employee Plans, as
defined in Section 2.7; and
(v) subject to Sections 1.1(a)(xii) and (xiii), all
of Seller's rights under any insurance policies.
SECTION 1.2 Assumed Liabilities. Subject to the provisions of Sections 1.3
and 1.7, and except as provided herein Purchaser shall not assume, pay, fulfill,
perform or otherwise discharge any liabilities or obligations of Seller except
(a) under the Assumed
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Contracts; and (b) accounts payable, accrued liabilities, contracts and leases
in relation to the conduct of the Business (collectively, the "Assumed
Liabilities"). There is annexed hereto as Schedule 1.2 a listing and aging of
the accounts payable of Seller as of the Effective Date.
SECTION 1.3 Excluded Liabilities. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to retain, and Seller shall defend,
indemnify and hold harmless Purchaser from and against, any and all of the
following liabilities and obligations of Seller, other than the Assumed
Liabilities (the "Excluded Liabilities") including without limitation:
(a) Seller's obligations and any liabilities of Seller arising
under this Agreement;
(b) subject to Section 4.7, any obligation of Seller for
federal, state or local income tax, or franchise tax, including interest,
penalties or additions to Tax relating thereto, arising from operations of the
Business up to and including the Effective Date;
(c) except as otherwise explicitly provided herein, any
obligation of Seller for expenses incurred by it in connection with the sale of
the Assets pursuant hereto, including, without limitation, the fees and expenses
of its counsel, consultants and independent auditors;
(d) any liability or obligation of Seller arising from
litigation or proceedings arising out of the conduct of the Business by Seller
up to and including the Effective Date, and any liability for Seller's
attorneys' fees or expenses;
(e) any obligation, responsibility or liability of Seller in
connection with any Employee Plan (as defined in Section 2.7);
(f) other than an Excluded Liability covered under subsection
(i) below, any liabilities or obligations of Seller relating to the Excluded
Assets;
(g) liabilities and obligations of Seller for borrowed money
and guarantees of borrowed money or letters of credit;
(h) any liabilities of Seller relating to its operations other
than the Business or the Products;
(i) any liabilities or obligations of Seller relating to (i)
any qualified employee benefit plans including, without limitation, those
arising under its 401K savings plan, group health and dental plan, and life,
accidental death and disability insurance policies or (ii) vacation pay
liability to employees accruing for service prior to August 1, 1997; and
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(j) the amount of any claim for Products sold or shipped by
Seller prior to the Effective Date and returned by the customer within ninety
(90) days after the Effective Date for any reason including claims for product
liability by the customer or third persons will become an obligation and
liability of Seller to Purchaser under Article VII hereof. Subject to
application of the "basket and cap" on liability contained in Section 7.5,
Purchaser will be reimbursed for the invoice price of any such returned Products
less 50% thereof representing the resin cost and less any adjustments that
Purchaser can make with the customer. Purchaser will use its best efforts to
mitigate and reduce any costs resulting from any customer return of Products.
SECTION 1.4 Purchase Price.
(a) The consideration for the Assets shall be $10,250,000 U.S.
Dollars (the "Purchase Price") and the assumption of the Assumed Liabilities.
(b) Purchaser shall pay Seller the Purchase Price, on the
Closing Date by wire transfer of immediately available funds in U.S. dollars;
provided Seller has given wire transfer instructions to Purchaser prior to the
Closing Date.
SECTION 1.5 Allocation of the Purchase Price. The allocation of
Purchase Price among the Assets shall be made by Purchaser, and the Sellers and
Purchaser shall mutually agree within sixty (60) days after the Closing Date as
to the determination of any such allocation. Each of the parties shall make all
appropriate tax and other filings on a basis consistent with such allocation.
The parties shall exchange drafts of any information returns required by Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and all
similar state statutes, ten days prior to filing any such return.
SECTION 1.6 Closing.
(a) Notwithstanding the date of this Agreement and the Closing
Date (as hereinafter defined), the effective date of this Agreement and the
Closing (as hereinafter defined) shall be as at the close of Business of the
Seller on March 28, 1998 (the "Effective Date").
(b) Subject to the terms and conditions of this Agreement, the
sale and purchase of the Assets contemplated hereby (the "Closing") shall take
place simultaneously with the execution of this Agreement, at [THE OFFICES OF
BAER MARKS & UPHAM LLP, 805 THIRD AVENUE, NEW YORK, NEW YORK,] or at such other
place as the parties may agree, but in no event later than March 30, 1998 (the
"Closing Date"), and time is considered to be of the essence.
(c) At the Closing, Seller shall deliver to Purchaser:
(i) a Bill of Sale, Assignment and Assumption
Agreement substantially in the form attached hereto as Exhibit A (the "Bill of
Sale") pursuant to which
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Seller assigns to Purchaser Seller's right, title and interest under the Assumed
Contracts and Purchaser assumes Seller's obligations thereunder;
(ii) an assignment of trademarks and servicemarks,
including applications and registrations, an assignment of copyrights, including
applications and registrations, and an assignment of patents and patent
applications substantially in the forms attached hereto as Exhibit B (the
"Intellectual Property Assignments"), relating to the Intellectual Property;
(iii) a warranty deed to the Property substantially
in the form attached hereto as Exhibit C (the "Deed");
(iv) a certificate of an officer of Seller
substantially in the form attached hereto as Exhibit D (the "Seller
Certificate");
(v) any consents that Seller has obtained pursuant to
Sections 4.4 and 5.4; and
(vi) such other instruments of assignment or
conveyance as Purchaser may reasonably request as necessary or appropriate to
vest in Purchaser good and marketable title to the Assets to be sold by Seller
hereunder.
(d) At the Closing, Purchaser shall deliver to Seller:
(i) the Purchase Price;
(ii) the Assignment and Assumption Agreement;
(iii) the Intellectual Property Assignments;
(iv) any consents that Purchaser has obtained
pursuant to Sections 4.4 and 6.3; and
(v) a certificate of an officer of Purchaser
substantially in the form attached hereto as Exhibit E (the "Purchaser
Certificate").
SECTION 1.7 Non-Assignable Contracts.
(a) Schedule 1.1(a)(vii) indicates which of the Assumed
Contracts are non-assignable. To the extent that any Assumed Contract is not
capable of being assigned, transferred, subleased or sublicensed without the
consent or waiver of the other party thereto or any third party (including a
government or governmental unit), or if such assignment, transfer, sublease or
sublicense or attempted assignment, transfer, sublease or sublicense would
constitute a breach thereof or a violation of any law, decree, order, regulation
or other governmental edict, this Agreement shall not constitute an assignment,
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transfer, sublease or sublicense thereof, or an attempted assignment, transfer,
sublease or sublicense of any such Assumed Contract.
(b) Anything in this Agreement to the contrary
notwithstanding, Seller is not obligated to transfer to Purchaser any of its
rights and obligations in and to any of the Assumed Contracts without first
having obtained all necessary consents and waivers. For a reasonable period of
time after the Closing Date, Seller shall use reasonable efforts (which shall
not require Seller to incur any financial obligation to third parties), and
Purchaser shall cooperate with Seller, to obtain the consents and waivers
referred to in Section 1.7(a) and to obtain any other consents and waivers
necessary to convey to Purchaser any of the Assumed Contracts.
(c) To the extent that such consents and waivers are not
obtained by Seller, Seller and Purchaser shall each use reasonable efforts to
establish arrangements that are reasonable and lawful as to Seller and
Purchaser, and which result in the benefits and obligations under such Assumed
Contracts being apportioned in a manner that is in accordance with the purpose
and intention of this Agreement.
(d) To the extent such consents and waivers are not obtained
by Seller, Purchaser shall have no obligations with respect thereto, except as
set forth in Section 1.7(c) above.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Sellers jointly and severally represent and warrant to Purchaser as
follows:
SECTION 2.1 Organization of Seller.
(a) Seller is duly organized, validly existing and in good
standing under the laws and jurisdiction of incorporation and has all requisite
power and authority to own the Assets and to carry on the Business as presently
conducted, to execute and deliver this Agreement and the other agreements and
instruments to be executed and delivered by the parties pursuant to this
Agreement, including without limitation the agreements and instruments listed as
Exhibits hereto (the "Ancillary Agreements"), and to consummate the transactions
contemplated hereby and thereby.
(b) Seller is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the ownership of the Assets or
the conduct of the Business requires such licensing or qualification, except
where the failure to be so licensed or qualified or in good standing would not
have a Material Adverse Effect.
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(c) For purposes of this Agreement, "Material Adverse Effect"
shall, as the case may be, mean a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Business taken as a whole.
SECTION 2.2 Due Authorization. The execution and delivery of this
Agreement by Sellers and the execution and delivery of the Ancillary Agreements
by Sellers or either of them, and the performance by Sellers of this Agreement
and the Ancillary Agreements are within the corporate powers of such Sellers'
signatory thereto and have been duly authorized by all necessary corporate
action on the part of such Sellers' signatory thereto. Assuming due and valid
authorization, execution and delivery thereof by the other parties thereto, this
Agreement constitutes, and when executed and delivered the Ancillary Agreements
will constitute, valid and binding agreements of such Sellers' signatory
thereto, enforceable against such Sellers' signatory thereto in accordance with
their respective terms except as such enforceability may be limited by
bankruptcy, insolvency or similar laws and by equitable principles.
SECTION 2.3 No Violation; Consents and Approvals. Except as provided in
Schedule 2.3, neither the execution, delivery and performance by Sellers of this
Agreement or the Ancillary Agreements nor the consummation by Sellers of the
transactions contemplated hereby and thereby and compliance by Sellers with the
terms hereof and thereof will (i) conflict with, violate or result in any breach
of the terms, conditions or provisions of Sellers' certificates of incorporation
or by-laws, (ii) assuming all required consents are obtained on or prior to
Closing, conflict with, violate or result in any breach of, or constitute a
default or loss of any right under or an event which, with the lapse of time or
notice or both, would result in a default or loss of any right under or the
creation of any security interest upon any of the Assets (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any agreement, lease, instrument, obligation,
understanding or arrangement to which Sellers are a party or by which Sellers or
any of the Assets may be bound or subject, except for such defaults, losses (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained, (iii) assuming all required consents are
obtained on or prior to Closing, violate any statute, ordinance or law or any
rule, regulation, order, writ, injunction or decree of any court or of any
public, governmental or regulatory body, agency or authority applicable to
Sellers or by which any of its properties or assets may be bound or subject, or
(iv) require any filing (other than as may be required to transfer any Permit),
declaration or registration with, or permit, consent or approval of, or the
giving of any notice to, any public, governmental or regulatory body, agency or
authority; excluding from the foregoing clauses (ii), (iii) and (iv) such
conflicts, violations, breaches and defaults which, and filings, declarations,
registrations, permits, consents, approvals and notices the absence of which,
either singly or in the aggregate, would not have a Material Adverse Effect.
With respect to any Ancillary Agreements or any undertaking with respect to any
Ancillary Agreements, the representations made in this Agreement shall be
limited to such of Sellers as are a signatory to any such Ancillary Agreements.
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SECTION 2.4 Financial Information. Sellers have furnished to Purchaser
and there is annexed as Schedule 2.4 audited financial statements of Seller for
its fiscal year ended July 31, 1997 and unaudited financial statements as at
February 28, 1998. Such financial statements have been prepared in a manner
consistent with past practice and fairly and accurately present the financial
condition of Seller as of the dates thereof and Seller's earnings changes in
stockholder's equity and cash flow for the periods then ended.
SECTION 2.5 Absence of Certain Changes or Events. Except as set forth
on Schedule 2.5, with respect to both the Business and the Assets, Seller has
not since December 31, 1997:
(a) permitted or allowed any of the Assets to be mortgaged,
pledged or subjected to any lien or encumbrance, other than Permitted Liens (as
defined below);
(b) canceled or compromised any material claims, or waived any
other material rights relating to the Business, or sold, transferred or
otherwise disposed of any properties or assets, real, personal or mixed,
tangible or intangible, material to the Business, other than in the ordinary
course of business;
(c) transferred to any other Person any Intellectual Property;
(d) granted increases in the compensation of any employee
other than in the ordinary course of business;
(e) increased or decreased the level of Inventories other than
in the ordinary course of business;
(f) to its knowledge made any material change in the customary
methods used in operating the Business;
(g) to its knowledge suffered any Material Adverse Effect;
(h) received any written notice, or had actual knowledge, that
any supplier or customer of the Business has suffered a Material Adverse Effect;
or
(i) entered into, amended, renewed or terminated any material
contract, agreement, lease or Permit relating to the Business.
SECTION 2.6 Certain Contracts and Commitments.
(a) Schedule 1.1(a)(vii) sets forth a true and complete list
of Assumed Contracts as of the date of the Effective Date. Except as set forth
in Schedule 1.1(a)(vii), the enforceability of the Assumed Contracts will not be
affected in any material respect by the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
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(b) To Seller's knowledge all of the Assumed Contracts are in
full force and effect as of the Effective Date, enforceable against Seller in
accordance with their respective terms. Seller is not in default, and to
Seller's knowledge, no other party is in default, nor does there exist any event
that, with notice or lapse of time or both, would constitute an event of default
by Seller, or to its knowledge, any other party thereto, under any Assumed
Contract, except where all such events in the aggregate would not result in a
Material Adverse Effect.
SECTION 2.7 Employee Benefit Plans. Schedule 2.7 lists each of the
employee benefit plans, contracts, policies, manuals, and arrangements whether
in writing or oral which is currently sponsored, maintained or contributed to
by, or otherwise binding upon Seller for the benefit of the individuals
designated on Schedule 4.2.
SECTION 2.8 Litigation.
(a) Except as set forth in Schedule 2.8, there are no claims,
actions, suits, proceedings or investigations pending or, to Seller's knowledge,
threatened against Seller with respect to the Business, the Products or the
Assets, at law or in equity or before or by any Federal, state, municipal,
foreign or other governmental department, commission, board, agency,
instrumentality or authority which is reasonably likely to have a Material
Adverse Effect or which may have a material effect on the transactions
contemplated hereby.
(b) Seller is not a party to or, to the knowledge of Seller,
bound by any judgment, injunction, award or order of any governmental entity,
arbitrator or any other Person which would bind Purchaser after the Effective
Date which could reasonably be expected to have a Material Adverse Effect.
SECTION 2.9 Assets.
(a) Seller has good and insurable (subject only to standard
ALTA exceptions) fee simple title to the Property free and clear of any
mortgages, pledges, liens, security interests, conditional and installment sale
agreements, easements or other encumbrances, charges, rights or other claims of
third parties of any kind (collectively, "Liens"), other than (A) Liens securing
or relating to liabilities or obligations which are to be (i) assumed by
Purchaser pursuant to this Agreement or (ii) satisfied or discharged by Seller
on or prior to the Closing, (B) Liens for current taxes and assessments not yet
due, (C) Liens created by Purchaser; and (D) other Liens listed on Schedule
2.9(a) (the Liens referred to in clauses (A) through (D) collectively being
referred to as "Permitted Liens").
(b) To Seller's knowledge, no material zoning law or other
material ordinance or municipal regulation is violated by continuation of the
present use and operation of the Assets presently on the Property, and Seller
has not received written notice of any such violation. No outstanding notice of
condemnation of any of the
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Property has been delivered to Seller, nor, to Seller's knowledge, is any
condemnation proceeding of any of the Property threatened. To Seller's
knowledge, no fact or condition exists which would result in the termination or
curtailment of the current access from the Property to any presently existing
public roads adjoining the Property. All of the Property has direct access to
existing public roads and to all utilities utilized at such location.
(c) Except as set forth in Schedule 2.9(c) and subject to
Section 1.8, on the Closing Date, Seller shall convey to Purchaser good and
marketable title, or valid and enforceable leasehold or other contractual
interest, in and to the Assets, Property and the Intellectual Property, free and
clear of any Liens other than (i) Permitted Liens and (ii) Liens disclosed on
any Schedule hereto. The Equipment is in good operating condition and repair,
normal wear and tear excepted. Except as set forth in Schedule 2.9(c), Seller
has not received any written notice within the twelve (12) months prior to the
date hereof of a violation of any ordinances, regulations or other laws with
respect to such Assets that could reasonably be expected to result in a Material
Adverse Effect.
SECTION 2.10 Intellectual Property.
(a) Schedule 1.1(a)(iv) sets forth a true and complete list of
all patents and patent applications, trade names, trademarks, service marks and
copyrights, including applications and registrations for all such items,
included in the Intellectual Property being transferred to Purchaser pursuant to
this Agreement. Seller shall convey to Purchaser good and marketable title in
and to all domestic and foreign patents, patent applications and copyright,
trademark and servicemark registrations and applications free and clear of any
liens other than (i) Permitted Liens and (ii) Liens disclosed in any Schedule
hereto.
(b) Seller has the right and authority to use and enforce its
rights to all of the Intellectual Property and, the operation of the Business,
the manufacture, use or sale of the Products by Seller or the use of the Assets
does not conflict with, infringe upon or violate any patent, trademark,
copyright, trade secret or other proprietary, personal or other right of any
other Person and no written claim has been made to that effect. There are no
pending, or to Seller's knowledge, threatened administrative, judicial,
arbitration or other adversary proceedings concerning the Intellectual Property.
(c) The Intellectual Property is not subject to any Liens,
licenses or sublicenses in favor of third parties, except any license agreements
set forth on Schedule 1.1(a)(vii). Such Schedule sets forth a complete and
correct list of each Intellectual Property license agreement to which Seller is
a party or by which it is bound (whether as the licensor or licensee)
indicating, as to each, the parties (specifying which party is the licensor and
which party is the licensee), the title of the agreement, the date executed, and
the general subject matter. Seller will not retain after the Closing any
interest in any intellectual property related to the Products.
(d) Schedule 1.1(a)(iv) sets forth a complete and correct list
of each United States and foreign (i) patent and patent application, indicating
as to each, the country, the patent number (or application number), the patent
title, the date filed, the date issued, and
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the expiry date; (ii) registered trademark, servicemark, or tradename and
application therefor, indicating, as to each, the country, the mark, the
registration number (or application number), the date issued, the date filed,
and the expiry date, and material nonregistered trademark; (iii) copyright
registration and copyright application indicating, as to each, the country, the
title of the work, the date issued, and the copyright number, and material
unregistered copyright; in each case owned in whole or in part by Seller and
included within the Intellectual Property. Except as and to the extent set forth
on Schedule 1.1(a)(iv), the applications and registrations set forth on Schedule
1.1(a)(iv) are subsisting in good standing, all maintenance fees have been paid,
and no challenges thereto are pending before the applicable intellectual
property registry. Seller is the current record owner of all registrations and
applications set forth on Schedule 1.1(a)(iv), except as noted on such Schedule.
(e) To Seller's knowledge, the items of Intellectual Property
are valid and enforceable and there are no infringements of Seller's rights in
and to the Intellectual Property by any third party. Seller has not entered into
any consent, indemnification, forbearance to sue or settlement agreement with
any Person relating to any item of Intellectual Property.
SECTION 2.11 Compliance with Laws. Except as set forth on Schedule
2.11, Seller is conducting the Business in compliance with all applicable laws,
rules, regulations, notices, standards, conditions, approvals and orders, except
for instances of noncompliance that would not have a Material Adverse Effect,
and Seller has not received any notice with respect to the Business that it is
in breach of any such laws, rules, regulations, notices, standards, conditions,
approvals or orders, except for instances of noncompliance and breach where
enforcement would not have a Material Adverse Effect.
SECTION 2.12 Permits. Schedule 1.1(a)(ix) is a true and complete list
and description of all Permits held by Seller with respect to the Business.
Except as set forth in Schedule 1.1(a)(ix), Seller validly holds and is in
compliance with all Permits, except where noncompliance would not have a
Material Adverse Effect. Seller holds all Permits required under applicable
laws, rules, regulations and orders, except where the failure to so hold would
not have a Material Adverse Effect.
SECTION 2.13 Inventory. All Inventories described in Section
1.1(a)(viii) and Schedule 1.1(a)(viii) to be sold to Purchaser pursuant to this
Agreement shall be, as of the Effective Date, useable and saleable in the
ordinary course of the Business. All Inventory disposed of by Seller since
February 28, 1998 has been disposed of only in the ordinary course of the
Business consistent with past practice. The Inventory does not include any
materials held by Seller on consignment from third parties. In the event
Purchaser alleges a violation of the representation contained in this section
with regard to Inventory, it shall give Seller the option of disposing of any
alleged obsolete Inventory. Regardless of which party disposes of such
Inventory, all net proceeds of such disposition shall belong to or inure to the
benefit of Seller. There is annexed hereto as Schedule 2.13 the locations where
the Inventory is maintained.
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SECTION 2.14 Brokers and Finders. Seller will pay the expense of any
broker or finder employed by it for any brokerage fees, commissions or finders
fees incurred in connection with the transactions contemplated by this
Agreement.
SECTION 2.15 Insurance. Schedule 2.15 sets forth a true and complete
list of the insurance policies maintained on the date hereof with respect to the
Business and the Assets, and the type and amount of coverage thereunder. During
the three years prior to the date hereof, Seller has not been refused insurance
in connection with the Business. Seller has heretofore delivered to Purchaser a
claims report for such period in respect of the Business, which report is
annexed as part of Schedule 2.15. Such policies are in full force and effect,
and Seller is not delinquent in any material respect with respect to any premium
payments thereon. Claims thereunder are payable on an "occurrence basis" such
that a claim of a type covered by such policies that arises after the Effective
Date for an event which occurred prior to the Effective Date would be covered by
Seller's policy. Schedule 2.15 reflects all insurance, performance bonds and
letters of credit which are required by law or any agreement relating to the
Business to be maintained or entered into by Seller, all of which are in full
force and effect.
SECTION 2.16 Labor Matters. Except as set forth in Schedule 2.16: (i)
there is, and during the three years prior to the Effective Date there has been,
no labor strike, work stoppage or lockout pending, or, to the knowledge of
Seller, threatened against Seller and related to the Business; (ii) to Seller's
knowledge there is no union organizational campaign in progress with respect to
the employees of Seller who work in the Business ("Employees") and no question
concerning representation exists respecting such Employees; (iii) there are no
pending or, to the knowledge of Seller, threatened unfair labor practice charges
or complaints, arbitrations or union grievances against Seller and related to
the Business; (iv) there are no pending, or to the knowledge of Seller,
threatened, charges against Seller or any current or former Employee relating to
the Business before the Equal Employment Opportunity Commission or any state or
local agency responsible for the prevention of unlawful employment practices;
(v) there are no material written personnel policies, rules or procedures
applicable to Employees (other than those with respect to which complete and
correct copies have heretofore been delivered to Seller); (vi) Seller has no
collective bargaining contract; (vii) Seller has not received notice of the
intent of any governmental entity responsible for the enforcement of labor or
employment laws to conduct an investigation with respect to or relating to the
Business and no such investigation is in progress; (viii) there are no
complaints, lawsuits or other proceedings pending or, to the knowledge of
Seller, threatened in any forum by or on behalf of any present or former
Employee, any applicant for employment in the Business or classes of the
foregoing, alleging breach of any express or implied contract of employment, any
law governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship;
(ix) prior to the Effective Date, Seller has not effectuated (A) a "plant
closing" (as defined in the Worker Adjustment Retraining Notification Act of
1988 (the "WARN Act")) affecting the site of employment of the Business or one
or more facilities or operating units within any site of employment or facility
of the Business, or (B) a "mass layoff" (as defined in the WARN Act) affecting
the site of employment or facility of the Business; (x) Seller has not been
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affected by any transaction or engaged in layoffs or employment terminations in
respect of the Business sufficient in number to trigger application of any state
or local law comparable to the WARN Act; and (xi) Seller has complied with all
laws relating to employment or labor, including, without limitation, ERISA, the
WARN Act, the American with Disabilities Act, the Family Medical Leave Act and
federal, state and local laws relating to wages, hours, collective bargaining,
unemployment insurance, workers' compensation, equal employment opportunity and
payment and withholding of Taxes, except for instances of noncompliance that,
individually or in the aggregate, would not have a Material Adverse Effect.
SECTION 2.17 Customers and Suppliers. To Seller's knowledge, except as
set forth on Schedule 2.17, there have been no material adverse changes in the
relationships between Seller and the customers and suppliers of the Business
since December 31, 1997. Except as and to the extent set forth on Schedule 2.17,
Seller is not aware of any significant supplier or customer of the Business has
given Seller notice that it intends to cease doing business with Seller. Except
as and to the extent set forth on Schedule 2.17, to the knowledge of Seller,
there are no facts or circumstances (including, without limitation, the
transactions contemplated by this Agreement) that could reasonably be expected
to have a Material Adverse Effect on Seller's relationships with the customers
and suppliers of the Business. There is set forth in Schedule 2.17 a list of the
twenty largest customers and suppliers of Seller for each of the last three
fiscal years of Seller.
SECTION 2.18 Disclosure. Seller has not knowingly failed to disclose to
Purchaser any facts material to the Business, its results of operations, assets
and liabilities or financial condition.
SECTION 2.19 Taxes.
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" means
all Federal, state, local and foreign taxes, charges, fees, duties, levies,
imposts, customs or other assessments, including without limitation all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, profit share, license, lease, service, service use, value
added, withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, premium, property, windfall profits, or other taxes, fees,
assessments, customs, duties, levies, imposts, or charges of any kind
whatsoever, together with any interest, penalties, additions to tax, fines, or
other additional amounts imposed thereon or with respect thereto and interest in
respect of such penalties, addition to tax, fines or additional amounts; and
(ii) "pre-Closing Tax Period" means all taxable periods ending on or before the
Effective Date and the portion ending on the Effective Date of any taxable
period that includes (but does not end on) such day.
(b) Except as set forth in Schedule 2.19, (i) Seller, any
affiliated group, within the meaning of Section 1504 of the Code, of which
Seller is or has been a member, and any combined unitary or consolidated group
of which Seller is or has been a member has filed or will file in a timely
manner (within any applicable extension periods) all Tax returns, reports and
forms required to be filed by the Code or by applicable state, local or
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foreign Tax laws, rules or regulations in connection with the Business with
respect to all pre-Closing Tax Periods (a "Tax Return"); (ii) all such Tax
Returns are or will be true, correct and complete in all material respects;
(iii) all Taxes shown to be due on such Tax Returns have been timely paid in
full or will be timely paid in full by the due date thereof; (iv) no tax Liens
have been filed with respect to the Assets, and no claims have been asserted
against Seller in writing with respect to any such Taxes; and (v) Seller has
withheld and paid or made provisions on its balance sheet for all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, recipient contractor, creditor, stockholder or other party arising out
of the operation of the Business.
(c) None of the Assets is property that Seller is subject to a
safe harbor lease pursuant to the provisions of Section 168(f)(8) of the Code
(as in effect prior to amendment by the Tax Return Act of 1986) or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(d) Seller is not a "Foreign Person" within the meaning of
Section 1445 of the Code.
SECTION 2.20 Environmental Matters. For purposes of this Agreement, the
following definitions shall apply:
"Environmental Laws" shall mean any statute, ordinance, rule,
regulation or order of any federal, state, or local government or governmental
agency relating to the protection of human health or the environment, including,
without limitation, CERCLA and RCRA.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended.
"RCRA" shall mean the Resource Conservation and Recovery Act,
as amended.
"Hazardous Substances" shall mean and include "hazardous
substances" as defined under CERCLA, "extremely hazardous substances" and "toxic
chemicals" as defined under the Emergency Planning and Community Right to Know
Act and "regulated substances" and "solid waste" as defined under RCRA and any
additional substance designated as hazardous under applicable state law.
Except as set forth on the Schedule 2.20:
(a) No governmental agency or other third party has made,
issued, filed in any court, or, to the knowledge of Seller threatened to make,
issue, or file, in writing, any notice of liability, notice of violation,
demand, claim, request for information, lien, citation, summons, complaint,
order, or settlement agreement with respect to:
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(i) Any alleged violation by Seller of any
Environmental Laws, with respect to the Business, the Property and Seller's
operations thereon, or
(ii) any alleged current failure by Seller to have or
comply with any Permit required under any Environmental Law (an "Environmental
Permit") for Seller's operation of the Business on the Property or its
management of Hazardous Substances, or
(iii) the use, storage, generation, emission,
discharge, transportation, treatment, recycling, or disposal of Hazardous
Substances by Seller or the release or threat of release of Hazardous Substances
by Seller in connection with Seller's operation of the Business and/or its
ownership of the Property.
(b) The Property is not now and has not been operated by
Seller as a treatment, storage, or disposal facility for hazardous waste (as
that term is defined under RCRA or any similar state statute), and Seller has
not received or ever applied for a Part A or Part B RCRA permit for the
operation on the Property of a treatment, storage or disposal facility for
hazardous waste (as defined in RCRA or any similar state statute).
(c) The Property is not listed, or to Seller's knowledge,
proposed for listing on the National Priorities List or any similar state
listing.
(d) Schedule 2.20(d) contains a complete list of disposal
facilities used by Seller for the disposal of hazardous or solid waste as
defined under applicable Environmental Laws as of the Effective Date.
(e) Except as listed on Schedule 2.20(e), no PCBs or active or
inactive underground storage tanks are presently located at the Property.
(f) Except as listed on Schedule 2.20(f), Seller holds all
Permits required for the operation of the Business in compliance with all
Environmental Laws, except when the failure to so hold would not have a Material
Adverse Effect.
(g) Seller is not in violation of any Environmental Law,
except for instances of noncompliance where enforcement would not have a
Material Adverse Effect.
(h) Seller hereby acknowledges receipt of a Phase I study
prepared by AccuTech Environmental Services, Inc. and dated March 5, 1998
conducted by Purchaser at the Property.
SECTION 2.21 Accounts Receivable. All of Seller's accounts receivable
reflected in the financial statements described in Section 2.4 and all accounts
receivable that have arisen since the dates of such financial statements (except
those which have been collected) and as set forth in Schedule 2.21(a) are valid
and enforceable claims and constitute bona fide accounts receivable arising in
the ordinary course of business in conformity with applicable purchase orders,
agreements and specifications. Such accounts receivable are subject to no
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valid defense, offsets, returns, allowances or credits of any kind other than in
the ordinary course of business and are fully collectible in accordance with
their terms except to the extent of the reserves reflected in such financial
statements and in Section 1.4 of this Agreement. There is annexed hereto as
Schedule 2.21(a) a description of aged accounts receivable as at the Effective
Date and in Schedule 2.21(b) a description of all Bill and Hold items as at the
Effective Date. Purchaser shall not make any claim against Sellers for any
alleged violation of this Section with respect to an account receivable until
such account receivable has not been paid within 120 days. In computing any
amount due to Purchaser hereunder, (i) Sellers shall be entitled to the benefit
of any reserve for collection or loss on the balance sheet on the Effective Date
and (ii) such claim is subject to the "basket" and "cap" on liability set forth
in Sections 7.1 and 7.5.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
SECTION 3.1 Organization of Purchaser. Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, and has all requisite power and authority to execute and deliver
this Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby.
SECTION 3.2 Execution and Binding Effect. The execution and delivery of
this Agreement by Purchaser and the execution and delivery of any Ancillary
Agreements by Purchaser, and the performance by Purchaser of this Agreement and
any Ancillary Agreements are within the powers of Purchaser and have been duly
authorized by all necessary corporate or comparable action on the part of
Purchaser. Assuming the due and valid authorization, execution and delivery
thereof by Seller, this Agreement constitutes, and when executed and delivered
the Ancillary Agreements will constitute, valid and binding agreements of
Purchaser, enforceable against it in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency or similar laws and by
equitable principles.
SECTION 3.3 No Violation; Consents and Approvals. Except as provided in
Schedule 3.3, neither the execution, delivery or performance by Purchase of this
Agreement or the Ancillary Agreements nor the consummation by Purchaser of the
transactions contemplated hereby or thereby and compliance by it with the terms
hereof and thereof will (i) conflict with, violate or result in any breach of
the terms, conditions or provisions of Purchaser's organizational documents,
(ii) conflict with, violate or result in any breach of, or constitute a default
or loss of any right under or an event which, with the lapse of time or notice
or both, would result in a default or loss of any right thereunder (or give rise
to any right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any agreement, lease, instrument, obligation,
understanding or arrangement to which Purchaser is a party or by which Purchaser
may be bound or subject
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except for such defaults, losses (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained,
(iii) assuming all required consents are obtained prior to Closing, violate any
statute, ordinance or law or any rule, regulation, order, writ, injunction or
decree of any court or of any public, governmental or regulatory body, agency or
authority applicable to Purchaser or by which any of its properties or assets
may be bound or subject, or (iv) require any filing (other than as may be
required to transfer any Permit), declaration or registration with, or permit,
consent or approval of, or the giving of any notice to, any public, governmental
or regulatory body, agency or authority; excluding from the foregoing clauses
(ii), (iii) and (iv) such conflicts, violations, breaches and defaults which,
and filings, declarations, registrations, permits, consents, approvals and
notices the absence of which, either singly or in the aggregate, would not
affect the consummation of the transactions contemplated hereby.
SECTION 3.4 Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to Purchaser's knowledge, threatened
by or against Purchaser with respect to, or which may have an effect on, the
transactions contemplated hereby, at law or in equity or before or by any
Federal, state, municipal, foreign or other governmental department, commission,
board, agency, instrumentality or authority.
SECTION 3.5 Brokers and Finders. Neither Purchaser nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1 Efforts; Further Assurances; Permits.
(a) Each of the parties shall use its best efforts, and the
parties shall cooperate with each other (including without limitation by
exchange of information), to obtain all waivers, permits, consents and approvals
and to effect all registrations, filings and notices with governmental or public
bodies or authorities that are in the reasonable opinion of Seller or Purchaser
necessary or reasonably desirable in connection with the transactions
contemplated by this Agreement. Each party will pay all fees due with respect to
any government filings required to be made by it.
(b) In the case at any time after the Closing Date any further
action is reasonably deemed necessary or desirable to carry out the purposes of
this Agreement, including action to fully vest in Purchaser its rights in the
Assets, to perfect the assumption by Purchaser of the Assumed Liabilities or to
perfect the retention by Seller of the Excluded Assets and the Excluded
Liabilities, the proper officers and/or directors of Seller and Purchaser shall
on the written request of either of them take all such necessary desirable
action.
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(c) Seller shall, at its own expense (but without the payment
of money or providing any guarantees), promptly apply for or otherwise seek and
use commercially reasonable efforts to obtain all authorizations, consents,
waivers and approvals as may be required in connection with the assignment of
the Assumed Contracts to Purchaser. Upon Purchaser's request, and at Purchaser's
expense, Seller will also use commercially reasonable efforts (not including the
payment of money, incurring any out-of-pocket costs or providing any guarantees)
to cooperate with Purchaser in its obtaining any permits, licenses or other
authorizations after the Closing Date necessary for Purchaser's operation of the
Business after the Closing Date in a manner consistent with past practice.
(d) In the event that any time, any order, decree or
injunction shall be entered which prevents or delays the consummation of any of
the transactions contemplated by this Agreement, each party shall promptly use
its best efforts to cause such order, decree or injunction to be reversed,
vacated or modified in order to permit such transactions to proceed as
expeditiously as possible.
SECTION 4.2 Employee Matters.
(a) On or prior to the Closing Date, Purchaser shall offer
employment to substantially all of the employees of Seller designated on
Schedule 4.2 ("Employees") on the Effective Date, at salary, hourly rates and
rates of commission, bonuses and other forms of benefits and incentive
compensation generally comparable to those provided to Purchaser's current
employees in similar positions and, to the extent practicable, for the similar
job position as currently provided by Purchaser to its current employees;
provided however that any offer of employment shall be contingent upon the
Closing actually occurring. All decisions regarding the hiring or employment by
Purchaser of any person shall be Purchaser's sole decision. Seller shall not
provide input, advice or counsel on any such decision. Purchaser acknowledges
that it is not relying on any information of Seller in making employment
decisions. As at the Effective Date, all employees of Seller will be terminated
by Seller. Schedule 4.2 contains a description of the amount of each Employee's
compensation and title. Prior to the Closing, Seller will not terminate except
for cause the employment of or transfer any Employee to another business of
Seller, and Seller will not take any action to hinder Purchaser's efforts to
hire or retain any Employee. Effective as of the Closing Date, all such
designated Employees who accept Purchaser's offer of employment and are actively
at work will become employees of Purchaser ("Transferred Employees"). Any
employee who receives an offer of employment in accordance with the provisions
of this Section 4.2 which such Employee does not affirmatively accept and, who
does not report to work on the workday immediately following the Closing Date
shall be deemed to have rejected Purchaser's offer of employment.
Notwithstanding the foregoing, any such Employee who provides notification to
his or her supervisor of a reasonably acceptable reason for such absence (which
may include without limitation, previously scheduled and approved vacation, jury
duty, funeral or bereavement leave or illness) within ten (10) business days
after the Closing Date and who is available to report to work upon the earlier
of the conclusion of the pre-approved leave or ten (10) business days after the
Closing Date, shall be permitted to accept Purchaser's offer of employment. With
respect to each Transferred Employee, Purchaser
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shall use its best efforts to cause to be waived pre-existing condition
requirements, evidence of insurability provisions, waiting period requirements
or any similar provisions under any employee benefit plan or compensation
arrangement maintained or sponsored by or contributed to by Purchaser for such
individuals after the Closing Date; provided that any pre-existing condition
requirements, evidence of insurability provisions, waiting period requirements
or any similar provisions under any employee benefit plan or compensation
arrangement maintained or sponsored by or contributed to by the Purchaser will
apply with respect to any Transferred Employee (or covered dependent of a
Transferred Employee) who, as of the Closing Date is subject to a similar
limitation under Seller's plan. All Transferred Employees, their spouses and
dependents will be covered after the Effective Date by the Purchaser's Group
Health, Dental and Drug Plans, and Purchaser will not pay or provide
reimbursement for health care continuation coverage by Seller under COBRA for
any Transferred Employee, their spouse or dependents.
(b) With respect to Purchaser's pension, savings, vacation and
health and welfare and disability benefits, executive compensation, incentive
and bonus arrangements (except with respect to plans not listed on Schedule
4.2(b) which are adopted after the Closing Date and which do not give credit for
past services), Purchaser shall recognize for purposes of participation,
eligibility, vesting and benefit accruals (including any early retirement
benefits available under Purchaser's pension plans (within the meaning of
Section 3(2) of ERISA)) under employee benefit plans and compensation
arrangements of Purchaser the service of any Transferred Employee with Seller,
or its predecessors, prior to the Closing Date, subject to appropriate offsets
to avoid duplication of benefits. Purchaser may, in its sole discretion, adjust
from time to time the wages paid to the Transferred Employees after the Closing
Date in order to compensate them for any differential that may exist in the
benefit plans of Seller as compared to those of Purchaser which will become
applicable to such Transferred Employees after the Closing Date until such time
as the benefits granted to the Transferred Employees after the Closing Date are
reasonably equal to those benefits being granted to the employees of Purchaser
at and after the Closing Date.
(c) As of the Closing Date, Purchaser will not assume any
obligations of Seller to Transferred Employees for any vacation entitlement,
vacation pay entitlement or severance pay arising or accruing prior to August 1,
1997. Purchaser shall provide vacation benefits to Transferred Employees in
accordance with Section 4.2(b).
(d) Except as specifically set forth in this Agreement, no
assets held in trust for any benefit plan of Seller shall be transferred to
Purchaser or to any plan adopted or maintained by Purchaser.
(e) No provision of this Agreement shall create any third
party beneficiary or other rights in any employee or former employee (including
any beneficiary or dependent thereof) of Seller in respect of employment with
Purchaser or in respect of any benefits that may be provided, directly or
indirectly, under any employee benefit plan, contract, policy or arrangement
which may be established by Purchaser. No provision of
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this Agreement shall constitute a limitation on rights to amend, modify or
terminate after the Closing Date any such plans, contracts, policies or
arrangements of Purchaser.
SECTION 4.3 Transfer Taxes; Expenses. All excise, sales, value added,
use, registration, stamp, transfer and similar taxes, levies, charges and fees,
including, without limitation, any real estate transfer taxes relating to the
Property, any fees required to record the Deed, any personal property transfer
taxes relating to the Assets and any fees required for the transfer and
recording of the Intellectual Property, incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by Sellers.
Purchaser will cooperate with Sellers in providing any appropriate resale
exemption certificates and other appropriate tax documentation.
SECTION 4.4 Access to Records.
(a) After the Closing and from time to time, Purchaser shall
permit Sellers and their authorized officers, employees, attorneys, accountants
and other representatives to have access during regular business hours and upon
reasonable notice, to inspect and copy agreements, records, books and other
documents that are included in the Assets and identified with reasonable
particularity, wherever located, for the purposes of (i) preparing tax returns
and financial statements and responding to tax audits, and (ii) prosecuting or
defending any claim, litigation, proceeding or investigation which arises out of
or relates to the Business or the Assets. If, after the Closing, Purchaser
determines to destroy any agreements, records, books or documents referred to
above, it will give to Sellers at least three months' prior written notice
thereof, and Sellers shall have the right during such three-month period upon
reasonable notice and during regular business hours to take possession of any
such agreements, records, books or documents.
(b) After the Closing and from time to time, Purchaser shall
permit Sellers and their authorized officers, employees, attorneys, accountants
and other agents to have access upon reasonable notice to the Property, and
shall make available to Sellers employees or other representatives of Purchaser
(including, where appropriate, Transferred Employees specified by Seller), at
the sole cost and expense of Sellers, for purposes of (i) permitting Sellers to
perform their obligations hereunder and (ii) prosecuting or defending any claim,
litigation, proceeding or investigation which arises out of or relates to the
Business, the Products or the Assets.
SECTION 4.5 Assets After Closing. In the event that a payment is
received by Sellers from any Person and such payment specifically indicates an
intent (or is accompanied by or is the subject of any other unsolicited,
unambiguous indication of intent) that the payment is being made with respect to
Products sold, or services performed before or after Closing, then Sellers shall
forward such payment to Purchaser as promptly as practicable after receipt.
Effective upon the Closing Date, Purchaser shall have the right to receive and
open all mail, packages and other communications which relate to the Business
addressed to Sellers; and Sellers agrees to promptly deliver to Purchaser any
such mail, packages or other communications received directly or indirectly by
Sellers or any of its affiliates and which relate to the Business but not to
Sellers. Purchaser shall promptly
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deliver to Sellers all mail, packages and other communications received by it
which relate to Sellers but not to the Business.
SECTION 4.6 Intellectual Property Cooperation. Sellers covenants and
agrees that at any time from and after the Closing Date upon reasonable and
specific written request of Purchaser, Sellers will use commercially reasonable
efforts to communicate to Purchaser all information known to it constituting a
part of the Intellectual Property, and will execute and deliver any papers, make
all rightful oaths, testify in any legal proceedings and perform all other
lawful acts reasonably deemed necessary or desirable by Purchaser to convey or
perfect title to the Intellectual Property and to enforce or defend Purchaser's
rights in and to the Intellectual Property or assist Purchaser in obtaining or
enforcing Purchaser's rights in and to the Intellectual Property. Purchase shall
reimburse Sellers for all reasonable and documented out-of-pocket expenses
incurred in providing cooperation pursuant to this Section 4.6.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of the following conditions, any
of which may be waived in writing in whole or in part by Purchaser as provided
herein, except as otherwise provided by law:
SECTION 5.1 Representations and Warranties of Sellers to be True;
Performance by Sellers; Certificates.
(a) The representations and warranties of Sellers contained in
this Agreement shall be true and correct in all material respects.
(b) Sellers shall have performed and complied in all material
respects with all of its agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
(c) Seller shall have delivered to Purchaser the Seller
Certificate dated as of the Closing Date and certifying the fulfillment of the
conditions set forth in this Section 5.1.
SECTION 5.2 Agreements. Seller shall have executed and delivered to
Purchaser the Bill of Sale, the Assignment and Assumption Agreement, the
Intellectual Property Assignments and the Deed.
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SECTION 5.3 Survey and Title Insurance; Defects.
(a) Seller shall have procured (i) title insurance, subject
only to Permitted Liens and such exceptions as are customary on the ALTA
standard title insurance form or which are specifically agreed to by Purchaser,
with respect to the Property from a title insurance company reasonably
satisfactory to Purchaser (not in excess of the portion of the Purchase Price
allocated to the Property pursuant to Section 1.6) and (ii) a recent survey, by
a licensed surveyor, of the Property, showing the boundaries, monuments,
easements and rights-of-way of record, improvements and encroachments, if any.
Purchaser and Seller shall share equally any costs incurred hereunder.
(b) If Seller is unable to convey title to the Property as
required by this Agreement, Purchaser may elect to (i) accept such title as
Seller is able to convey, (ii) if Seller so consents, adjourn the Closing for a
period reasonably necessary for Seller to cure or remove any conditions of title
subject to which Purchaser is not obligated to take the Property or (iii)
terminate this Agreement.
SECTION 5.4 Consents. All notices to, and declarations, filings and
registrations with, and consents, approvals and waivers from, and waiting
periods required by, governmental and regulatory agencies required in order for
Seller to consummate the transactions contemplated hereby shall have been made
or obtained or shall have expired, as the case may be.
SECTION 5.5 No Proceeding or Litigation.
(a) No preliminary or permanent injunction or other order
shall have been issued by any court of competent jurisdiction, whether federal,
state or foreign, or by any governmental or regulatory body, whether federal,
state or foreign, nor shall any statute, rule, regulation or executive order be
promulgated or enacted by any governmental authority, whether federal, state or
foreign, which prevents the consummation of the transactions contemplated in
this Agreement.
(b) No suit, action, claim, proceeding or investigation before
any court, arbitrator or administrative, governmental or regulatory body,
whether federal, state or foreign, shall have been commenced by any Person
(other than the parties hereto and their Affiliates) and be pending against
Seller, Purchaser or any of their respective Affiliates, associates, officers or
directors seeking to prevent the sale of the Assets or the Business or asserting
that the sale of the Assets or the Business would be illegal.
(c) The Purchaser will provide the Seller with reasonable
assistance and make available such books and records as may be reasonably
required in connection with any claims or litigation relating to the Business
and arising prior to the Effective Date.
SECTION 5.6 Opinion of Counsel for Seller. Purchaser shall have
received from Butzel Long, Esqs., counsel to Seller, a written opinion, dated as
of the Closing Date, substantially in the form attached hereto as Exhibit F.
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SECTION 5.7 Consent of Directors of Purchaser. Purchaser shall have
received approval of the transactions contemplated by this Agreement and the
authority to execute and deliver this Agreement by the Directors of Purchaser.
ARTICLE VI
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, any of which may be waived in whole or in part by Seller as provided
herein, except as otherwise provided by law:
SECTION 6.1 Representations and Warranties of Purchaser to be True;
Performance by Purchaser; Certificate.
(a) The representations and warranties of Purchaser contained
in this Agreement shall be true and correct in all material respects.
(b) Purchaser shall have performed and complied in all
material respects with all of its agreements, covenants and conditions required
by this Agreement to be performed or complied with by it prior to or at the
Closing Date.
(c) Purchaser shall have delivered to Sellers the Purchaser
Certificate dated as of the Closing Date and certifying the fulfillment of the
conditions set forth in this Section 6.1.
SECTION 6.2 Agreements. Purchaser shall have executed and delivered to
Sellers the Intellectual Property Assignments and the Assignment and Assumption
Agreement.
SECTION 6.3 Consents. All notices to, and declarations, filings and
registrations with, and consents, approvals and waivers from, and waiting
periods required by, governmental and regulatory agencies required in order for
Purchaser to consummate the transactions contemplated hereby shall have been
made or obtained or shall have expired, as the case may be.
SECTION 6.4 No Proceeding or Litigation.
(a) No preliminary or permanent injunction or other order
shall have been issued by any court of competent jurisdiction, whether federal,
state or foreign, or by any governmental or regulatory body, whether federal,
state or foreign, nor shall any statute, rule, regulation or executive order be
promulgated or enacted by any governmental authority, whether federal, state or
foreign, which prevents the consummation of the transactions contemplated in
this Agreement.
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(b) No suit, action, claim, proceeding or investigation before
any court, arbitrator or administrative, governmental or regulatory body,
whether federal, state or foreign, shall have been commenced by any Person
(other than the parties hereto and their Affiliates) and be pending against
Seller or Purchaser or any of their respective Affiliates, associates, officers
or directors seeking to prevent the sale of the Assets or the Business or
asserting that the sale of the Assets or the Business would be illegal.
SECTION 6.5 Opinion of Counsel for Purchaser. Seller shall have
received from Baer Marks & Upham, counsel to Seller, a written opinion, dated as
of the Closing Date, substantially in the form attached hereto as Exhibit G.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. Except
hereinafter provided the representations and warranties of Sellers in Article II
and of Purchaser in Article III shall survive the Closing until 15 months
following the Closing Date and thereafter no claim (and no action or proceeding
arising out of any such claim) may be brought in respect of any
misrepresentation or breach of warranty; provided, however, that (i)
representations and warranties relating to Taxes shall survive until the running
of the statute of limitations with respect to such matters and (ii)
representations and warranties relating to title to the Property shall not
terminate. The representations and warranties under Section 2.20 of this
Agreement shall survive the Closing for a period of three (3) years following
the Closing Date. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by a party in whose
favor such representations and warranties have been made to the party that made
such representations and warranties, then the relevant representations and
warranties shall survive as to such claim until the claim has been finally
resolved.
SECTION 7.2 Indemnification by Sellers. Except as otherwise limited by
this Article VII, Purchaser and its officers, directors, employees, agents,
successors and assigns shall be indemnified and held harmless by Sellers,
jointly and severally, from any and all liabilities, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable attorneys' fees and expenses) suffered or
incurred by it (hereinafter "Purchaser Losses"), arising out of or resulting
from:
(a) the breach of any representation or warranty by Sellers
contained herein or in any document delivered hereunder at the Closing; or
(b) the breach of any covenant or agreement by Sellers
contained herein or in any document delivered hereunder at the Closing; or
(c) Excluded Liabilities.
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SECTION 7.3 Indemnification by Purchaser. Except as otherwise limited
by this Article VII, Sellers and their officers, directors, employees, agents,
successors and assigns shall be indemnified and held harmless by Purchaser from
any and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable
attorneys' fees and expenses) suffered or incurred by it (hereinafter "Sellers
Losses"), arising out of or resulting from:
(a) the breach of any representation or warranty by Purchaser
contained herein or in any document delivered hereunder at the Closing; or
(b) the breach of any covenant or agreement by Purchaser
contained herein or in any document delivered hereunder at the Closing; or
(c) the Assumed Liabilities; or
(d) Purchaser's operation of the Business after the Closing
Date.
SECTION 7.4 General Indemnification Provisions.
(a) For the purposes of this Section 7.4, the term
"Indemnitee" shall refer to the Person or Persons indemnified, or entitled, or
claiming to be entitled to be indemnified, pursuant to the provisions of Section
7.2 or 7.3, as the case may be; the term "Indemnitor" shall refer to the Person
having the obligation to indemnify pursuant to such provisions; and "Losses"
shall refer to the "Seller Losses" or the "Purchaser Losses", as the case may
be.
(b) An Indemnitee shall promptly give the Indemnitor notice of
any matter which an Indemnitee has determined has given or could give rise to a
right of indemnification under this Agreement, stating the amount of the Losses,
if known, the method of computation thereof and the basis for the claim, all
with reasonable particularity; provided that, subject to the provisions of
Section 7.1 hereof, the failure to provide such notice shall not affect the
obligations of the Indemnitor unless it is actually prejudiced thereby. The
obligations and liabilities of an Indemnitor under this Article VII with respect
to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Article VII ("Third Party Claims") shall be
governed by and contingent upon the following additional terms and conditions:
If an Indemnitee shall receive notice of any Third Party Claim, the Indemnitee
shall give the Indemnitor prompt notice of such Third Party Claim and shall
permit the Indemnitor, at its option, to assume and control the defense and/or
management of such Third Party Claim at its expense and through counsel of its
choice if it gives prompt notice of intention to do so to the Indemnitee. In the
event the Indemnitor exercises its right to undertake the defense against or
management of any such Third Party Claim as provided above, the Indemnitee shall
cooperate with the Indemnitor in such defense or management and make available
to the Indemnitor all witnesses, pertinent records, materials and information in
its possession or under its control relating thereto as is reasonably required
by the Indemnitor. Similarly, in the event the Indemnitor does not exercise its
right to undertake the defense or
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management of any Third Party Claim and the Indemnitee is, directly or
indirectly, conducting the defense against or management of any such Third Party
Claim, the Indemnitor shall cooperate with the Indemnitee in such defense or
management and make available to it all such witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitee. Except for the settlement
of a Third Party Claim which involves the payment of money only and for which
the Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim
may be settled by the Indemnitor without the prior written consent of the
Indemnitee. Similarly, no Third Party Claim may be settled by the Indemnitee
without the prior written consent of the Indemnitor.
SECTION 7.5 Limits on Indemnification. Except as hereinafter provided
no claim may be made against an Indemnitor for indemnification pursuant to
Section 7.2 or 7.3, as the case may be, unless and only to the extent the
aggregate of all Losses of the Indemnitee with respect to such Sections shall
exceed $25,000. In no event shall the Indemnitor's liability under Section 7.2
or 7.3, as the case may be, exceed Three Hundred Fifty Thousand Dollars
($350,000). There is no minimum with respect to any claim pursuant to Section
7.2(c) of this Agreement or for violation of Section 2.20.
SECTION 7.6 Special Provisions Regarding Environmental Claims.
Notwithstanding any other provision hereunder, in the event Purchaser shall
allege a violation of any representation contained in Section 2.20, it shall
take no remedial action until it has offered Seller the opportunity to
investigate and, if necessary, correct or remediate the alleged condition.
Seller, at its expense, may retain such experts, attorneys and consultants as it
deems appropriate. In the event Seller elects to control the remediation, any
remediation shall be done in a manner determined by Seller and to standards
approved by Seller; provided (i) such remediation shall cause the affected
property to comply with applicable Environmental Laws and (ii) Seller shall
cooperate with Purchaser to limit or minimize interference with Purchaser's
operations or use of the facility. In no event shall Seller's costs or
obligation arising due to a breach of a representation contained in Section 2.20
exceed Three Million Dollars ($3,000,000).
ARTICLE VIII
AMENDMENT AND WAIVER
SECTION 8.1 Amendment. This Agreement may not be amended except by an
instrument in writing signed by Purchaser and Sellers.
SECTION 8.2 Waiver. Any failure of either of the parties to comply with
any provision hereof may be waived by the party entitled to the benefit thereof
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such provision shall not
operate as a waiver of or estoppel with respect to, any subsequent or other
failure.
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ARTICLE IX
NON-COMPETITION
SECTION 9.1 Non-Competition. Subject to consummation of the
transactions contemplated hereby, Sellers will not, and will cause its
Affiliates not to, for a period of three (3) years from and after the Closing
Date, engage, without Purchaser's prior written consent, directly or indirectly,
whether for their own account or otherwise, in the Business as conducted on the
day prior to the Closing Date (a "Competing Business"); provided, however, that
Sellers or any of its Affiliates may own as an investment, directly or
indirectly, securities of any corporation or other entity engaged in a Competing
Business which are publicly traded if Sellers or any of their Affiliates do not,
directly or indirectly, beneficially own 5% or more of the outstanding shares of
such entity.
SECTION 9.2 Non Solicitation. For a period of twenty four months after
the Closing Date, Sellers shall not directly or indirectly solicit for
employment by Sellers or any other Affiliates any Transferred Employee except
(i) with the prior written consent of Purchaser, or (ii) in the event that the
Transferred Employee's employment has been terminated by Purchaser. In the event
Sellers solicit for employment a Transferred Employee prior to the expiration of
twenty four months following the Closing Date without meeting one of the
exceptions set forth in the preceding sentence, Sellers shall pay Purchaser as
liquidated damages, and not as a penalty, a sum equal to one year's current
salary of such Transferred Employee. This represents the reasonable endeavor by
the parties hereto to estimate a fair compensation for the foreseeable and
unforeseeable losses that might result from any such violation of this Section
9.2.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred. Purchaser shall be
entitled to be reimbursed by Seller for any expenses which are the obligation of
Seller but which have been paid by the Company.
SECTION 10.2 Consents. Whenever this Agreement requires a permit or
consent by or on behalf of either party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in Section 8.4.
SECTION 10.3 Assignment; Parties in Interest. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations herein shall be assigned, except by
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operation of law, by any party hereto without the prior written consent of the
other party, which consent may be withheld by either party in its sole
discretion. Notwithstanding the foregoing, (i) Purchaser may assign this
Agreement and any and all of its rights hereunder, in whole or in part, to any
Affiliate of Purchaser and as provided for in Section 10.15 hereof without the
prior written consent of Seller, it being understood that no such assignment
shall in any way affect the obligations of Purchaser hereunder.
SECTION 10.4 Further Assurances. Each of the parties hereto agrees
that, from and after the Closing, upon the reasonable request of any other party
hereto and without further consideration, such party will execute and deliver to
such other party such documents and further assurances and will take such other
actions (without cost to such party) as such other party may reasonably request
in order to carry out the purpose and intention of this Agreement.
SECTION 10.5 Title and Risk of Loss. Legal title, equitable title and
risk of loss with respect to the Assets and rights to be transferred hereunder
shall not pass to Purchaser until the Assets or right are transferred at the
Closing hereunder.
SECTION 10.6 Entire Agreement. This Agreement and the Schedules and
Exhibits and other writings referred to herein or delivered pursuant hereto
which form a part hereof contain the entire understanding of the parties with
respect to the subject matter hereof. This Agreement supersedes all prior
agreements, except that the obligations of the parties under the Confidentiality
Agreement, dated December 22, 1997, between Devoto & Company, Inc. and Purchaser
shall survive and be binding on the parties.
SECTION 10.7 Headings. The Article and Section headings contained in
this Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.8 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder will be in writing and will be deemed
to have been duly given if personally delivered or on the date of receipt or
refusal indicated on the return receipt if delivered or sent by facsimile or
mailed (registered or certified mail, postage prepaid, return receipt requested)
as follows:
(a) If to Sellers:
McKechnie Investments, Inc.
2201 Regency Road
Suite 701
Lexington, Kentucky 40503
Attention: Bruce Graben, CFO
Fax: (606) 278-1186
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<PAGE> 35
with a copy to:
Butzel Long Esqs.
32270 Telegraph Road
Suite 200
Birmingham, Michigan 48025
Attention: Gordon W. Didier, Esq.
Fax: (248) 258-1439
(b) If to Purchaser:
PVC Container Corporation
401 Industrial Way West
Eatontown, New Jersey 07724
Attention: Phillip L. Friedman
Fax: (732) 542-7706
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Herbert S. Meeker, Esq.
Fax: (212) 702-5810
or to such other address as the Person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 10.9 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
without regard to its provisions concerning conflicts or choice of law. The
parties hereto irrevocably: (a) agree that any suit, action or other legal
proceeding arising out of this Agreement or the Confidentiality Agreement
referred to in Section 10.6 may be brought in the courts of the State of New
York, (b) consent to the jurisdiction of each court in any such suit, action or
proceeding, (c) waive any objection which they, or any of them, may have to the
laying of venue of any such suit, action or proceeding in any of such courts,
and (d) waives the right to a trial by jury in any such suit, action or other
legal proceeding.
SECTION 10.10 Bulk Sales Law. Purchaser and Seller waive compliance
with the provision of any applicable bulk sales laws.
SECTION 10.11 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
when taken together shall constitute one and the same agreement.
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SECTION 10.12 Certain Definitions. As used herein, an "Affiliate" of
Purchaser or Seller shall mean any Person controlling, controlled by or under
common control with, Purchaser or Seller, as the case may be, and for this
purpose "control" of any entity shall mean the direct or indirect beneficial
ownership of fifty percent (50%) or more of the voting interest in such Person,
or such other relationship as, in fact, constitutes actual control thereof. As
used herein, the term "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity, including a governmental entity.
SECTION 10.13 Publicity. Purchaser and Seller shall cooperate in any
public disclosure of the transaction which is the subject hereof within thirty
(30) days of the Closing. During this period, each party will provide a copy of
any proposed public statement and make reasonable modifications to such proposed
statement suggested by the other party prior to issuing such statement.
SECTION 10.14 Closing Documents. Any documents executed and delivered
by the parties pursuant to Section 1.7 may be delivered by fax with an
originally signed document to be delivered by courier.
SECTION 10.15 Designated Buyer. It is understood and agreed between the
parties that Purchaser may cause one or more Affiliates, direct or indirect
Subsidiaries or other entities designated by it (the "Designated Buyer") to
carry out all or part of the transactions to be carried out by Purchaser under
this Agreement; provided, however, that Purchaser nevertheless shall remain
liable (as principal and not as guarantor) for all of its obligations and those
of any Designated Buyer hereunder.
SECTION 10.16 Definition of Knowledge. The term "knowledge" as used in
this Agreement with respect to: (a) any individual shall mean actual knowledge
and (b) any corporation shall mean the actual knowledge of the directors and
executive officers of such corporation.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Sellers and Purchaser as of the date first
above written.
PVC CONTAINER CORPORATION
By:
---------------------------------
Name: Phillip L. Friedman
Title: President
MCKECHNIE INVESTMENTS, INC.
By:
---------------------------------
Name:
Title:
CHARTER SUPPLY COMPANY, INC.
By:
---------------------------------
Name:
Title:
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<PAGE> 1
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
FLEET BANK, NATIONAL ASSOCIATION
AND
PVC CONTAINER CORPORATION, NOVATEC
PLASTICS CORP., NOVAPAK CORPORATION AND
AIROPAK CORPORATION
Dated: as of March 27, 1998
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TABLE OF CONTENTS
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INTRODUCTION......................................................................................................1
ARTICLE I
DEFINITIONS................................................................................................... I-1
1.1 "INCORPORATION OF UCC DEFINITIONS".......................................................... I-1
1.2 "ACCOUNTS" or "ACCOUNTS RECEIVABLE"......................................................... I-1
1.3 "ACCOUNT DEBTOR"............................................................................ I-1
1.4 "AGREEMENT"................................................................................. I-1
1.5 "AIROPAK"................................................................................... I-1
1.6 "AIROPAK'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT".................................. I-2
1.7 "BORROWER".................................................................................. I-3
1.8 "BORROWERS"................................................................................. I-3
1.9 "CERTIFICATION AS TO LIENS"................................................................. I-3
1.10 "CHATTEL PAPER"............................................................................. I-3
1.11 "COLLATERAL"................................................................................ I-4
1.12 "COLLATERAL"................................................................................ I-4
1.13 "CONTRACT RIGHTS"........................................................................... I-4
1.14 "DEFAULT RATE".............................................................................. I-5
1.15 "EVENT OF DEFAULT".......................................................................... I-5
1.16 "EQUIPMENT"................................................................................. I-5
1.17 "FNB"....................................................................................... I-5
1.18 "GAAP"...................................................................................... I-5
1.19 "GENERAL INTANGIBLES"....................................................................... I-5
1.20 "GOODS"..................................................................................... I-6
1.21 "INSTRUMENT"................................................................................ I-6
1.22 "INVENTORY"................................................................................. I-6
1.23 "LIABILITIES"............................................................................... I-7
1.24 "LOAN DOCUMENTS"............................................................................ I-7
1.25 "MASTER AGREEMENT".......................................................................... I-7
1.26 "NOVAPAK"................................................................................... I-8
1.27 "NOVAPAK'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT".................................. I-8
1.28 "NOVATEC"................................................................................... I-9
1.29 "NOVATEC'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT".................................. I-9
1.30 "NY MORTGAGE"............................................................................... I-10
1.31 "NY PREMISES"............................................................................... I-10
1.32 "NY TERM LOAN".............................................................................. I-11
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1.33 "NY TERM NOTE".............................................................................. I-11
1.34 "OTHER LOANS"............................................................................... I-11
1.35 "PRIME RATE"................................................................................ I-11
1.36 "PROCEEDS".................................................................................. I-11
1.37 "PVC"....................................................................................... I-12
1.38 "PVC'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT"...................................... I-12
ARTICLE II
LOANS........................................................................................................ II-1
2.1 NY TERM LOAN............................................................................... II-1
2.2 REPAYMENT OF PRINCIPAL..................................................................... II-1
2.3 PAYMENT OF INTEREST........................................................................ II-2
2.4 YIELD MAINTENANCE AND INDEMNIFICATION RELATING TO LIBOR BASED INTEREST..................... II-7
2.5 MASTER AGREEMENT........................................................................... II-9
2.6 NY TERM NOTE TO EVIDENCE NY TERM LOAN...................................................... II-10
2.7 AUTHORIZATION TO CHARGE ACCOUNTS........................................................... II-12
2.8 APPLICATION OF PAYMENTS.................................................................... II-12
2.9 LATE CHARGE................................................................................ II-13
2.10 OPTIONAL PREPAYMENT OF NY TERM LOAN........................................................ II-13
2.11 MANDATORY REPAYMENT OF ALL LIABILITIES..................................................... II-14
2.12 APPLICATION OF PAYMENTS.................................................................... II-14
(a) Definition of "Other Loans"....................................................... II-15
(b) Cross-Collateralization........................................................... II-15
(c) Cross-Default..................................................................... II-16
(d) Ranking and Priority of Collateral................................................ II-16
2.13 OTHER LOANS.....................................................................................II-15
2.14 OBLIGATIONS ABSOLUTE............................................................................II-16
ARTICLE III
COLLATERAL.................................................................................................. III-1
3.1 CROSS COLLATERALIZATION................................................................... III-1
3.2 ACCOUNTS RECEIVABLE....................................................................... III-1
3.3 CHATTEL PAPER............................................................................. III-1
3.4 CONTRACT RIGHTS........................................................................... III-2
3.5 DEPOSIT ACCOUNTS.......................................................................... III-2
3.6 EQUIPMENT................................................................................. III-3
3.7 GENERAL INTANGIBLES....................................................................... III-4
3.8 GOODS..................................................................................... III-4
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3.9 INSTRUMENTS............................................................................... III-5
3.10 INVENTORY................................................................................. III-5
3.11 LEDGERS AND RECORDS....................................................................... III-6
3.12 NY MORTGAGE............................................................................... III-6
3.13 PROCEEDS.................................................................................. III-7
3.14 PRIORITY OF SHARED COLLATERAL SECURING THE NY TERM
LOAN AND THE OTHER LOANS.................................................................. III-7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES............................................................................... IV-1
ARTICLE V
CONDITIONS OF LENDING......................................................................................... V-1
ARTICLE VI
POSITIVE COVENANTS........................................................................................... VI-1
ARTICLE VII
NEGATIVE COVENANTS.......................................................................................... VII-1
ARTICLE VIII
EVENTS OF DEFAULT.......................................................................................... VIII-1
ARTICLE IX
REMEDIES..................................................................................................... IX-1
ARTICLE X
MISCELLANEOUS................................................................................................. X-1
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT made and dated as of
March 27, 1998 by and among
PVC CONTAINER CORPORATION, a Delaware corporation authorized
to do business in the States of New Jersey, Illinois, and
South Carolina, with its principal corporate place of business
at 401 Industrial Way West, P.O. Box 597, Eatontown, Monmouth
County, New Jersey 07724; NOVATEC PLASTICS CORP., a Delaware
corporation authorized to do business in the State of New
Jersey, with its principal corporate place of business at 401
Industrial Way West, P.O. Box 597, Eatontown, Monmouth County,
New Jersey 07724; NOVAPAK CORPORATION, a Delaware corporation
authorized to do business in the State of New Jersey, with its
principal corporate place of business at 401 Industrial Way
West, P.O. Box 597, Eatontown, Monmouth County, New Jersey
07724; and AIROPAK CORPORATION, a Delaware corporation
authorized to do business in the State of Pennsylvania, with
its principal corporate place of business at 401 Industrial
Way West, P.O. Box 597, Eatontown, Monmouth County, New Jersey
07724 (hereinafter singularly referred to as the "BORROWER"
and collectively referred to as the "BORROWERS")
and
FLEET BANK, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the
United States, with an address at 3670 Route 9 South,
Freehold, New Jersey 07728 (being hereinafter referred to as
"BANK")
WITNESSES THAT:
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(1) WHEREAS, PVC CONTAINER CORPORATION, NOVATEC PLASTICS
CORP., NOVAPAK CORPORATION and AIROPAK CORPORATION have an ongoing borrowing
relationship with BANK;
(2) WHEREAS, PVC CONTAINER CORPORATION is acquiring certain
assets owned by CHARTER SUPPLY COMPANY, INC., t/a McKechnie Plastics Packaging,
from McKechnie Investments, Inc. for $10,250,000 and the BORROWERS on a joint
and several basis wish to borrow $10,000,000 from BANK to help finance the
acquisition via a term loan facility (to be called the "NY Term Loan" in this
Agreement and more fully defined below);
(3) WHEREAS, BANK is willing to enter into this Agreement if
the conditions contained in this Agreement are satisfied;
(4) WHEREAS, as a condition of BANK's entering into such a
relationship, the BORROWERS are willing to execute this Agreement and comply
with the provisions of this Agreement or cause them to be complied with; and
(5) WHEREAS, each BORROWER represents that its execution of
this Agreement and its performance of the covenants and terms contained herein
will inure to its economic benefit and will be in furtherance of its corporate
purposes;
NOW, THEREFORE, in consideration of the premises and the
covenants contained in this Agreement and for other good and valuable
consideration, the BORROWERS jointly and severally do hereby agree with BANK as
follows:
2
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ARTICLE I
DEFINITIONS
1.1 "INCORPORATION OF UCC DEFINITIONS". All terms defined in
Articles 1 or 9 of the New Jersey Uniform Commercial Code shall have the
meanings given therein unless otherwise defined herein.
1.2 "ACCOUNTS" or "ACCOUNTS RECEIVABLE" means, in addition to
the definition of "account" as contained in the Uniform Commercial Code, all of
the accounts, contract rights of the BORROWERS (including their rights as an
unpaid vendor, or lienor, including stoppage in transit, replevin and
reclamation), instruments, documents, chattel paper, warehouse receipts and
general intangibles, whether secured or unsecured, and whether or not
specifically assigned to BANK hereunder, and includes a right to payment which
has been earned under a contract right and all Inventory returned or reclaimed
from Account Debtors.
1.3 "ACCOUNT DEBTOR" means, in addition to the definition of
"account debtor" as contained in the Uniform Commercial Code, the person or
persons obligated to any of the BORROWERS on an Account, or contract right, or
who is represented by the BORROWERS to be so obligated.
1.4 "AGREEMENT" means this Loan and Security Agreement and all
extensions, modifications and renewals hereof.
1.5 "AIROPAK" means AIROPAK CORPORATION, a corporation
organized under the laws of the State of Delaware and authorized to
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do business in the State of Pennsylvania, with its principal corporate place of
business at 401 Industrial Way West, Eatontown, Monmouth County, New Jersey
07724.
1.6 "AIROPAK'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT"
is a collective term which means the certification of AIROPAK as to the truth
and accuracy of certain representations and warranties, to which is attached
each of the following:
(a) EXHIBIT "A": the Certification of AIROPAK's
corporate secretary as to a true, complete and correct copy of the resolutions
adopted by AIROPAK's Board of Directors authorizing the execution and delivery
of this Agreement, the borrowings hereunder, and the execution and delivery of
the other Loan Documents to which AIROPAK is a party;
(b) EXHIBIT "B": the Certification of the
AIROPAK's corporate secretary as to a true, complete and correct copy of the
resolutions adopted by AIROPAK's stockholders authorizing the execution and
delivery of this Agreement, the borrowings hereunder, and the execution and
delivery of the other Loan Documents to which AIROPAK is a party;
(c) EXHIBIT "C": the Certification of AIROPAK's
corporate secretary as to a true, complete and correct copy of the incumbency
and specimen signatures of those officers of AIROPAK who are to execute this
Agreement and the other Loan Documents to which it is a party; and
(d) EXHIBIT "D": a true, complete and correct
copy of AIROPAK's Certificate of Incorporation, as amended;
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(e) EXHIBIT "E": the certificate as to AIROPAK's
"Good Standing" for the State of Delaware;
(f) EXHIBIT "F": the certificate as to AIROPAK's
"Good Standing" for the State of New Jersey;
(g) EXHIBIT "G": the certificate as to AIROPAK's
"Good Standing" for the Commonwealth of Pennsylvania.
1.7 "BORROWER" means any one of the BORROWERS.
1.8 "BORROWERS" is a collective term which means all of the
following:
(a) AIROPAK;
(b) NOVATEC;
(c) NOVAPAK; and
(d) PVC.
1.9 "CERTIFICATION AS TO LIENS" means that joint and several
certification given by the BORROWERS setting forth the existence or
non-existence of UCC liens, judgments, and tax liens filed against the
BORROWERS.
1.10 "CHATTEL PAPER" means, in addition to the definition of
"chattel paper" as contained in the Uniform Commercial Code, all writing or
writings which evidence both a money obligation and a security interest in, or a
lease of, specific Goods. When a transaction is evidenced both by such a
security agreement or a lease and by an Instrument or series of Instruments, the
group of writings taken together constitutes Chattel Paper. Chattel Paper shall
not include any "account" as that term is defined in the Uniform Commercial
Code.
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1.11 "COLLATERAL" means all property (including but not limited
to all Collateral set forth in Article III of this Agreement) whether real,
personal or mixed, or tangible or intangible, now or at any time hereafter
given, assigned or pledged to BANK to secure the Liabilities by (1) any of the
BORROWERS or (2) any guarantor not named in this Agreement. The definition of
"Collateral" includes Proceeds of all the foregoing.
1.12 "COLLATERAL" is a collective term which means all of the
following:
(a) all property (including but not limited to all
Collateral described in Article III of this Agreement), whether real, personal
or mixed, or tangible or intangible, now or at any time hereafter given,
assigned or pledged to BANK to secure the Liabilities by (1) any of the
BORROWERS or (2) any guarantor not named in this Agreement;
(b) without limitation, all right, title and interest
of the BORROWERS in any Master Agreement and each transaction entered into
thereunder (including, without limitation, all amounts payable or deliverable
thereunder [and the benefit of any guaranty or other credit support in
connection therewith]), and all proceeds of the foregoing in whatever form
received, in each case whether now owned or hereafter acquired; and
(c) all Proceeds of all the foregoing.
1.13 "CONTRACT RIGHTS" means any right of the BORROWERS to
receive payment under a contract not yet earned by performance and any franchise
right to operate a business.
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1.14 "DEFAULT RATE" means a rate per annum equal to 2% in
excess of the floating Prime Rate, provided, however, at no time will per annum
interest be calculated at a rate higher than the maximum rate allowed by law.
1.15 "EVENT OF DEFAULT" has the meaning set forth in Article
VIII of this Agreement.
1.16 "EQUIPMENT" means, in addition to the definition of
"equipment" contained in the Uniform Commercial Code, personal property,
fixtures, machinery and equipment, handling and delivery equipment, cranes and
hoisting equipment, office machines and equipment in all cases above, of every
kind, nature and description and whether affixed to realty or not.
1.17 "FNB" means Fleet National Bank, a national banking
association.
1.18 "GAAP" means generally accepted accounting principles and
practices consistently applied over the period to which they relate.
1.19 "GENERAL INTANGIBLES" means, in addition to the definition
of "General Intangibles" contained in the Uniform Commercial Code, all rights of
the BORROWERS, including but not limited to all rights to property, choses in
action and other rights of the BORROWERS not otherwise specifically included
elsewhere in this Agreement, further including but not limited to all licenses,
warranties, insurance proceeds for Collateral and condemnation awards.
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1.20 "GOODS" means, in addition to the definition of "goods" as
contained in the Uniform Commercial Code, all articles of tangible personal
property, sold, supplied, leased or otherwise disposed of, represented by an
Account and shall also mean and include all of any BORROWER's right, title and
interest in and to the goods and other property represented by or securing any
of the Accounts Receivable.
1.21 "INSTRUMENT" means, in addition to the definition of
"instrument" as contained in the Uniform Commercial Code, a negotiable
instrument or a security, or any other writing which evidences a right to the
payment of money and is not itself a security agreement or lease and is of the
type which is, in the ordinary course of business, transferred by delivery with
any necessary endorsement or assignment.
1.22 "INVENTORY" means, in addition to the definition of
"inventory" as contained in the Uniform Commercial Code, all goods held by the
BORROWERS for resale or lease or furnished or to be furnished under contracts of
service, and shall include all goods, materials and supplies (including but not
limited to incidentals, packaging materials and all other items which contribute
to the finished product or to the promotion or sale thereof) used or usable in
manufacturing, processing, packaging or shipping and shall also include raw
materials, goods and work in process and finished goods, and all goods returned
by or reclaimed from customers.
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1.23 "LIABILITIES" means (a) principal due on the NY Term Loan
and NY Term Note (including all advances, re-advances, borrowings and
re-borrowings under such NY Term Loan and NY Term Note) and the interest thereon
as required by this Agreement; (b) advances, re-advances, borrowings and
re-borrowings made from time to time by BANK over and above the $10,000,000.00
limitation on the NY Term Loan, and over and above any other lending limitation
contained in this Agreement, and the interest thereon; (c) principal and
interest on the Other Loans; (d) the performance and fulfillment by all
BORROWERS of all the terms, conditions, promises, covenants and provisions
contained in this Agreement, or in any now existing agreement or future
agreement or instrument (of whatever nature) between any of the BORROWERS and
BANK; and (e) BORROWERS' obligations to reimburse BANK for any amount paid to
FNB on account of any BORROWER's obligations under the Master Agreement.
1.24 "LOAN DOCUMENTS" means this Agreement, the NY Term Note,
the NY Mortgage, UCC-1 Financing Statements, any documents or instrument related
hereto or thereto and all extensions, modifications or renewals of any or all of
the foregoing.
1.25 "MASTER AGREEMENT" means any Master Agreement relating to
interest rate contracts and/or determinations hereafter entered into between
BORROWERS and FNB and all extensions, modifications and renewals thereof,
together with any Confirmation under such Master Agreement relating to the
hedge/rate swap transaction described in Paragraph 7(a) of the NY Term Note.
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1.26 "NOVAPAK" means NOVAPAK CORPORATION, a corporation
organized under the laws of the State of Delaware and authorized to do business
in the State of New Jersey, with its principal corporate place of business at
401 Industrial Way West, Eatontown, Monmouth County, New Jersey 07724.
1.27 "NOVAPAK'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT"
is a collective term which means the certification of NOVAPAK as to the truth
and accuracy of certain representations and warranties, to which is attached
each of the following:
(a) EXHIBIT "A": the Certification of NOVAPAK's
corporate secretary as to a true, complete and correct copy of the resolutions
adopted by NOVAPAK's Board of Directors authorizing the execution and delivery
of this Agreement, the borrowings hereunder, and the execution and delivery of
the other Loan Documents to which NOVAPAK is a party;
(b) EXHIBIT "B": the Certification of the NOVAPAK's
corporate secretary as to a true, complete and correct copy of the resolutions
adopted by NOVAPAK's stockholders authorizing the execution and delivery of this
Agreement, the borrowings hereunder, and the execution and delivery of the other
Loan Documents to which NOVAPAK is a party;
(c) EXHIBIT "C": the Certification of NOVAPAK's
corporate secretary as to a true, complete and correct copy of the incumbency
and specimen signatures of those officers of NOVAPAK who are to execute this
Agreement and the other Loan Documents to which it is a party; and
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(d) EXHIBIT "D": a true, complete and correct copy of
NOVAPAK's Certificate of Incorporation, as amended;
(e) EXHIBIT "E": the certificate as to NOVAPAK's
"Good Standing" for the State of Delaware;
(f) EXHIBIT "F": the certificate as to NOVAPAK's
"Good Standing" for the State of New Jersey.
1.28 "NOVATEC" means NOVATEC PLASTICS CORP., a corporation
organized under the laws of the State of Delaware and authorized to do business
in the State of New Jersey, with its principal corporate place of business at
401 Industrial Way West, Eatontown, Monmouth County, New Jersey 07724.
1.29 "NOVATEC'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT"
is a collective term which means the certification of NOVATEC as to the truth
and accuracy of certain representations and warranties, to which is attached
each of the following:
(a) EXHIBIT "A": the Certification of NOVATEC's
corporate secretary as to a true, complete and correct copy of the resolutions
adopted by NOVATEC's Board of Directors authorizing the execution and delivery
of this Agreement, the borrowings hereunder, and the execution and delivery of
the other Loan Documents to which NOVATEC is a party;
(b) EXHIBIT "B": the Certification of the NOVATEC's
corporate secretary as to a true, complete and correct copy of the resolutions
adopted by NOVATEC's stockholders authorizing the execution and delivery of this
Agreement, the
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borrowings hereunder, and the execution and delivery of the other Loan Documents
to which NOVATEC is a party;
(c) EXHIBIT "C": the Certification of NOVATEC's
corporate secretary as to a true, complete and correct copy of the incumbency
and specimen signatures of those officers of NOVATEC who are to execute this
Agreement and the other Loan Documents to which it is a party; and
(d) EXHIBIT "D": a true, complete and correct copy of
NOVATEC's Certificate of Incorporation, as amended;
(e) EXHIBIT "E": the certificate as to NOVATEC's
"Good Standing" for the State of Delaware;
(f) EXHIBIT "F": the certificate as to NOVATEC's
"Good Standing" for the State of New Jersey.
1.30 "NY MORTGAGE" is a collective term which means the
following:
(a) that certain first mortgage against the NY
Premises given by PVC to BANK to secure the NY Term Loan and the other
Liabilities; and
(b) all extensions, modifications, and renewals of
such term loan.
1.31 "NY PREMISES" means all of the land, buildings, and other
improvements thereon owned by PVC commonly known as 370 Stevers Crossing Road
(Columbia County Tax Parcel No. 123-2-20), in Claverack, New York, and includes
the "Mortgaged Property" as defined in the NY Mortgage.
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1.32 "NY TERM LOAN" is a collective term which means the
following:
(a) the $10,000,000.00 term loan made by BANK to the
BORROWERS and more fully described in Section 2.1 of this Agreement; and
(b) all extensions, modifications, and renewals of
such term loan.
1.33 "NY TERM NOTE" is a collective term which means the
following:
(a) the $10,000,000.00 term note which evidences the
NY Term Loan, which NY Term Note is more fully described in Section 2.4 of this
Agreement; and
(b) all extensions, modifications, and renewals of
such term note.
1.34 "OTHER LOANS" shall have the meaning set forth in Section
2.13 of this Agreement.
1.35 "PRIME RATE" means the variable per annum rate of interest
so designated from time to time by Fleet National Bank as its prime rate. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate being charged to any customer.
1.36 "PROCEEDS" means all additions, substitutions,
replacements, and increments to the Collateral, as well as a security interest
in Proceeds of all of the foregoing in whatever form, including cash, negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements or
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other documents, insurance or condemnation awards and any Collateral purchased
with Proceeds.
1.37 "PVC" means PVC CONTAINER CORPORATION, a corporation
organized under the laws of the State of Delaware and authorized to do business
in the States of New Jersey, South Carolina and Illinois, with its principal
corporate place of business at 401 Industrial Way West, Eatontown, Monmouth
County, New Jersey 07724.
1.38 "PVC'S CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT" is
a collective term which means the certification of PVC as to the truth and
accuracy of certain representations and warranties, to which is attached each of
the following:
(a) EXHIBIT "A": the Certification of PVC's corporate
secretary as to a true, complete and correct copy of the resolutions adopted by
PVC's Board of Directors authorizing the execution and delivery of this
Agreement, the borrowings hereunder, and the execution and delivery of the other
Loan Documents to which PVC is a party;
(b) EXHIBIT "B": the Certification of PVC's corporate
secretary as to a true, complete and correct copy of the incumbency and specimen
signatures of those officers of PVC who are to execute this Agreement and the
other Loan Documents to which it is a party; and
(c) EXHIBIT "C": a true, complete and correct copy of
PVC's Certificate of Incorporation, as amended;
(d) EXHIBIT "D": the certificate as to PVC's "Good
Standing" for the State of Delaware;
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(e) EXHIBIT "E": the certificate as to PVC's "Good
Standing" for the State of New Jersey;
(f) EXHIBIT "F": the certificate as to PVC's "Good
Standing" for the State of South Carolina; and
(g) EXHIBIT "G": the certificate as to PVC's "Good
Standing" for the State of Illinois.
END OF ARTICLE I
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ARTICLE II
LOANS
2.1 NY TERM LOAN.
(a) BANK will, under this Agreement, extend to the BORROWERS
on a joint and several basis a term loan (the "NY Term Loan" as more fully
defined below) in the aggregate principal amount of $10,000,000.
(b) The term loan described above and all extensions,
modifications and renewals thereof is the NY Term Loan described throughout this
Agreement.
2.2 REPAYMENT OF PRINCIPAL.
(a) So long as no Event of Default has occurred and is
continuing, no principal payments on the NY Term Loan are required during the
period from the date hereof to March 31, 1999, it being intended that during
such period, the NY Term Loan shall be interest only.
(b) On April 1, 1999, the BORROWERS will make a principal
installment repayment of $83,333.33 71 and one such installment payment will be
made on the first day of each and every consecutive calendar month thereafter
until March 1, 2005, when a 72nd payment of all remaining principal shall be due
and owing, unless the outstanding balance is sooner paid or accelerated as
provided herein.
(c) The amount of each principal installment payment and the
amount of principal amortization have been determined on a
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straight line basis over a 6 year term using a 10 year amortization period.
Thus, at the end of such 6 year period on March 1, 2005, the NY Term Loan will
not have been paid in full and a principal balance will "balloon" and be due.
(d) Notwithstanding the foregoing, principal, interest and all
other amounts due under the NY Term Loan may be accelerated or otherwise paid
upon the occurrence of an Event of Default.
2.3 PAYMENT OF INTEREST:
(a) Interest shall be charged on the unpaid principal balance
of the NY Term Loan at a fixed short term rate based on LIBOR (as defined in
subsection (d) below), such fixed short term rate being the "LIBOR Based Rate"
described and defined in subsection (d) below, it being understood that in no
event shall interest ever be calculated at a rate higher than the maximum rate
allowed by law:
(b) The LIBOR Based Rate shall be a rate per annum equal to
125 basis points in excess of LIBOR (as defined in subsection (d) below) with
respect to the applicable Interest Period (as defined in subsection (d) below)
- -- provided, however, that in all events on after the occurrence of an Event of
Default, per annum interest shall be charged on the outstanding principal amount
of the NY Term Loan at the Default Rate.
(c) Each determination of a LIBOR Based Rate shall be made by
BANK in its sole and absolute discretion and shall be conclusive and binding
upon the BORROWERS, absent manifest error.
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(d) For purposes of the determination of any LIBOR Based Rate,
the following terms shall have the following meanings:
(1) "Business Day" shall mean a day which is not a
Saturday, Sunday or day on which banks in London are required or permitted to
close.
(2) "Interest Period" means, initially, the period
commencing on the date hereof and ending one month thereafter, and thereafter,
each period commencing on the last day of the immediately preceding Interest
Period and ending one month thereafter, but in no event beyond the termination
date or any extended termination date of the NY Term Loan. No LIBOR Based
Interest Period shall commence other than on a Business Day. If any Interest
Period shall end on a day which is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day.
(3) (i) "LIBOR" means, as applicable to any Interest
Period, the rate per annum (rounded upward, if necessary, to the nearest 1/32 of
one percent) as determined on the basis of the offered rates for deposits in
U.S. dollars, for a period of time comparable to such Interest Period which
appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that
is three London Business Days preceding the first day of such LIBOR Based
Interest period; provided, however, if the rate described above does not appear
on the Telerate System on any applicable interest determination date, then LIBOR
shall be the rate (rounded
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upwards as described above, if necessary) for deposits in dollars for a period
substantially equal to the interest period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day that is three
London Business Days prior to the beginning of such Interest Period.
(ii) If both the Telerate and Reuters system are
unavailable, then the rate for that date will be determined on the basis of the
offered rates for deposits in U.S. dollars for a period of time comparable to
such Interest Period which are offered by four major banks in the London
interbank market at approximately 11:00 a.m. London time, on the day that is
three London Business Days preceding the first day of such Interest Period as
selected by the Calculation Agent. The principal London office of each of the
four major London banks will be requested to provide a quotation of its U.S.
dollar deposit offered rate. If at least two such quotations are provided, the
rate for that date will be the arithmetic mean of the quotations. If fewer than
two quotations are provided as requested, the rate for that date will be
determined on the basis of the rates quoted for loans in U.S. dollars to leading
European banks for a period of time comparable to such Interest Period offered
by major banks in New York City at approximately 11:00 a.m. New York City time,
on the day that is three London Business Days preceding the first day of such
Interest Period. In the event that BANK is unable to obtain any such
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quotation as provided above, it will be deemed that LIBOR pursuant to a Interest
Period cannot be determined.
(iii) In the event that the Board of Governors of the
Federal Reserve System shall impose a LIBOR Reserve Percentage with respect to
LIBOR deposits of BANK then for any period during which such LIBOR Reserve
Percentage shall apply, LIBOR shall be equal to the amount determined above
divided by an amount equal to 1 minus the LIBOR Reserve Percentage.
(4) "LIBOR Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding one billion
dollars in respect of Eurocurrency liabilities (as defined in Regulation D of
the Board of Governors of the Federal Reserve System) (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on loans covered by a LIBOR Based Rate is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of BANK to United States residents). The LIBOR Based
Rate shall be adjusted automatically on and as of the effective date of any
change in the LIBOR Reserve Percentage.
(5) "Principal Balance" means, at any time, the
entire outstanding principal amount of the NY Term Loan and
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includes all amounts that are to be borrowed at a LIBOR Based Rate, whether or
not the BORROWERS actually borrow such amounts.
(6) "Reference Banks" means one or more of the banks
appearing on the display designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBO page on that service
for the purpose of displaying London interbank offered rates of major banks);
provided that if no such offered rate shall appear on such display, "Reference
Banks" shall mean one or more major banks in the London interbank market as
selected by BANK.
(7) "Roll Over Date" shall mean the day immediately
following the last day of an Interest Period.
(e) As it relates to the LIBOR Based Rate, the following
conditions must be met:
(1) No Event of Default has occurred and is
continuing.
(2) The Interest Period must commence on a Business
Day.
(3) No Interest Period shall extend beyond the
termination date or any extended termination date of the NY Term Loan. If any
Interest Period shall end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day.
(4) The LIBOR Based Rate must apply to the entire
outstanding principal amount of the NY Term Loan.
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(5) Each Interest Period shall extend 1 month after
the commencement of the Interest Period, subject to the requirement that the
first day and last day of an Interest Period must be a Business Day.
(f) In the event, and on each occasion, that on or before the
date upon which an Interest Period is to commence, BANK shall have in its sole
discretion made a determination (which determination shall be conclusive and
binding upon the BORROWERS) that BANK is unable to quote a LIBOR Based Rate for
any reason whatsoever, BANK shall so notify the BORROWERS and the NY Term Loan
shall bear interest at the Prime Rate.
(g) On and after the occurrence of an Event of Default
hereunder or after maturity or after judgment has been rendered on the amounts
owing on the NY Term Loan, the unpaid principal of the NY Term Loan shall, at
the option of BANK, bear interest at the Default Rate.
(h) Interest shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed.
(i) Interest on all amounts outstanding under the NY Term Loan
shall be payable monthly on an accrued basis on the first day of each and every
calendar month, commencing on the first day of the first month following the
date hereof.
2.4 YIELD MAINTENANCE AND INDEMNIFICATION RELATING TO LIBOR BASED
INTEREST:
(a) The BORROWERS hereby jointly and severally agree to
indemnify BANK against any loss or expense which BANK may sustain
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or incur as a consequence of (1) any failure by any BORROWER to borrow all or
any portion of any Principal Balance or (2) the receipt or recovery by BANK of
all or any part of any Principal Balance prior to the maturity thereof whether
by voluntary or involuntary prepayment, acceleration or otherwise.
(b) Without limiting the effect of the foregoing, the amount
to be paid by the BORROWERS to BANK in order to indemnify BANK for any loss
occasioned by any of the events described in the preceding provisions of this
Section, and as liquidated damages therefor, shall be equal to the following
amount:
The current rate for United States Treasury
securities (Bills on a discounted basis shall be converted to
a bond equivalent) with a maturity closest to the maturity
date of the LIBOR Based Interest Period chosen pursuant to the
LIBOR Option and as to which the prepayment is made shall be
subtracted from the "cost of funds" component of the LIBOR
Based Rate in effect at the time of the prepayment. If the
result is zero or a negative number, there shall be no yield
maintenance fee. If the result is a positive number, then the
resulting percentage shall be multiplied by the amount of the
Principal Balance being prepaid. The resulting amount shall be
divided by 360 and multiplied by the number of days remaining
in the term of the LIBOR Based Interest Period chosen pursuant
to the LIBOR Option as to which the prepayment is made. Said
amount shall be reduced to present value calculated by using
the number of days remaining in the designated term and using
the above referenced United States Treasury security rate and
the number of days remaining in the term of the LIBOR Based
Interest Period chosen pursuant to the LIBOR Option as to
which the prepayment is made. The resulting amount shall be
the yield maintenance fee due to BANK upon any prepayment of
any Principal Balance. Such yield maintenance fee shall be
paid, if due under the formula set forth above, upon the
receipt or recovery by BANK of all or any part of any
Principal Balance prior to the maturity thereof whether by
voluntary or involuntary prepayment, acceleration or
otherwise.
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(c) A certificate as to any additional amounts payable
pursuant to this Section setting forth the basis and method of determining such
amounts shall be conclusive, absent manifest error, as to the determination by
BANK set forth therein if made reasonably and in good faith. The BORROWERS shall
pay any amounts so certified to it by BANK within 10 days of receipt of any such
certificate. For purposes of this Section, all references to "BANK" shall be
deemed to include any participant in this Note.
(d) The indemnities provided for herein shall survive payment
in full of the principal amount of this Note and the interest due hereon.
2.5 MASTER AGREEMENT.
(a) The BORROWERS have hedged and/or may from time to time
hedge some or all of the NY Term Loan's floating interest expense pursuant to
the terms and conditions of the Master Agreement by and between the BORROWERS
and FNB dated on or about even date herewith (as implemented through applicable
present and future schedules and confirmations relating thereto). Pursuant to
the foregoing, the BORROWERS have received or will receive the amount necessary
to pay the interest expense due under some or all of the NY Term Loan (exclusive
of default interest, any reserves, or other adjustments provided for in the Loan
Documents) and have agreed to pay the amount that would be equal to the interest
that would accrue on some or all of the NY Term Loan at a fixed rate.
(b) In the event that the BORROWERS fail to pay any amount
that is due and owing to FNB under and pursuant to the Master Agreement (after
giving effect to any applicable grace
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<PAGE> 29
period), then upon demand by FNB, in its sole discretion, BANK shall pay such
amount directly to FNB for the account of the BORROWERS and the BORROWERS hereby
authorizes and consents to such payment by BANK. The BORROWERS agree that (a)
FNB shall have no obligation to demand BANK to advance such funds on behalf of
the BORROWERS, (b) the making of such a demand by FNB will not create any
obligation to make such demand in the future and (c) at all times, FNB may
choose not to make such demand and choose, instead, to exercise its rights under
the Master Agreement. It shall be an additional one of the BORROWERS'
Liabilities hereunder to reimburse BANK for any amount BANK may pay on account
of any amount that is due and owing by the BORROWERS to FNB. Such additional
Liability shall be due upon demand and shall bear interest at a rate per annum
equal to the Default Rate from, and including, the date of payment by BANK to,
but excluding, the date the BORROWERS reimburse BANK for such additional
Liability. FNB is an intended third-party beneficiary of BANK's obligations
under this Section.
(c) In the event that the BORROWERS fail to perform or to pay
any amount that is due and owing to FNB under and pursuant to the Master
Agreement, such failure shall constitute an Event of Default under this
Agreement.
2.6 NY TERM NOTE TO EVIDENCE NY TERM LOAN.
(a) The NY Term Loan is evidenced by the BORROWERS'
certain $10,000,000 (face amount) joint and several promissory note dated even
date herewith and made payable to the order of BANK.
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(b) (1) In addition, the initial advance under the NY Term
Loan, any subsequent advances and other charges due under the NY Term Loan and
all payments made on account of principal and/or interest and/or such other
charges may be entered by BANK on its records. The aggregate amount of unpaid
principal and/or interest and/or other charges entered and shown on BANK's
records shall also evidence the amount of principal and/or interest and/or other
charges owing and unpaid on the NY Term Loan.
(2) BANK may from time to time render a statement of
the aforementioned records. If BORROWER fails to object to the statement within
thirty (30) days after it is received by BORROWER, it shall be deemed to be an
account stated and binding upon BORROWER, absent manifest error.
(3) BANK's failure to enter on its records the date
and amount of any advance or other charges due under the NY Term Loan shall not,
however, limit or otherwise affect the obligations of BORROWER to repay the
principal amount of the advances made under the NY Term Loan and other charges
due thereunder together with all interest accruing thereon at the rate or rates
required hereby.
(c) Such certain promissory note and all extensions,
modifications and renewals thereof and the records referred to above are
collectively described as the "NY Term Note" throughout this Agreement.
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<PAGE> 31
2.7 AUTHORIZATION TO CHARGE ACCOUNTS:
(a) BANK will bill the BORROWERS monthly for each
required installment of accrued interest and for each required installment of
principal that is due on the NY Term Loan. Notwithstanding the foregoing and in
lieu thereof, BANK is hereby authorized to charge principal, interest and any
other charges due under the NY Term Loan to PVC's Account No. 034-0942618, or in
the event that there are insufficient moneys in such account, then to any demand
deposit account of any BORROWER at BANK as of each due date. Notwithstanding the
foregoing, it remains the BORROWERS' joint and several responsibility to make
their payments of any and all sums due and owing on the NY Term Loan in a timely
manner.
(b) The fact that only one BORROWER's loan account may be
charged on BANK's books in no way alters or lessens the joint and several
liability of all BORROWERS for payment of the NY Term Loan. If for any reason,
the NY Term Loan (or any portion thereof) is deemed to be the obligation of only
one BORROWER, the other BORROWERS shall be deemed to have given hereby an
absolute and unconditional guaranty of payment of the obligation.
2.8 APPLICATION OF PAYMENTS:
(a) Except as the BORROWERS are otherwise notified by BANK,
payments received by BANK prior to the occurrence of an Event of Default and
designated as payments due under the NY Term Loan shall be applied against
amounts owing under the NY Term Loan.
(b) If BORROWER is so notified by BANK and in all events
automatically upon the occurrence of an Event of Default, BANK may
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apply all payments and other sums of money received by it from or on account of
BORROWER towards the satisfaction of those Liabilities which BANK in its sole
discretion deems fit.
2.9 LATE CHARGE:
(a) In the event that there are insufficient funds in any of
the BORROWERS' accounts described in Section 2.7 above, the BORROWERS will be
allowed a period of 10 days (after the due date) in which to pay the
aforementioned charges. If payment is not made within such 10 day period, then
the BORROWERS will be liable for a "late" charge of $.05 for each $1.00 of the
charges due.
(b) Nothing in the foregoing is intended to mean that BANK
will accept any payment after the payment's due date (after any applicable
"grace" period).
(c) Nothing in the foregoing is intended to mean that BANK's
acceptance of any payment more than 10 days after the payment's due date, other
than acceptance of payment of all sums outstanding under the NY Term Loan, is a
cure of any default.
2.10 OPTIONAL PREPAYMENT OF NY TERM LOAN.
(a) In the event that interest on any portion or
portions of the NY Term Loan is being determined at a LIBOR Based Rate, then the
following shall apply:
(1) Such portion or portions may be repaid at any
time but such prepayment must be made for the entirety of the portion for which
BANK has entered into contracts relating to LIBOR pricing. Partial prepayments
of such portion or portions are not allowed.
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<PAGE> 33
(2) Each prepayment shall be accompanied by the
payment of accrued interest on the amount of such prepayment to the date
thereof.
(3) All other interest must be current.
(4) Any prepayment must be accompanied by any yield
maintenance and/or indemnifications or other amounts due under Section 2.4
above.
2.11 MANDATORY REPAYMENT OF ALL LIABILITIES. The provisions of
other loan agreements among the BORROWERS and BANK are incorporated herein by
reference to the extent they do not conflict with the provisions of this
Agreement including, but not limited to, the BANK's option to accelerate payment
of the Liabilities and mandate payment by the BORROWERS as set forth in such
other loan agreements
2.12 APPLICATION OF PAYMENTS.
(a) Except as the BORROWERS are otherwise notified by BANK,
prior to the occurrence of an Event of Default (1) payments received by BANK
from the BORROWERS as regular installments of principal and interest due under
the NY Term Loan shall be applied against amounts owing under the NY Term Loan,
and (2) payments received by BANK from the BORROWERS as regular installments of
principal or interest due under the Other Loans shall be applied against amounts
owing under the Other Loans for which remittance was made.
(b) If the BORROWERS are so notified by BANK and in all events
automatically upon the occurrence of an Event of Default,
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<PAGE> 34
BANK may apply all payments and other sums of money received by it from or on
account of the BORROWERS towards the satisfaction of those Liabilities which
BANK in its sole discretion deems fit.
2.13 OTHER LOANS.
(a) Definition of "Other Loans".
(1) The BORROWERS acknowledge that BANK has
previously extended other financial accommodations to some and/or all of the
BORROWERS and that such financial accommodations (with the exception of a
$3,920,000 Line of Credit from BANK to some of the BORROWERS) will be continued
on the same terms now governing such other financial accommodations and such
terms will not be affected by BANK's extension of the NY Term Loan.
(2) In addition, the BORROWERS acknowledge that BANK
may from time to time hereafter extend other financial accommodations to some
and/or all of the BORROWERS.
(3) The financial accommodations described in
subsections (a) and (b) above, and all extensions, modifications or renewals of
such financial accommodations, are called "Other Loans" in this Agreement.
(b) Cross-Collateralization.
(1) The collateral now or hereafter securing the
Other Loans will additionally secure the NY Term Loan and in furtherance of the
foregoing, the definition of "Liabilities" set forth in the documentation
governing such Other Loans will be deemed amended so as to include within the
definition of "Liabilities" or "Obligations", as applicable, both the NY Term
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<PAGE> 35
Loan and all extensions, modifications and renewals of the NY Term Loan.
(2) The collateral now or hereafter securing the NY
Term Loan will additionally secure the Other Loans and in furtherance of the
foregoing, it is understood that the definition of "Liabilities" set forth
herein includes within its definition all the Other Loans and all extensions,
modifications and renewals of the Other Loans.
(c) Cross-Default.
(1) An Event of Default hereunder shall be an Event
of Default under the loan documents governing the Other Loans.
(2) An Event of Default under the loan documents
governing the Other Loans shall be an Event of Default hereunder.
(d) Ranking and Priority of Collateral. The BORROWERS
acknowledge that to secure the repayment of the NY Term Loan and the Other
Loans, BANK holds a common lien in the assets of the BORROWERS and that the lien
priority of the various liens securing the NY Term Loan and the Other Loans will
be as determined as specifically set forth in Section 3.14 below.
2.14 OBLIGATIONS ABSOLUTE. The obligations of the BORROWERS
under this Agreement shall be joint and several, absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under all circumstances whatsoever, including without limitation
the following circumstances:
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<PAGE> 36
(a) BANK's compromise, settlement, release, change,
modification, amendment (whether material or otherwise) or termination of any or
all of the obligations, duties, covenants or agreements of any BORROWER or other
party under any of the Loan Documents;
(b) BANK's waiver of the payment, performance or observance of
any of the obligations, conditions, covenants or agreements contained in the
Loan Documents;
(c) BANK's extension of the time for (1) the payment of the
amounts due on any of the Liabilities or (2) performance of any other
obligations, covenants or agreements of any person or entity under or arising
out of the Loan Documents;
(d) BANK's extension, renewal or modification of any of the
Loan Documents or the extension, renewal, modification or waiver of the
performance of any obligation thereunder;
(e) BANK's extension of the time for (1) payment of the
principal of, and premium, if any, and interest on the NY Term Loan, Other
Loans, if any, or other Liabilities or (2) performance of any other obligations,
covenants or agreements of any person or entity under or arising out of the Loan
Documents;
(f) BANK's taking or not taking any of the actions referred to
in the Loan Documents;
(g) BANK's release (whether with or without consideration),
impairment, failure to perfect a security interest in, exchange, surrender,
substitution or modification of (1) any Collateral or (2) any other collateral
or security given by any
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<PAGE> 37
BORROWER, or (3) any collateral or security given by any guarantor (whether or
not such guarantor is named in this Agreement) or (4) any Proceeds of the
foregoing;
(h) any failure, omission or delay on the part of BANK to
enforce, assert or exercise any right, power or remedy conferred on it in the
Loan Documents or any other action or acts on the part of BANK;
(i) the voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment or, other similar proceedings which affect any BORROWER, any
guarantor (whether or not such guarantor is named in this Agreement), or any of
the assets of any of them, or any allegation or invalidity or contest of the
validity of any of the Loan Documents in any proceeding;
(j) BANK's release (whether with or without consideration) or
discharge of any guarantor (whether or not such guarantor is named in this
Agreement) from the performance or observance of any obligation, covenant or
agreement contained in this Agreement or in any guaranty of the Liabilities;
(k) the default or failure of any BORROWER or any guarantor of
the Liabilities (whether or not such guarantor is named in this Loan Agreement)
fully to perform any of the obligations set forth in the Loan Documents;
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<PAGE> 38
(l) any lack of validity or enforceability of any of the Loan
Documents;
(m) BANK's inability to recover payment from any person or
entity under the Loan Documents;
(n) BANK's amendment or waiver of or any consent to departure
from all or any of the Loan Documents;
(o) the existence of any claim, setoff, defense or other
rights which any BORROWER or any guarantor may have at any time against any
person whether in connection with this Agreement, the other Loan Documents or
any unrelated transactions; or
(p) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
END OF ARTICLE II
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ARTICLE III
COLLATERAL
3.1 CROSS COLLATERALIZATION. The BORROWERS agree that (a) all
Collateral hereinafter set forth in this Article III, (b) all Collateral now or
hereafter given by any BORROWER to BANK (c) all Proceeds of the foregoing shall
secure payment and performance of all Liabilities.
3.2 ACCOUNTS RECEIVABLE.
(a) To secure payment and performance of all
Liabilities, the BORROWERS hereby create in favor of BANK and grant to BANK a
first security interest in all Accounts, as defined herein, presently owned by
the BORROWERS or hereafter existing, created or acquired by them.
(b) To the extent that the BORROWERS have previously
created in favor of BANK and previously granted to BANK a first security
interest in all Accounts, as defined herein, presently owned by the BORROWERS or
hereafter existing, created or acquired by them, such creation and grant are
hereby re-affirmed.
3.3 CHATTEL PAPER.
(a) To secure payment and performance of all
Liabilities, the BORROWERS hereby create in favor of BANK and grant to BANK a
first security interest in all of the BORROWERS' Chattel Paper, as defined
herein, whether presently owned by the BORROWERS
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<PAGE> 40
or hereafter acquired by them, including but not limited to all such Chattel
Paper, and now or hereafter left in the possession of BANK for any purpose.
(b) To the extent that the BORROWERS have previously
created in favor of BANK and previously granted to BANK a first security
interest in all Chattel Paper, as defined herein, presently owned by the
BORROWERS or hereafter acquired by them, such creation and grant are hereby
re-affirmed.
3.4 CONTRACT RIGHTS.
(a) To secure payment and performance of all
Liabilities, the BORROWERS hereby create in favor of BANK and grant to BANK a
first security interest in all Contract Rights, as defined herein, presently
owned by the BORROWERS or hereafter acquired by them.
(b) To the extent that the BORROWERS have previously
created in favor of BANK and previously granted to BANK a first security
interest in all Contract Rights, as defined herein, presently owned by the
BORROWERS or hereafter existing, created or acquired by them, such creation and
grant are hereby reaffirmed.
3.5 DEPOSIT ACCOUNTS.
(a) To secure payment and performance of all
Liabilities, the BORROWERS hereby create in favor of BANK and grant to BANK a
first security interest in the balance of every demand or deposit account, now
or hereafter existing, of the BORROWERS with
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BANK, and all money, instruments, securities, documents, credits, claims, and
other property of the BORROWERS, now or hereafter or for any purpose (including
safe-keeping or pledge or security for any of the Liabilities) in the possession
or custody of BANK or any of BANK's agents or any entity under the control of
Fleet Financial Group, Inc., or in transit to any of them (or any
successor-in-interest thereto).
(b) To the extent that the BORROWERS have previously
created in favor of BANK and previously granted to BANK a first security
interest in the foregoing, such creation and grant are hereby re-affirmed.
3.6 EQUIPMENT.
(a) To secure payment and performance of all
Liabilities, the BORROWERS hereby jointly and severally create in favor of BANK
and hereby grant to BANK each of the following:
(1) a first, purchase money security
interest in any Equipment, as defined herein, now acquired or hereafter acquired
by the BORROWERS with the proceeds of the NY Term Loan;
(2) a first security interest in any
Equipment, as defined herein, now owned or hereafter acquired by the BORROWERS
subject, however, to any existing liens held by any third party with respect to
such Equipment as more fully set forth on the Certification as to Liens or as
otherwise disclosed to BANK in writing prior to the date hereof.
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ARTICLE VII
NEGATIVE COVENANTS
Each BORROWER jointly and severally covenants and
agrees, that until the full and final payment of the Liabilities, unless BANK
waives compliance in writing:
7.1 No BORROWER will change its principal place of business
without notice to and consent from BANK.
7.2 No BORROWER will change or add to the location or locations
of any Collateral as set forth in Article IV above without the consent of BANK.
7.3 No BORROWER will materially change the type, quality or
quantity of the Collateral without the consent of BANK.
7.4 No BORROWER will suffer to exist any lien, encumbrance,
mortgage or security interest on property on which a lien has been given to BANK
pursuant to this Agreement or any of the other Loan Documents.
7.5 No BORROWER will sell, pledge, assign or otherwise dispose
of any of the Collateral to any person, firm or corporation other than BANK and
other than in the ordinary course of business but only as herein permitted.
7.6 No BORROWER will compromise, settle or adjust any claims
which are part of or which affect the Collateral, except claims against the
Accounts Receivable being compromised, settled or adjusted in the ordinary
course of business.
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7.7 No BORROWER will assume, guarantee or endorse any debt or
obligation of any person, firm or corporation.
7.8 FINANCIAL COVENANTS: The BORROWERS shall not permit the
following financial covenants to be violated, the following financial covenants
to supersede any prior financial covenant relating to Minimum Current Ratio,
Minimum Fixed Charge Coverage Ratio, Minimum Tangible Net Worth, Maximum
Leverage Ratio or Maximum Funded Debt/EBITDA, to the extent that any such prior
financial covenant is inconsistent herewith:
(a) Minimum Current Ratio: The BORROWERS will not
directly or indirectly, without the prior written consent of BANK, permit its
Current Ratio to be less than 1.2 to 1.0 during the term of this Agreement.
Current Ratio shall be calculated as the ratio of Current Assets to Current
Liabilities. This covenant shall be tested in accordance with GAAP and shall be
tested annually and quarterly based on the financial statements required to be
submitted by the BORROWERS to BANK.
(b) Minimum Fixed Charge Coverage Ratio: The
BORROWERS will not directly or indirectly, without the prior written consent of
BANK, permit the Fixed Charge Coverage to be less than 1.0 to 1.0 during the
term of this Agreement. Fixed Charge Coverage shall be calculated as the
following ratio and will be tested quarterly and annually on a rolling
four-quarter basis based on the financial statements required to be submitted by
the BORROWERS to BANK:
-VII-2-
<PAGE> 44
[(net income before restructuring charges + letter of credit
fees + interest + depreciation) for the four quarters being
measured]
divided by
[current portion of long-term debt + interest
+ dividends + non-financed capital expenditures
+ letter of credit fees, in all the foregoing
cases for the four quarters being measured]
This covenant shall be tested in accordance with GAAP.
(c) Minimum Tangible Net Worth: The BORROWERS will
not permit their Tangible Net Worth to fall below the amounts set forth below
for the periods set forth below:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
07/01/1996 to 06/30/1997: $14,000,000
07/01/1997 to 06/30/1998: $14,500,000
07/01/1998 to 06/30/1999: $15,000,000
07/01/1999 to 06/30/2000: $15,500,000
07/01/2000 to 06/30/2001: $16,000,000
07/01/2001 to 06/30/2002: $16,500,000
07/01/2002 to 06/30/2003: $17,000,000
07/01/2003 to 06/30/2004: $17,500,000
07/01/2004 to 06/30/2005: $18,000,000
07/01/2005 to 06/30/2006: $18,500,000
</TABLE>
This covenant will be tested annually and quarterly based on the financial
statements required to be submitted by the BORROWERS to BANK. For purposes of
the foregoing, "Tangible Net Worth" shall mean (i) total "Assets" less (ii)
total "Liabilities". For purposes of this definition, "Assets" and "Liabilities"
shall be determined in accordance with GAAP --- except as follows:
(1) there shall be excluded from the definition of
"Assets" each of the following: (i) all General Intangibles (including
goodwill); (ii) covenants not to compete; (iii) cash or other funds held by the
BORROWERS in escrow or otherwise in trust for third parties; (iv) research and
development costs; (v)
-VII-3-
<PAGE> 45
treasury stock; (vi) Account Receivables outstanding for more than twelve (12)
months from the original invoice date; and (vii) all unamortized debt, discounts
and deferred charges; and
(2) there shall be excluded from the definition of
"Liabilities" each of the following: (i) any debt owed by the BORROWERS to a
third party the payment of which has been subordinated to BANK; and (ii)
accounts payable arising on account of cash or other funds held by the BORROWERS
in escrow or otherwise in trust for third parties.
(d) Maximum Leverage Ratio:
(1) The BORROWERS on a combined basis will not permit
the ratio of their Total Liabilities to their Tangible Net Worth to exceed the
ratios set forth below for the periods set forth below (the ratio 3.0 to 1.0
assuming that the Acquisition Loan closes and is funded, in which case the
Maximum Leverage Ratio set forth in the loan documents governing the Other Loans
will be similarly amended):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
through 06/29/99 3.0 to 1.0
06/30/99 and thereafter 2.4 to 1.0
</TABLE>
(2) For purposes of the foregoing, "Tangible Net
Worth" shall have the meaning set forth in subparagraph (c) above. This covenant
will be tested, in accordance with GAAP, annually and quarterly based on the
financial statements required to be submitted by the BORROWERS to BANK.
-VII-4-
<PAGE> 46
(e) Maximum Funded Debt/EBITDA:
(1) The BORROWERS on a combined basis will not permit
the ratio of Funded Debt to EBITDA to exceed the following:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
from closing to 12/30/1998: 4.20 to 1.0
12/31/1998 to 06/29/1999: 3.75 to 1.0
06/30/1999 and thereafter: 3.00 to 1.0
</TABLE>
(2) (i) For purposes of the foregoing, Funded Debt
shall mean all of the BORROWERS' obligations for borrowed money for the four
quarters being measured.
(ii) Also for purposes of the foregoing, EBITDA
shall mean all of the BORROWERS' net income (before restructuring charges) plus
letter of credit fees plus interest plus taxes plus depreciation plus
amortization, all the foregoing to be based on the four quarters being measured.
(3) This covenant will be tested, in accordance with
GAAP, annually and quarterly based on the financial statements required to be
submitted by the BORROWERS to BANK.
END OF ARTICLE VII
-VII-5-
<PAGE> 47
ARTICLE VIII
EVENTS OF DEFAULT
Regardless of the terms of any other Loan Document, the
occurrence of any of the following events shall be deemed an event of default
(an "Event of Default") hereunder:
8.1 any BORROWER shall (a) fail to pay when due any installment
of principal or interest due in accordance with the provisions of the NY Term
Note, or (b) fail to pay on its due date (subject to any applicable grace
period) any installment of principal or interest due on any of the Other Loans,
or (c) fail to pay within 10 days of its due date any other payment or monetary
charge due under this Agreement or any of the other Loan Documents to which it
is a party or by which it is bound;
8.2 any representation or warranty herein, or in the NY Term
Note, or in any other note or other agreement, instrument or certificate
executed pursuant hereto or in connection with any transaction contemplated
hereby shall prove to have been false or misleading in any material respect when
made;
8.3 BANK shall fail to have a legal, valid and binding lien on
any of the Collateral with the priority required by this Agreement;
8.4 (a) without BANK's prior written consent, a security
interest (perfected or otherwise), other than the security interests
specifically provided for or permitted hereunder, shall be created in the
Collateral;
-VIII-1-
<PAGE> 48
(b) any lien, including but not limited to any
judgment (unless appealed and bonded and/or covered by insurance) against any
BORROWER, becomes an encumbrance against the Collateral;
8.5 any BORROWER shall admit in writing an inability to pay
debts as they come due or shall file any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors;
8.6 an involuntary petition shall be filed under any bankruptcy
or insolvency statute against any BORROWER and such petition is not discharged
or stayed within 60 days from the date of the filing of the petition;
8.7 a receiver or trustee shall be appointed to take
possession of the properties of any BORROWER;
8.8 any BORROWER ceases its operations or a substantial
portion of its property shall be condemned;
8.9 (a) any default shall occur under any of the Other Loans to
which any BORROWER may be a party as borrower or guarantor or any non-payment of
any other monetary charge due under this Agreement within 10 days after notice
of non-payment;
(b) any default in excess of $50,000 shall occur
under any other loan agreement or note involving either the borrowing of money
or the advance of credit to which any BORROWER may be a party as borrower or
guarantor and such default results
-VIII-2-
<PAGE> 49
(after any applicable cure periods) in the acceleration of the money owing under
such other loan agreement;
8.10 any BORROWER shall materially breach, or default under,
any term, condition, provision, representation or warranty contained in this
Agreement not specifically referred to in this Article VIII and the defaulting
BORROWER fails to cure same within 30 days of BANK's notice to cure or, if such
breach or default is of the type which can not be cured within such grace
period, the defaulting BORROWER does not commence to cure such breach or default
within such grace period and does not use its best efforts to continuously and
diligently proceed to cure such breach, default or violation at all times
thereafter;
8.11 any material non-monetary breach, default or violation
shall occur under any of the terms, conditions, representations, warranties or
covenants contained in any note or other instrument or agreement required
hereunder or in any other loan agreement or note to which any BORROWER may be a
party, and the defaulting BORROWER fails to cure same within 30 days of BANK's
notice to cure, or, if such breach, default or violation is of the type which
can not be cured within such grace period, the defaulting BORROWER does not
commence to cure such breach, default or violation within such grace period and
do not use its best efforts to continuously and diligently proceed to cure such
breach, default or violation at all times thereafter;
8.12 any document, instrument or agreement connected with this
Agreement is claimed by any BORROWER to be unenforceable;
-VIII-3-
<PAGE> 50
8.13 any BORROWER fails within 30 days of BANK's notice to
obtain and deliver to BANK any financing statement, subordination agreement or
any other documentation required to be signed or obtained as part of this
Agreement or fails to take any reasonable action requested by BANK to perfect or
protect the security interests provided for herein;
8.14 any other event occurs or condition exists which in the
opinion of BANK constitutes a material adverse change in the business condition
or financial status of any BORROWER or which in the opinion of BANK materially
impairs the ability of any BORROWER to discharge its obligations hereunder.
END OF ARTICLE VIII
-VIII-4-
<PAGE> 51
ARTICLE IX
REMEDIES
9.1 Whenever an uncured Event of Default has occurred, BANK may
do any or all of the following at the same time or at different times:
(a) BANK may declare the entire principal amount of
the NY Term Loan and/or the Other Loans, if any, or the unpaid balance thereof,
together with all accrued interest and all other lawful and proper charges
thereon immediately due and payable whereupon all such sums shall become
immediately due and payable with interest thereafter at the Default Rate,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by each BORROWER. It is expressly acknowledged that
BANK is not obligated to accelerate the Other Loans or exercise its rights and
remedies against Collateral.
(b) BANK may declare all other loans, sums and
Liabilities owed to BANK under this Agreement or any other agreement or loan
between BANK and any BORROWER together with all accrued interest and all other
lawful and proper charges thereon to be forthwith due and payable, whereupon all
such sums shall forthwith become immediately due and payable with interest
thereafter at the Default Rate, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by each BORROWER.
-IX-1-
<PAGE> 52
(c) as it relates to any Collateral which may not be
a part of the NY Premises, BANK may proceed with or without judicial process to
take possession of all or any part of the Collateral not already in the
possession of BANK, or to which BANK's security interest has not been previously
released or terminated in writing. The BORROWERS agree that upon receipt of
notice of BANK's intention to take possession of all or any part of said
Collateral, the BORROWERS will do everything reasonably necessary to make same
available to BANK.
(d) BANK may proceed to take possession of the NY
Premises and/or otherwise exercise its rights against the NY Premises in the
manner provided in the NY Mortgage and/or in the manner provided by law.
(e) BANK may assign, transfer and deliver at any time
or from time to time the whole or any portion of any Collateral which is subject
to the Uniform Commercial Code or in which BANK still holds a security interest,
or any rights or interests therein; and without limiting the scope of BANK's
rights thereunder, sell such Collateral at a public or private sale, or in any
other manner, at such price or prices as BANK may deem best, and either for cash
or credit, or for future delivery, at the option of BANK, in bulk or in parcels
and with or without having such Collateral at the sale or other disposition.
BANK shall have the right to be the purchaser at any public sale. Any
notification of a sale or other disposition of the Collateral or of any other
action by BANK required to be given by BANK to any BORROWER will be
-IX-2-
<PAGE> 53
sufficient if given not less than ten (10) days prior to the day on which such
sales or other disposition will be made and in the manner set forth in Section
10.1; such notification shall be deemed reasonable notice. In the event of a
sale of such Collateral, or any other disposition thereof, BANK shall apply all
proceeds first to all costs and expenses of disposition, including reasonable
attorneys' fees, and then to the Liabilities of each BORROWER to BANK.
(f) BANK may immediately, and without notice or other
action, set-off and apply against the Liabilities (1) any and all deposits and
all other items described in Section 3.5 hereof and/or (2) any sum owed by BANK
in any capacity to any BORROWER whether due or not. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE NY TERM LOAN, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO THE FOREGOING, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED. BANK may do the foregoing even though some or all of the
Liabilities may be unmatured and regardless of the adequacy of any other
Collateral securing the Liabilities. BANK shall be deemed to have exercised such
right of set-off and to have made a charge against any such sum immediately upon
the occurrence of such Event of Default, even though the actual book entries may
be made at some time subsequent thereto. The foregoing set-off rights shall be
deemed to have been exercised prior to any applicable cure period for the Event
of Default that has occurred. BANK will endeavor to provide notice to the
BORROWERS that the set-
-IX-3-
<PAGE> 54
off has occurred, but BANK's failure to notify will in no way nullify any
set-off that has occurred. Notwithstanding the foregoing, application of any
amounts set off shall be subject to the priority provisions of Article III
above.
(g) BANK may without notice to or consent from any
BORROWER sue upon or otherwise, collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise, upon any terms, any of the
Accounts Receivable or any securities, instruments or insurance applicable
thereto and/or release the Account Debtor thereon. BANK is authorized and
empowered to accept the return of the Goods represented by any of the Accounts
Receivable, without notice to or consent by any BORROWER all without discharging
or in any way affecting any BORROWER's liability hereunder. BANK does not, by
anything herein or in any assignment or otherwise, assume any obligations of any
BORROWER under any Account, contract or agreement assigned to BANK, and BANK
shall not be responsible in any way for the performance by any BORROWER of any
of the terms and conditions thereof.
(h) BANK may notify the Post Office authorities to
change the address for delivery of mail addressed to BORROWERS to such address
as BANK may designate.
(i) BANK may add to the Liabilities BANK's reasonable
expenses to obtain or enforce payment of any Liabilities hereunder and the
enforcement or liquidation of any debt hereunder shall include reasonable
attorneys' fees, plus other legal expenses incurred by BANK.
-IX-4-
<PAGE> 55
9.2 Each BORROWER shall remain liable for any deficiency
resulting from a sale, lease, foreclosure or other disposal of the Collateral
and shall pay any such deficiency forthwith on demand, together with per annum
interest thereon at the rate set forth in this Agreement.
9.3 The rights of BANK under this Article are in addition to
all other remedies, statutory and otherwise, which are available to it under law
or otherwise or under the terms of any note or other instrument or agreement
required hereunder.
END OF ARTICLE IX
-IX-5-
<PAGE> 56
ARTICLE X
MISCELLANEOUS
10.1 (a) Any communications between the parties hereto or
notices provided herein to be given may be given by mailing the same, certified
mail, return receipt requested, postage prepaid or by hand delivery or by an
overnight delivery service, to BANK at 3670 Route 9 South, Freehold, New Jersey
07728 Attn: "Current Account Officer for PVC Container Corporation" and to each
BORROWER (to the Attention of "President") at the address first above given for
such BORROWER in this Agreement or to such other addresses as a party may in
writing hereafter indicate by notice given in conformity with this Section.
(b) NOTICE SENT TO ANY ONE BORROWER AT THE ABOVE
ADDRESS WILL BE DEEMED NOTICE TO ALL BORROWERS AND NO SEPARATE NOTICE NEED BE
GIVEN ALL BORROWERS IF NOTICE IS GIVEN TO ONE BORROWER.
(c) Notices sent by certified mail shall be deemed
received when accepted. Notices sent by hand delivery shall be deemed received
when delivered to the address and/or person designated in this Section. Notices
sent by overnight delivery service shall be deemed received upon delivery.
10.2 In the event that any BORROWER shall default in the
performance of any of the provisions of this Agreement or in the event that any
BORROWER shall fail to pay any tax, assessment, government charge or levy,
except as the same are being contested
-X-1-
<PAGE> 57
in good faith by appropriate proceedings, or shall fail to discharge any lien,
encumbrance or security interest prohibited hereby, or shall fail to comply with
any other obligation of any BORROWER to BANK, BANK may but shall not be required
to, pay, satisfy, discharge or bond the same for the account of each BORROWER
and all moneys so paid out shall be an obligation of all BORROWERS hereunder
repayable on demand, together with per annum interest at the Default Rate, but
in no event at a rate higher than the maximum rate allowed by law.
10.3 PLEDGE TO FEDERAL RESERVE: BANK may at any time pledge all
or any portion of its rights under the Loan Documents including any portion of
the NY Term Note to any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or
enforcement thereof shall release BANK from its obligations under any of the
Loan Documents.
10.4 ASSIGNMENTS: BANK shall have the unrestricted right, at
BANK's expense, at any time or from time to time, on prior notice to the
BORROWERS but without the need for any BORROWER's consent, to assign all or any
portion of its rights and obligations hereunder to one or more banks or other
financial institutions (each, an "Assignee"), and each BORROWER agrees that it
shall execute, or cause to be executed, such documents, including without
limitation, amendments to this Agreement and to any other documents, instruments
and agreements executed in connection herewith as BANK shall deem necessary to
effect the
-X-2-
<PAGE> 58
foregoing. In addition, at the request of BANK and any such Assignee, the
applicable BORROWER shall issue one or more new promissory notes, as applicable,
to any such Assignee and, if BANK has retained any of its rights and obligations
hereunder following such assignment, to BANK, which new promissory notes shall
be issued in replacement of, but not in discharge of, the liability evidenced by
the promissory note held by BANK prior to such assignment and shall reflect the
amount of the respective commitments and loans held by such Assignee and BANK
after giving effect to such assignment. Upon the execution and delivery of
appropriate assignment documentation, amendments and any other documentation
required by BANK in connection with such assignment, and the payment by Assignee
of the purchase price agreed to by BANK, and such Assignee, such Assignee shall
be a party to this Agreement and shall have all of the rights and obligations of
BANK hereunder (and under any and all other guaranties, documents, instruments
and agreements executed in connection herewith) to the extent that such rights
and obligations have been assigned by BANK pursuant to the assignment
documentation between BANK and such Assignee, and BANK shall be released from
its obligations hereunder and thereunder to a corresponding extent. Nothing in
the foregoing shall increase any financial obligation of any BORROWER hereunder.
Notwithstanding anything else in this Section 10.4 or in Section 10.5 below, the
following shall apply:
(a) BANK shall not assign or participate all or any
part of its rights and obligations hereunder to any Assignee or
-X-3-
<PAGE> 59
Participant that is not a bank or trust company organized under the laws of the
United States or any state thereof having a combined capital and surplus of at
least $500,000,000;
(b) no assignment or participation shall be made for
less than $2,000,000 of BANK's commitment hereunder; and
(c) there shall in no event be more than an aggregate
of two Assignees and Participants hereunder at any time.
10.5 PARTICIPATIONS:
(a) BANK shall have the unrestricted right at any
time and from time to time, and on prior notice to the BORROWERS but without the
need for the consent of any BORROWER, to grant to one or more banks or other
financial institutions (each, a "Participant") participating interests in BANK's
obligation to lend hereunder and/or any or all of the loans held by BANK
hereunder. In the event of any such grant by BANK of a participating interest to
a Participant, whether or not upon notice to the BORROWERS, BANK shall remain
responsible for the performance of its obligations hereunder and the BORROWERS
shall continue to deal solely and directly with BANK in connection with BANK's
rights and obligations hereunder. Nothing in the foregoing shall increase any
financial obligation of any BORROWER hereunder.
(b) In this regard, it is understood and agreed that
BANK intends to participate up to fifty percent of the NY Term Loan. The
BORROWERS consent to this participation.
10.6 BANK may on prior notice to the BORROWERS but
without the need for the consent of any BORROWER furnish any
-X-4-
<PAGE> 60
information concerning any BORROWER in its possession from time to time to
prospective Assignees and Participants.
10.7 All payments shall be in lawful money of the United States
in immediately available funds unless otherwise provided in this Agreement.
10.8 All agreements between the BORROWERS and BANK are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to BANK for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Agreement shall be governed by such new law as of its effective date.
In this regard, it is expressly agreed that it is the intent of the BORROWERS
and BANK in the execution, delivery and acceptance of this Agreement to contract
in strict compliance with the laws of the State of New Jersey from time to time
in effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Loan Documents at the time of performance of
such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever BANK should
-X-5-
<PAGE> 61
ever receive as interest an amount which would exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal balance evidenced hereby and not to the payment of interest.
This provision shall control every other provision of all agreements between the
BORROWERS and BANK.
10.9 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that no BORROWER shall assign this Agreement or any of its rights, duties or
obligations hereunder without the prior written consent of BANK.
10.10 No delay or omission to exercise any right, power or
remedy accruing to BANK upon any breach or default (whether such breach or
default is now or hereafter occurring) of any BORROWER under this Agreement or
any note or other document or agreement executed in connection with this
Agreement shall (a) impair any such right, power or remedy of BANK, (b) be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or (c) be construed to be a waiver of or an acquiescence in any similar
breach or default thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of BANK of any breach or default under this
Agreement or any note or other instrument or agreement required hereunder, or
any waiver on the part of BANK of any provision or condition of this Agreement
or such other documents or agreements, must be in writing and shall be effective
only to the extent in such writing specifically set
-X-6-
<PAGE> 62
forth. All remedies, either under this Agreement or note or other instrument or
agreement required hereunder, or by law or otherwise afforded to BANK, shall be
cumulative and not alternative.
10.11 (a) Subject to the limitation set forth in BANK's March
25, 1998 Commitment Letter, the BORROWERS will pay fees and out-of-pocket
expenses incurred by BANK in connection with (1) the preparation of this
Agreement and other related documents, whether or not the transactions hereby
contemplated shall be consummated and (2) the making of the NY Term Loan
hereunder. Such out-of-pocket expenses include but are not limited to, charges
for the examination of title, inspections and drawings of paper, recording and
filing fees, and all reasonable attorneys' fees, including the fees and
disbursements of BANK's counsel. Any fees relating to the filing or recording of
the NY Mortgage in New York are not subject to any restriction on fees or
expenses.
(b) Whenever any attorney is used to collect any
obligation or to determine, preserve or enforce any right of BANK against any
BORROWER in connection with the NY Term Loan or against the Collateral under
this Agreement, the NY Term Note or any of the other Loan Documents, whether by
suit or other means, each BORROWER agrees to pay the reasonable attorney's fees
and other costs and expenses incurred by BANK. Each BORROWER also agrees to pay
BANK's attorneys a reasonable fee and costs and expenses for enforcing against
third parties any other rights of BANK pertaining hereto including BANK's
defending against any claim pertaining to the Collateral.
-X-7-
<PAGE> 63
(c) Until paid by BORROWERS, all of the foregoing
expenses set forth in Sections (a) and (b) above shall bear interest at the
Default Rate, but in no event higher than the maximum rate allowed by law, and
all such amounts shall be added to any one or all of the Liabilities at BANK's
sole discretion and shall be secured by the Collateral.
10.12 Nothing in this Agreement shall be deemed any waiver or
prohibition of BANK's right of set-off.
10.13 This Agreement, and any note, other instrument or
agreement required hereunder, shall be governed by, and construed under, the
laws of the State of New Jersey.
10.14 All of the parties hereto waive trial by jury in any
action or proceeding of any kind or nature in any Court in which they may be
parties, which action or proceeding arises out of, under, or by reason of this
Agreement or any assignment, Account or other transaction hereunder. Each
BORROWER agrees that, in addition to any other available forum, any suit, action
or proceeding against it arising under or growing out of, or relating to this
Agreement or any note or other instrument or agreement required hereunder, or
any other instrument executed by any BORROWER for the benefit of BANK may be
instituted in any Federal court in the State of New Jersey or any State court in
the State of New Jersey or in any other court having jurisdiction, and each
BORROWER hereby waives any objection which it might have now or hereafter to the
laying of the venue of any such suit, action or proceeding, and irrevocably
submits to the jurisdiction of any such
-X-8-
<PAGE> 64
court in any suit, action or proceeding and waives any claim or
defense of inconvenient forum.
10.15 (a) This Agreement shall not be effective
unless signed by an officer of the BANK.
(b) This Agreement contains the entire understanding
of the parties and any promises or representations not herein contained shall
have no force and effect, unless in writing, duly signed by the party to be
charged.
10.16 Neither this Agreement, nor any portion or provision
hereof, may be changed, modified, amended, waived, supplemented, discharged,
canceled or terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by BANK.
10.17 Notwithstanding the foregoing provisions of Section 10.11
but subject to the provisions of Section 3.1, the security interests, liens, and
rights granted to BANK hereunder shall continue in full force and effect (unless
formerly terminated and/or released in writing) notwithstanding: (1) the
Modification (as defined above) of this Agreement (unless all Liabilities have
been paid in full and all of BANK's relationships with all BORROWERS have been
terminated to the satisfaction of BANK), or (2) the fact that any BORROWER's
account may, from time to time, be temporarily in a credit position.
10.18 All representations, warranties, covenants, waivers and
agreements contained herein shall survive execution hereof, unless otherwise
provided.
-X-9-
<PAGE> 65
10.19 If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
10.20 Any requirement in this Agreement that BANK shall act
reasonably or any requirement in this Agreement that BANK show materiality shall
be broadly and liberally construed in favor of BANK bearing in mind BANK's need
to protect its security interests and to realize upon the Collateral.
10.21 BANK SHALL HAVE A RIGHT OF SUBROGATION TO THE EXTENT THAT
THE PROCEEDS OF THE NY TERM LOAN ARE USED TO REDEEM PAY-OFF OR RETIRE EXISTING
DEBT OF BORROWER. THIS RIGHT OF SUBROGATION WILL EXTEND TO THE SECURITY GIVEN TO
COLLATERALIZE ANY OTHER DEBT REDEEMED, PAID OFF, OR RETIRED BY USE OF THE
PROCEEDS OF THE NY TERM LOAN.
10.22 IN THE EVENT OF ANY INCONSISTENCY BETWEEN THIS AGREEMENT
AND ANY OTHER DOCUMENTS AFFORDING THE BANK RIGHTS AND REMEDIES SUCH
INCONSISTENCY SHALL BE RESOLVED BY AN INTERPRETATION WHICH EXPANDS BANK'S RIGHTS
RATHER THAN LIMITS BANK'S RIGHTS.
10.23 Nothing herein contained shall be construed to constitute
any BORROWER as BANK's agent for any purpose whatsoever, BANK shall not be
responsible or liable for (a) any acts of omission or commission, (b) any error
of judgment, (c) any mistake of fact, or (d) any shortage, discrepancy, damage,
loss or
-X-10-
<PAGE> 66
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof.
10.24 LOST LOAN DOCUMENTS: Upon receipt of an affidavit of an
officer of BANK as to the loss, theft, destruction or mutilation of the NY Term
Note or any other security document which is not of public record, the
applicable BORROWER will issue, in lieu thereof, a replacement NY Term Note or
other security document in the same principal amount thereof and otherwise of
like tenor.
10.25 ALL OBLIGATIONS OF EACH BORROWER UNDER THIS AGREEMENT
ARE JOINT AND SEVERAL WITH THE OBLIGATIONS OF THE OTHER BORROWERS.
10.26 This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile shall be as
effective as delivery of a manually executed counterpart of this Agreement.
10.27 BORROWERS and BANK have entered into the Master Agreement
on separate forms in order to accommodate the BORROWERS' desire to reduce
interest rate expenditures by locking in interest rates for a period of time as
offered by the interest rate swap concept. The obligations of BORROWERS under
the interest rate swap agreement are incorporated herein by reference and made a
part hereof, as if fully set forth herein.
-X-11-
<PAGE> 67
10.28 EACH BORROWER AND BANK MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR BANK TO ENTER INTO THIS AGREEMENT AND MAKE THE NY TERM LOAN.
END OF ARTICLE X
-X-12-
<PAGE> 68
IN WITNESS WHEREOF, BORROWERS and FLEET BANK, NATIONAL
ASSOCIATION, have caused this Loan and Security Agreement to be
executed by their respective duly authorized officers on the date
and year first above written.
<TABLE>
<CAPTION>
ATTEST: PVC CONTAINER CORPORATION
<S> <C>
/s/ John D'Avella By: /s/ Phillip Friedman
- ------------------------------ -------------------------------------------
John D'Avella, Secretary Phillip Friedman, President
ATTEST: NOVATEC PLASTICS CORP.
/s/ John D'Avella By:/s/ Phillip Friedman
- ------------------------------ -------------------------------------------
John D'Avella, Secretary Phillip Friedman, President
By:/s/ Bertram Berkowitz
-------------------------------------------
Bertram Berkowitz,
Treasurer
ATTEST: NOVAPAK CORPORATION
/s/ John D'Avella By:/s/ Phillip Friedman
- ------------------------------ -------------------------------------------
John D'Avella, Secretary Phillip Friedman, President
ATTEST: AIROPAK CORPORATION
/s/ John D'Avella By:/s/ Phillip Friedman
- ------------------------------ -------------------------------------------
John D'Avella, Secretary Phillip Friedman, President
FLEET BANK, NATIONAL ASSOCIATION
By: /s/ John T. Harrison
-------------------------------------------
John T. Harrison,
Vice President
</TABLE>
