SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended Commission File Number
November 22, 1996 1-10648
----------------- -------
BPI Packaging Technologies, Inc.
--------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 04-2997486
-------- ----------
(State of Other Jurisdiction (I.R.S. Employer
Incorporation of Organization) Identification Number)
455 Somerset Avenue, Dighton, Massachusetts 02764
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(508) 824-8636
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of December 23, 1996, there were issued and outstanding 13,982,120 shares of
Common Stock and 347,146 shares of Series A Preferred Stock.
BPI PACKAGING TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
<S> <C> <C>
ITEM 1. Financial Statements (Unaudited)
Balance Sheets - February 23, 1996 and November 22, 1996......................... 1
Statements of Operations - Three Months Ended
November 22, 1996 and November 24, 1995........................................ 3
Statements of Operations - Nine Months Ended
November 22, 1996 and November 24, 1995........................................ 4
Statements of Cash Flows - Nine Months Ended
November 22, 1996 and November 24, 1995........................................ 5
Notes to Financial Statements - November 22, 1996................................ 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... 9
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings................................................................ 15
ITEM 2. Changes in Securities............................................................ 15
ITEM 3. Defaults Upon Senior Securities.................................................. 15
ITEM 4. Submission of Matters to a Vote of Security-Holders.............................. 15
ITEM 5. Other Information................................................................ 16
ITEM 6. Exhibits and Reports on Form 8-K................................................. 16
SIGNATURES..................................................................................... 18
- ----------
</TABLE>
PART I. FINANCIAL INFORMATION
- ----------------------------------
ITEM I. FINANCIAL STATEMENTS
- ------------------------------
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 22, FEBRUARY 23,
1996 1996
--------------------- -------------------
(UNAUDITED)
<S> <C> <C>
Current assets
Cash $ 885,556 $ 109,093
Accounts receivable, net 3,662,497 2,178,132
Inventories 4,187,619 3,927,597
Prepaid expenses and other assets 1,297,789 1,085,258
--------------------- --------------------
Total current assets 10,033,461 7,300,080
--------------------- --------------------
Property and equipment, net 23,685,951 24,314,649
--------------------- --------------------
Patents, net 1,120,848 1,099,553
Deposits - leases and equipment purchases 482,661 802,383
Loans to officers 479,832 468,606
Other assets 1,517,875 1,292,704
--------------------- --------------------
3,601,216 3,663,246
--------------------- --------------------
$ 37,320,628 $ 35,277,975
===================== ====================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
1
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOVEMBER 22, FEBRUARY 23,
1996 1996
-------------------- ------------------
(UNAUDITED)
<S> <C> <C>
Current liabilities
Note payable - bank $ 3,724,612 $ 3,752,604
Capital lease obligations due within one year 2,071,533 1,832,847
Accounts payable 5,704,746 3,871,699
Other accrued expenses 490,877 427,428
Series C mandatorily redeemable preferred stock,
$.01 par value, at stated value 183,369 183,369
-------------------- ------------------
Total current liabilities 12,175,137 10,067,947
-------------------- ------------------
Capital lease obligations-long-term portion 4,356,011 5,441,057
Stockholders' Equity
Series B convertible preferred stock, $.01 par value 1,466,954 1,466,954
Series A convertible preferred stock, $.01 par value 1,313,584 1,215,784
Common stock, $.01 par value; shares authorized -
30,000,000; shares issued and outstanding - 13,957,120 at
November 22, 1996 and 11,800,909 at February 23, 1996 139,572 118,009
Capital in excess of par value 37,885,785 33,615,213
Accumulated deficit (20,016,415) (16,646,989)
-------------------- ------------------
20,789,480 19,768,971
-------------------- ------------------
Commitments and contingencies
$ 37,320,628 $ 35,277,975
==================== ==================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
-------- THREE MONTHS ENDED -------
NOVEMBER 22, NOVEMBER 24,
1996 1995
--------------------------- ---------------------------
(UNAUDITED)
<S> <C> <C>
Net sales $ 8,840,916 $ 8,073,432
Cost of goods sold 7,365,285 6,974,544
--------------------------- ---------------------------
Gross profit 1,475,631 1,098,888
Operating expenses
Selling, general and administrative 1,870,519 1,581,842
--------------------------- ---------------------------
1,870,519 1,581,842
--------------------------- ---------------------------
Loss from operations (394,888) (482,954)
Other income (expense)
Interest expense (258,364) (208,624)
Interest income 1,861 17,772
--------------------------- ---------------------------
Net loss $ (651,391) $ (673,806)
=========================== ===========================
Loss per share $ (0.05) $ (0.06)
Weighted average common shares outstanding 12,475,138 11,781,314
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
3
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
-------- NINE MONTHS ENDED -------
NOVEMBER 22, NOVEMBER 24,
1996 1995
--------------------------- ---------------------------
(UNAUDITED)
<S> <C> <C>
Net sales $ 24,670,990 $ 21,942,420
Cost of goods sold 21,665,509 17,878,560
--------------------------- ---------------------------
Gross profit 3,005,481 4,063,860
Operating expenses
Selling, general and administrative 5,553,788 4,353,641
--------------------------- ---------------------------
5,553,788 4,353,641
--------------------------- ---------------------------
Loss from operations (2,548,307) (289,781)
Other income (expense)
Interest expense (826,331) (516,575)
Interest income 5,212 35,360
--------------------------- ---------------------------
Net loss $ (3,369,426) $ (770,996)
=========================== ===========================
Loss per share $ (0.27) $ (0.07)
Weighted average common shares outstanding 12,298,560 11,745,801
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
4
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
------------ NINE MONTHS ENDED -------------
NOVEMBER 22, NOVEMBER 24,
1996 1995
--------------------- ----------------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,369,426) $ (770,996)
--------------------- ----------------------
Adjustments to reconcile net loss to net cash provided (used) by operating
activities:
Depreciation and amortization 2,506,266 1,820,156
Increase in accounts receivable - net (1,484,365) (266,876)
Increase in inventories (260,022) (847,526)
Increase in prepaid expenses and other current assets (212,531) (779,839)
Increase in accounts payable 1,833,047 422,880
Increase (decrease) in other accrued expenses 63,449 (135,034)
--------------------- ----------------------
Total adjustments 2,445,844 213,761
--------------------- ----------------------
Net cash used by operating activities (923,582) (557,235)
--------------------- ----------------------
Cash flows from investing activities:
Additions to property and equipment (1,136,196) (2,738,049)
Cost of patents (86,795) (44,461)
Decrease in deposits, net 34,722 116,170
Increase in advances to officers (11,226) (149,242)
Decrease in note receivable 0 721,980
Increase in other assets, net (20,874) (224,374)
--------------------- ----------------------
Net cash used by investing activities (1,220,369) (2,317,976)
--------------------- ----------------------
Cash flows from financing activities:
Net (payments) borrowings under note payable - bank (27,992) 2,321,273
Principal payments on capital lease obligations (1,436,429) (893,940)
Proceeds from equipment financings 0 330,808
Net proceeds from sales of stock and exercise of warrants 4,384,835 159,050
--------------------- ----------------------
Net cash provided by financing activities 2,920,414 1,917,191
--------------------- ----------------------
Net increase (decrease) in cash 776,463 (958,020)
Cash at beginning of period 109,093 1,350,450
--------------------- ----------------------
Cash at end of period $ 885,556 $ 392,430
===================== ======================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
BPI PACKAGING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
consolidated financial statements.
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) considered necessary for a fair statement of the
interim financial data have been included. Results from operations for the three
and nine month periods ended November 22, 1996 are not necessarily indicative of
the results that may be expected for the fiscal year ending February 28, 1997.
For further information, refer to the consolidated financial statements
and the footnotes included in the annual report on Form 10-K for BPI Packaging
Technologies, Inc. (the "Company") for the year ended February 23, 1996.
NOTE 2: EARNINGS PER SHARE
Earnings per share is calculated based upon the weighted average common
shares outstanding during the period including dilutive employee stock options,
underwriter warrants, Class A and B warrants, using the treasury stock method as
applicable, and Series A and B Preferred Stock. Common stock equivalents are not
reflected in the calculation in periods in which they would have an
anti-dilutive effect.
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable, net consists of the following:
NOVEMBER 22, FEBRUARY 23,
1996 1996
----------- -----------
Accounts receivable $ 3,780,924 $ 2,273,132
Allowance for doubtful accounts (118,427) (95,000)
----------- -----------
$ 3,662,497 $ 2,178,132
=========== ===========
NOTE 4: INVENTORIES
Inventories consist of the following:
NOVEMBER 22, FEBRUARY 23,
1996 1996
---------- ----------
Raw materials $1,938,478 $1,480,667
Finished goods 2,249,141 2,446,930
---------- ----------
$4,187,619 $3,927,597
========== ==========
6
NOTE 5: NOTE PAYABLE -BANK
The Company has a $4,000,000 revolving line of credit from a commercial
bank that is secured by accounts receivable and inventory. Borrowings under the
line of credit are subject to 80% of qualifying accounts receivable and 35% of
qualifying inventories (up to a maximum inventory loan of $1,500,000), less the
aggregate amount utilized under all commercial and standby letters of credit and
bank acceptances. The line of credit bears interest at the bank's prime rate
plus 2.5% (10.75% at November 22, 1996), and provides for a 1/8th of 1% unused
line fee and is subject to renewal annually. At November 22, 1996, availability
under the line of credit was approximately $330,000 and the balance under the
line of credit was $3,724,612.
Terms of an amendment dated March 1, 1996, include certain financial
covenants that the Company must maintain, including debt service coverage,
capital base, and debt to equity covenants. The Company is in violation of
several of the covenants as of November 22, 1996.
On December 5, 1996 the Company refinanced its bank line of credit with
a new lending institution (See Note 8-Subsequent Event).
NOTE 6: CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
NINE MONTHS ENDED NOVEMBER 22, 1996
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 22, 1996
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE
COMMON STOCK PREFERRED STOCK PREFERRED STOCK
----------------------------- -------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------
----------------------------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 23, 1996 11,800,909 $118,009 303,946 $1,215,784 146,695 $1,466,954
Sale of common stock pursuant to
Regulation S and Regulation D
private placement offerings, net of
issuance costs 1,207,500 12,075
Sale of common and preferred stock
pursuant to partial exercise of
underwriter's warrants from prior
public offerings, net of issuance costs 402,600 4,026 100,000 225,000
Conversion of Series A convertible
preferred stock to common stock 31,800 318 (31,800) (127,200)
Sale of common stock pursuant to
exercise of class B warrants from the
Company's third public offering, net
of issuance costs 511,761 5,118
Issuance of common stock based on
RC America's FY96 results 2,550 26
Net loss for the nine months ended
November 22, 1996
================ =========== ============ ============= ============= ==============
Balance at November 22, 1996 13,957,120 $139,572 372,146 $1,313,584 146,695 $1,466,954
================ =========== ============ ============= ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Capital in
Excess of Accumulated
Par Value Deficit Total
--------- ------- -----
------------- --------------------- ---------------
<S> <C> <C> <C>
Balance at February 23, 1996 $33,615,213 ($16,646,989) $19,768,971
Sale of common stock pursuant to
Regulation S and Regulation D
private placement offerings, net of
issuance costs 2,194,793 2,206,868
Sale of common and preferred stock
pursuant to partial exercise of
underwriter's warrants from prior
public offerings, net of issuance costs 851,024 1,080,050
Conversion of Series A convertible
preferred stock to common stock 126,882 ---
Sale of common stock pursuant to
exercise of class B warrants from the
Company's third public offering, net
of issuance costs 1,092,799 1,097,917
Issuance of common stock based on
RC America's FY96 results 5,074 5,100
Net loss for the nine months ended
November 22, 1996 (3,369,426) (3,369,426)
============= ===================== ===============
Balance at November 22, 1996 $37,885,785 ($20,016,415) $20,789,480
============= ===================== ===============
</TABLE>
7
NOTE 7: RC AMERICA, INC.
On May 15, 1996, the Company issued 2,550 shares to Ronald Caulfield as
part of the February 26, 1994 agreement providing for the issuance of up to an
additional 100,000 shares of the Company's Common Stock over a five year period
based on RC America, Inc. attaining certain levels of pre-tax earnings. The
Agreement also contains demand and piggy-back registration rights for the
shares.
NOTE 8: SUBSEQUENT EVENT
On December 5, 1996 the Company refinanced its bank line of credit with
a new lending institution. The new revolving line of credit is $8,000,000
secured by accounts receivable and inventory and all other assets except for
equipment. Availability of borrowings under the line of credit is determined by
calculations of the borrowing base, as specifically defined in the loan and
security agreement, but generally means 85% of qualifying accounts receivable
and 40% of eligible inventories less the aggregate amount of all outstanding
commercial and standby letters of credit. The line of credit bears interest at
1.5% above the variable interest rate quoted by Norwest Bank of Minnesota with a
minimum rate of 8.0%. The credit line is for 5 years and is subject to renewal
annually. The line of credit includes certain financial covenants that the
Company must maintain to avoid a default including current ratio, debt to
equity, maintaining a net worth of $14 million and profitability.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS OR INFORMATION
Certain statements contained in this Form 10-Q are not based on
historical facts, but are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, that are based upon a number
of assumptions concerning future conditions that may ultimately prove to be
inaccurate. Actual events and results may materially differ from anticipated
results described in such statements.
RESULTS OF OPERATIONS
THIRD QUARTER OF FISCAL YEAR 1997 COMPARED TO THIRD QUARTER
OF FISCAL YEAR 1996
For the third quarter of Fiscal 1997, ended November 22, 1996, the
Company had sales totaling $8,840,916 as compared to sales of $8,073,432 for the
third quarter of Fiscal 1996, ended November 24, 1995, an increase of 9.5%.
The Company's core bag and film business (traditional plastic grocery
carryout bags and proprietary plastic carryout bags of "T-shirt sack" design and
plastic film products) had sales of $8,761,116 in the third quarter of Fiscal
1997 compared to $7,542,638 in the third quarter of Fiscal 1996, an increase of
16.1%.
Sales of the Company's proprietary bag products (FRESH-SAC(R) T-shirt
sack produce bag, HANDI-SACTM and MAXI-SACTM) and plastic film products were
$3,228,335 in the third quarter of Fiscal 1997 compared to sales of $2,456,357
in the third quarter of Fiscal 1996, an increase of 31.4%. Management expects
that sales of proprietary bag products will continue to increase in the fourth
quarter of Fiscal 1997. Sales of traditional products were $5,532,781 in the
third quarter of Fiscal 1997 compared to sales of $5,086,281 in the third
quarter of Fiscal 1996, an increase of 8.8%. Sales from RC America, Inc. were
$79,800 in the third quarter of Fiscal 1997 compared to sales of $502,045 in the
third quarter of Fiscal 1996. RC America, Inc.'s sales may fluctuate
significantly from quarter to quarter due to the nature of its business and the
timing of transactions. BPI Packaging, Inc. did not have any sales of products
purchased from Integrated Bagging Systems Corporation in the third quarter of
Fiscal 1997 compared to sales of $28,749 in the third quarter of Fiscal 1996
because resources were not allocated to this subsidiary. Market Media, Inc. did
not have revenue during the third quarter of Fiscal 1997 primarily because of a
delay in receiving necessary independent third party research data for
advertised brands. The research data, received in the fourth quarter, documents
sales increases of up to 29.9% over a 12-week period for brands advertised on
the Floor Focus Ad-TileTM.
Cost of goods sold for the third quarter of Fiscal 1997 was $7,365,285
compared to $6,974,544 in the third quarter of Fiscal 1996. Cost of goods sold
as a percentage of sales was 83.3% for the third quarter of Fiscal 1997 compared
to 86.3% for the third quarter of Fiscal 1996. The decrease in cost of goods
sold as a percentage of sales was due primarily to increased manufacturing
output which lowered unit cost and an increased proprietary product mix which
9
has a lower cost of goods as a percentage of the selling price compared to the
traditional grocery carryout bag.
Selling, general and administrative expense for the third quarter of
Fiscal 1997 was $1,870,519 compared to $1,581,842 in the third quarter of Fiscal
1996. The increase is primarily related to increased shipments (freight and
related expenses are included in SG&A), sales and marketing activity for
proprietary bag and film products and in-store advertising and promotion
products, as well as start-up costs for Market Media, Inc.
Interest expense for the third quarter of Fiscal 1997 was $258,364
compared to $208,624 for the third quarter of Fiscal 1996. The increase is
related to debt incurred for purchases of equipment and higher rates of interest
on the credit line in Fiscal 1997 compared to Fiscal 1996.
Net loss was $651,391 for the third quarter of Fiscal 1997 compared to
net loss of $673,806 for the third quarter of Fiscal 1996. (The non-cash expense
of depreciation and amortization was $859,406 in the third quarter of Fiscal
1997 compared to $618,663 in the third quarter of Fiscal 1996.)
Operating profits (loss) for the various business segments are as
follows:
Third Quarter
Fiscal 1997 Fiscal 1996
----------- -----------
Proprietary, traditional and film products $ 335,159 ( $119,974)
RC America, Inc. ( 42,806) 15,427
BPI Packaging, Inc. 0 23,662
Market Media, Inc. (187,344) 0
Unallocated corporate overhead ( 499,897) ( 402,069)
------------- ------------
Operating loss ( 394,888) ( 482,954)
Interest expense, net (256,503) ( 190,852)
------------- ----------
Net loss ( $ 651,391) ($ 673,806)
============ ============
FIRST NINE MONTHS OF FISCAL YEAR 1997 COMPARED TO FIRST NINE MONTHS OF
FISCAL YEAR 1996
For the first nine months of Fiscal 1997, ended November 22, 1996, the
Company had sales totaling $24,670,990 as compared to sales of $21,942,420 for
the first nine months ended November 24, 1995, an increase of 12.4%.
The Company's core bag and film business (traditional plastic grocery
carryout bags and proprietary plastic carryout bags of "T-shirt sack" design and
plastic film products) had sales of
10
$22,730,048 for the first nine months of Fiscal 1997 compared to sales of
$20,341,088 for the first nine months of Fiscal 1996, an increase of 11.7%.
Sales of the Company's proprietary bag products (FRESH-SAC(R) T-shirt
sack produce bag, HANDI-SAC(TM) and MAXI-SAC(TM)) and plastic film products were
$8,762,324 in the first nine months of Fiscal 1997 compared to sales of
$7,146,125 in the first nine months of Fiscal, 1996, an increase of 22.6%. Sales
of traditional grocery carryout T-shirt bags increased from $13,194,963 in the
first nine months of Fiscal 1996 to $13,967,724 in the first nine months of
Fiscal 1997, an increase of 5.8%. RC America, Inc. sales for the first nine
months of Fiscal 1997 were $1,882,423 compared to $1,197,205 in the first nine
months of Fiscal 1996. RC America, Inc.'s sales may fluctuate significantly from
quarter to quarter due to the nature of its business. BPI Packaging, Inc. did
not have any sales of product purchased from Integrated Bagging Systems
Corporation in the first nine months of Fiscal 1997 compared to sales of
$404,127 in the first nine months of Fiscal 1996 because resources were not
allocated to this subsidiary. Market Media, Inc. recorded revenue of $58,519
during the first nine months of Fiscal 1997 which represented revenue from the
initial installation of Floor Focus Ad-TileTM in 104 supermarkets in May, 1996.
Cost of goods sold for the first nine months of Fiscal 1997 was
$21,665,509 compared to $17,878,560 in the previous year. Cost of goods sold as
a percentage of sales was 87.8% for the first nine months of Fiscal 1997,
compared to 81.4% for the first nine months of Fiscal 1996. The increase in cost
of goods sold as a percentage of sales was due primarily to an increase in
material costs relative to the selling prices of the Company's products which
occurred primarily in the first six months of Fiscal 1997. Increased
manufacturing productivity and increased proprietary product mix decreased the
cost of goods as a percentage of sales in the third quarter.
Several factors that materially contributed to the increase in cost of
goods sold as a percentage of sales in the first six months were the following:
One factor that contributed to lower margins was the impact of a major
program cancellation in Fiscal 1996. In the third quarter of Fiscal 1996, a
proprietary bag program to which the Company had allocated more than 25% of its
manufacturing capacity was canceled by a major retail chain, and the negative
impact of this cancellation continued through the second quarter of Fiscal 1997.
The manufacturing capacity released by the program cancellation was partially
replaced with lower margin traditional grocery T-shirt sacks which have higher
material costs compared to proprietary products as a percentage of the selling
price. A decline in margin for the traditional grocery T-shirt sack, caused
primarily by market conditions and competition for new accounts, in the first
six months of Fiscal 1997 compared to the first six months of Fiscal 1996
reduced the gross margin approximately $800,000 and caused the cost of goods
sold as a percentage of sales to increase.
A second factor was that manufacturing productivity declined in the
first six months of Fiscal 1997 and materially contributed to the increase in
cost of goods sold as a percentage of sales. In the first six months of Fiscal
1997, unit production was less than unit sales resulting in lost value added of
approximately $300,000. The negative impact of under-production resulted in
manufacturing cost that would otherwise have been absorbed in inventory or
additional sales being expensed in the first six months. Manufacturing
productivity was negatively impacted by several factors: Low backlog at the
beginning of the fiscal year, unfavorable product mix with
11
traditional bag products at 60% and proprietary bag products at 28% of the core
bag and film business, disruption to routine production caused by the
installation of a new advanced technology printing press and bag manufacturing
machines, and a successful crash research and development effort to manufacture
a proprietary film product for the building products industry.
A third factor is product mix which materially impacts actual capacity,
capacity utilization and potential revenues from the facility. Management
believes that actual plant capacity and potential revenues from the facility
will expand significantly up to the $60-$70 million range if management is
successful in its plans to shift product mix entirely to proprietary bags and
plastic films from lower margin traditional standard T-shirt sack bags. In
particular, most of the capital equipment needed for these proprietary bag and
film sales is in place and only relatively minor additions are needed to meet
anticipated demand over the near term for these non-traditional bag and film
products. Management's goal is to seek to significantly increase revenues from
the existing facility through the sale of proprietary bag and plastic film
products, which typically have higher margins compared to utilizing the same
production capacity for traditional T-shirt bags.
Selling, general and administrative expense for the first nine months
of Fiscal 1997 was $5,553,788 or 22.5% of sales, compared to $4,353,641, or
19.8% of sales for the first nine months of Fiscal 1996. The increase is
primarily related to increased shipments (freight and related expenses are
included in SG&A), sales and marketing activity for proprietary bag and film
products and in-store advertising and promotion products, as well as start-up
costs for Market Media, Inc.
Interest expense for the first nine months of Fiscal 1997 was $826,331
compared to $516,575 for the first nine months of the previous year. The
increase is related to debt incurred for purchases of equipment and higher rates
of interest on the credit line in Fiscal 1997 compared to Fiscal 1996.
A net loss of $3,369,426 for the first nine months of Fiscal 1997
compared to a net loss of $770,996 for the first nine months of Fiscal 1996. The
increase in net loss was caused primarily by increased cost of goods sold and
increased selling, general and administrative expenses. (The non-cash expense of
depreciation was $2,506,266 in the first nine months of Fiscal 1997 compared to
$1,820,156 in the first nine months of Fiscal 1996.)
Operating profits (loss) for the various business segments are as
follows:
Nine Months
Fiscal 1997 Fiscal 1996
----------- -----------
Proprietary, traditional and film products ($ 810,433) $ 849,113
RC America, Inc. 98,082 ( 39,743)
BPI Packaging, Inc. 0 51,962
Market Media, Inc. ( 500,568) 0
Unallocated corporate overhead ( 1,335,388) ( 1,151,113)
------------- -----------
12
Operating (loss) ( 2,548,307) ( 289,781)
Interest expense, net ( 821,119) ( 481,215)
------------ ------------
Net loss ($ 3,369,426) ($770,996)
============= ============
LIQUIDITY AND CAPITAL RESOURCES
BANK LOANS
The Company has a $4,000,000 revolving line of credit secured by
accounts receivable and inventory. Borrowings under the line of credit are
subject to 80% of qualifying accounts receivable and 35% of qualifying
inventories up to a maximum inventory loan of $1,500,000, less the aggregate
amount utilized under all commercial and standby letters of credit and bank
acceptances. The line of credit bears interest at the bank's prime rate plus
2.5% (10.75% at November 22, 1996), and provides for a 1/8th of 1% unused line
fee and is subject to renewal annually. At November 22, 1996, availability under
the line of credit was approximately $330,000 and the balance under the line of
credit was $3,724,612.
Terms of an amendment dated March 1, 1996, include certain financial
covenants that the Company must maintain, including debt service coverage,
capital base, and debt to equity covenants. The Company was in violation of
several of the covenants as of November 22, 1996.
On December 5, 1996 the Company refinanced its bank line of credit with
a new lending institution. The new revolving line of credit is $8,000,000
secured by accounts receivable and inventory and all other assets except for
equipment. Availability of borrowings under the line of credit is determined by
calculations of the borrowing base, as specifically defined in the loan and
security agreement, but generally means 85% of qualifying accounts receivable
and 40% of eligible inventories less the aggregate amount of all outstanding
commercial and standby letters of credit. The line of credit bears interest at
1.5% above the variable interest rate quoted by Norwest Bank of Minnesota with a
minimum rate of 8.0%. The credit line is for 5 years and is subject to renewal
annually. The line of credit includes certain financial covenants that the
Company must maintain to avoid a default including current ratio, debt to
equity, maintaining a net worth of $14 million and profitability.
SALES OF SECURITIES
During the first nine months of Fiscal 1997, the Company received
additional equity funding through the sale of Common Stock from a Regulation S
and a Regulation D offering, the exercise of underwriters warrants and the
exercise of Class B warrants from the Company's third public offering. The
Company received net proceeds of $4,384,835 from the sale of an aggregate of
2,121,861 shares of Common Stock and 100,000 shares of Series A Preferred Stock.
The proceeds were used to purchase equipment and for general corporate purposes
and the reduction of bank debt. The Company may raise additional financing
through the sale of equity or debt securities to pay for all or part of the
planned $2.0 million increase in capacity at the Dighton facility during the
next six months as well as to increase general working capital. The Company
13
has no commitments for such financing, and no assurance can be given that
additional financing will be successfully completed or that such financing will
be available or, if available, will be on terms favorable to the Company.
EQUIPMENT AND LEASE FINANCING
From March 1994 through November 1996, the Company acquired through
purchase or lease approximately $19.7 million in additional equipment to
increase manufacturing capacity and efficiency and to expand the Company's
product line. The equipment was financed from the sale of equity securities and
from equipment lease financing and bank loans.
The Company currently has no outstanding commitments to purchase
additional equipment. Management intends to finance any new purchases of
equipment primarily through equipment lease financing. No assurance can be given
that the Company will be able to obtain new equipment financing through banks or
equipment lessors.
CASH FLOW
For the nine months ended November 22, 1996, net cash used by operating
activities totaled $923,582 due to a net loss of $3,369,426 and $1,484,365 used
to finance an increase in accounts receivable which was partially offset by
$2,506,266 from depreciation and amortization and $1,833,047 from an increase in
accounts payable. The Company also received net proceeds of $4,384,835 from the
sale of an aggregate of 2,121,861 shares of Common Stock and 100,000 shares of
Series A Preferred Stock. $1,136,196 was used to purchase equipment and for
plant improvements, $1,436,429 was used to make principal payments on capital
lease obligations and $27,992 to reduce the bank note. At November 22, 1996,
stockholders' equity was $20,789,480 as compared to $23,508,120 at November 24,
1995. The Company's current ratio decreased from 1.13:1 at November 24, 1995 to
0.82:1 at November 22, 1996. The net book value of property and equipment
increased from $22,485,845 at November 24, 1995 to $23,685,951 at November 22,
1996.
To date, the Company has generated cash flows from financing
activities, including sales of equity securities and bank lines of credit.
Management believes that fixed asset or lease financing is now available at
competitive rates from institutional lenders and leasing companies. The Company
may raise additional financing through the sale of equity or debt to fund all or
part of the planned $2.0 million increase in capacity at the Dighton facility
during the next six months as well as to increase general working capital. The
Company has no commitments for such financing, and no assurance can be given
that additional financings will be successfully completed or that such financing
will be available or, if available, will be on terms favorable to the Company.
IMPACT OF INFLATION
Inflation during the last three fiscal years has not had a significant
effect on the Company's activities.
14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
------------------
On December 4, 1995, Mobil Oil Corporation ("Mobil") filed suit against
the Company in the U.S. District Court for the District of Delaware, Civil
Action No. 95-737. Subsequently, the Company filed a counter claim against Mobil
for patent infringement. In December 1996, Mobil and the Company settled this
patent litigation by mutual agreement.
ITEM 2. CHANGES IN SECURITIES. Not Applicable.
----------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
--------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
----------------------------------------------------
On September 17, 1996, the Company held an Annual Meeting of
Stockholders (the "Annual Meeting") to vote on the following proposals:
1. To elect two (2) members of the Company's Board of Directors for a
three (3) year term. Nominees for Director were Ronald V. Caulfield and Gregory
M. Davall ("Proposal No. 1");
2. To approve the Company's 1996 Stock Option Plan, under which
1,000,000 shares of the Company's Common Stock, $.01 par value per share, have
been reserved for issuance ("Proposal No. 2"); and
3. To ratify and confirm the appointment of Price Waterhouse LLP as the
independent accountants for the Company for the fiscal year ending February 28,
1997 ("Proposal No. 3").
Of the 13,445,259 shares of the Company's Common Stock of record as of
July 26, 1996 able to be voted at the Annual Meeting, a total of approximately
9,094,878 shares were voted, or approximately 68% of the Company's issued and
outstanding shares of Common Stock entitled to vote on these matters. Of the
372,146 shares of the Company's Series A Convertible Preferred Stock ("Preferred
Stock") able to be voted at the Annual Meeting, a total of approximately 307,828
shares were voted, or approximately 83% of the Company's issued and outstanding
shares of Preferred Stock entitled to vote on these matters. Common Stock and
Preferred Stock voted as a single class. Each of the proposals was adopted, with
the vote totals as follows:
15
<TABLE>
<CAPTION>
Shares
Shares Voting Shares Broker
Proposal Voting For Against Abstaining Non-Votes
- -------- ---------- ------- ---------- ---------
Proposal No. 1
--------------
<S> <C> <C> <C> <C> <C>
(a) Ronald V. Caulfield 9,276,072 126,634 0 0
(b) Gregory M. Davall 9,276,072 126,634 0 0
Shares
Shares Voting Shares Broker
Proposal Voting For Against Abstaining Non-Votes
- -------- ---------- ------- ---------- ---------
Proposal No. 2 4,437,276 539,733 42,337 4,383,360
--------------
Proposal No. 3 9,324,655 64,064 13,987 0
--------------
</TABLE>
ITEM 5. OTHER INFORMATION. None.
------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(a) Exhibits.
---------
The following exhibits are filed herewith:
Exhibit
Number Title
------ -----
10a Loan and Security Agreement by and among the Company, RC
America, Inc. and Foothill Capital Corporation ("Foothill").
10b Secured Term Promissory Note from the Company and RC America
to Foothill.
10c Pledge and Security Agreement by and between the Company and
Foothill.
10d Continuing Guaranty of Market Media, Inc.
10e Continuing Guaranty of BPI Packaging (UK) Limited.
10f Security Agreement by and between Market Media, Inc. and
Foothill.
16
10g Security Agreement by and between BPI Packaging (UK) Limited
and Foothill.
10i* Settlement Agreement by and between the Company and Mobil Oil
Corporation, dated December 19, 1996.
27 Financial Data Schedule.
- --------------------
* Certain information withheld and filed separately with the
Commission pursuant to a request for confidential treatment.
(b) Reports on Form 8-K. None.
- --------------------
17
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.
BPI PACKAGING TECHNOLOGIES, INC.
Date: January 6, 1997 By:/s/ Dennis N. Caulfield
-----------------------
Dennis N. Caulfield, Chief Executive Officer
and Chief Accounting Officer
18
================================================================================
LOAN AND SECURITY AGREEMENT
by and among
BPI PACKAGING TECHNOLOGIES, INC.,
RC AMERICA, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of November 25, 1996
================================================================================
TABLE OF CONTENTS
Page(s)
-------
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 15
1.3 Code 15
1.4 Construction 15
1.5 Schedules and Exhibits 16
2. LOAN AND TERMS OF PAYMENT 16
2.1 Revolving Advances 17
2.2 Letters of Credit 17
2.3 Term Loan 19
2.4 Capital Expenditure Line 19
2.5 Overadvances 19
2.6 Interest and Letter of Credit Fees:
Rates, Payments, and Calculations 19
2.7 Collection of Accounts 21
2.8 Crediting Payments; Application of Collections 21
2.9 Designated Account 22
2.10 Maintenance of Loan Account; Statements of Obligations 22
2.11 Fees 22
3. CONDITIONS; TERM OF AGREEMENT 23
3.1 Conditions Precedent to the Initial Advance, Letter of Credit,
the Term Loan, and the Initial Capital Expenditure Loan 23
3.2 Conditions Precedent to all Advances, all Letters of Credit,
the Term Loan, and all Capital Expenditure Loans 25
3.3 Condition Subsequent 26
3.4 Term; Automatic Renewal 26
3.5 Effect of Termination 26
3.6 Early Termination by Borrower 26
3.7 Termination Upon Event of Default 27
4. CREATION OF SECURITY INTEREST 27
4.1 Grant of Security Interest 27
4.2 Negotiable Collateral 27
4.3 Collection of Accounts, General Intangibles, and
Negotiable Collateral 27
4.4 Delivery of Additional Documentation Required 27
4.5 Power of Attorney 28
4.6 Right to Inspect 28
i
5. REPRESENTATIONS AND WARRANTIES 28
5.1 No Encumbrances 29
5.2 Eligible Accounts 29
5.3 Eligible Inventory 29
5.4 Equipment 29
5.5 Location of Inventory and Equipment 29
5.6 Inventory Records 29
5.7 Location of Chief Executive Office; FEIN 29
5.8 Due Organization and Qualification; Subsidiaries 29
5.9 Due Authorization; No Conflict 30
5.10 Litigation 31
5.11 No Material Adverse Change 31
5.12 Solvency 32
5.13 Employee Benefits 32
5.14 Environmental Condition 32
6. AFFIRMATIVE COVENANTS 32
6.1 Accounting System 32
6.2 Collateral Reporting 33
6.3 Financial Statements, Reports, Certificates 33
6.4 Tax Returns 34
6.5 Guarantor Reports 34
6.6 Returns 35
6.7 Title to Equipment 35
6.8 Maintenance of Equipment 35
6.9 Taxes 35
6.10 Insurance 36
6.11 No Setoffs or Counterclaims 37
6.12 Location of Inventory and Equipment 37
6.13 Compliance with Laws 37
6.14 Employee Benefits 37
6.15 Leases 38
7. NEGATIVE COVENANTS 38
7.1 Indebtedness 38
7.2 Liens 39
7.3 Restrictions on Fundamental Changes 39
7.4 Disposal of Assets 39
7.5 Change Name 39
7.6 Guarantee 39
7.7 Nature of Business 40
7.8 Prepayments and Amendments 40
7.9 Change of Control 40
7.10 Consignments 40
7.11 Distributions 40
ii
7.12 Accounting Methods 40
7.13 Investments 41
7.14 Transactions with Affiliates 41
7.15 Suspension 41
7.16 Compensation 41
7.17 Use of Proceeds 41
7.18 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees 41
7.19 No Prohibited Transactions Under ERISA 41
7.20 Financial Covenants 42
7.21 Capital Expenditures 43
7.22 Financial Projections 43
8. EVENTS OF DEFAULT 43
9. FOOTHILL'S RIGHTS AND REMEDIES 45
9.1 Rights and Remedies 45
9.2 Remedies Cumulative 47
10. TAXES AND EXPENSES 47
11. WAIVERS; INDEMNIFICATION 48
11.1 Demand; Protest; etc 48
11.2 Foothill's Liability for Collateral 48
11.3 Indemnification 48
12. NOTICES 48
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER 50
14. DESTRUCTION OF BORROWER'S DOCUMENTS 50
15. GENERAL PROVISIONS 51
15.1 Effectiveness 51
15.2 Successors and Assigns 51
15.3 Section Headings 51
15.4 Interpretation 51
15.5 Severability of Provisions 51
15.6 Amendments in Writing 51
15.7 Counterparts; Telefacsimile Execution 51
15.8 Revival and Reinstatement of Obligations 52
15.9 Integration 52
iii
SCHEDULES AND EXHIBITS
----------------------
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens - UCC Schedule
Schedule 5.8 Listing of Subsidiary, Jurisdiction, Stock Ownership
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 6.12 Location of Inventory
iv
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as
of November, 1996, among FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, BPI PACKAGING TECHNOLOGIES,
INC., a Delaware corporation ("BPI"), with its chief executive office located at
455 Somerset Avenue, Building 3, North Dighton, Massachusetts 02764 and RC
America, Inc. ("RC, and with BPI, the Borrower") a Delaware corporation with its
chief executive office located at 455 Somerset Avenue, Building 3, North
Dighton, Massachusetts 02764.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods or the rendition of services by
Borrower, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote 5%
or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Authorized Person" means any officer or other employee of
Borrower.
1
"Average Unused Portion of Adjusted Revolving Amount" means, as of
any date of determination, (a) $6,000,000, less (b) the sum of (i) the average
Daily Balance of Advances that were outstanding during the immediately preceding
month, plus (ii) the average Daily Balance of the undrawn Letters of Credit that
were outstanding during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C.ss. 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such time
as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 10% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors.
"Closing Date" means the date of the first to occur of the making
of the initial Advance, the issuance of the initial Letter of Credit, the
funding of the Term Loan, or the making of the initial Capital Expenditure Loan.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following:
2
(a) the Accounts,
(b) Borrower's Books,
(c) General Intangibles,
(d) the Inventory,
(e) the Negotiable Collateral,
(f) any money, or other assets of Borrower that now or hereafter
come into the possession, custody, or control of Foothill, and
(g) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, General Intangibles,
Inventory, Negotiable Collateral, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgement agreement of any warehouseman,
processor, lessor, consignee, or other Person in possession of, having a Lien
upon, or having rights or interests in the Inventory, in each case, in form and
substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 and delivered by the Treasurer of Borrower to Foothill.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all Obligations outstanding under
this Agreement shall be deemed to be current liabilities without regard to
whether they would be deemed to be so under GAAP.
3
"Daily Balance" means the amount of an Obligation owed at the end
of a given day.
"deems itself insecure" means that the Person deems itself
insecure in accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number 3192652 of Borrower
maintained with Borrower's Designated Account Bank, or such other deposit
account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
"Designated Account Bank" means Citizens Bank, whose office is
located at Summer Street, Boston, Massachusetts, and whose ABA number is
011500120.
"Dilution" means, in each case based upon the experience of the
immediately prior 3 months, the result of dividing the Dollar amount of (a) bad
debt write-downs, discounts, advertising, returns, promotions, credits, or other
dilutive items with respect to the Accounts, by (b) Borrower's Collections
(excluding extraordinary items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce Foothill's advance rate against Eligible Accounts by
one percentage point for each percentage point by which Dilution is in excess of
4%.
"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Foothill regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section
3.6.
"Eligible Accounts" means those Accounts created by Borrower in
the ordinary course of business, that arise out of Borrower's sale of goods or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by Borrower to Foothill
in the Loan Documents, and that are and at all times continue to be acceptable
to Foothill in all respects; provided, however, that standards of eligibility
may be fixed and revised from time to time by Foothill in Foothill's reasonable
credit judgment. Eligible Accounts shall not include the following:
4
(a) Accounts that the Account Debtor has failed to pay within 90
days of invoice date or Accounts with selling terms of more than 30 days;
(b) Accounts owed by an Account Debtor or its Affiliates where 50%
or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts that are not payable in Dollars or with respect to
which the Account Debtor: (i) does not maintain its chief executive office in
the United States or, subject to the limitations set forth below, in Canada, or
(ii) is not organized under the laws of the United States or any State thereof,
or (iii) is the government of any foreign country or sovereign state, or of any
state, province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Account is supported by an irrevocable letter of credit satisfactory to
Foothill (as to form, substance, and issuer or domestic confirming bank) that
has been delivered to Foothill and is directly drawable by Foothill, or (z) the
Account is covered by credit insurance in form and amount, and by an insurer,
satisfactory to Foothill;
(f) Accounts due from Account Debtors located in Canada which, in
the aggregate, exceed $150,000.00;
(g) Accounts with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which Borrower
has complied, to the satisfaction of Foothill, with the Assignment of Claims
Act, 31 U.S.C. ss. 3727), or (ii) any State of the United States (exclusive,
however, of Accounts owed by any State that does not have a statutory
counterpart to the Assignment of Claims Act);
(h) Accounts with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Account;
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed 10% of all Eligible Accounts, to the extent
of the obligations owing by such Account Debtor in excess of such percentage;
5
(j) Accounts with respect to which the Account Debtor is subject
to any Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts the collection of which Foothill, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(l) Accounts with respect to which the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, the services
giving rise to such Account have not been performed and accepted by the Account
Debtor, or the Account otherwise does not represent a final sale;
(m) Accounts with respect to which the Account Debtor is located
in the states of New Jersey, Minnesota, Indiana, or West Virginia (or any other
state that requires a creditor to file a Business Activity Report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless Borrower has qualified to do business in New Jersey, Minnesota, Indiana,
West Virginia, or such other states, or has filed a Notice of Business
Activities Report with the applicable division of taxation, the department of
revenue, or with such other state offices, as appropriate, for the then-current
year, or is exempt from such filing requirement; and
(n) Accounts that represent progress payments or other advance
billings that are due prior to the completion of performance by Borrower of the
subject contract for goods or services.
"Eligible Inventory" means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrower's business and
raw materials for such finished goods (and expressly excluding work in process),
that are located at or in-transit between Borrower's premises identified on
Schedule E-1, that strictly comply with each and all of the representations and
warranties respecting Inventory made by Borrower to Foothill in the Loan
Documents, and that are and at all times continue to be acceptable to Foothill
in all respects; provided, however, that standards of eligibility may be fixed
and revised from time to time by Foothill in Foothill's reasonable credit
judgment. In determining the amount to be so included, Inventory shall be valued
at the lower of cost or market on a basis consistent with Borrower's current and
historical accounting practices. An item of Inventory shall not be included in
Eligible Inventory if:
(a) it is not owned solely by Borrower or Borrower does not have
good, valid, and marketable title thereto;
6
(b) it is not located at one of the locations set forth on
Schedule E-1;
(c) it is not located on property owned or leased by Borrower or
in a contract warehouse, in each case, subject to a Collateral Access Agreement
executed by the mortgagee, lessor, the warehouseman, or other third party, as
the case may be, and segregated or otherwise separately identifiable from goods
of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first priority
security interest in favor of Foothill;
(e) it consists of goods returned or rejected by Borrower's
customers or goods in transit; and
(f) it is obsolete or slow moving, a restrictive or custom item,
work-in-process, a component that is not part of finished goods, or constitutes
spare parts, packaging and shipping materials, inks, supplies used or consumed
in Borrower's business, Inventory subject to a Lien in favor of any third
Person, bill and hold goods, defective goods, "seconds," or Inventory acquired
on consignment.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including,
(a) any assets acquired by Borrower with the proceeds of a Capital Expenditure
Loan (if applicable), (b) any interest of Borrower in any of the foregoing, and
(c) all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
29 U.S.C. ss.ss. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an
7
arrangement with Borrower and whose employees are aggregated with the employees
of Borrower under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means Citizens Bank.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: costs or expenses (including taxes,
and insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by Foothill; fees or charges paid or
incurred by Foothill in connection with Foothill's transactions with Borrower,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Personal Property
Collateral or Real Property Collateral appraisals), real estate surveys, real
estate title policies and endorsements, and environmental audits (but in the
case of Real Property expenses, only to the extent that Borrower has granted an
interest in Real Property to Foothill); costs and expenses incurred by Foothill
in the disbursement of funds to Borrower (by wire transfer or otherwise);
charges paid or incurred by Foothill resulting from the dishonor of checks;
costs and expenses paid or incurred by Foothill to correct any default or
enforce any provision of the Loan
8
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Personal Property Collateral or the Real Property Collateral (if any), or any
portion thereof, irrespective of whether a sale is consummated; costs and
expenses paid or incurred by Foothill in examining Borrower's Books; costs and
expenses of third party claims or any other suit paid or incurred by Foothill in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or Foothill's relationship with Borrower or
any guarantor; and Foothill's reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, literature, reports, catalogs,
deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Guarantees" means those certain Unlimited Guarantees of the
Obligations of the Borrower to Foothill by BPI Packaging, Ltd., a corporation
organized under the laws of the United Kingdom and Market Media, Inc., a
corporation organized under the laws of the Commonwealth of Massachusetts,
together with any other limited or unlimited guarantees of the Borrower's
Obligations however and wherever arising;
"Guarantor Security Documents" means those certain security
agreements, collateral assignments of patents, trademarks, copyrights and all
other documents and agreements given to Foothill as collateral security for the
Guarantees.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other
9
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil, petroleum, or
petroleum derived substances, natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources, (c) any flammable substances or explosives or any radioactive
materials, and (d) asbestos in any form or electrical equipment that contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of 50 parts per million.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of Borrower
in respect of letters of credit, bankers acceptances, interest rate swaps, or
other financial products, (c) all obligations of Borrower under capital leases,
(d) all obligations or liabilities of others secured by a Lien on any property
or asset of Borrower, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of Borrower guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
10
"Letter of Credit" means an L/C or an L/C Guaranty, as the context
requires.
"Lien" means any interest in property securing an obligation owed
to, or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement Letter,
the Letters of Credit, the Lockbox Agreements, the Agented Borrowing Agreement,
the UCC financing statement, any note or notes executed by Borrower and payable
to Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Lockbox Account" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and one of the Lockbox Banks.
"Lockbox Bank" means Citizens Bank.
"Lockboxes" has the meaning set forth in Section 2.7.
"Material Adverse Change" means (a) a material adverse change in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrower, (b) the material impairment
of Borrower's ability to perform its obligations under the Loan Documents to
which it is a party or of Foothill to enforce the Obligations or realize upon
the Collateral, (c) a material adverse effect on the value of the Collateral or
the amount that Foothill would be likely to receive (after giving consideration
11
to delays in payment and costs of enforcement) in the liquidation of such
Collateral, or (d) a material impairment of the priority of Foothill's Liens
with respect to the Collateral.
"Maximum Amount" means, as of any date of determination, the
Maximum Revolving Amount.
"Maximum Revolving Amount" means $8,000,000.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit, notes, drafts, instruments, investment property, security
entitlements, securities (including the shares of stock of Subsidiaries of
Borrower), documents, personal property leases (wherein Borrower is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 2.5.
"Pay-Off Letter" means a letter, in form and substance reasonably
satisfactory to Foothill, from Existing Lender respecting the amount necessary
to repay in full all of the obligations of Borrower owing to Existing Lender and
obtain a termination or release of all of the Liens existing in favor of
Existing Lender in and to the properties or assets of Borrower.
12
"PBGC" means the Pension Benefit Guaranty Corporation as defined
in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens for
unpaid taxes that either (i) are not yet due and payable or (ii) are the subject
of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of
lessors under operating leases and purchase money Liens of lessors under capital
leases to the extent that the acquisition or lease of the underlying asset is
permitted under Section 7.21 and so long as the Lien only attaches to the asset
purchased or acquired and only secures the purchase price of the asset, (e)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business of Borrower and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet due and payable, or (ii) are the
subject of Permitted Protests, (f) Liens arising from deposits made in
connection with obtaining worker's compensation or other unemployment insurance,
(g) Liens or deposits to secure performance of bids, tenders, or leases (to the
extent permitted under this Agreement), incurred in the ordinary course of
business of Borrower and not in connection with the borrowing of money, (h)
Liens arising by reason of security for surety or appeal bonds in the ordinary
course of business of Borrower, (i) Liens of or resulting from any judgment or
award that would not have a Material Adverse Effect and as to which the time for
the appeal or petition for rehearing of which has not yet expired, or in respect
of which Borrower is in good faith prosecuting an appeal or proceeding for a
review, and in respect of which a stay of execution pending such appeal or
proceeding for review has been secured, (j) Liens with respect to the Real
Property Collateral (if any) that are exceptions to the commitments for title
insurance issued in connection with the Mortgages, as accepted by Foothill, and
(k) with respect to any Real Property that is not part of the Real Property
Collateral, easements, rights of way, zoning and similar covenants and
restrictions, and similar encumbrances that customarily exist on properties of
Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral by Borrower or the value of Foothill's Lien thereon or therein, or
materially interfere with the ordinary conduct of the business of Borrower.
"Permitted Protest" means the right of Borrower to protest any
Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Foothill is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Foothill in and to
the Collateral.
13
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than the
Real Property Collateral (if any).
"Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"Real Property" means any estates or interests in real property
now owned or hereafter acquired by Borrower. The parties acknowledge that there
is no Real Property presently owned by the Borrower.
"Reference Rate" means the variable rate of interest, per annum,
most recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Solvent" means, with respect to any Person on a particular date,
that on such date (a) at fair valuations, all of the properties and assets of
such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably
14
small capital after giving due consideration to the prevailing practices in the
industry in which such Person is engaged. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount that, in light of all the facts and circumstances existing at such
time, represents the amount that reasonably can be expected to become an actual
or matured liability.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors (or appoint
other comparable managers) of such corporation, partnership, limited liability
company, or other entity.
"Tangible Net Worth" means, as of any date of determination, the
difference of (a) Borrower's total stockholder's equity, minus (b) the sum of:
(i) all Intangible Assets of Borrower, (ii) all of Borrower's prepaid expenses,
and (iii) all amounts due to Borrower from Affiliates.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. An Event of Default shall "continue"
or be "continuing" until such Event of Default has been waived in writing by
Foothill. Section, subsection, clause, schedule, and exhibit references are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
the Loan Documents to this Agreement or any of the Loan Documents shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
15
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount less the outstanding balance of all undrawn or unreimbursed
Letters of Credit, or (ii) the Borrowing Base less (A) the aggregate amount of
all undrawn or unreimbursed Letters of Credit. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of:
(x) the lesser of (i) 85% of Eligible Accounts, less the
amount, if any, of the Dilution Reserve, or (ii) an amount equal to
Borrower's Collections with respect to Accounts for the immediately
preceeding forty-five (45) day period, plus
(y) the lowest of (i) $4,000,000, (ii) 40% of the value of
Eligible Inventory, and (iii) 150% of the amount of credit availability
created by clause (x) above, minus
(z) the aggregate amount of reserves, if any, established by
Foothill under Section 2.1(b).
(b) Anything to the contrary in Section 2.1(a) above notwith
standing, Foothill may create reserves against or reduce its advance rates based
upon Eligible Accounts or Eligible Inventory without declaring an Event of
Default if it determines that there has occurred a Material Adverse Change.
(c) Foothill shall have no obligation to make Advances hereunder
to the extent they would cause the outstanding Obligations to exceed the Maximum
Revolving Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
16
2.2 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue letters of credit for the account of Borrower (each, an
"L/C") or to issue guarantees of payment (each such guaranty, an "L/C Guaranty")
with respect to letters of credit issued by an issuing bank for the account of
Borrower. Foothill shall have no obligation to issue a Letter of Credit if any
of the following would result:
(i) the aggregate amount of all Letters of Credit, would exceed
the Borrowing Base less the amount of outstanding Advances less the
amount of reserves established under Section 2.1(b); or
(ii) the aggregate amount of all undrawn or unreimbursed
Letters of Credit would exceed the lower of: (x) the Maximum Revolving
Amount less the amount of outstanding Advances less the amount of
reserves established under Section 2.1(b); or (y) $500,000.
Borrower expressly understands and agrees that Foothill shall have no obligation
to arrange for the issuance by issuing banks of the letters of credit that are
to be the subject of L/C Guarantees. Borrower and Foothill acknowledge and agree
that certain of the letters of credit that are to be the subject of L/C
Guarantees may be outstanding on the Closing Date. Each Letter of Credit shall
have an expiry date no later than 60 days prior to the date on which this
Agreement is scheduled to terminate under Section 3.4 (without regard to any
potential renewal term) and all such Letters of Credit shall be in form and
substance acceptable to Foothill in its sole discretion. If Foothill is
obligated to advance funds under a Letter of Credit, Borrower immediately shall
reimburse such amount to Foothill and, in the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances under Section 2.6.
(b) Borrower hereby agrees to indemnify, save, defend, and hold
Foothill harmless from any loss, cost, expense, or liability, including payments
made by Foothill, expenses, and reasonable attorneys fees incurred by Foothill
arising out of or in connection with any Letter of Credit. Borrower agrees to be
bound by the issuing bank's regulations and interpretations of any Letters of
Credit guarantied by Foothill and opened to or for Borrower's account or by
Foothill's interpretations of any L/C issued by Foothill to or for Borrower's
account, even though this interpretation may be different from Borrower's own,
and Borrower understands and agrees that Foothill shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Borrower understands that the
L/C Guarantees may require Foothill to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower
17
against such issuing bank. Borrower hereby agrees to indemnify, save, defend,
and hold Foothill harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by Foothill under any L/C
Guaranty as a result of Foothill's indemnification of any such issuing bank,
other than as a result of Foothill's intentional misconduct or gross negligence.
(c) Borrower hereby authorizes and directs any bank that issues a
letter of credit guaranteed by Foothill to deliver to Foothill all instruments,
documents, and other writings and property received by the issuing bank pursuant
to such letter of credit, and to accept and rely upon Foothill's instructions
and agreements with respect to all matters arising in connection with such
letter of credit and the related application. Borrower may or may not be the
"applicant" or "account party" with respect to such letter of credit.
(d) Any and all charges, commissions, fees, and costs incurred by
Foothill relating to the letters of credit guaranteed by Foothill shall be
considered Foothill Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrower to Foothill.
(e) Immediately upon the termination of this Agreement, Borrower
agrees to either (i) provide cash collateral to be held by Foothill in an amount
equal to 102% of the maximum amount of Foothill's obligations under Letters of
Credit, or (ii) cause to be delivered to Foothill releases of all of Foothill's
obligations under outstanding Letters of Credit. At Foothill's discretion, any
proceeds of Collateral received by Foothill after the occurrence and during the
continuation of an Event of Default may be held as the cash collateral required
by this Section 2.2(e).
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application by any
governmental authority of any such applicable law, treaty, rule, or regulation,
or (ii) compliance by the issuing bank or Foothill with any direction, request,
or requirement (irrespective of whether having the force of law) of any
governmental authority or monetary authority including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letters of Credit issued hereunder, or
(B) there shall be imposed on the issuing bank or Foothill
any other condition regarding any letter of credit, or Letter of Credit, as
applicable, issued pursuant hereto;
18
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining
any letter of credit, or Letter of Credit, as applicable, or to reduce the
amount receivable in respect thereof by such issuing bank or Foothill, then, and
in any such case, Foothill may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts as the issuing bank or Foothill
may specify to be necessary to compensate the issuing bank or Foothill for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate set forth in
Section 2.6(a)(i) or (c)(i), as applicable. The determination by the issuing
bank or Foothill, as the case may be, of any amount due pursuant to this Section
2.2(f), as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
2.3 Intentionally deleted.
2.4 Intentionally deleted.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Section 2.1 is greater than
either the Dollar or percentage limitations set forth in Section 2.1 (an
"Overadvance"), Borrower immediately shall pay to Foothill, in cash, the amount
of such excess to be used by Foothill first, to repay Advances outstanding under
Section 2.1 and, thereafter, to be held by Foothill as cash collateral to secure
Borrower's obligation to repay Foothill for all amounts paid pursuant to Letters
of Credit.
2.6 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) Interest Rate. Except as provided in clause (b) below,
(i) all Obligations shall bear interest at a per annum rate of one and one half
(1 1/2%) above the Reference Rate..
(b) Letter of Credit Fee. Borrower shall pay Foothill a fee
(in addition to the charges, commissions, fees, and costs set forth in Section
2.2(d)) equal to 2% per annum times the aggregate undrawn amount of all
outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all Obligations (except for undrawn Letters
of Credit) shall bear interest at a per annum rate equal to five and one-half (5
1/2%) percent age points above the Reference Rate.
19
(d) Minimum Interest. In no event shall the rate of interest
chargeable hereunder for any day be less than 8.0% per annum. In no event shall
the amount of interest chargeable to the Borrower in any month hereunder be less
than the greater of the actual amount of interest hereunder calculated at the
effective interest rate provided herein or the amount of interest calculated at
the effective interest rate hereunder on an assumed outstanding loan balance
equal to (i) Three Million, Five Hundred Thousand ($3,500,000.00) Dollars, less
(ii) the amount of any outstanding Letters of Credit. To the extent that
interest accrued hereunder at the rate set forth herein would be less than the
foregoing minimum daily rate, the interest rate chargeable hereunder for such
day automatically shall be deemed increased to the minimum rate. To the extent
that interest accrued hereunder at the rate set forth herein (including the
minimum interest rate) would yield less than the foregoing minimum amount, the
interest rate chargeable hereunder for the period in question automatically
shall be deemed increased to that rate that would result in the minimum amount
of interest being accrued and payable hereunder.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Foothill, at its option,
without prior notice to Borrower, to charge such interest and Letter of Credit
fees, all Foothill Expenses (as and when incurred), the charges, commissions,
fees, and costs provided for in Section 2.2(d) (as and when accrued or
incurred), the fees and charges provided for in Section 2.11 (as and when
accrued or incurred), and all installments or other payments due under the Term
Loan, the Capital Expenditure Loans, or any Loan Document to Borrower's Loan
Account, which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable to
Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is 8.25% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and Foothill, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the
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date of this Agreement, Borrower is and shall be liable only for the payment of
such maximum as allowed by law, and payment received from Borrower in excess of
such legal maximum, whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess.
2.7 Collection of Accounts. Borrower shall at all times maintain
lockboxes (the "Lockboxes") and, immediately after the Closing Date, shall
instruct all Account Debtors with respect to the Accounts, General Intangibles,
and Negotiable Collateral of Borrower to remit all Collections in respect
thereof to such Lockboxes. Borrower, Foothill, and the Lockbox Banks shall enter
into the Lockbox Agreements, which among other things shall provide for the
opening of a Lockbox Account for the deposit of Collections at a Lockbox Bank.
Borrower agrees that all Collections and other amounts received by Borrower from
any Account Debtor or any other source immediately upon receipt shall be
deposited into a Lockbox Account. No Lockbox Agreement or arrangement
contemplated thereby shall be modified by Borrower without the prior written
consent of Foothill. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all amounts received in each Lockbox Account shall be
wired each Business Day into an account (the "Foothill Account") maintained by
Foothill at a depositary selected by Foothill.
2.8 CREDITING PAYMENTS; Application of Collections. The receipt of
any Collections by Foothill (whether from transfers to Foothill by the Lockbox
Banks pursuant to the Lockbox Agreements or otherwise) immediately shall be
applied provisionally to reduce the Obligations outstanding under Section 2.1,
but shall not be considered a payment on account unless such Collection item is
a wire transfer of immediately available federal funds and is made to the
Foothill Account or unless and until such Collection item is honored when
presented for payment. From and after the Closing Date, Foothill shall be
entitled to charge Borrower for (2) Business Days of `clearance' or `float' at
the rate set forth in Section 2.6(a)(i), on all Collections that are received by
Foothill (regardless of whether forwarded by the Lockbox Banks to Foothill,
whether provisionally applied to reduce the Obligations under Section 2.1, or
otherwise). This across-the-board 2 Business Day clearance or float charge on
all Collections is acknowledged by the parties to constitute an integral aspect
of the pricing of Foothill's financing of Borrower, and shall apply irrespective
of the characterization of whether receipts are owned by Borrower or Foothill,
and whether or not there are any outstanding Advances, the effect of such
clearance or float charge being the equivalent of charging 2 Business Days of
interest on such Collections. Should any Collection item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any Collection item shall be deemed
received by Foothill only if it is received into the Foothill Account on a
Business Day on or before 11:00 a.m. California time. If any Collection item is
received into the Foothill Account on a non-Business Day or after 11:00 a.m.
California time on a Business Day, it shall be deemed
21
to have been received by Foothill as of the opening of business on the
immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Foothill is authorized to make the
Advances and the Letters of Credit under this Agreement based upon telephonic or
other instructions received from anyone purporting to be an Authorized Person,
or without instructions if pursuant to Section 2.6(e). Borrower agrees to
establish and maintain the Designated Account with the Designated Account Bank
for the purpose of receiving the proceeds of the Advances requested by Borrower
and made by Foothill hereunder. Unless otherwise agreed by Foothill and
Borrower, any Advance requested by Borrower and made by Foothill hereunder shall
be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances made by
Foothill to Borrower or for Borrower's account, including, accrued interest,
Foothill Expenses, and any other payment Obligations of Borrower. In accordance
with Section 2.8, the Loan Account will be credited with all payments received
by Foothill from Borrower or for Borrower's account, including all amounts
received in the Foothill Account from any Lockbox Bank. Foothill shall render
statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Foothill Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and Foothill unless, within 30 days after receipt thereof by Borrower,
Borrower shall deliver to Foothill written objection thereto describing the
error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of
$60,000.00;
(b) Unused Line Fee. On the first day of each month during
the term of this Agreement, an unused line fee in an amount equal to .50% per
annum times the Average Unused Portion of the Adjusted Revolving Amount.
(c) Annual Facility Fee. On each anniversary of the Closing
Date, an annual facility fee in an amount equal to .25% of the Maximum Amount;
(d) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of $650 per day per examiner, plus out-of-pocket
expenses for each financial analysis and examination (i.e., audits) of Borrower
performed by personnel employed by Foothill; Foothill's customary appraisal fee
of $1,000 per day per appraiser, plus out-of-pocket expenses for each appraisal
of the Collateral performed by personnel employed
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by Foothill; and, the actual charges paid or incurred by Foothill if it elects
to employ the services of one or more third Persons to perform such financial
analyses and examinations (i.e., audits) of Borrower or to appraise the
Collateral; and, on each anniversary of the Closing Date, Foothill's customary
fee of $1,000 per year for its loan documentation review; and
(e) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $1,750.00.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE, LETTER OF CREDIT,
THE TERM LOAN, AND THE INITIAL CAPITAL EXPENDITURE LOAN. The obligation of
Foothill to make the initial Advance or, to issue the initial Letter of Credit,
is subject to the fulfillment, to the satisfaction of Foothill and its counsel,
of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before December 13,
1996 unless extended by Foothill, which extension will require approval by
Foothill's credit committee;
(b) Foothill shall have received searches reflecting the
filing of its financing statements;
(c) Foothill shall have confirmed filing of its security
interests in patents and trademarks with the U.S. Patent and Trademark Office;
(d) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
a. the Lockbox Agreement;
b. the Disbursement Letter;
c. The Guarantees;
d. The Guarantee Security Documents;
e. the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the
termination
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by Existing Lender of its Liens in and to the
properties and assets of Borrower;
f. this Agreement duly executed;
g. the Promissory Note;
h. the Agented Borrowing Agreement;
i. the Collateral Assignment of Exclusive Licensing
Agreement Re: Floor-Focus Ad-Tile;
j. Assignments of credit insurance policies in form
satisfactory to Foothill;
k. the Stock Pledge Agreement, together with Stock
Certificates of Borrower's Subsidiaries and
Apprpriate Stock Powers;
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same;
(f) Foothill shall have received copies of Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Borrower;
(g) Foothill shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(h) Foothill shall have received certificates of status with
respect to Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that Borrower is in good
standing in such jurisdictions;
(i) Foothill shall have received a certificate of insurance
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
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(j) Foothill shall have received duly executed certificates
of title with respect to that portion of the Collateral that is subject to
certificates of title;
(k) Foothill shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as
Foothill may require;
(l) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
(m) the Borrower shall have minimum Excess Availability under
the Borrowing Base of at least One Million ($1,000,000.00) Dollars on the date
of closing; minus any accounts payable deterioration (as determined by Foothill
in its discretion) since the prospect audit completed by Foothill;
(n) An updated field audit shall have been performed by
Foothill within 40 business days prior to the closing, results of which shall be
satisfactory to Foothill in its sole discretion;
(o) A Dilution Reserve shall have been established in an
amount equal to the excess of Borrower's actual Dilution over 4%; and
(p) A "takeover field audit" shall have been performed by
Foothill within one (1) week prior to the closing, results of which shall be
satisfactory to Foothill in its sole discretion; and
(q) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND ALL LETTERS OF
CREDIT. The following shall be conditions precedent to all Advances, all Letters
of Credit, the Term Loan, and all Capital Expenditure Loans hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and
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(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Closing Date, deliver to Foothill
the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.10, the form and substance of
which shall be satisfactory to Foothill and its counsel.
3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and Foothill and shall
continue in full force and effect for a term ending on the date (the "Renewal
Date") that is 5 years from the Closing Date and automatically shall be renewed
for successive 1 year periods thereafter, unless sooner terminated pursuant to
the terms hereof. Either party may terminate this Agreement effective on the
Renewal Date or on any anniversary of the Renewal Date by giving the other party
at least 90 days prior written notice. The foregoing notwithstanding, Foothill
shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
Obligations, or covenants hereunder, and Foothill's continuing security
interests in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and Foothill's obligation to provide
additional credit hereunder is terminated. If Borrower has sent a notice of
termination pursuant to the provisions of Section 3.4, but fails to pay the
Obligations in full on the date set forth in said notice, then Foothill may, but
shall not be required to, renew this Agreement for an additional term of 1 year.
3.6 EARLY TERMINATION BY BORROWER. The provisions of Section 3.4
that allow termination of this Agreement by Borrower only on the Renewal Date
and certain anniversaries thereof notwithstanding, Borrower has the option, at
any time upon 90 days prior written notice to Foothill, to terminate this
Agreement by paying to Foothill, in cash, the Obligations (including an amount
equal to 102% of the undrawn amount of the Letters of Credit), in full, together
with a premium (the "Early Termination Premium") equal to the
26
greater of (a) the total interest and Letter of Credit fees for the immediately
preceding 6 months, and (b) $50,000.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Foothill
a continuing security interest in all currently existing and hereafter acquired
or arising Personal Property Collateral other than Equipment in order to secure
prompt repayment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Foothill's security interests in the Personal Property Collateral
shall attach to all Personal Property Collateral without further act on the part
of Foothill or Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for the sale of Inventory to
buyers in the ordinary course of business, Borrower has no authority, express or
implied, to dispose of any item or portion of the Personal Property Collateral
or the Real Property Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time, Foothill or Foothill's designee may (a) notify
customers or Account Debtors of Borrower that the Accounts, General Intangibles,
or Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein, and (b) collect the Accounts, General Intangibles,
and Negotiable Collateral directly and charge the collection costs and expenses
to the Loan Account. Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any Collections that it receives and immediately will
deliver said Collections to Foothill in their original form as received by
Borrower.
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4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the Collateral, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to (a) if Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4, sign the name of Borrower on any of
the documents described in Section 4.4, (b) at any time that an Event of Default
has occurred and is continuing or Foothill deems itself insecure, sign
Borrower's name on any invoice or bill of lading relating to any Account, drafts
against Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse Borrower's name on any Collection item that may come into
Foothill's possession, (e) at any time that an Event of Default has occurred and
is continuing or Foothill deems itself insecure, notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Foothill, to receive and open all mail addressed to Borrower, and
to retain all mail relating to the Collateral and forward all other mail to
Borrower, (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, make, settle, and adjust all
claims under Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.6 RIGHT TO INSPECT. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
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5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance or Letter of Credit, made thereafter, as though
made on and as of the date of such Advance or Letter of Credit (except to the
extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrower's
business, unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. Borrower has not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from defects.
5.4 INTENTIONALLY DELETED.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Foothill's prior written consent) and are located only at the locations
identified on Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of each Borrower is located at the address indicated in the preamble to
this Agreement and BFI's FEIN is 04-2997486, and RC's FEIN is 06-4372711.
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5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Borrower is duly organized and existing and in good
standing under the laws of the state of Delaware and qualified and licensed to
do business in, and in good standing in, any state where the failure to be so
licensed or qualified reasonably could be expected to have a Material Adverse
Change.
(b) Set forth on Schedule 5.8, is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrower. All of the outstanding capital stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule 5.8, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
(d) BPI Packaging, Inc. ("Packaging") is a Delaware
corporation which is a wholly-owned subsidiary of Borrower. Packaging owns no
Real Property or Personal Property and Borrower intends to cause its
dissolution. Borrower shall not transact any business with, or transfer any Real
Property or Personal Property to Packaging, or permit Packaging to own legally
or beneficially any Real Property or Personal Property.
(e) BPI Packaging Limited ("Limited") is a UK subsidiary of
Borrower which operates as a sales agent for Borrower. Limited owns no Inventory
or other tangible personal property.
(f) The chief executive office of RC America, Inc. is located
at 455 Somerset Ave., North Dighton, Massachusetts and all of its books and
records are maintained at such address and all of its billing, collections and
other operations are conducted from such address. RC America, Inc. maintains a
sales office in Guilford, Connecticut.
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5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation or material
lease of Borrower, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of Borrower, other
than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) Other than the filing of appropriate financing
statements, fixture filings, and filings with the U.S. Patent and Trademark
Office, the execution, delivery, and performance by Borrower of this Agreement
and the Loan Documents to which Borrower is a party do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, any federal, state, foreign, or other Governmental Authority or
other Person.
(d) This Agreement and the Loan Documents to which Borrower
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, and first priority Liens, subject only to
Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff;
31
(b) matters disclosed on Schedule 5.10; and (c) matters arising after the date
hereof that, if decided adversely to Borrower, would not have a Material Adverse
Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating
to Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.12 SOLVENCY. Each Borrower is Solvent. No transfer of property
is being made by Borrower and no obligation is being incurred by Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 ENVIRONMENTAL CONDITION. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of Borrower's knowledge,
by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials in violation of
any applicable law or regulation. None of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No Lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by Borrower. Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
32
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Foothill shall otherwise consent in writing, Borrower
shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that contain
information as from time to time may be requested by Foothill. Borrower also
shall keep a modern inventory reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register since the
last such schedule and a calculation of the Borrowing Base as of such date, (b)
on a monthly basis and, in any event, by no later than the 10th day of each
month during the term of this Agreement, (i) a detailed calculation of the
Borrowing Base, and (ii) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (c) on a monthly basis and, in any event, by no
later than the 10th day of each month during the term of this Agreement, a
summary aging, by vendor, of Borrower's accounts payable and any book overdraft,
(d) on a weekly basis by Tuesday of each week by as of the previous Friday,
Inventory reports specifying Borrower's cost and the wholesale market value of
its Inventory by category, with additional detail showing additions to and
deletions from the Inventory, (e) on each Business Day, notice of all returns,
disputes, or claims, (f) upon request, copies of invoices in connection with the
Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with the Accounts
and for Inventory and Equipment acquired by Borrower, purchase orders and
invoices, (g) on a quarterly basis within 30 days of each quarter end, a
detailed list of Borrower's customers, (h) on a monthly basis, and in any event
by no later than the 10th of each month, a calculation of the Dilution for the
prior month; and (i) such other reports as to the Collateral or the financial
condition of Borrower as Foothill may request from time to time. Original sales
invoices evidencing daily sales shall be mailed by Borrower to each Account
Debtor and, at Foothill's direction, the invoices shall indicate on their face
that the Account has been assigned to Foothill and that all payments are to be
made directly to Foothill.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Foothill: (a) as soon as available, but in any event within 45 days after the
end of each month during each of Borrower's fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering Borrower's
operations during such period; and (b) as soon
33
as available, but in any event within 90 days after the end of each of
Borrower's fiscal years, financial statements of Borrower for each such fiscal
year, audited by independent certified public accountants reasonably acceptable
to Foothill and certified, without any qualifications, by such accountants to
have been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Foothill stating that such accountants do not have
knowledge of the existence of any Default or Event of Default. Such audited
financial statements shall include a balance sheet, profit and loss statement,
and statement of cash flow and, if prepared, such accountants' letter to
management. If Borrower is a parent company of one or more Subsidiaries, or
Affiliates, or is a Subsidiary or Affiliate of another company, then, in
addition to the financial statements referred to above, Borrower agrees to
deliver financial statements prepared on a consolidating basis so as to present
Borrower and each such related entity separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and
Form 8-K Current Reports, and any other filings made by Borrower with the
Securities and Exchange Commission, if any, as soon as the same are filed, or
any other information that is provided by Borrower to its shareholders, and any
other report reasonably requested by Foothill relating to the financial
condition of Borrower.
Each month, together with the financial statements provided
pursuant to Section 6.3(a), Borrower shall deliver to Foothill a certificate
signed by its Treasurer to the effect that: (i) all financial statements
delivered or caused to be delivered to Foothill hereunder have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
fairly present the financial condition of Borrower, (ii) the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents
are true and correct in all material respects on and as of the date of such
certificate, as though made on and as of such date (except to the extent that
such representations and warranties relate solely to an earlier date), (iii) for
each month that also is the date on which a financial covenant in Section 7.20
is to be tested, a Compliance Certificate demonstrating in reasonable detail
compliance at the end of such period with the applicable financial covenants
contained in Section 7.20, and (iv) on the date of delivery of such certificate
to Foothill there does not exist any condition or event that constitutes a
Default or Event of Default (or, in the case of clauses (i), (ii), or (iii), to
the extent of any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrower has taken, is taking, or
proposes to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
Borrower that Foothill may request. Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third
34
parties to deliver to Foothill, at Borrower's expense, copies of Borrower's
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Foothill any information they
may have regarding Borrower's business affairs and financial conditions.
6.4 TAX RETURNS. Deliver to Foothill copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within 30 days of
the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause each guarantor of any of the
Obligations to deliver its annual financial statements at the time when Borrower
provides its audited financial statements to Foothill and copies of all federal
income tax returns as soon as the same are available and in any event no later
than 30 days after the same are required to be filed by law.
6.6 RETURNS. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to
Borrower, Borrower promptly shall determine the reason for such return and, if
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Foothill) in the appropriate amount to such Account Debtor. If, at a time
when an Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to Borrower, Borrower promptly shall determine the reason
for such return and, if Foothill consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Foothill) in the appropriate amount to such Account Debtor.
6.7 INTENTIONALLY DELETED
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved.
6.9 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrower shall make due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Foothill, on demand, appropriate certificates
attesting to the payment
35
thereof or deposit with respect thereto. Borrower will make timely payment or
deposit of all tax payments and withholding taxes required of it by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish Foothill
with proof satisfactory to Foothill indicating that Borrower has made such
payments or deposits.
6.10 INSURANCE.
(a) At its expense, keep the Personal Property Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured against
by other owners in similar businesses. Borrower also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to Borrower's ownership and use of the Personal Property Collateral, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
(b) Intentionally deleted.
(c) Intentionally Deleted.
(d) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All insurance required herein shall be written by companies which are
authorized to do insurance business in the State of California. All hazard
insurance and such other insurance as Foothill shall specify, shall contain a
California Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Foothill, showing Foothill as sole loss payee thereof, and shall
contain a waiver of warranties. Every policy of insurance referred to in this
Section 6.10 shall contain an agreement by the insurer that it will not cancel
such policy except after 30 days prior written notice to Foothill and that any
loss payable thereunder shall be payable notwithstanding any act or negligence
of Borrower or Foothill which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by Foothill pursuant to the Mortgages upon the happening of
an Event of Default, or (iii) any change in title or ownership of the Real
Property Collateral. Borrower shall deliver to Foothill certified copies of such
policies of insurance and evidence of the payment of all premiums therefor.
(e) Original policies or certificates thereof satisfactory to
Foothill evidencing such insurance shall be delivered to Foothill at least 30
days prior to the expiration of the existing or preceding policies. Borrower
shall give Foothill prompt notice of any loss covered by such insurance, and
Foothill shall have the right to adjust any loss.
36
Foothill shall have the exclusive right to adjust all losses payable under any
such insurance policies without any liability to Borrower whatsoever in respect
of such adjustments. Any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, shall be paid
over to Foothill to be applied at the option of Foothill either to the
prepayment of the Obligations without premium, in such order or manner as
Foothill may elect, or shall be disbursed to Borrower under stage payment terms
satisfactory to Foothill for application to the cost of repairs, replacements,
or restorations. All repairs, replacements, or restorations shall be effected
with reasonable promptness and shall be of a value at least equal to the value
of the items or property destroyed prior to such damage or destruction. Upon the
occurrence of an Event of Default, Foothill shall have the right to apply all
prepaid premiums to the payment of the Obligations in such order or form as
Foothill shall determine.
(f) Borrower shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be maintained
under this Section 6.10, unless Foothill is included thereon as named insured
with the loss payable to Foothill under a standard California 438BFU (NS)
Mortgagee endorsement, or its local equivalent. Borrower immediately shall
notify Foothill whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies immediately shall be provided to Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on Schedule 6.12; provided, however,
that Borrower may amend Schedule 6.12 so long as such amendment occurs by
written notice to Foothill not less than 30 days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States, and so long as, at the time of
such written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's security
interests in such assets and also provides to Foothill a Collateral Access
Agreement.
6.13 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to have a Material Adverse Change.
37
6.14 EMPLOYEE BENEFITS.
(a) Promptly, and in any event within 10 Business Days after
Borrower or any of its Subsidiaries knows or has reason to know that an ERISA
Event has occurred that reasonably could be expected to result in a Material
Adverse Change, a written statement of the chief financial officer of Borrower
describing such ERISA Event and any action that is being taking with respect
thereto by Borrower, any such Subsidiary or ERISA Affiliate, and any action
taken or threatened by the IRS, Department of Labor, or PBGC. Borrower or such
Subsidiary, as applicable, shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within 3 Business Days after the filing thereof with
the IRS, a copy of each funding waiver request filed with respect to any Benefit
Plan and all communications received by Borrower, any of its Subsidiaries or, to
the knowledge of Borrower, any ERISA Affiliate with respect to such request, and
(iii) promptly, and in any event within 3 Business Days after receipt by
Borrower, any of its Subsidiaries or, to the knowledge of Borrower, any ERISA
Affiliate, of the PBGC's intention to terminate a Benefit Plan or to have a
trustee appointed to administer a Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's
request, each of the following: (i) a copy of each Plan (or, where any such plan
is not in writing, complete description thereof) (and if applicable, related
trust agreements or other funding instruments) and all amendments thereto, all
written interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 LEASES. Pay when due all rents and other amounts payable
under any leases to which Borrower is a party or by which Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest. To the extent that Borrower fails timely to make payment of such rents
and other amounts payable when due under its leases, Foothill shall be entitled,
in its discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
38
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not do any of the following without Foothill's prior
written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth in the latest financial statements
of Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets.
39
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of any of Borrower's properties or assets other than sales of
Inventory to buyers in the ordinary course of Borrower's business as currently
conducted.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure
(within the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
Section 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase,
or change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c), or (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
bill and hold, sale or return, sale on approval, or other conditional terms of
sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding, except for payment of dividends on
Borrower's issued and outstanding preferred stock provided that no Default has
occurred and is continuing under this Agreement at the time that such dividend
payments are due.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or
40
storage of Borrower's accounting records without said accounting firm or service
bureau agreeing to provide Foothill information regarding the Collateral or
Borrower's financial condition. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Foothill pursuant
to or in accordance with this Agreement, and agrees that Foothill may contact
directly any such accounting firm or service bureau in order to obtain such
information.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or incur
any liabilities (including contingent obligations) for or in connection with (a)
the acquisition of the securities (whether debt or equity) of, or other
interests in, a Person, (b) loans, advances, capital contributions, or transfers
of property to a Person, or (c) the acquisition of all or substantially all of
the properties or assets of a Person.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to Foothill, and that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 COMPENSATION. Increase the annual fee or per-meeting fees
paid to directors during any year by more than 15% over the prior year; pay or
accrue total cash compensation, during any year, to officers and senior
management employees in an aggregate amount in excess of 115% of that paid or
accrued in the prior year.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances made
hereunder for any purpose other than (i) on the Closing Date, (y) to repay in
full the outstanding principal, accrued interest, and accrued fees and expenses
owing to Existing Lender, and (z) to pay transactional costs and expenses
incurred in connection with this Agreement, and (ii) thereafter, consistent with
the terms and conditions hereof, for its lawful and permitted corporate
purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Foothill and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests and also provides to Foothill a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written consent.
41
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage,
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to
pay timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to
pay any required installment or any other payment required under Section 412 of
the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in any material claim against or liability of Borrower, any
of its Subsidiaries or any ERISA Affiliate.
7.20 FINANCIAL COVENANTS. Fail to maintain:
42
(a) Current Ratio. A ratio of Consolidated Current Assets
divided by Consolidated Current Liabilities of at least .5: 1.0, measured on a
fiscal quarter-end basis;
(b) Total Liabilities to Tangible Net Worth Ratio. A ratio of
Borrower's total liabilities divided by Tangible Net Worth of 1.25: 1.0, or
less, measured on a fiscal quarter-end basis;
(c) Tangible Net Worth. Tangible Net Worth of at least
$14,000,000.00, measured on a fiscal quarter-end basis; and
7.21 CAPITAL EXPENDITURES. Make capital expenditures in any fiscal
year in excess of $2,000,000.
7.22 NET PROFIT. Fail, (i) for the consecutive ninety (90) day
period ending on February 28, 1997, (ii) for the consecutive six (6) month
period ending on May 31, 1997, (iii) for the consecutive nine (9) month period
ending on August 31, 1997, (iv) for the consecutive twelve (12) month period
ending on November 30, 1997, and (v) for each twelve (12) month period ending on
each fiscal quarter thereafter, to earn and report a net profit of at least One
($1.00) Dollar.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event
of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in any
of the Loan Documents, or in any other present or future agreement between
Borrower and Foothill, provided that Borrower shall have five (5) days from the
due date of any required report to cure any reporting default under Sections
6.2, 6.3, 6.4 or 6.5;
8.3 If there is a Material Adverse Change;
43
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Foothill shall be relieved of its obligation to extend credit hereunder; (d) an
interim trustee is appointed to take possession of all or a substantial portion
of the properties or assets of, or to operate all or any substantial portion of
the business of, Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer,
44
employee, agent, or director of Borrower, or if any such warranty or
representation is withdrawn; or
8.13 If the obligation of any guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by operation
of law or by the guarantor or other third Person thereunder, or any such
guarantor or other third Person becomes the subject of an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Personal Property
Collateral or the Real Property Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers advisable,
and in such cases, Foothill will credit Borrower's Loan Account with only the
net amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust
for Foothill, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interests in the Collateral. Borrower
agrees to assemble the Personal Property Collateral if Foothill so requires, and
to make the Personal Property Collateral available to
45
Foothill as Foothill may designate. Borrower authorizes Foothill to enter the
premises where the Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or Lien that in
Foothill's determination appears to conflict with its security interests and to
pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned or leased premises, Borrower hereby grants Foothill a license
to enter into possession of such premises and to occupy the same, without
charge, for up to 120 days in order to exercise any of Foothill's rights or
remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the Lockbox
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Personal Property Collateral. Foothill is hereby granted a license
or other right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Foothill's benefit;
(j) Sell the Personal Property Collateral at either a public
or private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrower's
premises) as Foothill determines is commercially reasonable. It is not necessary
that the Personal Property Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:
(l) Foothill shall give Borrower and each holder of a
security interest in the Personal Property Collateral who has filed with
Foothill a written request for notice, a notice in writing of the time and place
of public sale, or, if the sale is a
46
private sale or some other disposition other than a public sale is to be made of
the Personal Property Collateral, then the time on or after which the private
sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least 5 days before
the date fixed for the sale, or at least 5 days before the date on or after
which the private sale or other disposition is to be made; no notice needs to be
given prior to the disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market. Notice to Persons other
than Borrower claiming an interest in the Personal Property Collateral shall be
sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at least
5 days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public sale;
and
(m) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Foothill to Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Foothill may do
any or all of the following: (a) make payment of the same or any part thereof;
(b) set up such reserves in Borrower's Loan Account as Foothill deems necessary
to protect Foothill from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type described
47
in Section 6.10, and take any action with respect to such policies as Foothill
deems prudent. Any such amounts paid by Foothill shall constitute Foothill
Expenses. Any such payments made by Foothill shall not constitute an agreement
by Foothill to make similar payments in the future or a waiver by Foothill of
any Event of Default under this Agreement. Foothill need not inquire as to, or
contest the validity of, any such expense, tax, or Lien and the receipt of the
usual official notice for the payment thereof shall be conclusive evidence that
the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and
hold Foothill, each Participant, and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such
48
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
IF TO BORROWER: BPI PACKAGING TECHNOLOGIES, INC.
455 Somerset Avenue, North Dighton, MA
Attn: Ms. Jill Beresford
Fax No. (508) 822-6872
WITH COPIES TO: WILSON AND ORCUTT, P.C.
201 Great Road
Acton, Massachusetts 01720
Attn: Daniel Greenberg, Esq.
Fax No. 508-263-7142
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.478.9788
WITH COPIES TO: STROOCK & STROOCK & LAVAN
100 Federal Street
Boston, MA 02110
Attn: John L. Hackett, Esq.
Fax No. (617)330-5111
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date
49
of actual receipt or 3 days after the deposit thereof in the mail. Borrower
acknowledges and agrees that notices sent by Foothill in connection with
Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the
mail or personally delivered, or, where permitted by law, transmitted
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN SUFFOLK COUNTY,
MASSACHUSETTS, THE COUNTY OF LOS ANGELES, CALIFORNIA, OR, AT THE SOLE OPTION OF
FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS JURISDICTION OVER THE PARTIES AND MATTER IN
CONTROVERSY. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS
THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
50
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill 4
months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill may assign this Agreement
and its rights and duties hereunder and no consent or approval by Borrower is
required in connection with any such assignment. Foothill reserves the right to
sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Foothill's rights and benefits hereunder. In connection
with any such assignment or participation, Foothill may disclose all documents
and information which Foothill now or hereafter may have relating to Borrower or
Borrower's business. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
51
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended by
a writing signed by both Foothill and Borrower.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
52
15.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in Los Angeles, California.
BORROWER
--------
BPI PACKAGING TECHNOLOGIES, INC.
A DELAWARE CORPORATION
By /s/ Dennis Caufield
-----------------------------------
Title: Chief Executive Officer
-------------------------------
RC AMERICA, INC.
a Delaware corporation
By /s/ Dennis Caufield
-----------------------------------
Title: Chief Executive Officer
-------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Stephen C. Weber
-----------------------------------
Title: Senior Vice President
-------------------------------
53
LOAN AND SECURITY AGREEMENT
SCHEDULE E-1 and SCHEDULE 6.12
BUSINESS LOCATIONS
ELIGIBLE INVENTORY LOCATIONS
(INDICATED WITH ASTERISK)
BPI PACKAGING TECHNOLOGIES, INC.
--------------------------------
*1. 455 Somerset Avenue, North Dighton, Massachusetts 02764
*2. 22 Fifth Street, Taunton, Massachusetts 02780
RC AMERICA, INC.
----------------
1. 455 Somerset Avenue, North Dighton, Massachusetts 02764
2. 741 Boston Road, Gulford, Connecticut 06437
MARKET MEDIA, INC.
------------------
1. 455 Somerset Avenue, North Dighton, Massachusetts 02764
LOAN AND SECURITY AGREEMENT
SCHEDULE P-1
PERMITTED LIENS
See Attached UCC-1 Grids
[ATTACHMENT NOT INCLUDED]
LOAN AND SECURITY AGREEMENT
SCHEDULE 5.8
LISTING OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAME AND ADDRESS JURISDICTION STOCK OWNERSHIP
---------------------------------------------------------------------------------------------------
<S> <C> <C>
BPI Packaging, Inc. Delaware 100%-BPI Packaging
455 Somerset Avenue Technologies, Inc.
N. Dighton, MA 02764
Market Media, Inc. Massachusetts 100%-BPI Packaging
455 Somerset Avenue Technologies, Inc.
N. Dighton, MA 02764
BPI Packaging Limited United Kingdom 100%-BPI Packaging
455 Somerset Avenue Technologies, Inc.
N. Dighton, MA 02764
</TABLE>
LOAN AND SECURITY AGREEMENT
SCHEDULE 5.10
LITIGATION
See Attached Discussion
[ATTACHMENT NOT INCLUDED]
LOAN AND SECURITY AGREEMENT
SCHEDULE 5.13
ERISA BENEFIT PLANS
See Attached Discussion
[ATTACHMENTS NOT INCLUDED]
SECURED TERM PROMISSORY NOTE
----------------------------
$8,000,000.00 Boston, Massachusetts
November 25, 1996
FOR VALUE RECEIVED, the undersigned BPI Packaging Technologies, Inc.
and RC America, Inc. (collectively, the "Maker") hereby jointly and severally
promise to pay to FOOTHILL CAPITAL CORPORATION ("Foothill"), or order, at 11111
Santa Monica Boulevard, Los Angeles, California, or at such other address as the
holder may specify in writing, the principal sum of Eight Million and 00/100
Dollars ($8,000,000.00) or such lesser amount as may be advanced hereunder and
under the Loan Agreement, plus interest in the manner and upon the terms and
conditions set forth below.
1. RATE OF INTEREST
----------------
This Secured Promissory Note (this "Note") shall bear interest at the
rate of one and one-half (1.50%) percent per annum plus the Reference Rate,
computed on the basis of a three hundred sixty (360) day year for actual days
elapsed.
For purposes of this Note, the Reference Rate shall mean the variable
rate of interest, per annum, most recently announced by Norwest Bank of
Minnesota, N.A. or any successor thereto, as its "base rate," whether or not
such announced rate is the best rate available from such financial institution.
The Reference Rate as of this date is eight and one quarter percent
(8.25%) per annum. In the event the Reference Rate is from time to time
hereafter changed, the rate of interest provided in this Note shall be increased
or decreased by an amount equal to the Reference Rate change. For each month the
rate of interest charged under this Note shall be based
1
on the average Reference Rate in effect during such month.
In no event shall the amount of interest chargeable to Maker in any
month be less than the greater of the actual amount of interest hereunder
calculated at the effective interest rate provided herein or the amount of
interest calculated at the effective interest rate hereunder on an assumed
outstanding balance equal to (i) Three Million Five Hundred Thousand
($3,500,000.00) Dollars, less (ii) the amount of any outstanding Letters of
Credit.
In no event shall the interest rate chargeable hereunder be less than
eight (8.0%) percent per annum. Any interest not paid when due may be compounded
by adding it to principal and thereafter shall bear interest at the rate
provided herein. Upon the occurrence of an Event of Default under that certain
Loan and Security Agreement dated November 25, 1996 between Maker and Foothill
(the "Agreement"), the rate of interest on this Note shall, at holder's option,
be increased to five and one-half percent (5.50%) percent per annum plus the
then applicable effective interest rate under the Note, computed on the basis of
a three hundred sixty (360) day year for actual days elapsed.
2. Schedule of Payments
--------------------
Interest under this Note shall be due and payable on the first day of
each month commencing December 1, 1996 and continuing through November 25, 2001,
at which time the entire remaining principal balance owing and all accrued and
unpaid interest and charges shall be paid in full. During the term of this Note,
payments of principal shall be made in accordance with the provisions of the
Loan Agreement.
2
3. Prepayment
----------
This Note may be prepaid in full, at any time, provided however, Maker
shall pay to Lender, together with such prepayment, a premium equal to the
greater of (a) the total interest hereunder for the then immediately preceeding
six months and the letter of credit fees (as required in the
Agreement) for the then immediately proceeding six months and (b) $50,000.00.
4. Holder's Right of Acceleration
------------------------------
Upon the occurrence of an Event of Default under the Agreement
including, but not limited to, the failure to pay any installment of interest
hereunder when due, the holder of this Note may, at its election and without
notice to Maker, declare the entire balance hereof immediately due and payable.
5. Additional Rights of Holder
---------------------------
If any installment of interest hereunder is not paid when due, the
holder shall have the following rights in addition to the rights set forth
elsewhere herein, in the Agreement and under law:
(a) the right to compound interest by adding the unpaid interest to
principal, with such amount thereafter bearing interest at the rate provided in
this Note; and
(b) if any installment is more than ten (10) days past due, the right
to collect a charge equal to the greater of Fifteen Dollars ($15) or five
percent (5%) of the late payment for the month in which it is late. This charge
is a result of a reasonable endeavor by Maker and the holder to estimate the
holder's added costs and Maker's failure to make timely payments under this
Note; hence Maker agrees that the charge shall be presumed to be the amount of
damage sustained by the holder since it is
3
extremely difficult to determine the actual amount necessary to reimburse the
holder for damages.
6. General Provisions
------------------
(a) If this Note is not paid when due, Maker further promises to pay
all costs of collection, foreclosure fees, and reasonable attorneys' fees
incurred by the holder, whether or not suit is filed hereon.
(b) If there is more than one Maker, then each Maker agrees to be
jointly and severally liable on this Note.
(c) Maker hereby consents to any and all renewals, replacements and/or
extensions of time for payment of this Note before, at or after maturity.
(d) Maker hereby consents to the acceptance, release or substitution of
security for this Note.
(e) Presentment for payment, notice of dishonor, protest and notice of
protest are hereby expressly waived.
(f) Any waiver of any rights by the holder under this Note, the
Agreement or under any other agreement, instrument or paper signed by Maker is
neither valid nor effective unless made in writing and signed by the holder of
this Note.
(g) No delay or omission on the part of the holder of this Note in
exercising any right shall operate as a waiver thereof or of any other right.
(h) A waiver by the holder of this Note upon any one occasion shall not
be construed as a bar or waiver of any right or remedy on any future occasion.
(i) Should any one or more of the provisions of this Note be determined
illegal or unenforceable, all other provisions shall nevertheless remain
effective.
4
(j) This Note cannot be changed, modified, amended or terminated
orally.
(k) This Note shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to the principles of conflicts of laws thereof.
(l) Capitalized terms used but not defined in this Note shall have the
meanings given them in the Loan Agreement.
(m) THE VALIDITY OF THIS NOTE, THE AGREEMENT OR ANY MATTER OR
PROCEEDING RELATING HERETO OR THERETO, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS NOTE OR THE AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN SUFFOLK COUNTY, COMMONWEALTH OF MASSACHUSETTS, THE
COUNTY OF LOS ANGELES, CALIFORNIA, OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY
OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS JURISDICTION OVER THE PARTIES AND MATTER IN CONTROVERSY. EACH OF MAKER
AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 6.
MAKER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
MAKER AND FOOTHILL REPRESENT THAT EACH HAS
5
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS NOTE OR THE AGREEMENT OR ANY MATTER OR PROCEEDING RELATING HERETO
OR THERETO MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
7. Security for the Note
---------------------
This Note is secured by the Agreement, and is subject to all of the
terms and conditions thereof including, but not limited to, the remedies
specified therein.
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first set forth above.
BPI PACKAGING TECHNOLOGIES, INC.
By: /s/ Dennis Caulfield
-------------------------------
Its: CEO
-------------------------------
RC AMERICA, INC.
By: /s/ Dennis Caulfield
-------------------------------
Its: Vice President
-------------------------------
ACCEPTED:
FOOTHILL CAPITAL CORPORATION
By: /s/ Stephen C. Weber
-------------------------------
Sr. Vice President
-------------------------------
6
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement is made as of the 25th day of
November, 1996 between BPI Packaging Technologies, Inc., a Delaware corporation
with a place of business at 455 Somerset Avenue, North Dighton, Massachusetts
("Pledgor") and Foothill Capital Corporation, a California corporation with a
place of business at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles,
California ("Pledgee").
1. Pledge of Collateral. Pledgor hereby grants to Pledgee a continuing
security interest in and to, and assigns and pledges to the Pledgee the
following items and types of property, and all products, proceeds,
substitutions, additions, interest, dividends and other distributions
(including, without limitation, stock splits) in respect thereto, and all books,
records and papers relating to the foregoing (all of which is referred to
hereinafter as the "Collateral"): All of Pledgor's right, title and interest in
and to all securities, investments and property described in the attached
Schedule "A", together with all interest, cash dividends, rights to receive
dividends, stock dividends, distributions upon redemption or liquidation,
distributions as a result of split-ups, mergers, consolidations,
reorganizations, dissolutions, conversions, recapitalizations or rearrangements,
all stock rights, rights to subscribe, voting rights, rights to receive
securities and all other property or securities of any type whatsoever which the
Pledgor is or may become entitled to receive on account of the securities,
investments and property described in Schedule "A", together with all rights,
titles, interest, privileges and preferences appertaining or incidental thereto,
together with all cash and non-cash proceeds of any or all of the foregoing.
2. Obligations Secured. The security interest in the Collateral granted
hereby secures payments and performance of all debts, obligations, loans and
liabilities of Pledgor to Pledgee, whether now existing or hereafter arising
(the "Obligations") under that certain Loan and Security Agreement dated of even
date herewith among Pledgor, RC America, Inc. and Pledgee (the "Loan
Agreement"). This Pledge Agreement shall remain in full force and effect until
all of the Obligations, and any extensions or renewals thereof, together with
interest accruing thereon, shall be finally and irrevocably paid in full at
which time Pledgee shall convey the Collateral to Pledgor without recourse.
3. Perfection of Security Interest. All income from the Pledged
Accounts shall be reported to taxing authorities as income of the Pledgor.
4. Pledgee's Rights and Duties with Respect to the Collateral.
(a) Pledgee's only duty with respect to the Collateral shall be to
exercise reasonable care to secure the safe custody of such Collateral as may be
in the actual possession of Pledgee. Pledgee shall have the right, but not the
obligation to pay any taxes, liens, assessments, insurance premiums or other
charges pertaining to Collateral. Any expenses incurred by Pledgee under the
preceding sentence shall be paid to Pledgee by Pledgor upon demand, become part
of the Obligations secured by the Collateral and bear interest at the default
rate provided in the Loan
Agreement until paid. Pledgee shall be relieved of all responsibility for all
Collateral which may be in Pledgee's possession upon surrendering it to Pledgor.
(b) The Pledgor hereby designates the Pledgee as and for the
attorney-in-fact and proxy of the Pledgor to: endorse in favor of the Pledgee
any of the Collateral; cause the transfer of any of the Collateral into such
name or into an account as the Pledgee may, from time to time, determine; cause
the issuance of certificates for book entry and/or uncertificated securities;
renew, extend, or roll over any Collateral; and make demand and initiate actions
to enforce any of the Collateral, and receive and collect all money or money
damages payable on account of any of the Collateral; and protect, preserve or
assert any other rights of Pledgor or take any other action with respect to the
Collateral. The Pledgee may take such action with respect to the Collateral as
the Pledgee may reasonably determine to be necessary to protect and preserve its
interest in the Collateral. The rights, remedies, powers, privileges and
discretions included in this Section 4(b) may be exercised by the Pledgee at any
time after the occurrence of an Event of Default. The within designation, being
coupled with an interest, is irrevocable until the within Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Pledgee. The power of attorney shall not be affected by subsequent disability or
incapacity of the Pledgor. The Pledgee shall not be liable for any act or
omission to act pursuant to this Section, except for Pledgee's own gross
negligence and for any act or omission of Pledgee which is in actual bad faith.
5. Pledgor's Covenants, Warranties and Indemnify. Pledgor represents,
warrants and covenants
(a) that Pledgor is the lawful owner of all right, title and interest
in the Collateral and will not encumber or suffer the encumbrance of the
Collateral except in favor of Pledgee,
(b) that the Collateral is and will be fully paid and non-assessable,
(c) that Pledgor will not:
i. cause or permit any of the Collateral presently
evidenced by a written certificate to be converted
to uncertificated securities;
ii. exercise any right with respect to the Collateral
which would adversely affect the Pledgee's rights
in the Collateral;
iii. file any affidavit of lost stock certificates or
bonds; or
iv. vote the Collateral in favor of or consent to any
resolution which might impose any restrictions on
the sale, transfer or disposition of the
Collateral.
2
(d) that the Collateral represents 100% of the issued and outstanding
capital stock of each of RC America, Inc., Market Media, Inc., BPI Packaging,
Inc. and BPI Packaging Limited (collectively, the "Subsidiaries"), and that
Pledgor shall not permit any of the Subsidiaries to authorize or issue any
further capital stock or securities or rights convertible into capital stock at
any time that there remain any Obligations of Pledgor to Pledgee without written
consent of Pledgee, and
(e) that the Collateral is and will remain free and clear of all liens,
encumbrances and security interests other than the security interest granted by
Pledgor hereunder, and
(f) that Pledgor has the sole right and lawful authority to pledge the
Collateral and otherwise to comply with the provisions hereof. In the event that
any adverse claim is asserted in respect of the Collateral or any portion
thereof, except such as may result from an act of Pledgee not authorized
hereunder, Pledgor promises and agrees to indemnify Pledgee and hold Pledgee
harmless from and against any losses, liabilities, damages, expenses, costs and
reasonable counsel fees incurred by Pledgee in exercising any right, power or
remedy of Pledgee hereunder or defending, protecting or enforcing the security
interest created hereunder. Any such loss, liability or expense so incurred
shall be paid by Pledgor upon demand, become part of the Obligations secured by
the Collateral and bear interest, at the default rate of interest set forth in
the Loan Agreement and related documents, until paid.
6. Pledgor's Default. Pledgor shall be in default hereunder upon the
occurrence of any of the following events ("Events of Default"):
Pledgor's failure to pay or perform any of the Obligations described in
this Agreement or under the Loan Agreement when such payment or performance is
due.
7. Rights Appertaining to Collateral.
(a) Prior to Event of Default: Prior to an Event of Default, the
Pledgor shall be entitled to vote the Collateral and give consents, waivers and
ratifications in respect thereof subject to the requirements of Section 5 above,
and to the extent allowed by the Loan Agreement, any cash interest, dividends or
distributions received from the Collateral.
(b) Pledgee's Rights Upon Default. Upon the occurrence of any Event of
Default, the rights of the Pledgor pursuant to Subsection (a) hereof shall
automatically and immediately cease and Pledgee, if Pledgee so elects at its
sole option, in addition to exercising rights granted under Section 4(b):
i. may vote all or any part of the Collateral and give all
consents, waivers and ratifications in respect thereof, sell or convey the
Collateral, cause the Collateral to be transferred into its own name, into its
own account or the name or account of its nominee and otherwise act with respect
thereto as the absolute owner thereof (the Pledgor hereby irrevocably
constituting and appointing Pledgee Pledgor's proxy and attorney-in-fact, with
full power of substitution, to do so, which
3
appointment is coupled with an interest) and exercise all rights with respect to
the Collateral as though Pledgee were the absolute owner thereof, whether or not
such rights were retained by Pledgor as against Pledgee before the Event of
Default; and
ii. may exercise all other rights available to a secured party
under the Uniform Commercial Code and other applicable law, including without
limitation the right to apply Pledgor's rights to the Collateral against the
Obligations regardless of the adequacy or existence of other collateral
therefor.
Without limiting the generality of the foregoing, upon
the occurrence of any Event of Default, and at any time thereafter, the Pledgee
shall have all of the rights and remedies which a secured party is entitled to
exercise upon default under the Uniform Commercial Code as adopted in
Massachusetts, in addition to which the Pledgee may sell or otherwise dispose of
the Collateral (in one or more sales) and/or enforce and collect the Collateral
(including, without limitation, the liquidation of debt instruments or
securities and the exercise of conversion rights with respect to convertible
securities, whether or not such instruments or securities have matured and
whether or not any penalties or other charges are imposed on account of such
action), for application towards (but not necessarily in complete satisfaction
of) the Obligations. The Pledgor shall remain liable to the Pledgee for any
deficiency remaining following such application. Any such sale may be made
either at public or private sale at Pledgee's place of business or elsewhere, or
at any brokers' board or securities exchange, either or cash or upon receipt or
for future delivery, at such price as Pledgee may deem fair (to the extent
permitted by law), and Pledgee may be the purchaser of any or all Collateral so
sold and may hold the same thereafter in its own right free from any claim of
Pledgor or right of redemption. No such purchase or holding by Pledgee shall be
deemed a retention by Pledgee in satisfaction of the Obligations. Unless the
Collateral, threatens to decline speedily in value, or is of a type customarily
sold on a recognized market (in which event the Pledgee shall give the Pledgor
such notice as may be practicable under the circumstances), the Pledgee shall
give the Pledgor at least the greater of the minimum notice required by law or
seven (7) days prior written notice of the date, time, and place of any public
sale thereof or of the time after which any private sale or any other intended
disposition is to be made. The Pledgor acknowledges that any exercise by the
Pledgee of the Pledgee's right upon default may be subject to compliance by the
Pledgee with any statute, regulation, ordinance, directive, or order of any
federal, state, municipal, or other governmental authority ("Securities
Regulations"), and Pledgee may impose, without limitation, any of the foregoing
restricting the sale of securities in order to comply with applicable Securities
Regulations. The Pledgee, in its reasonable discretion at any such sale, in
order to comply with applicable Securities Regulations, may restrict the
prospective bidders or purchasers as to their number, nature of business and
investment intention, and impose, without limitation, a requirement that the
persons making such purchases represent and agree, to the satisfaction of the
Pledgee, that they are purchasing the Collateral for their own account, for
investment, and not with a view to the distribution or resale thereof.
4
8. Application of Sale Proceeds. In the event of a sale of Collateral,
the proceeds shall first be applied to the payment of the expenses of the sale,
including brokers' commissions, counsel fees, any taxes or other charges imposed
by law upon the Collateral or the transfer thereof and all other charges paid or
incurred by Pledgee pertaining to the sale; and, second, to satisfy outstanding
Obligations, in the order in which Pledgee elects in its sole discretion, any
statute, custom, or usage to the contrary notwithstanding; and, third, the
surplus (if any) shall be paid to Pledgor.
9. Return of Collateral. If any Collateral is held by the Pledgee, the
Pledgee shall return to the Pledgor certificates evidencing the Collateral and
any blank stock powers delivered to the Pledgee pursuant to this Agreement
hereof (together with any other securities and transfer documents delivered to
the Pledgee under the terms hereof and, where appropriate, satisfactions,
releases, discharges and notices of termination of this Agreement, duly executed
and acknowledged and in proper form for filing or recording) upon the final and
irrevocable payment and performance of all of the Obligations.
10. Further Documents and Assurances.
(a) The Pledgor shall, from time to time and at his own
expense, promptly execute, acknowledge, witness, deliver, file and record (or
procure the execution, acknowledgment, witnessing, delivery, filing and
recordation of) such documents or instruments (and shall take or cause to be
taken such other action) as Pledgee may reasonably request for the perfection of
the security interests created hereby and for the continuation and protection
thereof. The Pledgor shall promptly furnish to Pledgee evidence satisfactory to
Pledgee of such filing and recordation. In addition, the Pledgor shall execute
all such instruments, documents, and papers, and will do all such acts as the
Pledgee may request from time to time to carry into effect the provisions and
intent of this Agreement, including, without limitation, the execution of stop
transfer orders, stock powers, notifications to obligors on the Collateral, the
providing of notification in connection with book entry securities or general
intangibles, and the providing of instructions to the issuers of uncertificated
securities, and will do all such other acts as the Pledgee may request with
respect to the perfection and protection of the security interest granted herein
and the assignment effected hereby. Without limiting the generality of the
foregoing, Pledgor shall, contemporaneously herewith, deliver to Pledgee such
duly executed financing statements and consents as may be necessary in the
judgment of Pledgee to perfect Pledgee's security interests in any Collateral
and shall execute, acknowledge,witness, deliver, file and record such Uniform
Commercial Code financing and continuation statements, notices and additional
security agreements, make such notations on their records and take such other
actions as Pledgee may reasonably request for the purpose of so perfecting,
maintaining and protecting its security interests hereunder.
11. Notices. All notices, demands and other communications by one party
hereunder to the other shall be in writing and shall be deemed effective when
sent by certified or registered mail, return receipt
5
requested, postage prepaid, or by recognized overnight delivery service and
addressed to the other party as set forth below:
If to the Pledgor: BPI Packaging Technologies, Inc.
455 Somerset Avenue
North Dighton, MA 02764
With a copy to: Daniel Greenberg, Esq.
Wilson and Orcutt, P.C.
201 Great Road
Acton, MA 01720
If to the Pledgee: Foothill Capital Corporation
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, CA 90025
Attn: Ms. Amy Flaskerud
With a copy to: John L. Hackett, Esquire
Stroock & Stroock & Lavan
100 Federal Street
Boston, MA 02110
or to such other address of which notice is given in the same manner.
11. Heirs, Successors, Etc. This Pledge Agreement and all of its terms
and provisions shall benefit and bind the heirs, successors, assigns,
transferees, executors and administrators of each of the parties hereto.
12. Miscellaneous
(a) The rights, remedies, powers, privileges, and discretions
of the Pledgee hereunder (hereinafter, the "Pledgee's Rights and Remedies")
shall be cumulative and not exclusive of any rights, remedies, powers,
privileges or discretions which Pledgee otherwise may have under the Agreement
or otherwise. No delay or omissions by the Pledgee in exercising or enforcing
any of the Pledgee's Rights and Remedies shall operate as, or constitute, a
waiver thereof. No waiver by the Pledgee of any Event of Default or of any
default under any other agreement shall operate as a waiver of any other default
hereunder or under any other agreement. No exercise of any of the Pledgee's
Rights and Remedies and no other agreement or transaction of whatever nature
entered into between the Pledgee and the Pledgor at any time shall preclude any
other exercise of the Pledgee's Rights and Remedies. No waiver by the Pledgee of
any of the Pledgee's Rights and Remedies on any one occasion shall be deemed a
waiver on any subsequent occasion, nor shall it be deemed a continuing waiver.
All of the Pledgee's Rights and Remedies and all of the Pledgee's rights,
remedies, powers, privileges, and discretions under any other agreement or
transaction are cumulative and not alternative or exclusive and may be exercised
by the Pledgee at such time or times and in such order of preference as the
Pledgee in its sole discretion may determine.
6
(b) This Agreement is intended to take effect as a sealed
instrument, and it and all transactions thereunder or pursuant thereto shall be
governed as to interpretation, validity, effect, rights, duties and remedies of
the parties thereunder and in all other respects by the internal laws of the
Commonwealth of Massachusetts.
(c) This Agreement and all documents which have been or may be
hereinafter furnished by Pledgor to the Pledgee may be reproduced by the Pledgee
by any photographic, photostatic, microfilm, xerographic, or similar process,
and any such reproduction shall be admissible in evidence as the original itself
in any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of
business).
(d) Jurisdiction and Venue. Borrower irrevocably submits to
the non-exclusive jurisdiction of any federal or state court sitting in Suffolk
County of Massachusetts, or the County of Los Angeles, California, or at Bank's
discretion any other court in which the Bank shall initiate legal or equitable
proceedings and which has jurisdiction over the parties and any suit, action or
proceeding arising out of or relating to this Agreement. Borrower irrevocably
waives, to the fullest extent it may effectively do so under applicable law, any
objection it may have or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that the same
has been brought in an inconvenient forum.
(e) JURY WAIVER. THE BORROWER AND BANK EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL, WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
IN CONNECTION WITH THIS AGREEMENT, THE OBLIGATIONS, IN ALL MATTERS CONTEMPLATED
HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. THE BORROWER CERTIFIES
THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT IN THE EVENT OF ANY
SUCH PROCEEDING, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
EXECUTED under seal as of the date first above written.
Witness: BPI PACKAGING TECHNOLOGIES, INC.
By: /s/ Dennis Caulfield
- ------------------ -----------------------
7
ACCEPTED:
FOOTHILL CAPITAL CORPORATION
By:_______________________________
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss November 25, 1996
Then personally appeared the above-named, Dennis N. Caulfield, the CEO
of BPI Packaging Technologies, Inc., and acknowledged the foregoing instrument
to be his/her free act and deed on behalf of BPI Packaging Technologies, Inc.,
before me,
---------------------------------------
, Notary Public
My Commission Expires: November 2, 2002
8
Pledge and Security Agreement Among
Foothill Capital Corporation and BPI Packaging Technologies, Inc.
Schedule "A"
------------
1. 1 share of the common stock of Market Media, Inc., representing all of
the issued and outstanding capital stock of Market Media, Inc.
2. 6 shares of the common stock of BPI Packaging (UK) Limited,
representing all of the issued and outstanding capital stock of BPI
Packaging (UK) Limited.
3. 50,500 shares of the common stock of RC America, Inc., representing all
of the issued and outstanding capital stock of RC America, Inc.
CONTINUING GUARANTY
-------------------
THIS CONTINUING GUARANTY ("Guaranty"), dated as of November 25, 1996,
is executed and delivered by Market Media, Inc. ("Guarantor") in favor of
Foothill Capital Corporation, a California corporation ("Foothill") and in light
of the following:
FACT ONE: BPI Packaging Technologies, Inc. and RC America, Inc.
(collectively the "Borrower") and Foothill are, contemporaneously herewith,
entering into the Loan Documents; and
FACT TWO: In order to induce Foothill to extend financial
accommodations to Borrower pursuant to the Loan Documents, and in consideration
thereof, and in consideration of any loans or other financial accommodations
heretofore or hereafter extended by Foothill to Borrower, whether pursuant to
the Loan Documents or otherwise, Guarantor has agreed to guarantee the
Guaranteed Obligations.
FACT THREE: Guarantor is a wholly-owned subsidiary of BPI
Packaging Technologies, Inc. and has and shall receive direct and substantial
benefits from the Borrower in consideration of this Guaranty.
NOW, THEREFORE, in consideration of the foregoing, Guarantor
hereby agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following
terms, as used in this Guaranty, shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978 (11
U.S.C. Sections 101-1330), as amended or supplemented from time to time, and any
successor statute, and any and all rules issued or promulgated in connection
therewith.
"Guaranteed Obligations" means any and all obligations,
indebtedness, or liabilities of any kind or character owed by Borrower to
Foothill including all such obligations, indebtedness, or liabilities, whether
for principal, interest (including any interest which, but for the application
of the provisions of the Bankruptcy Code, would have accrued on such amounts),
premium, reimbursement obligations, fees, costs, expenses (including, attorneys'
fees), or indemnity obligations, whether heretofore, now, or hereafter made,
incurred, or created, whether voluntarily or involuntarily made, incurred, or
created, whether secured or unsecured (and if secured, regardless of the nature
or extent of the security), whether absolute or contingent, liquidated or
unliquidated, determined or indeterminate, whether Borrower is liable
individually or jointly with others, and whether recovery is or hereafter
becomes barred by any statute of limitations or otherwise becomes unenforceable
for any reason whatsoever, including any act or failure to act by Foothill.
"Loan Documents" shall mean that certain Loan and Security
Agreement, of even date herewith, between Foothill and Borrower, any promissory
notes issued by
-1-
Borrower in connection therewith, and those documents, instruments, and
agreements which either now or in the future exist among Borrower, Guarantor, or
any affiliate of Borrower, on the one hand, and Foothill, on the other hand.
(b) Construction. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Loan Documents includes any and all
alterations, amendments, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable. Neither this Guaranty nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Guarantor,
whether under any rule of construction or otherwise. On the contrary, this
Guaranty has been reviewed by Guarantor, Foothill, and their respective counsel,
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of Foothill
and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final and
indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection; and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by Borrower of all of the agreements, conditions, covenants, and
obligations of Borrower contained in the Loan Documents.
3. Continuing Guaranty. This Guaranty includes Guaranteed Obligations
arising under successive transactions continuing, compromising, extending,
increasing, modifying, releasing, or renewing the Guaranteed Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Guaranteed Obligations after prior
Guaranteed Obligations have been satisfied in whole or in part. To the maximum
extent permitted by law, Guarantor hereby waives any right to revoke this
Guaranty as to future indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that (a)
no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms, or
other terms and conditions thereof), (c) no such revocation shall apply to any
Guaranteed Obligations made or created after such date to the extent made or
created pursuant to a legally binding commitment of Foothill in existence on the
date of such revocation, (d) no payment by Guarantor, Borrower, or from any
other source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by Borrower or from any
source other than Guarantor, subsequent to the date of such revocation, shall
first be applied to that portion of the Guaranteed Obligations as to which the
revocation is effective and which are not, therefore, guaranteed hereunder, and
to the extent so applied shall not reduce the maximum obligation of Guarantor
hereunder.
-2-
4. Performance Under This Guaranty. In the event that Borrower fails
to make any payment of any Guaranteed Obligations on or before the due date
thereof, or if Borrower shall fail to perform, keep, observe, or fulfill any
other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents, Guarantor immediately shall cause such payment
to be made or each of such obligations to be performed, kept, observed, or
fulfilled.
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the issuance of any promissory notes. Guarantor
agrees that it is directly, jointly and severally with any other guarantor of
the Guaranteed Obligations, liable to Foothill, that the obligations of
Guarantor hereunder are independent of the obligations of Borrower or any other
guarantor, and that a separate action may be brought against Guarantor whether
such action is brought against Borrower or any other guarantor or whether
Borrower or any such other guarantor is joined in such action. Guarantor agrees
that its liability hereunder shall be immediate and shall not be contingent upon
the exercise or enforcement by Foothill of whatever remedies it may have against
Borrower or any other guarantor, or the enforcement of any lien or realization
upon any security Foothill may at any time possess. Guarantor agrees that any
release which may be given by Foothill to Borrower or any other guarantor shall
not release Guarantor. Guarantor consents and agrees that Foothill shall be
under no obligation to marshal any assets of Borrower or any other guarantor in
favor of Guarantor, or against or in payment of any or all of the Guaranteed
Obligations.
6. Waivers.
(a) To the maximum extent permitted by law, Guarantor hereby
waives: (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount of
the Guaranteed Obligations, subject, however, to Guarantor's right to make
inquiry of Foothill to ascertain the amount of the Guaranteed Obligations at any
reasonable time; (4) notice of any adverse change in the financial condition of
Borrower or of any other fact that might increase Guarantor's risk hereunder;
(5) notice of presentment for payment, demand, protest, and notice thereof as to
any promissory notes or other instruments among the Loan Documents; (6) notice
of any breach, default or Event of Default under the Loan Documents; and (7) all
other notices (except if such notice is specifically required to be given to
Guarantor hereunder or under any Loan Document to which Guarantor is a party)
and demands to which Guarantor might otherwise be entitled.
(b) To the maximum extent permitted by law, Guarantor hereby
waives any right Guarantor may have by statute or otherwise to require Foothill
to institute suit against Borrower or to exhaust any rights and remedies which
Foothill has or may have against Borrower. In this regard, Guarantor agrees that
it is bound to the payment of all Guaranteed Obligations, whether now existing
or hereafter accruing, as fully as if such Guaranteed Obligations were directly
owing to Foothill by Guarantor. Guarantor further waives any defense arising by
reason of any disability or other
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defense (other than the defense that the Guaranteed Obligations shall have been
fully and finally performed and indefeasibly paid) of Borrower or by reason of
the cessation from any cause whatsoever of the liability of Borrower in respect
thereof.
(c) To the maximum extent permitted by law, Guarantor hereby
waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against Borrower or any other party liable to Foothill; (2)
any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense arising by reason of any claim or defense
based upon an election of remedies by Foothill; (4) the benefit of any statute
of limitations affecting Guarantor's liability hereunder or the enforcement
thereof, and any act which shall defer or delay the operation of any statute of
limitations applicable to the Guaranteed Obligations shall similarly operate to
defer or delay the operation of such statute of limitations applicable to
Guarantor's liability hereunder.
(d) To the maximum extent permitted by law, Guarantor hereby
waives any right of subrogation Guarantor has or may have as against Borrower
with respect to the Guaranteed Obligations. In addition, Guarantor hereby waives
any right to proceed against Borrower, now or hereafter, for contribution,
indemnity, reimbursement, and any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising under express or
implied contract or by operation of law, which Guarantor may now have or
hereafter have as against the Borrower with respect to the Guaranteed
Obligations. Guarantor also hereby waives any rights to recourse to or with
respect to any asset of Borrower. Guarantor agrees that in light of the
immediately foregoing waivers, the execution of this Guaranty shall not be
deemed to make Guarantor a "creditor" of Borrower, and that for purposes of
Sections 547 and 550 of the Bankruptcy Code Guarantor shall not be deemed a
"creditor" of Borrower.
7. Releases. Guarantor consents and agrees that, without notice to or
by Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the
time for the payment of, or discharge the performance of,
or may refuse to or otherwise not enforce the Loan
Documents;
(b) release all or any one or more parties to any one
or more of the Loan Documents or grant other indulgences to
Borrower in respect thereof;
(c) amend or modify in any manner and at any time (or
from time to time) any of the Loan Documents; or
(d) release or substitute any other guarantor, if
any, of the Guaranteed Obligations, or enforce, exchange,
release, or waive any security for the Guaranteed
Obligations (including, the collateral referred to in
Section 18 hereof) or any other guaranty of the
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Guaranteed Obligations, or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein, and no election by Foothill
to proceed in one form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Foothill's right to proceed in any
other form of action or proceeding or against other parties unless Foothill has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Foothill under any
document or instrument evidencing the Guaranteed Obligations shall serve to
diminish the liability of Guarantor under this Guaranty except to the extent
that Foothill finally and unconditionally shall have realized indefeasible
payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to Foothill are no longer subject to any right on the part of any
person, including Borrower, Borrower as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of Borrower's assets
to invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential. Upon such full and final performance and indefeasible payment of
the Guaranteed Obligations whether by Guarantor or Borrower, Foothill shall have
no obligation whatsoever to transfer or assign its interest in the Loan
Documents to Guarantor. In the event that, for any reason, any portion of such
payments to Foothill is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and Guarantor shall be liable for
the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees) paid by Foothill in connection therewith.
10. Financial Condition of Borrower. Guarantor represents and warrants
to Foothill that Guarantor is currently informed of the financial condition of
Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor further represents and warrants to Foothill that Guarantor has read
and understands the terms and conditions of the Loan Documents. Guarantor hereby
covenants that Guarantor will continue to keep informed of Borrower's financial
condition, the financial condition of other guarantors, if any, and of all other
circumstances which bear upon the risk of nonpayment or nonperformance of the
Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present and
future indebtedness of Borrower owing to Guarantor is postponed in favor of and
subordinated to payment, in full, in cash, of the Guaranteed Obligations. In
this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.
12. Payments; Application. All payments to be made hereunder by
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without
-5-
deduction (whether for taxes or otherwise) or offset. All payments made by
Guarantor hereunder shall be applied as follows: first, to all costs and
expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued and
unpaid interest, premium, if any, and fees owing to Foothill constituting
Guaranteed Obligations; and third, to the balance of the Guaranteed Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand, all
reasonable attorneys' fees and all other costs and expenses which may be
incurred by Foothill in the enforcement of this Guaranty or in any way arising
out of, or consequential to the protection, assertion, or enforcement of the
Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
14. Indemnification. Guarantor agrees to indemnify Foothill and hold
Foothill harmless against all obligations, demands, or liabilities asserted by
any party and against all losses in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with Borrower, other than losses
arising primarily from the gross negligence or intentional misconduct of
Foothill.
15. Notices. All notices or demands by Guarantor or Foothill to the
other relating to this Guaranty shall be in writing and either personally served
or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given received on the earlier of actual receipt or three (3) days after
the deposit of such notice in the mail. Unless otherwise specified in a notice
sent or delivered in accordance with the provisions of this section, such
writing shall be sent, if to Guarantor, then to the attention of Dennis
Caulfield at Guarantor's address set forth on the signature page hereof, and if
to Foothill, then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
16. Cumulative Remedies. No remedy under this Guaranty or under any
Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Loan Document, and those provided by law or in
equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof. No
failure on the part of Foothill to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
17. Books and Records. Guarantor agrees that Foothill's books and
records showing the account between Foothill and Borrower shall be admissible in
any action or proceeding and shall be binding upon Guarantor for the purpose of
establishing the items therein set forth and shall constitute prima facie proof
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thereof.
18. Severability of Provisions. Any provision of this Guaranty which is
prohibited or unenforceable under applicable law, shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes the entire
agreement between Guarantor and Foothill pertaining to the subject matter
contained herein. This Guaranty may not be altered, amended, or modified, nor
may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which given. No
course of dealing and no delay or waiver of any right or default under this
Guaranty shall be deemed a waiver of any other, similar or dissimilar right or
default or otherwise prejudice the rights and remedies hereunder.
20. Successors and Assigns. The dissolution of Guarantor shall not
terminate this Guaranty. This Guaranty shall be binding upon Guarantor's
representatives, successors, and assigns and shall inure to the benefit of the
successors and assigns of Foothill; provided, however, Guarantor shall not
assign this Guaranty or delegate any of its duties hereunder without Foothill's
prior written consent. Any assignment without the consent of Foothill shall be
absolutely void. In the event of any assignment or other transfer of rights by
Foothill, the rights and benefits herein conferred upon Foothill shall
automatically extend to and be vested in such assignee or other transferee.
21. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR AND
FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS GUARANTY SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN SUFFOLK COUNTY, MASSACHUSETTS, THE COUNTY OF LOS ANGELES,
CALIFORNIA,OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH
FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
JURISDICTION OVER THE PARTIES AND MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT
PERMITTED BY LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
22. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF
ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY
COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE
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WAIVER OF ITS RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date set forth in the first paragraph hereof.
MARKET MEDIA, INC.
By: /s/ Dennis Caulfield
----------------------
Its:
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CONTINUING GUARANTY
-------------------
THIS CONTINUING GUARANTY ("Guaranty"), dated as of November 25, 1996,
is executed and delivered by BPI Packaging (UK) Limited ("Guarantor") in favor
of Foothill Capital Corporation, a California corporation ("Foothill") and in
light of the following:
FACT ONE: BPI Packaging Technologies, Inc. and RC America,
Inc. (collectively, the "Borrower") and Foothill are, contemporaneously
herewith, entering into the Loan Documents; and
FACT TWO: In order to induce Foothill to extend financial
accommodations to Borrower pursuant to the Loan Documents, and in consideration
thereof, and in consideration of any loans or other financial accommodations
heretofore or hereafter extended by Foothill to Borrower, whether pursuant to
the Loan Documents or otherwise, Guarantor has agreed to guarantee the
Guaranteed Obligations.
NOW, THEREFORE, in consideration of the foregoing, Guarantor
hereby agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in this
Guaranty, shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of
1978 (11 U.S.C. Sections 101-1330), as amended or supplemented from time to
time, and any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Guaranteed Obligations" means any and all
obligations, indebtedness, or liabilities of any kind or character owed by
Borrower to Foothill including all such obligations, indebtedness, or
liabilities, whether for principal, interest (including any interest which, but
for the application of the provisions of the Bankruptcy Code, would have accrued
on such amounts), premium, reimbursement obligations, fees, costs, expenses
(including, attorneys' fees), or indemnity obligations, whether heretofore, now,
or hereafter made, incurred, or created, whether voluntarily or involuntarily
made, incurred, or created, whether secured or unsecured (and if secured,
regardless of the nature or extent of the security), whether absolute or
contingent, liquidated or unliquidated, determined or indeterminate, whether
Borrower is liable individually or jointly with others, and whether recovery is
or hereafter becomes barred by any statute of limitations or otherwise becomes
unenforceable for any reason whatsoever, including any act or failure to act by
Foothill.
"Loan Documents" shall mean that certain Loan and
Security Agreement, of even date herewith, between Foothill and Borrower, any
promissory notes issued by Borrower in connection therewith, and those
documents, instruments, and agreements which either now or in the future exist
among Borrower, Guarantor, or any affiliate of Borrower, on the one hand, and
Foothill, on the other hand.
(b) Construction. Unless the context of this Guaranty clearly
-1-
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Loan Documents includes any and all
alterations, amendments, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable. Neither this Guaranty nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Guarantor,
whether under any rule of construction or otherwise. On the contrary, this
Guaranty has been reviewed by Guarantor, Foothill, and their respective counsel,
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of Foothill
and Guarantor.
2. Guaranteed Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Foothill, as and for its own debt, until final and
indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection; and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by Borrower of all of the agreements, conditions, covenants, and
obligations of Borrower contained in the Loan Documents.
3. Continuing Guaranty. This Guaranty includes Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, Guarantor hereby waives any right to revoke
this Guaranty as to future indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that (a)
no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms, or
other terms and conditions thereof), (c) no such revocation shall apply to any
Guaranteed Obligations made or created after such date to the extent made or
created pursuant to a legally binding commitment of Foothill in existence on the
date of such revocation, (d) no payment by Guarantor, Borrower, or from any
other source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by Borrower or from any
source other than Guarantor, subsequent to the date of such revocation, shall
first be applied to that portion of the Guaranteed Obligations as to which the
revocation is effective and which are not, therefore, guaranteed hereunder, and
to the extent so applied shall not reduce the maximum obligation of Guarantor
hereunder.
4. Performance Under This Guaranty. In the event that Borrower
fails to make any payment of any Guaranteed Obligations on or before the due
date thereof, or if Borrower shall fail to perform, keep, observe, or fulfill
any other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents,
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Guarantor immediately shall cause such payment to be made or each of such
obligations to be performed, kept, observed, or fulfilled.
5. Primary Obligations. This Guaranty is a primary and
original obligation of Guarantor, is not merely the creation of a surety
relationship, and is an absolute, unconditional, and continuing guaranty of
payment and performance which shall remain in full force and effect without
respect to future changes in conditions, including any change of law or any
invalidity or irregularity with respect to the issuance of any promissory notes.
Guarantor agrees that it is directly, jointly and severally with any other
guarantor of the Guaranteed Obligations, liable to Foothill, that the
obligations of Guarantor hereunder are independent of the obligations of
Borrower or any other guarantor, and that a separate action may be brought
against Guarantor whether such action is brought against Borrower or any other
guarantor or whether Borrower or any such other guarantor is joined in such
action. Guarantor agrees that its liability hereunder shall be immediate and
shall not be contingent upon the exercise or enforcement by Foothill of whatever
remedies it may have against Borrower or any other guarantor, or the enforcement
of any lien or realization upon any security Foothill may at any time possess.
Guarantor agrees that any release which may be given by Foothill to Borrower or
any other guarantor shall not release Guarantor. Guarantor consents and agrees
that Foothill shall be under no obligation to marshal any assets of Borrower or
any other guarantor in favor of Guarantor, or against or in payment of any or
all of the Guaranteed Obligations.
6. Waivers.
(a) To the maximum extent permitted by law, Guarantor hereby
waives: (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount of
the Guaranteed Obligations, subject, however, to Guarantor's right to make
inquiry of Foothill to ascertain the amount of the Guaranteed Obligations at any
reasonable time; (4) notice of any adverse change in the financial condition of
Borrower or of any other fact that might increase Guarantor's risk hereunder;
(5) notice of presentment for payment, demand, protest, and notice thereof as to
any promissory notes or other instruments among the Loan Documents; (6) notice
of any breach, default or Event of Default under the Loan Documents; and (7) all
other notices (except if such notice is specifically required to be given to
Guarantor hereunder or under any Loan Document to which Guarantor is a party)
and demands to which Guarantor might otherwise be entitled.
(b) To the maximum extent permitted by law, Guarantor hereby
waives any right Guarantor may have by statute or otherwise to require Foothill
to institute suit against Borrower or to exhaust any rights and remedies which
Foothill has or may have against Borrower. In this regard, Guarantor agrees that
it is bound to the payment of all Guaranteed Obligations, whether now existing
or hereafter accruing, as fully as if such Guaranteed Obligations were directly
owing to Foothill by Guarantor. Guarantor further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Guaranteed Obligations shall have been fully and finally performed and
indefeasibly paid) of Borrower or by reason of the cessation from any cause
whatsoever of the liability of Borrower in respect thereof.
-3-
(c) To the maximum extent permitted by law, Guarantor hereby
waives: (1) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against Borrower or any other party liable to Foothill; (2)
any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense arising by reason of any claim or defense
based upon an election of remedies by Foothill; (4) the benefit of any statute
of limitations affecting Guarantor's liability hereunder or the enforcement
thereof, and any act which shall defer or delay the operation of any statute of
limitations applicable to the Guaranteed Obligations shall similarly operate to
defer or delay the operation of such statute of limitations applicable to
Guarantor's liability hereunder.
(d) To the maximum extent permitted by law, Guarantor hereby
waives any right of subrogation Guarantor has or may have as against Borrower
with respect to the Guaranteed Obligations. In addition, Guarantor hereby waives
any right to proceed against Borrower, now or hereafter, for contribution,
indemnity, reimbursement, and any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising under express or
implied contract or by operation of law, which Guarantor may now have or
hereafter have as against the Borrower with respect to the Guaranteed
Obligations. Guarantor also hereby waives any rights to recourse to or with
respect to any asset of Borrower. Guarantor agrees that in light of the
immediately foregoing waivers, the execution of this Guaranty shall not be
deemed to make Guarantor a "creditor" of Borrower, and that for purposes of
Sections 547 and 550 of the Bankruptcy Code Guarantor shall not be deemed a
"creditor" of Borrower.
7. Releases. Guarantor consents and agrees that, without
notice to or by Guarantor and without affecting or impairing the obligations of
Guarantor hereunder, Foothill may, by action or inaction:
(a) compromise, settle, extend the duration or the
time for the payment of, or discharge the performance of,
or may refuse to or otherwise not enforce the Loan
Documents;
(b) release all or any one or more parties to any one
or more of the Loan Documents or grant other indulgences to
Borrower in respect thereof;
(c) amend or modify in any manner and at any time (or
from time to time) any of the Loan Documents; or
(d) release or substitute any other guarantor, if
any, of the Guaranteed Obligations, or enforce, exchange,
release, or waive any security for the Guaranteed
Obligations (including, the collateral referred to in
Section 18 hereof) or any other guaranty of the Guaranteed
Obligations, or any portion thereof.
8. No Election. Foothill shall have the right to seek recourse
against
-4-
Guarantor to the fullest extent provided for herein, and no election by Foothill
to proceed in one form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Foothill's right to proceed in any
other form of action or proceeding or against other parties unless Foothill has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Foothill under any
document or instrument evidencing the Guaranteed Obligations shall serve to
diminish the liability of Guarantor under this Guaranty except to the extent
that Foothill finally and unconditionally shall have realized indefeasible
payment by such action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations shall not
be considered indefeasibly paid for purposes of this Guaranty unless and until
all payments to Foothill are no longer subject to any right on the part of any
person, including Borrower, Borrower as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of Borrower's assets
to invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential. Upon such full and final performance and indefeasible payment of
the Guaranteed Obligations whether by Guarantor or Borrower, Foothill shall have
no obligation whatsoever to transfer or assign its interest in the Loan
Documents to Guarantor. In the event that, for any reason, any portion of such
payments to Foothill is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and Guarantor shall be liable for
the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees) paid by Foothill in connection therewith.
10. Financial Condition of Borrower. Guarantor represents and
warrants to Foothill that Guarantor is currently informed of the financial
condition of Borrower and of all other circumstances which a diligent inquiry
would reveal and which bear upon the risk of nonpayment of the Guaranteed
Obligations. Guarantor further represents and warrants to Foothill that
Guarantor has read and understands the terms and conditions of the Loan
Documents. Guarantor hereby covenants that Guarantor will continue to keep
informed of Borrower's financial condition, the financial condition of other
guarantors, if any, and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all
present and future indebtedness of Borrower owing to Guarantor is postponed in
favor of and subordinated to payment, in full, in cash, of the Guaranteed
Obligations. In this regard, no payment of any kind whatsoever shall be made
with respect to such indebtedness until the Guaranteed Obligations have been
indefeasibly paid in full.
12. Payments; Application. All payments to be made hereunder
by Guarantor shall be made in lawful money of the United States of America at
the time of payment, shall be made in immediately available funds, and shall be
made without deduction (whether for taxes or otherwise) or offset. All payments
made by Guarantor hereunder shall be applied as follows: first, to all costs and
expenses (including attorneys' fees) incurred by Foothill in enforcing this
Guaranty or in collecting the Guaranteed Obligations; second, to all accrued and
unpaid interest, premium, if any,
-6-
and fees owing to Foothill constituting Guaranteed Obligations; and third, to
the balance of the Guaranteed Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on
demand, all reasonable attorneys' fees and all other costs and expenses which
may be incurred by Foothill in the enforcement of this Guaranty or in any way
arising out of, or consequential to the protection, assertion, or enforcement of
the Guaranteed Obligations (or any security therefor), whether or not suit is
brought.
14. Indemnification. Guarantor agrees to indemnify Foothill
and hold Foothill harmless against all obligations, demands, or liabilities
asserted by any party and against all losses in any way suffered, incurred, or
paid by Foothill as a result of or in any way arising out of, following, or
consequential to Foothill's transactions with Borrower, other than losses
arising primarily from the gross negligence or intentional misconduct of
Foothill.
15. Notices. All notices or demands by Guarantor or Foothill
to the other relating to this Guaranty shall be in writing and either personally
served or sent by registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, telefacsimile, or telegram, and shall be deemed
to be given received on the earlier of actual receipt or three (3) days after
the deposit of such notice in the mail. Unless otherwise specified in a notice
sent or delivered in accordance with the provisions of this section, such
writing shall be sent, if to Guarantor, then to the attention of Dennis
Caulfield at Guarantor's address set forth on the signature page hereof, and if
to Foothill, then as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
16. Cumulative Remedies. No remedy under this Guaranty or
under any Loan Document is intended to be exclusive of any other remedy, but
each and every remedy shall be cumulative and in addition to any and every other
remedy given hereunder or under any Loan Document, and those provided by law or
in equity. No delay or omission by Foothill to exercise any right under this
Guaranty shall impair any such right nor be construed to be a waiver thereof. No
failure on the part of Foothill to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
17. Books and Records. Guarantor agrees that Foothill's books
and records showing the account between Foothill and Borrower shall be
admissible in any action or proceeding and shall be binding upon Guarantor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof.
18. Severability of Provisions. Any provision of this Guaranty
which is prohibited or unenforceable under applicable law, shall be ineffective
to the extent of
-6-
such prohibition or unenforceability without invalidating the remaining
provisions hereof.
19. Entire Agreement; Amendments. This Guaranty constitutes
the entire agreement between Guarantor and Foothill pertaining to the subject
matter contained herein. This Guaranty may not be altered, amended, or modified,
nor may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Foothill. Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which given. No
course of dealing and no delay or waiver of any right or default under this
Guaranty shall be deemed a waiver of any other, similar or dissimilar right or
default or otherwise prejudice the rights and remedies hereunder.
20. Successors and Assigns. The dissolution of Guarantor shall
not terminate this Guaranty. This Guaranty shall be binding upon Guarantor's
representatives, successors, and assigns and shall inure to the benefit of the
successors and assigns of Foothill; provided, however, Guarantor shall not
assign this Guaranty or delegate any of its duties hereunder without Foothill's
prior written consent. Any assignment without the consent of Foothill shall be
absolutely void. In the event of any assignment or other transfer of rights by
Foothill, the rights and benefits herein conferred upon Foothill shall
automatically extend to and be vested in such assignee or other transferee.
21. Choice of Law and Venue. THE VALIDITY OF THIS GUARANTY,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR
AND FOOTHILL, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS GUARANTY SHALL BE TRIED AND DETERMINED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN SUFFOLK COUNTY, MASSACHUSETTS, THE COUNTY OF LOS
ANGELES, CALIFORNIA, OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN
WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
JURISDICTION OVER THE PARTIES AND MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT
PERMITTED BY LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
22. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT TO THIS GUARANTY, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, GUARANTOR HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF
ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY AND THAT FOOTHILL MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY
COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE
WAIVER OF ITS RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date set forth in the first paragraph hereof.
-7-
BPI PACKAGING (UK) LIMITED
By: /s/ Dennis Caulfield
---------------------
Its:
-8-
SECURITY AGREEMENT
(All Asset)
AGREEMENT entered into at Boston, Massachusetts this 25th day of
November, 1996 between Market Media, Inc. with an address of 455 Somerset
Avenue, Building No. 3, North Dighton, Massachusetts (hereinafter called the
"Borrower") and Foothill Capital Corporation, a California corporation with an
address of 11111 Santa Monica Boulevard, Los Angeles, California (hereinafter
called the "Bank"). The tangible personal property which is the subject matter
of this Agreement is and will be kept at the address indicated above.
1. Grant of Security Interest. In consideration of the Bank's
extending credit and other financial accommodations to BPI Packaging
Technologies, Inc. ("BPI") and RC America, Inc. ("RC"), whether evidenced by
notes or not, the Borrower hereby grants to the Bank a security interest in
(including, without limitation, a lien on and pledge of) all of the Borrower's
Collateral (as hereinafter defined). The security interest granted by this
Agreement is given to and shall be held by the Bank as security for the payment
and performance of all Obligations (as hereinafter defined). The Bank shall have
the unrestricted right from time to time to apply (or to change any application
already made of) the proceeds of any of the Collateral to any of the
Obligations, as the Bank in its sole discretion may determine. The Borrower
will, at such intervals as the Bank may request, notify the Bank, upon a form
satisfactory to the Bank, of all Collateral which has come into existence since
the date hereof or the date of the last such notification, including, without
limitation, the delivery of schedules of the Collateral and/or proceeds
resulting from the sale or other disposition thereof.
2. Definitions. The following definitions shall apply:
(a) "Collateral" shall mean all the Borrower's present and future
right, title and interest in and to any and all of the following property,
whether such property is now existing or hereafter created:
(i) All Inventory;
(ii) All accounts, accounts receivable, contract rights, and chattel
paper, regardless of whether or not they constitute proceeds of
other Collateral;
1
(iii) All general intangibles, regardless of whether or not they
constitute proceeds of other Collateral, including, without
limitation, all of the Borrower's rights to tax refunds and all the
Borrower's rights (which the Bank may exercise or not as it in its
sole discretion may determine) to acquire or obtain goods and/or
services with respect to the manufacture, processing, storage,
sale, shipment, delivery or installation of any of the Borrower's
inventory or other Collateral:
(iv) All products of and accessions to any of the Collateral;
(v) All liens, guaranties, securities, rights, remedies and privileges
pertaining to any of the Collateral, including the right of
stoppage in transit;
(vi) All obligations owing to the Borrower of every kind and nature; and
all choses in action;
(vii) All goodwill, trade secrets, computer programs (other than programs
related to production equipment of Borrower), customer lists, trade
names, trademarks and patents;
(viii) All documents and instruments (whether negotiable or
non-negotiable, and regardless of their being attached to chattel
paper);
(ix) All proceeds of Collateral of every kind and nature in whatever
form, including, without limitation, both cash and noncash proceeds
resulting or arising from the rendering of services by the Borrower
or the sale or other disposition by the Borrower of the Inventory
or other Collateral;
(x) All books and records relating to the conduct of the Borrower's
business including, without in any way limiting the generality of
the foregoing, those relating to its accounts; and
(xi) All deposit accounts maintained by the Borrower with any bank,
trust company, investment firm or fund, or any similar institution
or organization.
(b) "Contract Rights" or "contract rights" means rights of the Borrower
to payment under contracts not yet earned by performance and not evidenced by
instruments or chattel paper.
(c) "Inventory" shall include, without limitation, any and all goods,
wares, merchandise and other tangible personal property, including raw
materials, work in process, supplies and components, and finished goods, whether
held by the Borrower for sale or other disposition, and also including any
returned or repossessed inventory or inventory detained from or rejected for
entry into the United States by the appropriate governmental authorities, all
products of and accessions to inventory and including documents of title,
whether negotiable or non-negotiable, representing any of the foregoing.
2
(d) "Debtors" shall mean the Borrower's customers who are indebted to
the Borrower.
(e) "Obligation(s)" shall include, without limitation, all loans,
advances, indebtedness, notes, liabilities and amounts, liquidated or
unliquidated, owing by the Borrower to the Bank at any time, of each and every
kind, nature and description, whether arising under this Agreement or otherwise,
and whether secured or unsecured, direct or indirect (that is, whether the same
are due directly by the Borrower to the Bank; or are due indirectly by the
Borrower to the Bank as endorser, guarantor or other surety, or as obligor of
obligations due third persons which have been endorsed or assigned to the Bank,
or otherwise), absolute or contingent, due or to become due, now existing or
hereafter contracted. Said term shall also include all interest and other
charges chargeable to the Borrower or due from the Borrower to the Bank from
time to time and all costs and expenses referred to in this Agreement.
(f) "Person" or "party" shall include individuals, firms, corporations
and all other entities.
(g) "Event of Default" shall mean the occurrence of any one or more of
the following events:
(1) default of any liability, obligation or
undertaking of the Borrower to the Bank, hereunder or
otherwise; (2) an Event of Default under the Loan and Security
Agreement of even date herewith among BPI, RC and the Bank
(the "Loan Agreement"); (3) occurrence with respect to the
Borrower of one of the Events of Default set forth in the Loan
Agreement as if the Borrower hereunder was a party to the Loan
Agreement; or (4) the termination of any guaranty of the
obligations of BPI and RC to the Bank.
All words and terms used in this Agreement other than those
specifically defined herein shall have the meanings accorded to them in the
Massachusetts Uniform Commercial Code (General Law, Chapter 106) as amended from
time to time (herein the "Code").
3. Ordinary Course of Business. The Bank hereby authorizes and permits
the Borrower to hold, process, sell, use or consume in the manufacture or
processing of finished goods, or otherwise dispose of the Inventory for fair
consideration, all in the ordinary course of the Borrower's business, excluding,
without limitation, sales to creditors or in bulk or sales or other dispositions
occurring under circumstances which would or could create any lien or interest
adverse to the Bank's security interest or other right hereunder in the proceeds
resulting therefrom. The Bank also hereby authorizes and permits the Borrower to
receive from the Debtors all amounts due as proceeds of the Collateral at the
Borrower's own cost and expense, and also liability, if any, subject to the
direction and control of the Bank at all times; and the Bank may at any time,
without cause or notice, and whether or not a default has occurred or demand has
been made, terminate all or any part of the authority and permission herein or
elsewhere in this Agreement granted to the Borrower with reference to the
Collateral.
Until the Bank shall otherwise notify the Borrower, all proceeds of and
collections of Collateral shall be retained by the Borrower and used solely for
the
3
ordinary and usual operation of the Borrower's business. From and after notice
by the Bank to the Borrower, all proceeds of and collections of the Collateral
shall be held in trust by the Borrower for the Bank and shall not be commingled
with the Borrower's other funds or deposited in any bank account of the
Borrower; and the Borrower agrees to deliver to the Bank on the dates of receipt
thereof by the Borrower, duly endorsed to the Bank or to bearer, or assigned to
the Bank, as may be appropriate, all proceeds of the Collateral in the identical
form received by the Borrower.
4. Allowances. The Borrower may grant such allowances or other
adjustments to Debtors (exclusive of extending the time for payment of any item
which shall not be done without first obtaining the Bank's written consent in
each instance) as the Borrower may reasonably deem to accord with sound business
practice, including, without limiting the generality of the foregoing accepting
the return of all or any part of the Inventory (subject to the provisions set
forth in this Agreement with reference to returned Inventory).
5. Costs and Expenses. The Borrower shall pay to the Bank any and all
costs and expenses (including, without limitation, reasonable attorneys' fees,
court costs, litigation and other expenses) incurred or paid by the Bank in
establishing, maintaining, protecting or enforcing any of the Bank's rights or
the Obligations, including, without limitation, any and all such costs and
expenses incurred or paid by the Bank in defending the Bank's security interest
in, title or right to the Collateral or in collecting or attempting to collect
or enforcing or attempting to enforce payment of the Collateral.
6. Books and Records. The Borrower shall hold its books and records
relating to the Collateral segregated from all the Borrower's other books and
records in a manner satisfactory to the Bank; and shall deliver to the Bank from
time to time promptly at its request, all invoices, original documents of title,
contracts, chattel paper, instruments and any other writings relating thereto,
and other evidence of performance of contracts, or evidence of shipment or
delivery of the merchandise or of the rendering of services; and the Borrower
will deliver to the Bank promptly at the Bank's request from time to time
additional copies of any or all of such papers or writings, and such other
information with respect to any of the Collateral and such schedules of
Inventory, schedules of accounts and such other writings as the Bank may in its
sole discretion deem to be necessary or effectual to evidence any loan hereunder
or the Bank's security interest in the Collateral.
7. Legends. The Borrower shall promptly make, stamp or record such
entries or legends on the Borrower's books and records or on any of the
Collateral as the Bank shall request from time to time to indicate and disclose
that the Bank has a security interest in such Collateral.
8. Inspection. The Bank, or its representatives, at any time and from
time to time, shall have the right, and the Borrower will permit it and them:
(a) to examine, check, make copies of or extracts from any of the
Borrower's books, records and files (including, without limitation, orders and
original correspondence);
4
(b) to inspect and examine the Borrower's Inventory or other Collateral
and to check and test the same as to quality, quantity, value and condition; and
the Borrower agrees to reimburse the Bank for its reasonable costs and expenses
in so doing; and
(c) to verify the Collateral or any portion or portions thereof or the
Borrower's compliance with the provisions of this Agreement.
9. Further Assurance. The Borrower will execute and deliver to the Bank
any writings and do all things necessary, or requested by the Bank to carry into
effect the provisions and intent of this Agreement, or to vest more fully in or
assure to the Bank the security interest in the Collateral granted to the Bank
by this Agreement or to comply with applicable statute or law and to facilitate
the collection of the Collateral, including the furnishing, at the Borrower's
own cost and expense, at such intervals as the Bank may establish from time to
time, of reports, financial data and analyses satisfactory to the Bank. A
carbon, photographic or other reproduction of this Agreement or any financing
statement executed pursuant to the terms hereof shall be sufficient as a
financing statement for the purpose of filing with the appropriate authorities.
10. Covenants and Warranties. The Borrower covenants with and warrants
to the Bank:
(a) That all Inventory in which the Bank is now or hereafter given a
security interest pursuant to this Agreement will at all times be kept and
maintained in good order and condition at the sole cost and expense of the
Borrower.
(b) That the Borrower will maintain in force one or more policies of
insurance on all Inventory against risks of fire (with customary extended
coverage), sprinkler leakage, theft, loss or damage and other risks customarily
insured against by companies engaged in businesses similar to that of the
Borrower in such amounts, containing such terms, in such form, for such periods,
covering such hazards and written by such companies as may be satisfactory to
the Bank, such insurance to be payable to the Bank as its interest may appear in
the event of loss; the policies for the same shall be deposited with the Bank;
no loss shall be adjusted thereunder without the Bank's approval; and all such
policies shall provide that they may not be cancelled without first giving at
least ten (10) days' written notice of cancellation to the Bank. In the event
that the Borrower fails to provide evidence of the maintenance of such insurance
satisfactory to the Bank, the Bank may, at is option, secure such insurance and
charge the cost thereof to the Borrower and as a debit charge in the Borrower's
Loan Account, if any, or any other account of the Borrower with the Bank. At the
option of the Bank, all insurance proceeds received from any loss or damage to
any of the Collateral shall be applied either to the replacement or repair
thereof or as a payment on account of the Obligations. From and after the
occurrence of an Event of Default, or after demand respecting any Obligations
payable upon demand, the Bank is authorized to cancel any insurance maintained
hereunder and apply any returned or unearned premiums, all of which are hereby
assigned to the Bank, as a payment on account of the Obligations.
5
(c) That at the date hereof the Borrower is (and as to Collateral that
the Borrower may acquire after the date hereof, will be) the lawful owner of the
Collateral, and that the Collateral, and each item thereof, is, will be, and
shall continue to be free of all restrictions, liens, encumbrances, or other
rights, title or interests (other than the security interest therein granted to
the Bank hereby), credits, defenses, recoupments, set-offs or counterclaims
whatsoever; that the Borrower has and will have full power and authority to
grant to the Bank a security interest therein, and that the Borrower has not
transferred, assigned, sold, pledged, encumbered, subjected to lien or granted
any security interest in, and will not transfer, assign, sell (except sales or
other dispositions in the ordinary course of business in respect to Inventory as
expressly permitted in this Agreement), pledge, encumber, subject to lien or
grant any security interest in any of the Collateral (or any of the Borrower's
right, title or interest therein), to any person other than the Bank; that the
Collateral is and will be valid and genuine in all respects; that all accounts
arise out of legally enforceable and existing contracts in accordance with their
tenor; and that upon the Borrower's acquisition of any interest in contract
rights, it shall in writing immediately notify the Bank thereof, specifically
identifying the same as contract rights, and, except for such contract rights,
no part of the Collateral (or the validity or enforceability by the Bank
thereof) is or shall be contingent upon the fulfillment of any agreement or
condition whatsoever and that the Collateral, other than Inventory and
Equipment, shall represent unconditional and undisputed bona fide indebtedness
by the Debtor for sales or leases of Inventory shipped and delivered or services
rendered by the Borrower to Debtor, and is not and will not be subject to any
discount (except such cash or trade discount as may be shown on any invoice,
contract or other writing delivered to the Bank); and that the Borrower will
warrant and defend the Bank's right to and interest in the Collateral against
all claims and demands of all persons whatsoever.
(d) That no contract right, account, general intangible or chattel
paper is or will be represented by any note or other instrument (negotiable or
otherwise), and that no contract right, account or general intangible is, or
will be represented by any conditional or installment sales obligation or other
chattel paper, except such instruments or chattel paper as have been or
forthwith upon receipt by the Borrower will be delivered to the Bank (duly
endorsed or assigned, as may be appropriate), such delivery, in the case of
chattel paper, to include all executed copies except those in the possession of
the installment buyer and that any security for or guaranty of any of the
Collateral shall be delivered to the Bank immediately upon receipt thereof by
the Borrower, with such assignments and endorsements thereof as the Bank may
request.
(e) That, except for sale, processing, use consumption or other
disposition in the ordinary course of business, the Borrower will keep all
Inventory only at locations specified in this Agreement; that the Borrower
shall, during the term of this Agreement, keep the Bank currently and accurately
informed in writing of each location where the Borrower's records relating to
its accounts and contract rights, respectively, are kept, and shall not remove
such records, or any of them, to another state without giving the Bank at least
thirty (30) days prior written notice thereof; that the Borrower's chief
executive office is correctly stated in the preamble to this Agreement, and
Borrower shall, during the term of this Agreement, keep the Bank currently and
accurately informed in writing of each of its other places of business, and
shall not change the location of such chief executive office or open any new, or
close, move or change any existing of new place of business without giving the
Bank at
7
least thirty (30) days prior written notice thereof.
(f) That the Bank shall not be deemed to have assumed any liability or
responsibility to the Borrower or any third person for the correctness, validity
or genuineness of any instruments or documents that may be released or endorsed
to the Borrower by the Bank (which shall automatically be deemed to be without
recourse to the Bank in any event) or for the existence, character, quantity,
quality, condition, value or delivery of any goods purporting to be represented
by any such documents; and that the Bank, by accepting such security interest in
the Collateral, or by releasing any Collateral to the Borrower, shall not be
deemed to have assumed any obligation or liability to any supplier or Debtor or
to any other third party, and the Borrower agrees to indemnify and defend the
Bank and hold it harmless in respect to any claim or proceeding arising out of
any matter referred to in this Paragraph.
(g) That each account or other item of Collateral, other than Inventory
and Equipment, will be paid in full on or before the date shown as its due date
in the schedule of Collateral, in the copy of the invoice(s) relating to the
account or other Collateral or in contracts relating thereto; that upon any
suspension of business, assignment or trust mortgage for the benefit of
creditors, dissolution, petition in receivership or under any chapter of the
Bankruptcy Code as amended from time to time by or against any Debtor, any
Debtor becoming insolvent or unable to pay its debts as they mature, or any
other act of the same or different nature amounting to a business failure, the
Borrower will forthwith notify the Bank thereof.
(h) That the Borrower will immediately notify the Bank of any loss or
damage to, or material diminution in or any occurrence which would adversely
affect the value of, the Inventory, the Equipment or other Collateral.
(i) That the Bank may from time to time in the Bank's discretion hold
and treat any deposits or other sums at any time credited by or due from the
Bank to the Borrower and any securities or other property of the Borrower in the
possession of the Bank, whether for safekeeping or otherwise, as collateral
security for and apply or set the same off against any Obligations whether or
not an Event of Default has occurred or demand has been made. Without limiting
the generality of the foregoing, if at any time the amount of the revolving
credit as then set by the Bank shall be exceeded, the Borrower shall pay cash to
the Bank in the amount of such excess if the Bank so requests, or the Bank may
charge such amount against any deposit account of the Borrower with the Bank.
(j) That if any of the Collateral includes a charge for, or if any loan
by the Bank to the Borrower shall be subject to any tax payable to any
governmental taxing authority, the Borrower shall pay such tax independently
when due. The Bank may retain the full proceeds of the Collateral and the
Borrower will indemnify and save the Bank harmless from any loss, cost,
liability or expense (including, without limitation, reasonable attorney's
fees), in connection therewith.
(k) That at any time or times and whether or not an Event of Default
has occurred or demand has been made, the Bank may notify any Debtor or Debtors
of its security interest in the Collateral and collect all amounts due thereon;
and the Borrower agrees, at the request of the Bank, to notify all or any of the
Debtors in writing of the Bank's security interest in the Collateral in whatever
manner the Bank
7
requests and, if the Bank so requests, to permit the Bank to mail such notices
at the Borrower's expense.
(l) That the Bank may, at its option, from time to time, discharge any
taxes, liens or encumbrances of any of the Collateral, or take any other action
that the Bank may deem proper to repair, maintain or preserve any of the
Collateral, and the Borrower will pay to the Bank on demand or the Bank in its
sole discretion may charge to the Borrower all amounts so paid or incurred by it
or as a debit charge against the Borrower's loan account, if any, or any other
deposit account of the Borrower with the Bank.
(m) That all representations now or hereafter made by the Borrower to
the Bank, whether in this Agreement or in any supporting or supplemental
reports, statements or documentation, including, without limitation, statements
relating to the Collateral and financial statements, are, will be, and shall
continue to be true and correct in all respects.
11. Power of Attorney. The Borrower hereby irrevocably constitutes and
appoints the Bank as the Borrower's true and lawful attorney, with full power of
substitution, at the sole cost and expense of the Borrower but for the sole
benefit of the Bank after occurrence of an Event of Default, to convert the
Collateral into cash, including, without limitation, completing the manufacture
or processing of work in process, and the sale (either public or private) of all
or any portion or portions of the Inventory and other Collateral; to enforce
collection of the Collateral, either in its own name or in the name of the
Borrower, including, without limitation, executing releases, compromising or
settling with any Debtors and prosecuting, defending, compromising or releasing
any action relating to the Collateral; to receive, open and dispose of all mail
addressed to the Borrower and to take therefrom any remittances or proceeds of
Collateral in which the Bank has a security interest; to notify Post Office
authorities to change the address for delivery of mail addressed to the Borrower
to such address as the Bank shall designate; to endorse the name of the Borrower
in favor of the Bank upon any and all checks, drafts, money orders, notes,
acceptances or other instruments of the same or different nature; to sign and
endorse the name of the Borrower on and to receive as secured party any of the
Collateral, any invoices schedules of Collateral, freight or express receipts,
or bills of lading, storage receipts, warehouse receipts, or other documents of
title of the same or different nature relating to the Collateral; to sign the
name of the Borrower on any notice of the Debtors or on verification of the
Collateral; and to sign and file or record on behalf of the Borrower any
financing or other statement in order to perfect or protect the Bank's security
interest. The Bank shall not be obliged to do any of the acts or exercise any of
the powers hereinabove authorized, but if the Bank elects to do any such act or
exercise any such power, it shall not be accountable for more than it actually
receives as a result of such exercise of power, and it shall not be responsible
to the Borrower except for willful misconduct in bad faith. All powers conferred
upon the Bank by this Agreement, being coupled with an interest, shall be
irrevocable so long as any Obligation of the Borrower to the Bank shall remain
unpaid.
Whenever the Bank deems it desirable that any legal action be
instituted with
8
respect to any Collateral or that any other action be taken in any attempt to
effectuate collection of any Collateral, the Bank may reassign the item in
question to the Borrower (and if the Bank shall execute any such reassignment,
it shall automatically be deemed to be without recourse to the Bank in any
event) and require the Borrower to proceed with such legal or other action at
the Borrower's sole liability, cost and expense, in which event all amounts
collected by the Borrower on such item shall nevertheless be subject to the
Bank's security interest.
12. Default. If an Event of Default shall occur, at the election of the
Bank, all Obligations shall become immediately due and payable without notice or
demand.
The Bank is hereby authorized, at its election, after an Event of
Default or after Demand, without any further demand or notice except to such
extent as notice may be required by applicable law, to take possession and/or
sell or otherwise dispose of all or any of the Collateral at public or private
sale; and the Bank may also exercise any and all other rights and remedies of a
secured party under the Code or which are otherwise accorded to it by applicable
law, all as the Bank may determine. If notice of a sale or other action by the
Bank is required by applicable law, unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Borrower agrees that five (5) days' written notice to the
Borrower, or the shortest period of written notice permitted by such law,
whichever is larger, shall be sufficient notice; and that to the extent
permitted by law, the Bank, its officers, attorneys and agents may bid and
become purchasers at any such sale, if public, and may purchase at any private
sale any of the Collateral that is of a type customarily sold on a recognized
market or which is the subject of widely distributed standard price quotations.
Any sale (public or private) shall be free from any right of redemption, which
the Borrower hereby waives and releases. No purchaser at any sale (public or
private) shall be responsible for the application of the purchase money. Any
balance of the net proceeds of sale remaining after paying all Obligations of
the Borrower to the Bank shall be returned to the Borrower or to such other
party as may be legally entitled thereto; and if there is a deficiency, the
Borrower shall be responsible for the same, with interest. Upon demand by the
Bank, the Borrower shall assemble the Collateral and make it available to the
Bank at a place designated by the Bank which is reasonably convenient to the
Bank and the Borrower. The Borrower hereby acknowledges that the Bank has
extended credit and other financial accommodations to the Borrower upon reliance
of the Borrower's granting the Bank the rights and remedies contained in this
Agreement including without limitation the right to take immediate possession of
the Collateral upon the occurrence of an Event of Default or after DEMAND with
respect to Obligations payable on DEMAND and the Borrower hereby acknowledges
that the Bank is entitled to equitable and injunctive relief to enforce any of
its rights and remedies hereunder or under the Code and the Borrower hereby
waives any defense to such equitable or injunctive relief based upon any
allegation of the absence of irreparable harm to the Bank.
13. Indemnification. The Borrower shall indemnify, defend, and hold the
Bank harmless of and from any claim brought or threatened against the Bank by
the Borrower, any guarantor or endorser of the Obligations, or any other person
(as well from attorneys' reasonable fees and expenses in connection therewith)
on account of the Bank's relationship with the Borrower, or any guarantor or
endorser of the Obligations (each of which may be defended, compromised,
settled, or pursued by the Bank with counsel of the Bank's election, but at the
expense of the Borrower). The Borrowers
9
shall not be required to indemnify the Bank from any loss or cost which arises
primarily from the Bank's own gross negligence or intentional misconduct. The
within indemnification shall survive payment of the Obligations, and/or any
termination, release, or discharge executed by the Bank in favor of the
Borrower.
14. Waivers. The Borrower waives notice of nonpayment, demand,
presentment, protest or notice of protest of the Collateral, and all other
notices, consents to any renewals or extensions of time of payment thereof, and
generally waives any and all suretyship defenses and defenses in the nature
thereof. No delay or omission of the Bank in exercising or enforcing any of its
rights, powers, privileges, remedies, immunities or discretions (all of which
are hereinafter collectively referred to as "the Bank's rights and remedies")
hereunder shall constitute a waiver thereof; and no waiver by the Bank of any
default of the Borrower hereunder or of any demand shall operate as a waiver of
any other default hereunder or of any other demand. No term or provision hereof
shall be waived, altered or modified except with the prior written consent of
the Bank, which consent makes explicit reference to this Agreement. Except as
provided in the preceding sentence, no other agreement or transaction, of
whatsoever nature, entered into between the Bank and the Borrower at any time
(whether before, during or after the effective date or term of this Agreement)
shall be construed as a waiver, modification or limitation of any of the Bank's
rights and remedies under this Agreement (nor shall anything in this Agreement
be construed as a waiver, modification or limitation of any of the Bank's rights
and remedies under any such other agreement or transaction) but all the Bank's
rights and remedies not only under the provisions of this Agreement but also
under any such other agreement or transaction shall be cumulative and not
alternative or exclusive, and may be exercised by the Bank at such time or times
and in such order of preference as the Bank in its sole discretion may
determine.
15. Severability. If any provision of this Agreement or portion of such
provision or the application thereof to any person or circumstance shall to any
extent be held invalid or unenforceable, the remainder of this Agreement (or the
remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.
16. Binding Effect of Agreement. This Agreement shall be binding upon
and inure to the benefit of the respective heirs, executors, administrators,
legal representatives, successors and assigns of the parties hereto, and shall
remain in full force and effect (and the Bank shall be entitled to rely thereon)
until terminated as to future transactions by written notice from either party
to the other party of the termination hereof; provided that any such termination
shall not release or affect any Collateral in which the Bank already has a
security interest or any Obligations incurred or rights accrued hereunder prior
to the effective date of such notice (as hereinafter defined) of such
termination. Notwithstanding any such termination, the Bank shall have a
security interest in all Collateral to secure the payment and performance of
Obligations arising after such termination as a result of commitments or
undertakings made or entered into by the Bank prior to such termination. The
Bank may transfer and assign this Agreement and deliver the Collateral to the
assignee, who shall thereupon have all of the rights of the Bank; and the Bank
shall then be relieved and discharged of any any responsibility or liability
with respect to this Agreement and the Collateral.
10
17. Notices. Any notices under or pursuant to this Agreement shall be
deemed duly received by the Borrower and effective if delivered in hand to any
officer or agent of the Borrower, or if mailed by registered or certified mail,
return receipt requested, addressed to the Borrower at the Borrower's last
address on the Bank's records. Any notices to the Bank under or pursuant to this
Agreement shall be mailed to the Bank by registered, certified, or express mail,
return receipt requested, addressed to the Bank at the address shown at the
beginning of this Agreement and shall be deemed effective five (5) days after
receipt by the Bank.
18. Massachusetts Law. This Agreement is intended to take effect as a
sealed instrument, and it and all transactions thereunder or pursuant thereto
shall be governed as to interpretation, validity, effect, rights, duties and
remedies of the parties thereunder and in all other respects by the internal
laws of the Commonwealth of Massachusetts.
19. Reproductions. This Agreement and all documents which have been or
may be hereinafter furnished by Borrower to the Bank may be reproduced by the
Bank by any photographic, photostatic, microfilm, xerographic, or similar
process, and any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business).
20. Jurisdiction and Venue. Borrower irrevocably submits to the
non-exclusive jurisdiction of any federal or state court sitting in Suffolk
County of Massachusetts, the County of Los Angeles, California, or at Bank's
discretion any other court in which the Bank shall initiate legal or equitable
proceedings and which has jurisdiction over the parties and any suit, action or
proceeding arising out of or relating to this Agreement. Borrower irrevocably
waives, to the fullest extent it may effectively do so under applicable law, any
objection it may have or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that the same
has been brought in an inconvenient forum.
21. JURY WAIVER. THE BORROWER AND BANK EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL, WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
IN CONNECTION WITH THIS AGREEMENT, THE OBLIGATIONS, IN ALL MATTERS CONTEMPLATED
HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. THE BORROWER CERTIFIES
THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT IN THE EVENT OF ANY
SUCH PROCEEDING, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
MARKET MEDIA, INC.
[By:] /s/ Dennis Caulfield
--------------------------
Name: Dennis Caulfield
--------------------------
Title: Chief Executive Officer
--------------------------
11
ACCEPTED:
FOOTHILL CAPITAL CORPORATION
By: /s/ Stephen C. Weber
----------------------
Name: Stephen C. Weber
----------------------
Title: Senior Vice President
----------------------
12
LEGAL CHARGE AND SECURITY AGREEMENT
(All Asset)
AGREEMENT entered into at 100 Federal Street, Boston,
Massachusetts this 25th day of November 1996 between BPI Packaging (UK) Limited,
a Private Limited Company incorporated under the United Kingdom Companies Act of
1985 with a registered office situated at 211 Picadilly, London, England W1V9LD
(hereinafter called the "Guarantor") and Foothill Capital Corporation, a
California corporation with a place of business at 1111 Santa Monica Boulevard,
Los Angeles, California (the "Lender"). The tangible personal property which is
the subject matter of this Agreement is and will be kept at the Guarantor's
address indicated above.
1 . Grant of Security Interest. In consideration of the Lender's
extending financial accommodations to the Guarantor, through loans made to BPI
Packaging Technologies, Inc. ("BPI") under a Loan and Security Agreement (the
"Loan Agreement") dated November __,1996, and to secure Guarantor's obligations
pursuant to Guarantor's Guaranty of the obligations of BPI Packaging
Technologies, Inc. to the Lender, the Guarantor hereby grants to the Lender a
security interest in and floating charge in and against (including, without
limitation, a lien on and pledge of) all of the Guarantor's Collateral (as
hereinafter defined). The security interest and floating charge granted by this
Agreement is given to and shall be held by the Lender as security for the
payment and performance of all Obligations (as hereinafter defined). The Lender
shall have the unrestricted right from time to time apply (or to change any
application already made of) the proceeds of any of the Collateral to any of the
Obligations, as the Lender in its sole discretion may determine. The Guarantor
will, at such intervals as the Lender may request, notify the Lender, upon a
form satisfactory to the Lender, of all Collateral which has come into existence
since the date hereof or the date of the last such notification, including,
without limitation, the delivery of schedules of the Collateral and/or proceeds
resulting from the sale or other disposition thereof.
2. Definitions. The following definitions shall apply:
(a) "Collateral" shall mean all the Guarantor's present and future
right, title and interest in and to any and all of the following property,
whether such property is now existing or hereafter created:
(i) All Inventory;
(ii) All accounts, accounts receivable, contract rights, and chattel
paper, regardless of whether or not they constitute proceeds of
other Collateral;
(iii) All general intangibles, regardless of whether or not they
constitute proceeds of other Collateral, including, without
limitation, all of the Guarantor's rights to tax refunds and
all the Guarantor's rights (which
1
the Lender may exercise or not as it in its sole discretion may
determine) to acquire or obtain goods and/or services with
respect to the manufacture, processing, storage, sale,
shipment, delivery or installation of any of the Guarantor's
inventory or other Collateral:
iv) All products of and accessions to any of the Collateral;
(v) All liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the Collateral, including the
right of stoppage in transit;
(vi) All obligations owing to the Guarantor of every kind and
nature; and all choses in action;
(vii) All goodwill, trade secrets, computer programs (other than
programs relating to production equipment), customer lists,
trade names, trademarks and patents;
(viii) All documents and instruments (whether negotiable or
non-negotiable, and regardless of their being attached to
chattel paper);
(ix) All proceeds of Collateral of every kind and nature in whatever
form, including, without limitation, both cash and noncash
proceeds resulting or arising from the rendering of services by
the Guarantor or the sale or other disposition by the Guarantor
of the Inventory or other Collateral;
(x) All books and records relating to the conduct of the
Guarantor's business including, without in any way limiting the
generality of the foregoing, those relating to its accounts;
and
(xi) All deposit accounts maintained by the Guarantor with any bank,
trust company, investment firm or fund, or any similar
institution or organization.
(b) "Contract Rights" or "contract rights" means rights of the
Guarantor to payment under contracts not yet earned by performance and not
evidenced by instruments or chattel paper.
(c) "Inventory" shall include, without limitation, any and all goods,
wares, merchandise and other tangible personal property, including raw
materials, work in process, supplies and components, and finished goods, whether
held by the Guarantor for sale or other disposition, and also including any
returned or repossessed inventory or inventory detained from or rejected for
entry into the United States by the appropriate governmental authorities, all
products of and accessions to inventory and including documents of title,
whether negotiable or non-negotiable, representing any of the foregoing.
(d) "Debtors" shall mean the Guarantor's customers who are indebted
to the Guarantor.
2
(e) "Obligation(s)" shall include, without limitation, all loans,
advances, indebtedness, notes, liabilities and amounts, liquidated or
unliquidated, owing by the Guarantor to the Lender at any time, of each and
every kind, nature and description, whether arising under this Agreement or
otherwise, and whether secured or unsecured, direct or indirect (that is,
whether the same are due directly by the Guarantor to the Lender; or are due
indirectly by the Guarantor to the Lender as endorser, guarantor or other
surety, or as obligor of obligations due third persons which have been endorsed
or assigned to the Lender, or otherwise), absolute or contingent, due or to
become due, now existing or hereafter contracted. Said term shall also include
all interest and other charges chargeable to the Guarantor or due from the
Guarantor to the Lender from time to time and all costs and expenses referred to
in this Agreement.
(f) "Person" or "party" shall include individuals, firms,
corporations and all other entities.
(g) "Event of Default" shall mean the occurrence of any one or more
of the following events:
(1) default of any liability, obligation or undertaking of the
Guarantor to the Lender hereunder;
(2) an Event of Default under the Loan and Security Agreement
of even date among BPI, RC AMERICA, INC. ("RC") and the Lender
(the "Loan Agreement");
(3) occurrence with respect to the Guarantor of one of the
Events of Default set forth in the Loan Agreement as if the
Guarantor hereunder was a party to the Loan Agreement; or
(4) the termination of any guaranty of the obligations of BPI
and RC to the Lender.
All words and terms used in this Agreement other than those
specifically defined herein shall have the meanings accorded to them in the
Massachusetts Uniform Commercial Code (General Law, Chapter 106) as amended from
time to time (herein the "Code").
3. Ordinary Course of Business. The Lender hereby authorizes and
permits the Guarantor to hold, process, sell, use or consume in the manufacture
or processing of finished goods, or otherwise dispose of the Inventory for fair
consideration, all in the ordinary course of the Guarantor's business,
excluding, without limitation, sales to creditors or in bulk or sales or other
dispositions occurring under circumstances which would or could create any lien
or interest adverse to the Lender's security interest or other right hereunder
in the proceeds resulting therefrom. The Lender also hereby authorizes and
permits the Guarantor to receive from the Debtors all amounts due as proceeds of
the Collateral at the Guarantor's own cost and expense, and also liability, if
any, subject to the direction and control of the Lender at all times; and the
Lender may at any time, without cause or notice, and whether or not a default
has occurred or demand has been made, terminate all or any part of the authority
and permission herein or elsewhere in this Agreement granted to the
3
Guarantor with reference to the Collateral.
Until the Lender shall otherwise notify the Guarantor, all proceeds
of and collections of Collateral shall be retained by the Guarantor and used
solely for the ordinary and usual operation of the Guarantor's business. From
and after notice by the Lender to the Guarantor, all proceeds of and collections
of the Collateral shall be held in trust by the Guarantor for the Lender and
shall not be commingled with the Guarantor's other funds or deposited in any
bank account of the Guarantor; and the Guarantor agrees to deliver to the Lender
on the dates of receipt thereof by the Guarantor, duly endorsed to the Lender or
to bearer, or assigned to the Lender, as may be appropriate, all proceeds of the
Collateral in the identical form received by the Guarantor.
4. Allowances. The Guarantor may grant such allowances or other
adjustments to Debtors (exclusive of extending the time for payment of any item
which shall not be done without first obtaining the Lender's written consent in
each instance) as the Guarantor may reasonably deem to accord with sound
business practice, including, without limiting the generality of the foregoing
accepting the return of all or any part of the Inventory (subject to the
provisions set forth in this Agreement with reference to returned Inventory).
5. Costs and Expenses. The Guarantor shall pay to the Lender any and
all costs and expenses (including, without limitation, reasonable attorneys'
fees, court costs, litigation and other expenses) incurred or paid by the Lender
in establishing, maintaining, protecting or enforcing any of the Lender's rights
or the Obligations, including, without limitation, any and all such costs and
expenses incurred or paid by the Lender in defending the Lender's security
interest in, title or right to the Collateral or in collecting or attempting to
collect or enforcing or attempting to enforce payment of the Collateral.
6. Books and Records. The Guarantor shall hold its books and records
relating to the Collateral segregated from all the Guarantor's other books and
records in a manner satisfactory to the Lender; and shall deliver to the Lender
from time to time promptly at its request, all invoices, original documents of
title, contracts, chattel paper, instruments and any other writings relating
thereto, and other evidence of performance of contracts, or evidence of shipment
or delivery of the merchandise or of the rendering of services; and the
Guarantor will deliver to the Lender promptly at the Lender's request from time
to time additional copies of any or all of such papers or writings, and such
other information with respect to any of the Collateral and such schedules of
Inventory, schedules of accounts and such other writings as the Lender may in
its sole discretion deem to be necessary or effectual to evidence any loan
hereunder or the Lender's security interest in the Collateral.
7. Legends. The Guarantor shall promptly make, stamp or record such
entries or legends on the Guarantor's books and records or on any of the
Collateral as the Lender shall request from time to time to indicate and
disclose that the Lender has a security interest in such Collateral.
8. Inspection. The Lender, or its representatives, at any time and
from time to time, shall have the right, and the Guarantor will permit it and
them:
4
(a) to examine, check, make copies of or extracts from any of the
Guarantor's books, records and files (including, without limitation, orders and
original correspondence);
(b) to inspect and examine the Guarantor's Inventory or other
Collateral and to check and test the same as to quality, quantity, value and
condition; and the Guarantor agrees to reimburse the Lender for its reasonable
costs and expenses in so doing; and
(c) to verify the Collateral or any portion or portions thereof or
the Guarantor's compliance with the provisions of this Agreement.
9. Further Assurance. The Guarantor will execute and deliver to the
Lender any writings and do all things necessary, or requested by the Lender to
carry into effect the provisions and intent of this Agreement, or to vest more
fully in or assure to the Lender the security interest in the Collateral granted
to the Lender by this Agreement or to comply with applicable statute or law and
to facilitate the collection of the Collateral, including the furnishing, at the
Guarantor's own cost and expense, at such intervals as the Lender may establish
from time to time, of reports, financial data and analyses satisfactory to the
Lender. A carbon, photographic or other reproduction of this Agreement or any
financing statement executed pursuant to the terms hereof shall be sufficient as
a financing statement for the purpose of filing with the appropriate
authorities.
10. Covenants and Warranties. The Guarantor covenants with and
warrants to the Lender:
(a) That all Inventory in which the Lender is now or hereafter given
a security interest pursuant to this Agreement will at all times be kept and
maintained in good order and condition at the sole cost and expense of the
Guarantor.
(b) That the Guarantor will maintain in force one or more policies of
insurance on all Inventory against risks of fire (with customary extended
coverage), sprinkler leakage, theft, loss or damage and other risks customarily
insured against by companies engaged in businesses similar to that of the
Guarantor in such amounts, containing such terms, in such form, for such
periods, covering such hazards and written by such companies as may be
satisfactory to the Lender, such insurance to be payable to the Lender as its
interest may appear in the event of loss; the policies for the same shall be
deposited with the Lender; no loss shall be adjusted thereunder without the
Lender's approval; and all such policies shall provide that they may not be
cancelled without first giving at least ten (10) days' written notice of
cancellation to the Lender. In the event that the Guarantor fails to provide
evidence of the maintenance of such insurance satisfactory to the Lender, the
Lender may, at is option, secure such insurance and charge the cost thereof to
the Guarantor and as a debit charge in the Guarantor's Loan Account, if any, or
any other account of the Guarantor with the Lender. At the option of the Lender,
all insurance proceeds
5
received from any loss or damage to any of the Collateral shall be applied
either to the replacement or repair thereof or as a payment on account of the
Obligations. From and after the occurrence of an Event of Default, or after
demand respecting any Obligations payable upon demand, the Lender is authorized
to cancel any insurance maintained hereunder and apply any returned or unearned
premiums, all of which are hereby assigned to the Lender, as a payment on
account of the Obligations.
(c) That at the date hereof the Guarantor is (and as to Collateral
that the Guarantor may acquire after the date hereof, will be) the lawful owner
of the Collateral, and that the Collateral, and each item thereof, is, will be,
and shall continue to be free of all restrictions, liens, encumbrances, or other
rights, title or interests (other than the security interest therein granted to
the Lender hereby), credits, defenses, recoupments, set-offs or counterclaims
whatsoever; that the Guarantor has and will have full power and authority to
grant to the Lender a security interest therein, and that the Guarantor has not
transferred, assigned, sold, pledged, encumbered, subjected to lien or granted
any security interest in, and will not transfer, assign, sell (except sales or
other dispositions in the ordinary course of business in respect to Inventory as
expressly permitted in this Agreement), pledge, encumber, subject to lien or
grant any security interest in any of the Collateral (or any of the Guarantor's
right, title or interest therein), to any person other than the Lender; that the
Collateral is and will be valid and genuine in all respects; that all accounts
arise out of legally enforceable and existing contracts in accordance with their
tenor; and that upon the Guarantor's acquisition of any interest in contract
rights, it shall in writing immediately notify the Lender thereof, specifically
identifying the same as contract rights, and, except for such contract rights,
no part of the Collateral (or the validity or enforceability by the Lender
thereof) is or shall be contingent upon the fulfillment of any agreement or
condition whatsoever and that the Collateral, other than Inventory and
Equipment, shall represent unconditional and undisputed bona fide indebtedness
by the Debtor for sales or leases of Inventory shipped and delivered or services
rendered by the Guarantor to Debtor, and is not and will not be subject to any
discount (except such cash or trade discount as may be shown on any invoice,
contract or other writing delivered to the Lender); and that the Guarantor will
warrant and defend the Lender's right to and interest in the Collateral against
all claims and demands of all persons whatsoever.
(d) That no contract right, account, general intangible or chattel
paper is or will be represented by any note or other instrument (negotiable or
otherwise), and that no contract right, account or general intangible is, or
will be represented by any conditional or installment sales obligation or other
chattel paper, except such instruments or chattel paper as have been or
forthwith upon receipt by the Guarantor will be delivered to the Lender (duly
endorsed or assigned, as may be appropriate), such delivery, in the case of
chattel paper, to include all executed copies except those in the possession of
the installment buyer and that any security for or guaranty of any of the
Collateral shall be delivered to the Lender immediately upon receipt thereof by
the Guarantor, with such assignments and endorsements thereof as the Lender may
request.
(e) That, except for sale, processing, use consumption or other
disposition in the ordinary course of business, the Guarantor will keep all
Inventory only at locations specified in this Agreement; that the Guarantor
shall, during the term of this Agreement, keep the Lender currently and
accurately informed in writing of each
6
location where the Guarantor's records relating to its accounts and contract
rights, respectively, are kept, and shall not remove such records, or any of
them, to another state without giving the Lender at least thirty (30) days prior
written notice thereof; that the Guarantor's chief executive office is correctly
stated in the preamble to this Agreement, and Guarantor shall, during the term
of this Agreement, keep the Lender currently and accurately informed in writing
of each of its other places of business, and shall not change the location of
such chief executive office or open any new, or close, move or change any
existing of new place of business without giving the Lender at least thirty (30)
days prior written notice thereof.
(f) That the Lender shall not be deemed to have assumed any liability
or responsibility to the Guarantor or any third person for the correctness,
validity or genuineness of any instruments or documents that may be released or
endorsed to the Guarantor by the Lender (which shall automatically be deemed to
be without recourse to the Lender in any event) or for the existence, character,
quantity, quality, condition, value or delivery of any goods purporting to be
represented by any such documents; and that the Lender, by accepting such
security interest in the Collateral, or by releasing any Collateral to the
Guarantor, shall not be deemed to have assumed any obligation or liability to
any supplier or Debtor or to any other third party, and the Guarantor agrees to
indemnify and defend the Lender and hold it harmless in respect to any claim or
proceeding arising out of any matter referred to in this Paragraph.
(g) That each account or other item of Collateral, other than
Inventory will be paid in full on or before the date shown as its due date in
the schedule of Collateral, in the copy of the invoice(s) relating to the
account or other Collateral or in contracts relating thereto; that upon any
suspension of business, assignment or trust mortgage for the benefit of
creditors, dissolution, petition in receivership or under any chapter of the
Bankruptcy Code as amended from time to time by or against any Debtor, any
Debtor becoming insolvent or unable to pay its debts as they mature, or any
other act of the same or different nature amounting to a business failure, the
Guarantor will forthwith notify the Lender thereof.
(h) That the Guarantor will immediately notify the Lender of any loss
or damage to, or material diminution in or any occurrence which would adversely
affect the value of, the Inventory, or other Collateral.
(i) That the Lender may from time to time in the Lender's discretion
hold and treat any deposits or other sums at any time credited by or due from
the Lender to the Guarantor and any securities or other property of the
Guarantor in the possession of the Lender, whether for safekeeping or otherwise,
as collateral security for and apply or set the same off against any Obligations
whether or not an Event of Default has occurred or demand has been made. Without
limiting the generality of the foregoing, if at any time the amount of the
revolving credit as then set by the Lender shall be exceeded, the Guarantor
shall pay cash to the Lender in the amount of such excess if the Lender so
requests, or the Lender may charge such amount against any deposit account of
the Guarantor with the Lender.
(j) That if any of the Collateral includes a charge for, or if any
loan by the Lender to the Guarantor shall be subject to any tax payable to any
governmental taxing authority, the Guarantor shall pay such tax independently
when due. The Lender
7
may retain the full proceeds of the Collateral and the Guarantor will indemnify
and save the Lender harmless from any loss, cost, liability or expense
(including, without limitation, reasonable attorney's fees), in connection
therewith.
(k) That at any time or times and whether or not an Event of Default
has occurred or demand has been made, the Lender may notify any Debtor or
Debtors of its security interest in the Collateral and collect all amounts due
thereon; and the Guarantor agrees, at the request of the Lender, to notify all
or any of the Debtors in writing of the Lender's security interest in the
Collateral in whatever manner the Lender requests and, if the Lender so
requests, to permit the Lender to mail such notices at the Guarantor's expense.
(l) That the Lender may, at its option, from time to time, discharge
any taxes, liens or encumbrances of any of the Collateral, or take any other
action that the Lender may deem proper to repair, maintain or preserve any of
the Collateral, and the Guarantor will pay to the Lender on demand or the Lender
in its sole discretion may charge to the Guarantor all amounts so paid or
incurred by it or as a debit charge against the Guarantor's loan account, if
any, or any other deposit account of the Guarantor with the Lender.
(m) That the Lender in its sole discretion from time to time shall
have the right to demand and receive from the Guarantor additional property of
nature and types not included in this Agreement, including, without limitation,
interests in real property, and thereupon the words "Collateral" and "security
interest" shall be deemed to include, any and all such additional property and
the Lender's interests therein. The Guarantor shall promptly, upon request of
the Lender, deliver, transfer, assign and make over to the Lender all the
Guarantor's right, title and interest in any such additional property; and shall
execute and deliver to the Lender any writings and do all things necessary,
effectual or requested by the Lender to vest fully in or assure to the Lender
(including, without limitation, all steps to create and perfect) its security
interest in such additional property. The Lender shall have in respect to such
additional property all the rights, powers, privileges, discretions and
immunities granted to it under this Agreement with the same force and effect as
if said additional property had been listed herein, including, without
limitation, the right to apply such property, or any part thereof, and any
proceeds thereof to any Obligation.
(n) That all representations now or hereafter made by the Guarantor
to the Lender, whether in this Agreement or in any supporting or supplemental
reports, statements or documentation, including, without limitation, statements
relating to the Collateral and financial statements, are, will be, and shall
continue to be true and correct in all respects.
11. Power of Attorney. The Guarantor hereby irrevocably constitutes
and appoints the Lender as the Guarantor's true and lawful attorney, with full
power of substitution, at the sole cost and expense of the Guarantor but for the
sole benefit of the Lender, to convert the Collateral into cash, including,
without limitation, completing the manufacture or processing of work in process,
and the sale (either public or private) of all or any portion or portions of the
Inventory and other Collateral; to enforce collection of the Collateral, either
in its own name or in the
8
name of the Guarantor, including, without limitation, executing releases,
compromising or settling with any Debtors and prosecuting, defending,
compromising or releasing any action relating to the Collateral; to receive,
open and dispose of all mail addressed to the Guarantor and to take therefrom
any remittances or proceeds of Collateral in which the Lender has a security
interest; to notify Post Office authorities to change the address for delivery
of mail addressed to the Guarantor to such address as the Lender shall
designate; to endorse the name of the Guarantor in favor of the Lender upon any
and all checks, drafts, money orders, notes, acceptances or other instruments of
the same or different nature; to sign and endorse the name of the Guarantor on
and to receive as secured party any of the Collateral, any invoices schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title of the same or different nature
relating to the Collateral; to sign the name of the Guarantor on any notice of
the Debtors or on verification of the Collateral; and to sign and file or record
on behalf of the Guarantor any financing or other statement in order to perfect
or protect the Lender's security interest. The Lender shall not be obliged to do
any of the acts or exercise any of the powers hereinabove authorized, but if the
Lender elects to do any such act or exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise of
power, and it shall not be responsible to the Guarantor except for willful
misconduct in bad faith. All powers conferred upon the Lender by this Agreement,
being coupled with an interest, shall be irrevocable so long as any Obligation
of the Guarantor to the Lender shall remainunpaid.
Whenever the Lender deems it desirable that any legal action be
instituted with respect to any Collateral or that any other action be taken in
any attempt to effectuate collection of any Collateral, the Lender may reassign
the item in question to the Guarantor (and if the Lender shall execute any such
reassignment, it shall automatically be deemed to be without recourse to the
Lender in any event) and require the Guarantor to proceed with such legal or
other action at the Guarantor's sole liability, cost and expense, in which event
all amounts collected by the Guarantor on such item shall nevertheless be
subject to the Lender's security interest.
12. Default. If an Event of Default shall occur, at the election of
the Lender, all Obligations shall become immediately due and payable without
notice or demand, except with respect to Obligations payable on DEMAND, which
shall be due and payable on DEMAND, whether or not an Event of Default has
occurred.
The Lender is hereby authorized, at its election, after an Event of
Default or after Demand, without any further demand or notice except to such
extent as notice may be required by applicable law, to take possession and/or
sell or otherwise dispose of all or any of the Collateral at public or private
sale; and the Lender may also exercise any and all other rights and remedies of
a secured party under the Code or which are otherwise accorded to it by
applicable law, all as the Lender may determine. If notice of a sale or other
action by the Lender is required by applicable law, unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Guarantor agrees that five (5) days' written
notice to the Guarantor, or the shortest period of written notice permitted by
such law, whichever is larger, shall be sufficient notice; and that to the
extent permitted by law, the Lender, its officers, attorneys and agents may bid
and become purchasers at any such sale, if public, and may purchase at any
private
9
sale any of the Collateral that is of a type customarily sold on a recognized
market or which is the subject of widely distributed standard price quotations.
Any sale (public or private) shall be free from any right of redemption, which
the Guarantor hereby waives and releases. No purchaser at any sale (public or
private) shall be responsible for the application of the purchase money. Any
balance of the net proceeds of sale remaining after paying all Obligations of
the Guarantor to the Lender shall be returned to the Guarantor or to such other
party as may be legally entitled thereto; and if there is a deficiency, the
Guarantor shall be responsible for the same, with interest. Upon demand by the
Lender, the Guarantor shall assemble the Collateral and make it available to the
Lender at a place designated by the Lender which is reasonably convenient to the
Lender and the Guarantor. The Guarantor hereby acknowledges that the Lender has
extended credit and other financial accommodations to the Guarantor upon
reliance of the Guarantor's granting the Lender the rights and remedies
contained in this Agreement including without limitation the right to take
immediate possession of the Collateral upon the occurrence of an Event of
Default or after DEMAND with respect to Obligations payable on DEMAND and the
Guarantor hereby acknowledges that the Lender is entitled to equitable and
injunctive relief to enforce any of its rights and remedies hereunder or under
the Code and the Guarantor hereby waives any defense to such equitable or
injunctive relief based upon any allegation of the absence of irreprable harm to
the Lender.
13. Indemnification. The Guarantor shall indemnify, defend, and hold
the Lender harmless of and from any claim brought or threatened against the
Lender by the Guarantor, any guarantor or endorser of the Obligations, or any
other person (as well from attorneys' reasonable fees and expenses in connection
therewith) on account of the Lender's relationship with the Guarantor, or any
guarantor or endorser of the Obligations (each of which may be defended,
compromised, settled, or pursued by the Lender with counsel of the Lender's
election, but at the expense of the Guarantor). The within indemnification shall
survive payment of the Obligations, and/or any termination, release, or
discharge executed by the Lender in favor of the Guarantor.
14. Waivers. The Guarantor waives notice of nonpayment, demand,
presentment, protest or notice of protest of the Collateral, and all other
notices, consents to any renewals or extensions of time of payment thereof, and
generally waives any and all suretyship defenses and defenses in the nature
thereof. No delay or omission of the Lender in exercising or enforcing any of
its rights, powers, privileges, remedies, immunities or discretions (all of
which are hereinafter collectively referred to as "the Lender's rights and
remedies") hereunder shall constitute a waiver thereof; and no waiver by the
Lender of any default of the Guarantor hereunder or of any demand shall operate
as a waiver of any other default hereunder or of any other demand. No term or
provision hereof shall be waived, altered or modified except with the prior
written consent of the Lender, which consent makes explicit reference to this
Agreement. Except as provided in the preceding sentence, no other agreement or
transaction, of whatsoever nature, entered into between the Lender and the
Guarantor at any time (whether before, during or after the effective date or
term of this Agreement) shall be construed as a waiver, modification or
limitation of any of the Lender's rights and remedies under this Agreement (nor
shall anything in this Agreement be construed as a waiver, modification or
limitation of any of the Lender's rights and remedies under any such other
agreement or transaction) but all the Lender's rights and remedies not only
under the provisions of this Agreement but also under any such other agreement
or transaction shall be cumulative and not alternative
10
or exclusive, and may be exercised by the Lender at such time or times and in
such order of preference as the Lender in its sole discretion may determine.
15. Severability. If any provision of this Agreement or portion of
such provision or the application thereof to any person or circumstance shall to
any extent be held invalid or unenforceable, the remainder of this Agreement (or
the remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.
16. Binding Effect of Agreement. This Agreement shall be binding upon
and inure to the benefit of the respective heirs, executors, administrators,
legal representatives, successors and assigns of the parties hereto, and shall
remain in full force and effect (and the Lender shall be entitled to rely
thereon) until terminated as to future transactions by written notice from
either party to the other party of the termination hereof; provided that any
such termination shall not release or affect any Collateral in which the Lender
already has a security interest or any Obligations incurred or rights accrued
hereunder prior to the effective date of such notice (as hereinafter defined) of
such termination. Notwithstanding any such termination, the Lender shall have a
security interest in all Collateral to secure the payment and performance of
Obligations arising after such termination as a result of commitments or
undertakings made or entered into by the Lender prior to such termination. The
Lender may transfer and assign this Agreement and deliver the Collateral to the
assignee, who shall thereupon have all of the rights of the Lender; and the
Lender shall then be relieved and discharged of any any responsibility or
liability with respect to this Agreement and the Collateral.
17. Notices. Any notices under or pursuant to this Agreement shall be
deemed duly received by the Guarantor and effective if delivered in hand to any
officer or agent of the Guarantor, or if mailed by registered or certified mail,
return receipt requested, addressed to the Guarantor at the Guarantor's last
address on the Lender's records. Any notices to the Lender under or pursuant to
this Agreement shall be mailed to the Lender by registered, certified, or
express mail, return receipt requested, addressed to the Lender at the address
shown at the beginning of this Agreement and shall be deemed effective five (5)
days after receipt by the Lender.
18. Reproductions. This Agreement and all documents which have been
or may be hereinafter furnished by Guarantor to the Lender may be reproduced by
the Lender by any photographic, photostatic, microfilm, xerographic, or similar
process, and any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business).
BORROWER:
BPI PACKAGING (UK) LIMITED
[By:] /s/ Dennis N. Caulfield
-----------------------
Name: Dennis N. Caulfield
-----------------------
11
Title: Chief Executive Officer
---------------------------
[By:]____________________________
Name:____________________________
Title:___________________________
ACCEPTED:
Foothill Capital Corporation
By: /s/ Stephen C. Weber
-------------------------
Senior Vice President
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss November 25, 1996
Then personally appeared the above-named, Dennis N. Caulfield the CEO
of BPI Packaging (UK) Limited, and acknowledged the foregoing instrument to be
his free act and deed, before me,
------------------------------------
, Notary Public
My Commission Expires: Nov. 2, 2002
12
CONFIDENTIAL TREATMENT
SETTLEMENT AGREEMENT
This Settlement Agreement is made, entered into, and effective as of
this 19th day of December, 1996 (the "Effective Date"), by and between Mobil Oil
Corporation, a New York corporation with its principal place of business at 3225
Gallows Road, Fairfax, Virginia 22037 ("Mobil"), and BPI Packaging Technologies,
Inc., a Delaware corporation with its principal place of business at 455
Somerset Avenue, Dighton, Massachusetts 02764 ("BPI").
WHEREAS, Mobil filed an action against BPI in the United States
District Court for the District of Delaware (Civil Action No. 95-737) (the
"Action") alleging infringement of Mobil's U.S. Patent No. Re. 34,019 (the "019
patent"), which issued on August 4, 1992 and is directed to plastic carrying
bags;
WHEREAS, BPI filed a counterclaim against Mobil in the Action alleging
infringement of BPI's U.S. Patent No. 4,877,473 (the "473 patent"), which issued
on October 31, 1989 and is directed to a method of making a bag pack;
WHEREAS, Mobil and BPI are desirous of reaching a final settlement and
disposition of their respective claims against each other in the Action;
NOW THEREFORE, in consideration of the mutual undertakings hereinafter
set forth, Mobil and BPI agree as follows:
1. BPI shall pay Mobil the sum of X* in four equal installments of X*
on each of the following dates: July 15, 1997, April 15, 1998, February 15,
1999, and December 15, 1999.
Payment shall be made by check made payable to Mobil Oil Corporation.
- ----------------
*Certain information withheld and filed separately with the Commission pursuant
to a request for confidential treatment.
1
2. BPI's payment obligations hereunder will be considered liquidated,
due and owing as of the date of this Settlement Agreement, and are neither
contingent upon, nor subject to modification by, any action or event whatsoever,
including, but not limited to, the outcome of the Action against the remaining
defendants, Inteplast Corporation and Integrated Bagging Systems Corporation, or
any finding of non-infringement, invalidity or unenforceability of the '019
patent.
3. BPI shall provide its reasonable cooperation in response to specific
informal discovery requests from Mobil, to the extent that the documents or
information requested by Mobil would have been otherwise discoverable in the
Action. If requested by Mobil, Dennis N. Caulfield, President of BPI, agrees to
appear and testify as a witness at the trial in the Action. If so requested,
Mobil will reimburse BPI for its costs in making Mr. Caulfield available to
testify at trial.
4. In the event of any default under this Settlement Agreement
(including any failure to make any payment in accordance with the schedule set
forth in paragraph 1), Mobil shall have the right to seek an immediate judgment
in any court of competent jurisdiction for the immediate payment of the entire
amount of X* less any amounts already paid to Mobil under this Settlement
Agreement ("Remaining Liability"). In any such action by Mobil to enforce BPI's
obligations under this Settlement Agreement, BPI shall interpose no objections
to entry of judgment for the Remaining Liability. BPI shall be liable to Mobil
for all costs, including attorneys' fees, incurred in collecting said amounts
due and owing from BPI to Mobil.
5. Mobil hereby releases BPI from all liability for past damages with
respect to the '019 patent. This release shall not be deemed a release of any
claims under the '019 patent against any party other than BPI.
- ----------------
*Certain information withheld and filed separately with the Commission pursuant
to a request for confidential treatment.
2
6. BPI hereby releases Mobil from all liability for past damages with
respect to the '473 patent. This release shall not be deemed a release of any
claims under the '473 patent against any party other than Mobil.
7. Within ten (10) days of the Effective Date, Mobil and BPI shall
jointly file in the Action a joint motion in the form of Appendix A and take
such other action as may be necessary to cause the Action to be dismissed, with
prejudice, as between Mobil and BPI.
8. Mobil and BPI shall each bear its own costs and attorneys fees
associated with the Action.
9. Mobil hereby grants to BPI an irrevocable, nonexclusive, paid-up
license, without the right to sublicense, under the '019 patent to make, use,
and sell plastic carrying bags covered by the patent. This license shall extend
for the full term of the '019 patent.
10. BPI hereby grants to Mobil an irrevocable, nonexclusive, paid-up
license, without the right to sublicense, under the '473 patent to practice the
methods covered by the '473 patent and to make, use, and sell bags in accordance
with the methods covered by the '473 patent. This license shall extend for the
full term of the '473 patent.
11. The terms of this Settlement Agreement shall be maintained in
confidence by Mobil and BPI, and neither Mobil nor BPI shall disclose the terms
of this Settlement Agreement to any third party, except pursuant to a court
order or as required by law. The parties agree, however, that prior to making
any disclosure of the Settlement Agreement pursuant to a court order, the party
which has been or may be ordered to make such a disclosure shall give the
earliest possible notice to the other party and shall permit the other party to
contest the court order or its application to the Settlement Agreement.
3
12. This Settlement Agreement represents the entire agreement and
understanding between Mobil and BPI with respect to the subject matter hereof
and it supersedes any and all prior or contemporaneous discussions, agreements,
and understandings relating thereto. This Settlement Agreement may not be varied
or modified other than by a writing executed on behalf of the parties.
13. This Settlement Agreement shall be binding upon and inure to the
benefit of Mobil and BPI and their respective successors and assigns; provided,
however, that neither party may assign or transfer the licenses granted herein
without the prior written consent of the licensing party. Any attempt to assign
or transfer a license without the prior written consent of the licensing party
shall be null and void and shall not be binding on the licensing party.
14. Any payment, notice, or communication required by or relating to
this Settlement Agreement shall be in writing and delivered to Mobil at:
Mobil Oil Corporation
3225 Gallows Road
Fairfax, Virginia 22037
Attention: Edward H. Beck, Esq.
and to BPI at: BPI Packaging Technologies, Inc.
455 Somerset Avenue
Dighton, Massachusetts 02764
Attention: Dennis N. Caulfield
15. This Agreement shall be governed by the laws of the State of
Delaware. Mobil and BPI consent to be subject to the jurisdiction of the
Delaware state and federal courts with regard to any litigation arising from any
dispute regarding this Settlement Agreement. The parties specifically agree not
to interpose any defense of lack of personal jurisdiction or improper venue in
an action brought in Delaware state or federal courts to enforce any provision
of this Settlement Agreement.
4
16. It is understood and agreed by the parties that the execution of
this Settlement Agreement and the terms, conditions and consideration recited,
are solely for the purpose of settling and compromising disputed matters, and
that the Settlement Agreement does not constitute and shall not be construed as
an admission of any kind by either party in connection with the Action or any
other demand, claim, action, proceeding or lawsuit.
IN WITNESS WHEREOF, the parties hereto have caused this Settlement
Agreement to be executed by their duly authorized representatives, as of the
Effective Date indicated above. MOBIL OIL CORPORATION BPI PACKAGING
TECHNOLOGIES, INC.
By: /s/ By: /s/ C. Jill Beresford
---------------------- ----------------------
Title: Title: President
---------------------- --------------------
Date: December 16, 1996 Date: December 19, 1996
----------------------- ------------------
5
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> AUG-24-1996
<PERIOD-END> NOV-22-1996
<CASH> 885,556
<SECURITIES> 0
<RECEIVABLES> 3,780,924
<ALLOWANCES> 118,427
<INVENTORY> 4,187,619
<CURRENT-ASSETS> 10,033,461
<PP&E> 31,908,352
<DEPRECIATION> 8,222,401
<TOTAL-ASSETS> 37,320,628
<CURRENT-LIABILITIES> 12,175,137
<BONDS> 0
0
2,780,530
<COMMON> 139,572
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 37,320,628
<SALES> 8,840,916
<TOTAL-REVENUES> 8,840,916
<CGS> 7,365,285
<TOTAL-COSTS> 9,235,804
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 256,503
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<INCOME-CONTINUING> (651,391)
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<CHANGES> 0
<NET-INCOME> (651,391)
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