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UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20509
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- ------------------
Commission file number 0-26568
USA Detergents, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2935430
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1735 Jersey Avenue, North Brunswick, New Jersey 08902
-----------------------------------------------------
(Address of principal executive offices - Zip code)
(732) 828-1800
--------------
(Registrant's telephone number, including area code)
--------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was
required to file reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Stock No. of Shares Outstanding Date
-------------- ------------------------- ----
Common 13,825,602 November 5, 1998
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USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,848 $ 1,710
Accounts receivable, net of customer allowances and doubtful
accounts of $867 and $1,257 , respectively 24,349 19,904
Inventories 17,258 16,056
Refundable income taxes 7,120 3,885
Prepaid expenses and other current assets 3,173 3,260
--------- --------
Total current assets 53,748 44,815
Property and equipment - net 45,672 45,757
Restricted funds 275 -
Deferred financing costs 567 1,790
Other non-current assets 2,546 1,945
--------- --------
Total assets $ 102,808 $ 94,307
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,501 $ 15,415
Accounts payable 29,880 24,630
Accrued expenses 13,259 12,065
Other current liabilities 1,405 245
--------- --------
Total current liabilities 47,045 52,355
Long-term debt - net of current portion 38,998 21,547
Other non-current liabilities (Note 3) - 3,295
Deferred rent payable 1,181 943
--------- --------
Total liabilities 87,224 78,140
--------- --------
Commitments and Contingencies
Stockholders' equity:
Preferred stock-no par value; authorized 1,000,000
shares, none issued - -
Common stock-$.01 par value; authorized 30,000,000 shares,
issued and outstanding 13,806,279 and 13,825,602 shares,
respectively 138 138
Additional paid-in capital 28,336 29,200
Deficit (12,715) (12,996)
Note receivable - warrant (175) (175)
--------- --------
Total stockholders' equity 15,584 16,167
--------- --------
Total liabilities and stockholders' equity $ 102,808 $ 94,307
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
2
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USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT NET INCOME/(LOSS) PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
------------------------ ------------------------
1997 1998 1997 1998
--------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 57,345 $ 52,709 $ 172,985 $ 163,459
Cost of goods sold 41,073 34,794 137,185 111,597
--------- --------- --------- ---------
Gross profit 16,272 17,915 35,800 51,862
Selling, general and administrative 16,547 15,455 56,184 44,382
Restructuring costs - - 2,379 400
Litigation settlement (Note 3) - - - 3,266
--------- --------- --------- ---------
16,547 15,455 58,563 48,048
Income/(loss) from operations (275) 2,460 (22,763) 3,814
Interest and amortization of deferred
financing costs - net 770 1,784 2,365 4,024
--------- --------- --------- ---------
Income/(loss) before provision/(benefit)
for income taxes (1,045) 676 (25,128) (210)
Provision/(benefit) for income taxes - 25 (3,909) 71
--------- --------- --------- ---------
Net income/(loss) $ (1,045) $ 651 $ (21,219) $ (281)
========= ========= ========= =========
Basic net income/(loss) per share $ (.08) $ .05 $ (1.54) $ (.02)
========= ========= ========= =========
Weighted average shares outstanding 13,795 13,826 13,785 13,822
========= ========= ========= =========
Diluted net income/(loss) per share $ (.08) $ .05 $ (1.54) $ (.02)
========= ========= ========= =========
Weighted average shares outstanding and
common share equivalents 13,795 14,074 13,785 13,822
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
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USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (21,219) $ (281)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 3,030 3,900
Amortization of deferred financing costs 481 1,405
Amortization of slotting 3,116 3,258
Other amortization 472 691
Change in the provision for customer allowances and doubtful
accounts 2,489 390
Decrease in deferred rent (49) (118)
Changes in operating assets and liabilities:
Decrease in accounts receivable 1,422 4,055
Decrease in inventories 10,117 1,202
Increase in prepaid expenses and other current assets (3,061) (3,345)
Increase in other non-current assets (126) (90)
Increase/(decrease) in accounts payable and accrued expenses 16,887 (6,444)
(Increase)/decrease in refundable income taxes (3,740) 3,235
Decrease in deferred tax asset 534 -
Decrease in deferred tax liability (735) -
--------- ----------
Net cash provided by operating activities 9,618 7,858
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (21,813) (3,985)
--------- ----------
Net cash used in investing activities (21,813) (3,985)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of current portion of long-term debt (229) (1,226)
Net proceeds from/(repayments to) credit facilities 6,674 (7,036)
Increase in short-term note payable - 4,000
Increase in other current liabilities - 87
Increase/(repayments) of Oracle purchase obligation 1,604 (1,367)
Increase in deferred financing costs (735) (1,878)
Increase in other non-current liabilities - 3,295
Net proceeds from exercise of options 258 114
Decrease in note receivable 2,250 -
--------- ----------
Net cash provided by/(used in) financing activities 9,822 (4,011)
--------- ----------
Net decrease in cash (2,373) (138)
Cash at beginning of period 2,373 1,848
--------- ----------
Cash at September 30, $ - $ 1,710
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS FROM OPERATING ACTIVITIES:
Interest paid 1,703 $ 2,496
========= ==========
Income taxes $ 32 $ 70
========= ==========
Income tax refunds received $ - $ 3,235
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS FROM FINANCING ACTIVITIES:
Value of warrants issued in connection with bank and related
party financings $ - $ 750
========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
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USA DETERGENTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules of the Securities and Exchange
Commission ("SEC") and in the opinion of management, include all adjustments,
(consisting of normal recurring accruals) necessary for the fair presentation
of the Company's financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such SEC rules. The Company believes
the disclosures made are adequate to make such financial statements not
misleading. The results for the interim periods presented are not necessarily
indicative of the results to be expected for the full year. These financial
statements should be read in conjunction with the Company's December 31, 1997
Form 10-K, as amended, which includes financial information for the year ended
December 31, 1997.
Reclassification - Certain reclassifications have been made to prior
period amounts to conform with the presentation for the current period.
NOTE 2 - DEBT
On August 14, 1998, the Company entered into a Senior Loan and
Security Agreement ("FINOVA Agreement") with a syndicate of lenders including
FINOVA Capital Corporation ("FINOVA") as agent for itself and other lenders,
providing the Company with up to $48.5 million of available financing. The
FINOVA Agreement consists of a five-year revolving credit facility of up to
$40.0 million, subject to availability based on eligible accounts receivable
and inventory, and two five-year term loans aggregating $8.5 million. The
revolving credit facility bears interest at a rate of prime +.75% and on
September 30, 1998, the rate was 9.25%. Unused portions of the revolving credit
facility are subject to a commitment fee of .0375%. On September 30, 1998, net
availability to the Company under the revolving credit facility was $900,000
million and the amount outstanding was $14.4 million.
One of the term loans in the amount of $6.4 million is repayable in 59
fixed monthly principal payments of $76,190 and a final principal payment of
$1,904,767. This loan bears interest at a fixed rate of 9.33%. The second term
loan in the amount of $2.1 million is repayable in 60 fixed monthly principal
payments of $35,000. This loan bears interest at prime plus 2.0% and on
September 30, 1998 the rate was 10.50%. The aggregate amount outstanding on
September 30, 1998 under both term loans was $8.5 million.
5
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The FINOVA Agreement contains various covenants which include, among
other things, specified levels of debt to equity, current ratios, a minimum net
worth and a minimum senior debt service coverage ratio. The FINOVA Agreement
also prohibits the payment of dividends and incurrence of new debt.
Funding under the Agreement is secured by a first priority security interest in
substantially all of the assets of the Company and its subsidiaries, except for
certain real estate.
$25 million of the initial proceeds from the FINOVA Agreement was used
to pay down the Company's credit facility with PNC Bank, N.A. ("PNC"). In
connection with this payment, the due date of the remaining $10 million of debt
owed to PNC was extended until June 30, 1999, personal guarantees by certain
shareholders of the Company aggregating $5 million were cancelled and the
number of shares of Common Stock issuable to PNC pursuant to a previously
issued warrant was fixed at the minimum level of approximately 140,000 shares,
subject to certain anti-dilution provisions. The remaining $10 million of debt
continues to be secured by certain real property owned by the Company and bears
interest at a rate that ranges from prime plus .75% to 2.0%. On September 30,
1998 the rate was 9.5%.
During the three months ended September 30, 1998, the Company recorded
a $602,000 charge related to the write-off of previously incurred unamortized
financing costs associated with the closing of the new financing agreement with
FINOVA Capital Corporation.
EDA LOAN
On September 3, 1998, as required by the FINOVA Agreement, the Company
repaid $1,034,512 to the New Jersey Economic Development Authority, fully
satisfying the Company's remaining obligation to that entity.
ORACLE PURCHASE OBLIGATION
On September 30, 1998, the Company paid $18,466 to Sanwa Business
Credit Corporation ("SBCC"), representing the last payment required to be made
under the April 16, 1998 forbearance agreement between the Company and SBCC.
This payment fully satisfied the Company's remaining obligation to SBCC.
NOTE 3 - LEGAL PROCEEDINGS
On May 5, 1997, a securities class action lawsuit entitled Feldbaum v.
USA Detergents, Inc. et al., No. 97-CV-3227, was filed in the U.S. District
Court for the Eastern District of Pennsylvania against the Company and certain
of its current and former officers and directors; the Feldbaum case
subsequently was transferred to the U.S. District Court for the District of New
Jersey. On May 15, 1997, a second securities class action lawsuit entitled
Einhorn v. USA Detergents, Inc. et al., No. 97-2459, was filed against the
Company and certain of its
6
<PAGE>
current and former officers and directors in the U.S. District Court for the
District of New Jersey. Since the Einhorn lawsuit was filed, twelve additional
securities class action lawsuits have been filed in the U.S. District Court for
the District of New Jersey against the Company and certain of its current and
former officers and directors. The class actions purport to be brought on
behalf of all persons who purchased the Company's common stock between June 5,
1996, at the earliest, and May 8, 1997, at the latest (the "putative class
period"). The class actions generally allege that, during the putative class
period, the defendants made false or misleading public statements and engaged
in improper accounting practices, which caused the price of the Company's
common stock to be artificially inflated. The class actions assert that the
defendants' conduct violated Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and SEC Rule 10b-5 promulgated thereunder, as well as
state common law. The class actions do not specify an amount of damages. In
June and July 1997, the U.S. District Court for the District of New Jersey
entered orders consolidating all of the pending class actions with the Einhorn
case. In August 1997, the court entered an order establishing a master docket
for the consolidated class actions, In re USA Detergents, Inc. Securities
Litigation, Master File No. 97-CV-2459 (MTB), and appointed lead plaintiffs and
lead plaintiffs' co-lead counsel.
The Company has reached an agreement in principle to settle for $10.0
million the consolidated stockholder class action. The Company's total cost
under the agreement, including legal fees, after insurance and other
participation, is anticipated to be approximately $3.3 million, and the Company
recorded a charge in that amount during the second quarter of 1998. Such amount,
less attorney fees, has been classified as a non-current liability because a
portion of the Company's revolving credit facility has been reserved for the
payment of this obligation. The preliminary order approving the agreed upon
settlement was signed on October 14, 1998 and a notice of the proposed
settlement was sent to all affected shareholders who are members of the class
action suit on October 23, 1998. A final approval hearing is scheduled for
December 14, 1998. There can be no assurance that the settlement will finally
be approved on these terms, if at all.
In connection with certain events related to the foregoing litigation,
including the restatement of the Company's financial statements for the year
ended December 31, 1996, each of the quarters in 1996 and the quarter ended
March 31, 1997, the Company received a formal request from the Securities and
Exchange Commission ("SEC") for the production of various documents. The
Company intends to continue to cooperate with the SEC in this matter.
As previously reported, on October 20, 1997, the Company instituted an
action in the Superior Court of New Jersey, Chancery Division, Middlesex County
challenging a claim by North Brunswick Water, LLC ("NBW") that the Company had
failed to pay approximately $5,000,000 in water and sewer charges and seeking
to enjoin NBW from discontinuing water and sewer services. On October 21, 1997
the Company and NBW entered into a Consent Order, pursuant to which the Company
paid $532,118, subject to refund pending resolution of the matter. Thereafter,
based upon a preliminary ruling by the trial court, and in the context of
settlement discussions, NBW as acknowledged that the actual amount due is less
than the original $5,000,000 demand. NBW has, for settlement purposes reduced
its demand to approximately $1,800,000; however, the final amount demanded by
NBW will be determined at the conclusion of the discovery process. The matter
is currently in discovery which must be completed by January 1999. Trial is
scheduled in February, 1999.
Based upon an assessment made by independent counsel for the Company
and independent engineering estimates of the amount of water used and the
extent of the sewer discharge, management believes that the Company's
obligation if any to NBW will not have a significant impact on the Company's
results of operations or financial position beyond amounts already paid.
NOTE 4 - NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is based on the weighted average
number of shares outstanding during the periods presented. Diluted net income
per share also includes Common Stock equivalents that are dilutive. Common
Stock equivalents have not been included in the computation of diluted net loss
per share since the impact is antidilutive.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
Net sales for the three months ended September 30, 1998 decreased 8.1%
to $52.7 million from $57.3 million for the three months ended September 30,
1997. The decrease was primarily the result of a decrease in unit sales of
laundry products, household cleaners and scented candles.
Gross profit for the three months ended September 30, 1998 increased
10.1% to $17.9 million from $16.3 million for the three months ended September
30, 1997. Gross profit as a percentage of net sales increased to 34.0% for the
three months ended September 30, 1998 from 28.4% for the same period in 1997.
The increase in gross profit as a percentage of net sales was primarily
attributable to a decrease of 5.2% in material costs due to more favorable
pricing and manufacturing efficiencies, and a decrease as a percentage of net
sales of 1.6% in facilities overhead costs, offset in part by a combined slight
increase as a percentage of net sales of 1.2% in direct labor, manufacturing
and distribution overhead.
Selling, general and administrative expenses decreased 6.6% to $15.5
million in the three months ended September 30, 1998 from $16.5 million for the
three months ended September 30, 1997. As a percentage of net sales, these
expenses increased to 29.3% for the three months ended September 30, 1998 from
28.9% for the same period in 1997. The increase as a percentage of net sales
was primarily due to an increase of 1.6% in general and administrative
expenses, which included increases for salaries, 1998 bonus accruals (1997 did
not have a bonus accrual) of .44%, accounting and general legal expenses of
.19%, equipment rental charges of .16%, expenses relating to the implementation
of new software of .25%, warrant amortization costs of .12%; and an increase of
.8% in marketing funds (co-op advertising, promotional allowances and slotting
amortization). These increases were offset in part by decreases as a percentage
of net sales of 1.7% in freight costs to customers and .3% in selling expenses.
Interest and amortization of deferred financing costs (net) increased
to $1.8 million for the three months ended September 30, 1998 from $0.8 million
for the three months ended September 30, 1997, primarily as a result of higher
average outstanding borrowings and the accelerated amortization of warrant and
bank closing costs related to the FINOVA Agreement.
Income tax provision for the three month periods ended September 30,
1998 and September 30, 1997 are based on actual tax computations for each of
the periods. The difference between the effective rates and the statutory rate
relates primarily to the Company's net operating loss carry forward for which
the Company has not provided a tax benefit.
8
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997
Net sales for the nine months ended September 30, 1998 decreased 5.5%
to $163.5 million from $173.0 million for the nine months ended September 30,
1997. The decrease was primarily the result of a decrease in unit sales of
household cleaners and candles offset by an increase in unit sales of laundry
products.
Gross profit for the nine months ended September 30, 1998 increased
44.9% to $51.9 million from $35.8 million for the nine months ended September
30, 1997. Gross profit as a percentage of net sales increased to 31.7% for the
nine months ended September 30, 1998 from 20.7% for the same period in 1997.
The increase in gross profit as a percentage of net sales was primarily
attributable to a decrease of 8.8% in material costs due to more favorable
pricing and manufacturing efficiencies, and to a lesser extent, by decreases as
a percentage of net sales in distribution, manufacturing overhead, direct labor
and facilities overhead costs, resulting from improved cost control measures.
Selling, general and administrative expenses decreased 21.0% to $44.4
million for the nine months ended September 30, 1998 from $56.2 million for the
nine months ended September 30, 1997. As a percentage of net sales, these
expenses decreased to 27.2% for the nine months ended September 30, 1998 from
32.5% for the same period in 1997. The decrease as a percentage of net sales
was primarily due to decreases of 2.6% in marketing funds (co-op advertising,
promotional allowances and slotting amortization), 1.9% in freight to customers
and 1.4% in selling expenses, offset by an increase of .6% in general and
administrative expenses.
In June 1998, the Company recorded an additional $400,000 charge
relating to its future lease commitment (net of sublease income) and associated
lease expenses for its Edison, New Jersey facility which was closed during the
second quarter of 1997.
The Company has reached an agreement in principle to settle for, $10.0
million, a consolidated stockholder class action lawsuit. The Company's total
cost under the agreement, including legal fees, after insurance and other
participation, is anticipated to be approximately $3.3 million, and the Company
recorded a charge in that amount during the second quarter of 1998. Such
amount, less attorney fees, has been classified as a non-current liability
because a portion of the Company's revolving credit facility has been reserved
for the payment of this obligation. The preliminary order approving the agreed
upon settlement was signed on October 14, 1998 and a notice of the proposed
settlement was sent to all affected shareholders who are members of the class
action suit on October 23, 1998. A final approval hearing is scheduled for
December 14, 1998. There can be no assurance that the settlement will
finally be approved on these terms, if at all.
Interest and amortization of deferred financing costs-net increased to
$4.0 million for the nine months ended September 30, 1998 from $2.4 million for
the nine months ended September 30, 1997, primarily as a result of higher
average outstanding borrowings and the accelerated amortization of warrant and
bank closing costs directly related to the FINOVA Agreement.
Income tax provision for the nine months ended September 30, 1998 of
$71,000 and the income tax benefit for the nine months ended September 30, 1997
of $3.9 million are based on actual tax computations for each of the periods.
The difference
9
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between the effective rates and the statutory rate relates primarily to the
Company's net operating loss carry forward for which the Company has not
provided a tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
On August 14, 1998, the Company entered into a Senior Loan and
Security Agreement with a syndicate of lenders including FINOVA Capital
Corporation as agent for itself and other lenders, providing the Company with
up to $48.5 million of available financing. The FINOVA Agreement consists of a
five-year revolving credit facility of up to $40.0 million, subject to
availability based on eligible accounts receivable and inventory, and two
five-year term loans aggregating $8.5 million. The revolving credit facility
bears interest at a rate of prime +.75% and on September 30, 1998, the rate was
9.25%. Unused portions of the revolving credit facility are subject to a
commitment fee of .0375%. On September 30, 1998, net availability to the
Company under the FINOVA Agreement was $900,000 million and the amount
outstanding was $14.4 million.
One of the term loans in the amount of $6.4 million is repayable in 59
fixed monthly principal payments of $76,190 and a final principal payment of
$1,904,767. This loan bears interest at a fixed rate of 9.33%. The second term
loan in the amount of $2.1 million is repayable in 60 fixed monthly principal
payments of $35,000. This loan bears interest at prime plus 2.0% and on
September 30, 1998 the rate was 10.50%. The aggregate amount outstanding on
September 30, 1998 under both term loans was $8.5 million.
The FINOVA Agreement contains various covenants which include, among
other things, specified levels of debt to equity, current ratios, a minimum net
worth and a minimum senior debt service coverage ratio. The Agreement
also prohibits the payment of dividends and incurrence of new debt. Funding
under the Agreement is secured by a first priority security interest in
substantially all of the assets of the Company and its subsidiaries, except for
certain real estate.
$25 million of the initial proceeds from the FINOVA Agreement was used
to pay down the Company's credit facility with PNC Bank, N.A. ("PNC"). In
connection with this payment, the due date of the remaining $10 million of debt
owed to PNC was extended until June 30, 1999, personal guarantees by certain
shareholders of the Company aggregating $5 million were cancelled and the
number of shares of Common Stock issuable to PNC pursuant to a previously
issued warrant was fixed at the minimum level of approximately 140,000 shares,
subject to certain anti-dilution provisions. The remaining $10 million of debt
continues to be secured by certain real property owned by the Company and bears
interest at a rate that ranges from prime plus .75% to 2.0%. On September 30,
1998 the interest rate was 9.5%.
During the three months ended September 30, 1998, the Company recorded
a $602,000 charge related to the write-off of previously incurred unamortized
financing costs associated with the closing of the new financing agreement with
FINOVA.
EDA LOAN
On September 3, 1998, as required by the FINOVA Agreement, the Company
paid $1,034,512 to the New Jersey Economic Development Authority, fully
satisfying the Company's remaining obligation to that entity.
10
<PAGE>
ORACLE PURCHASE OBLIGATION
On September 30, 1998, the Company paid $18,466 to Sanwa Business
Credit Corporation ("SBCC"), representing the last payment required to be made
under the April 16, 1998 forbearance agreement between the Company and SBCC.
This payment fully satisfied the Company's remaining obligation to SBCC.
At September 30, 1998, the Company's working capital deficiency was
$7.5 million compared to a positive working capital of $6.7 million at December
31, 1997. The decrease in working capital is primarily attributable to the
classification of the $10 million indebtedness to PNC, due in June 1999, as
current.
Net cash provided by operating activities for the nine months ended
September 30, 1998 was $7.9 million compared to $9.9 million for the nine
months ended September 30, 1997. The cash provided by operating activities
resulted primarily from a decrease in inventories of $1.2 million, a decrease
in accounts receivable of $4.1 million, a decrease in refundable income taxes
of $3.2 million and an increase of $9.2 in depreciation and amortization,
offset in part by the net loss of $.3 million, a decrease in accounts payable
and accrued expenses of $6.4 million and an increase in prepaid expenses and
other current assets of $3.3 million.
Net cash used in investing activities for the nine months ended
September 30, 1998 was $4.0 million relating to the purchase of machinery and
equipment. This compares to net cash used in investing activities of $21.8
million for the nine months ended September 30, 1997. The Company anticipates
that capital expenditures for the remainder of 1998 will be approximately $1
million, which includes certain expenditures to upgrade the Company's
manufacturing and distribution capabilities and enhance the Company's
information systems.
Net cash used in financing activities for the nine months ended
September 30, 1998 was $4.0 million compared to the net cash provided by
financing activities of $9.6 million for the nine months ended September 30,
1997. Net cash used in financing activities resulted primarily from a repayment
of PNC debt of $5.0 million, an increase in deferred financing costs of $1.9
million, and repayments to SBCC of $1.4 million, offset in part by an increase
in a short-term note payable to a related party of $4.0 million and an
increase in a long-term debt of $3.3 million.
For the nine months ended September 30, 1998, the Company has
experienced losses relating to, among other things, additional restructuring
costs associated with the closing of its Edison facility and the settlement of
the shareholder litigation. The Company requires the availability of sufficient
cash flow and borrowing capacity to finance its operations, meet its debt
service obligations and fund future capital expenditure requirements. The
Company's operating plan for the remaining three months of 1998 includes
continuing its cost reduction programs. The cost reduction programs include
additional automation of manufacturing facilities, further production
rationalization, increased use of high speed fillers and cartoners and improved
production planning and control. There can be no assurance that the Company
will be successful in these efforts.
11
<PAGE>
On June 30, 1999, PNC's remaining debt of approximately $10.0 million
will mature and on July 31, 1999, 101 Realty Associates, L.L.C.'s debt of $4.0
million will also mature. Management is currently negotiating with FINOVA and
other financial institutions to refinance the Company's respective debts with
PNC and 101 Realty Associates, L.L.C. The Company must refinance these debts
with FINOVA or obtain other sources of financing in order to meet these
anticipated near-term commitments. Although the Company is optimistic about its
ability to refinance these debts, there can be no assurance that the Company
will be successful in obtaining the refinancing from FINOVA or any other
lender.
YEAR 2000 DISCLOSURE
This section discusses the processes currently being implemented with
respect to issues relating to the Year 2000.
READINESS:
- ----------
The Company initiated its Year 2000 project in late 1996 with a
complete review of all products, manufacturing facilities, information systems
and the impact on the Company from customers and suppliers that may fail to
deal with the issue. The Year 2000 issues that need to be addressed within the
organization pertain to the Company's internal information systems that date
stamp transactions. All current applications, operating systems, databases, and
EDI transactions requiring conversion are expected to be completed by the end
of 1998 or first quarter of 1999.
PRODUCTS:
- ---------
The Year 2000 issue with respect to the Company's product line is
minimal because our products are not date sensitive and require no internal or
external date tracking.
MANUFACTURING FACILITIES:
- -------------------------
All existing pieces of machinery and equipment have been reviewed and
examined and management believes that Year 2000 issues regarding them will not
effect production or delivery of product because the equipment is not date
reliant and the product movement is a manual process.
12
<PAGE>
INFORMATION SYSTEMS:
- --------------------
Year 2000 issues with respect to information systems, have been addressed
in six major areas:
1. Operating Systems
2. Databases
3. Business Systems
4. Support Systems
5. Backup Systems
6. Hardware Platforms
The following comments discuss the status of each area:
OPERATING SYSTEM:
The Company has been advised by its software vendors that all existing
operating systems, Novell 3.12, Windows NT, Unix 4.0D, and Windows 95 are
currently Year 2000 compliant.
DATABASE:
The Company has been advised by its software vendors that all
databases used by the current systems and anticipated new systems are Year 2000
compliant.
BUSINESS SYSTEMS:
It is expected that by year-end 1998, all existing business systems
will be Year 2000 compliant. To date approximately 95% of the applications have
been converted in a test environment and will soon be placed into a production
status.
SUPPORT SYSTEMS:
Support systems include all desktop applications. These applications
have been upgraded to be Year 2000 compliant.
BACKUP SYSTEMS:
The Company has been advised by its software vendors that all
applications that currently back up business applications and databases are
Year 2000 compliant.
13
<PAGE>
HARDWARE PLATFORMS:
The Company has been advised by its hardware vendors that all
platforms that run the aforementioned systems and databases are Year 2000
compliant.
CUSTOMERS
- ---------
The Company has responded to all customers who have requested Y2K
compliance information, plans, and due dates.
SUPPLIERS:
- ----------
The Company has contacted its major suppliers and has asked them to
respond to questions concerning their ability to be Year 2000 compliant on a
timely basis. The Company plans to monitor the information received in response
to these inquiries on a continuous basis into 2000. The final analysis of the
responses, which is expected to be completed during the 1st quarter of 1999
will determine the need and extent for contingency planning.
COST OF YEAR 2000 READINESS
- ---------------------------
Based on management's assessment of systems, the cost of addressing
the Year 2000 is not currently expected to have a material adverse impact on
the Company's financial condition. To date, the Year 2000 conversion costs
incurred are approximately $60,000, and should not exceed $100,000. (Conversion
costs do not include funds spent by the Company on the purchase of the Oracle
system, which would have been acquired irrespective of the Year 2000 issues).
The Oracle system has been represented to be Year 2000 compliant .
RISK OF THE COMPANY'S YEAR 2000 ISSUES
- --------------------------------------
Achieving Year 2000 compliance is dependent on many factors, some of
which are not completely within the Company's control. There can be no
assurance that the Company has or will be able to identify all aspects of its
business that are subject to Year 2000 problems of customers or suppliers that
affect the Company's business. There also can be no assurance that the
Company's software vendors are correct in their assertions that the software is
Year 2000 compliant, or that the Company's estimate of the costs of systems
preparation for Year 2000 compliance will prove ultimately to be accurate.
Should either the Company's internal systems or internal systems of one or more
significant suppliers or customers fail to achieve Year 2000 compliance, or the
Company's estimate of the costs of becoming Year 2000 compliant prove to be
materially inaccurate, the Company's business and its results of operations
could be adversely affected. In addition to becoming Year 2000 compliant on the
existing applications, the Company is in the process of converting to ORACLE
database and applications, which is scheduled for completion before the Year
2000.
14
<PAGE>
IMPACT OF INFLATION
General inflation in the economy increases operating expenses of most
businesses. The Company has provided compensation increases generally in line
with the inflation rate and incurred higher prices for goods and services.
While the Company is subject to inflation as described above, management
believes that inflation currently does not have a material effect on the
Company's operating results, but there can be no assurance that this will
continue to be so in the future.
NEW ACCOUNTING PRINCIPLES
During 1997, and 1998, the Financial Accounting Standards Board issued
the following account standards: Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS No. 130), Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), Statement of Financial
Accounting Standards No. 132 "Employers Disclosures about Pension and other
Post retirement Benefit Plans" (SFAS No. 132) and Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities. The Company does not expect any material effect from adoption of
SFAS Nos. 131, 132 and 133. The Company will report comprehensive income as a
component of equity. During the quarter ended September 30, 1998, the Company
does not have any items that would be reportable as a component of
comprehensive income other than its income from operations.
15
<PAGE>
MISCELLANEOUS
The Company's quarterly and annual operating results are affected by a
wide variety of factors that could materially and adversely affect revenues and
profitability, including competition from other suppliers of laundry and
household cleaning products; changes in consumer preferences and spending
habits; the inability to successfully manage growth; seasonality; the ability
to introduce and the timing of the introduction of new products; the inability
to obtain adequate supplies or materials at acceptable prices; the inability to
reduce expenses to a level commensurate with revenues; and the inability to
negotiate acceptable credit terms with the current or prospective lenders. As a
result of these and other factors, the Company may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition,
operating results, and stock price. Furthermore, this document and other
documents filed by the Company with the Securities and Exchange Commission (the
"SEC") contain certain forward looking statements with respect to the business
of the Company, including prospective financing arrangements. These
forward-looking statements are subject to certain risks and uncertainties,
including those mentioned above, which may cause actual results to differ
significantly from these forward-looking statements. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events. An
investment in the Company involves various risks, including those mentioned
above and those which are detailed from time to time in the Company's SEC
filings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
On May 5, 1997, a securities class action lawsuit entitled
Feldbaum v. USA Detergents, Inc. et al., No. 97-CV-3227, was filed in
the U.S. District Court for the Eastern District of Pennsylvania
against the Company and certain of its current and former officers and
directors; the Feldbaum case subsequently was transferred to the U.S.
District Court for the District of New Jersey. On May 15, 1997, a
second securities class action lawsuit entitled Einhorn v. USA
Detergents, Inc. et al., No. 97-2459, was filed against the Company
and certain of its current and former officers and directors in the
U.S. District Court for the District of New Jersey. Since the Einhorn
lawsuit was filed, twelve additional securities class action lawsuits
have been filed in the U.S. District Court for the District of New
Jersey against the Company and certain of its current and former
officers and directors. The class actions purport to be brought on
behalf of all persons who purchased the Company's common stock between
June 5, 1996, at the earliest, and May 8, 1997, at the latest (the
"putative class period"). The class actions generally allege that,
during the putative class period, the defendants made false or
misleading public statements and engaged in improper accounting
practices, which caused the price of the Company's common stock to be
artificially inflated. The class actions assert that the defendants'
conduct violated Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, and SEC Rule 10b-5 promulgated thereunder, as well as
state common law. The class actions do not specify an amount of
damages. In June and July 1997, the U.S. District Court for the
District of New Jersey entered orders consolidating all of the pending
class actions with the Einhorn case. In August 1997, the court entered
an order establishing a master docket for the consolidated class
actions, In re USA Detergents, Inc. Securities Litigation, Master File
No. 97-CV-2459 (MTB), and appointed lead plaintiffs and lead
plaintiffs' co-lead counsel.
The Company has reached an agreement in principle to settle
for $10.0 million the consolidated stockholder class action. The
Company's total cost under the agreement, including legal fees, after
insurance and other participation, is anticipated to be approximately
$3.3 million, and the Company recorded a charge in that amount during
the second quarter of 1998. Such amount, less attorney fees, has been
classified as a non-current liability because a portion of the
Company's revolving credit facility has been reserved for the payment
of this obligation. The preliminary order approving the agreed upon
settlement was signed on October 14, 1998 and a notice of the
proposed settlement was sent to all affected shareholders who are
members of the class action suit on October 14, 1998. A final
approval hearing is scheduled for December 14, 1998. There can be no
assurance that the settlement will finally be approved on these
terms, if at all.
In connection with certain events related to the foregoing
litigation, including the restatement of the Company's financial
statements for the year ended December 31, 1996, each of the quarters
in 1996 and the quarter ended March 31, 1997, the Company received a
formal request from the Securities and
17
<PAGE>
Exchange Commission ("SEC") for the production of various documents.
The Company intends to continue to cooperate with the SEC in this
matter
As previously reported, on October 20, 1997, the Company instituted an
action in the Superior Court of New Jersey, Chancery Division, Middlesex County
challenging a claim by North Brunswick Water, LLC ("NBW") that the Company had
failed to pay approximately $5,000,000 in water and sewer charges and seeking
to enjoin NBW from discontinuing water and sewer services. On October 31, 1997
the Company and NBW entered into a Consent Order, pursuant to which the Company
paid $532,118, subject to refund pending resolution of the matter. Thereafter,
based upon a preliminary ruling by the trial court, and in the context of
settlement discussions, NBW as acknowledged that the actual amount due is less
than the original $5,000,000 demand. NBW has, for settlement purposes reduced
its demand to approximately $1,800,000; however, the final amount demanded by
NBW will be determined at the conclusion of the discovery process. The matter
is currently in discovery which must be completed by January 1999. Trial is
scheduled in February, 1999.
Based upon an assessment made by independent counsel for the Company
and independent engineering estimates of the amount of water used and the
extent of the sewer discharge, management believes that the Company's
obligation if any to NBW will not have a significant impact on the Company's
results of operations or financial position beyond amounts already paid.
ITEM 2. CHANGES IN SECURITIES:
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.29 Amended and Restated Warrant, dated August 14, 1998
issued by the Company to PNC Bank National
Association.
10.30 Second Amended and Restated Loan and Security
Agreement, dated August 14, 1998, between the
Company and PNC Bank National Association.
10.31 Loan and Security Agreement, dated August 14, 1998,
between the Company and a syndicate of lenders
including FINOVA Capital Corporation as Agent for
itself and other lenders.
10.32 Revolving Loan Note, dated August 14, 1998, issued
by the Company to FINOVA Capital Corporation.
10.33 Term Loan A Note, dated August 14, 1998, issued by
the Company to FINOVA Capital Corporation.
10.34 Term Loan B Note, dated August 14, 1998, issued by
the Company to FINOVA Capital Corporation.
10.35 Agency Agreement dated August 14, 1998 between the
Company, FINOVA Capital Corporation, First Source
Financial LLP, Merrill Lynch Business Financial
Services, Inc., and Foothill Capital Corporation.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
USA DETERGENTS, INC.
November 13, 1998 By: /s/ Uri Evan
----------------------
Uri Evan
Chairman of the Board and
Chief Executive Officer
November 13, 1998 /s/ Richard D. Coslow
----------------------
Richard D. Coslow
Executive Vice President
& Chief Financial Officer
19
<PAGE>
[Execution Copy]
AMENDED AND RESTATED WARRANT
THIS AMENDED AND RESTATED WARRANT (THE "WARRANT") OF THE WARRANT ISSUED TO PNC
BANK, NATIONAL ASSOCIATION ON FEBRUARY 25, 1998 (AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
OFFERED, SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF (A) SUCH REGISTRATION OR (B) IF ANY SUCH OFFER, SALE, PLEDGE,
TRANSFER, ASSIGNMENT OR OTHER DISPOSITION IS MADE PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS, IN EITHER SUCH
CASE, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED FOR IN SECTIONS 5 AND 11 OF THIS
WARRANT.
EFFECTIVE AS OF 5:00 P.M. ON FEBRUARY 25, 1998
VOID AFTER 5:00 P.M. ON FEBRUARY 26, 2003
USA DETERGENTS, INC.
COMMON STOCK PURCHASE WARRANT
USA DETERGENTS, INC., a Delaware corporation (the "Company"),
hereby certifies that, for value received, PNC BANK, NATIONAL ASSOCIATION (the
"Bank"), or its registered assigns (the Bank and such registered assigns at the
time being the registered holder hereof being hereinafter referred to as
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time commencing at 5:00 p.m. (New York
City time), February 25, 1998, and continuing to and expiring at 5:00 p.m. (New
York City time) February 26, 2003, up to 1.00% of the number of shares of
Common Stock issued and outstanding on the date hereof (the "Warrant Number")
at a price per share of Common Stock that is equal to ninety percent (90%) of
the Market Price per share of the Common Stock at the date hereof (the "Warrant
Price," and the shares of the Common Stock that become deliverable to Holder
upon the exercise of this Warrant (and which are not subject to cancellation or
relinquishment as provided below) are hereinafter referred to as the "Warrant
Shares").
Certain capitalized terms used in this Warrant, if not
otherwise defined, shall have the meanings set forth in Section 15 or elsewhere
in this Warrant.
Section 1. EXERCISE OF WARRANT.
<PAGE>
1.1 Exercise.
(a) This Warrant may be exercised by Holder, in whole or in
part, at any time and from time to time after the date hereof by surrender (in
person or by notice as provided in Article 12 hereof) of this Warrant at the
principal offices of the Company located at 1735 Jersey Avenue, North
Brunswick, New Jersey 08902, together with:
(i) (A) the form of subscription following the
signature page of this Warrant executed by Holder, and (B) payment, by
certified or official bank check payable to the order of the Company
or by wire transfer to the Company's account, in the amount obtained
by multiplying the number of shares of Common Stock for which this
Warrant is then being exercised by the Warrant Price then in effect;
provided, however, if the Bank or any Person affiliated with the Bank
is the Holder at the time of any exercise under this Section
1.1(a)(i), in lieu of paying by certified or official bank check or
wire transfer as provided in Section 1.1(a)(i)(B), the Bank may at its
option execute and deliver to the Company a certificate of reduction
(the "Certificate of Reduction") in the form following the signature
page of this Warrant, which Certificate of Reduction shall reduce the
amount of the PNC Debt by the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is then being
exercised by the Warrant Price then in effect, and in each instance
where the Bank so executes and delivers a Certificate of Reduction and
the Holder hereof exercises its right to effect payment pursuant to
the Certificate of Reduction in lieu of paying by certified or
official bank check or wire transfer as provided in Section
1.1(a)(i)(B) the same shall be as legal, valid, binding and
enforceable against the Company as if the Company had received the
certified or official bank check or wire transfer referred to in
Section 1.1(a)(i)(B); or
(ii) the form of cashless exercise election (a "Cashless
Exercise") following the signature page of this Warrant executed by
Holder. Such presentation and surrender constituting a Cashless
Exercise shall be deemed a waiver of Holder's obligation to pay all or
any portion of the Warrant Price in the manner contemplated by
Subsection 1.1(a)(i) hereof or otherwise. In the event of a Cashless
Exercise, Holder shall exchange this Warrant for that number of shares
of Common Stock determined by multiplying the number of Warrant Shares
being exercised by a fraction, the numerator of which shall be the
difference between the Market Price and the Warrant Price per share of
Common Stock, and the denominator of which shall be the Market Price
per share of Common Stock.
(b) If this Warrant is not exercised in full, the Company, at
its sole cost expense, shall forthwith issue and deliver to or upon the order
of Holder, a new Warrant of like tenor in the name of Holder or as Holder may
request, calling in the aggregate on the face thereof for the number of shares
of Common Stock equal (without giving effect to any adjustment therein) to (i)
the number of such shares called for on the face of this Warrant minus (ii) the
2
<PAGE>
number of such shares for which this Warrant shall have been exercised without
giving effect to any adjustment in number as a result of changes in the Warrant
Price called for above.
(c) If the Warrant Price is adjusted pursuant to Section 8 of
this Warrant, the number of Warrants to which Holder is entitled shall be
adjusted by multiplying the number of Warrants to which Holder is entitled
immediately prior to such adjustment by a fraction, the numerator of which is
the Warrant Price prior to such adjustment and the denominator of which is the
Warrant Price after such adjustment.
1.2 Delivery of Stock Certificates. Subject to the terms and
conditions of this Warrant, as soon as commercially reasonable and practicable
after the exercise of this Warrant by Holder, in full or in part, the Company
will issue or will cause its transfer agent to issue, as applicable, in the
name of and deliver to Holder, or to any assignee, nominee or designee as
Holder may direct, one or more certificates evidencing the Warrant Shares to
which Holder shall be entitled on such exercise, together with any other stock
or other securities and property (including cash, where applicable, or the new
Warrant upon a partial exercise as described in Section 1.1(b) above) to which
Holder is entitled upon such exercise.
1.3 Fractional Shares. This Warrant may not be exercised as
to fractional shares of Common Stock. In the event that the exercise of this
Warrant, in full or in part, would result in the issuance of any fractional
share of Common Stock, then in such event Holder shall be entitled to cash
equal to the Market Price of such fractional share.
1.4 Payment of Taxes. The Company shall pay all documentary
stamp taxes, if any, attributable to the issuance of Warrants and issuance of
shares of Common Stock or other securities upon the exercise of warrants;
provided, however, that subject to Sections 5 and 11 of this Warrant, the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issue of any certificates for the Warrant Shares
in a name other than that of the registered holder of a Warrant surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such certificates unless and until the Persons requesting the
issuance thereof have paid to the Company the amount of such tax or shall have
established to the reasonable satisfaction of the Company that such tax has
been paid or that adequate provision for the payment of such tax has been made.
Section 2. CERTAIN OBLIGATIONS OF THE COMPANY.
2.1 Reservation of Stock. The Company will reserve and keep
available out of its authorized and unissued Common Stock or out of shares of
its treasury stock, solely for the purpose of issue upon exercise of the
purchase rights evidenced by this Warrant, a number of shares of Common Stock
equal to the number of shares of Common Stock issuable hereunder. Without
limiting the obligations of the Company that are set forth in the foregoing
sentence, the Company will from time to time, in accordance with applicable
laws, take such action as is necessary or desirable to increase the authorized
amount of its Common Stock if at any time the number of shares of Common Stock
authorized but remaining unissued and unreserved for other purposes shall be
insufficient to permit the full exercise of this Warrant.
3
<PAGE>
2.2 No Valuation or Impairment. The Company will not, by
amendment or restatement of its certificate of incorporation, including,
without limitation, amendment of the par value of its Common Stock, or through
reorganization, consolidation, merger, dissolution, issuance of capital stock
or sale of treasury stock (otherwise than upon exercise of this Warrant) or
sale of assets, by effecting any subdivision of or stock split or stock
dividend with respect to its Common Stock, or by any other voluntary act or
deed, avoid or seek to avoid the material observance or performance of any of
the covenants, stipulations or conditions in this Warrant to be observed or
performed by the Company. Nothing herein should be inferred to restrict the
Company from completing any of such transactions if Holder of this Warrant is
provided with and not deprived of the material benefits that are intended to be
provided to Holder by this Warrant upon terms and conditions and pursuant to
procedures not more onerous than those contained in this Warrant.
2.3 Maintenance of Office. The Company will maintain an
office where presentations and demands to or upon the Company in respect of
this Warrant may be made. The Company will give not less than 10 days' prior
written notice in writing to Holder, in the manner contemplated by Section 12
of this Warrant, of each change in the location of such office.
Section 3. REORGANIZATION, ETC.
If any reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation which after the transaction will be required to file reports with
the Securities and Exchange Commission (the "SEC") pursuant to Section 13 or 15
of the Exchange Act (a "Public Corporation"), or sale of all or substantially
all of the Company's assets to another Public Corporation shall be effected,
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby Holder
shall thereafter have the right to purchase and receive, upon the terms and
conditions and pursuant to the procedures herein specified and in lieu of the
shares of Common Stock immediately theretofore purchasable and receivable upon
exercise of this Warrant, such securities or property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon exercise of this Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interests of Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price
and of the number of shares purchasable upon the exercise of this Warrant)
shall thereafter be applicable, as nearly as may be, in relation to any
securities or property thereafter deliverable upon the exercise hereof. The
Company shall not effect any such reorganization, reclassification,
consolidation, merger or sale unless, prior to or contemporaneously with the
consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and delivered to Holder,
which written instrument shall be in form and substance reasonably satisfactory
to Holder, the obligation to deliver to Holder such securities or property as,
in
4
<PAGE>
accordance with the foregoing provisions, Holder may be entitled to purchase
or receive upon Holder's proper exercise of the terms and provisions of this
Warrant.
Section 4. NOTICES OF RECORD DATE.
In the event of:
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification of the capital stock of the Company or any transfer
of all or substantially all the assets of the Company to or any
consolidation or merger of the Company with or into any other Person;
or
(c) any voluntary or involuntary dissolution,
liquidation, or winding-up of the Company,
then, and in each event, the Company will give to Holder a written notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character
of such dividend, distribution or right, and (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding-up is to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock for securities or
other property deliverable on such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable on such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given prior to the date specified in such
notice on which any such action is to be taken, and in no event later than the
earlier of (i) 10 business days prior to the date on which such action is taken
and (ii) the time when notice of such event is given to holders of record of
the Company's issued and outstanding capital stock.
Section 5. REGISTRATION RIGHTS.
5.1 Warrant Holder Exercise; Payment of Costs and Expenses.
(a) If Holder exercises this Warrant pursuant to Section
1.1(a) hereof, in whole or in part (provided that on the date of any such
partial exercise that is not a Cashless Exercise the Market Price of the Common
Shares being acquired by Holder pursuant to such partial exercise that is not a
Cashless Exercise is not less than $100,000 and in the event of a Cashless
Exercise, in whole or in part, the Market Price of the Common Shares being
acquired by
5
<PAGE>
Holder pursuant to such Cashless Exercise is not less than $100,000) (any such
whole or partial exercise being hereinafter referred to as a "Warrant Holder
Exercise"), the Company shall, without any notice or demand, use its reasonable
good faith efforts to effectuate a registration on Form S-3 of the Registrable
Securities of Warrant Holder that are issuable upon such Warrant Holder
Exercise (any registration that is required to be made pursuant to this Section
5.1a is hereinafter referred to as an "Warrant Holder Exercise Registration"),
all in accordance with Section 5.3(a)(ii) hereof.
(b) Notwithstanding Section 5.1(a), if, within 10 Business
Days after any Warrant Holder Exercise, the Company shall furnish to Holder an
affidavit signed by an executive officer of the Company (including, among
others, the president, the chief executive officer, a vice president in charge
of a principal business unit and any other officer of the Company who performs
a policymaking function) stating that, in the good faith business judgment of
the board of directors of the Company, it would be seriously detrimental to the
Company and its shareholders for a Registration Statement to be filed and it
is, therefore, essential to defer the filing of such Registration Statement,
the Company shall have the right to defer taking action with respect to such
filing for a period of not more than 90 days from the date of such Warrant
Holder Exercise (the "Qualified Company Extension Right"); provided, however,
the Company may not use the Qualified Company Extension Right more than once in
any 12 month period (which 12 month period shall commence on the date of the
applicable Warrant Holder Exercise and terminate at midnight on the day
preceding the first anniversary of such Warrant Holder Exercise).
(c) All costs and expenses of each Warrant Holder Exercise
Registration, including, among other costs and expenses, underwriting discounts
and commissions, all registration, filing and qualification fees, printers and
accounting fees, fees and disbursements of counsel for Company, the reasonable
fees and disbursements of one law firm for Holder and all other usual and
customary costs and expenses generally associated with registration of
securities shall be borne by the Company, except underwriting discounts and
commissions attributable solely to Holder in connection with the Registrable
Securities of Warrant Holder.
5.2 Company Initiated Registration; Payment of Costs and
Expenses of Registration.
(a) If the Company proposes to register (including
for this purpose a registration effected by the Company for shareholders other
than Holder) any of its Common Stock, Additional Shares of Common Stock or
other securities under the Securities Act in connection with the public
offering of such securities solely for cash (other than a registration relating
either to the sale of securities to participants in a Company stock option,
stock purchase or similar plan or to an SEC Rule 145 transaction, or a
registration on any form which does not include substantially the same
information as would be required to be included in a Registration Statement
covering the sale of the Registrable Securities of Warrant Holder), the Company
shall, at such time, give Holder not less than 20 days prior written notice of
such registration (the "Company Registration Notice"). Unless Holder sends the
Company a written notice to the effect it does not want all of the Registrable
Securities of Warrant Holder to be registered in such registration, which
written request shall be made within 15 days after Holder's receipt of the
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Company Registration Notice, the Company shall, subject to the provisions of
Section 5.5, include in such contemplated registration all of the Registrable
Securities of Warrant Holder (any registration that is contemplated to be made
pursuant to this Section 5.2(a) is hereinafter referred to as a "Company
Initiated Registration"). Holder may, at its option, send to the Company within
15 days after Holder's receipt of the Company Registration Notice a notice to
the effect that Holder wants some portion or none of the Registrable Securities
of Warrant Holder included in such Company Initiated Registration (such a
notice being a "Holder Response Notice"); provided, however, in the absence of
Holder giving to the Company a Holder Response Notice, the Company shall
include all of the Registrable Securities of Warrant Holder in such Company
Initiated Registration.
(b) Any Company Initiated Registration that is approved by
the board of directors of the Company may be withdrawn with the approval of
such withdrawal by the board of directors of the Company. The Company shall
give Holder written notice promptly after the approval of or withdrawal of
approval of a Company Initiated Registration by the board of directors of the
Company.
(c) All costs and expenses of each Company Initiated
Registration and Warrant Holder Exercise Registration, including, among other
costs and expenses, underwriting discounts and commissions, all registration,
filing and qualification fees, printers and accounting fees, fees and
disbursements of counsel for Company, the reasonable fees and disbursements of
one law firm for Holder and all other usual and customary costs and expenses
generally associated with registration of securities shall be borne by the
Company, except underwriting discounts and commissions attributable solely to
Holder in connection with the Registrable Securities of Warrant Holder.
5.3 Obligations of the Company. To effect the registration of
the Registrable Securities of Warrant Holder contemplated hereby, the Company
shall, as expeditiously as reasonably possible after the initiation of each
Company Initiated Registration or at such one or more times it is required to
effectuate a Warrant Holder Exercise Registration:
(a) (i) If a Company Initiated Registration, prepare
and file with the SEC a Registration Statement and use its best
efforts to cause such Registration Statement to become effective, and
keep such Registration Statement effective for up to 120 days or until
the distribution contemplated in the Registration Statement has been
completed; provided, however, that (A) such 120-day period shall be
extended for a period of time equal to the period Holder refrains from
selling any securities included in such registration at the request of
an underwriter of Common Stock, Additional Shares of Common Stock or
other securities of the Company; and (B) in the case of any
registration of Registrable Securities of Warrant Holder on Form S-3
which are intended to be offered on a continuous or delayed basis,
such 120-day period shall be extended, if necessary, to keep the
Registration Statement effective until all such Registrable Securities
of Warrant Holder are sold, but in no event greater than 180 days,
provided that Rule 405, or any successor rule under the Securities
Act, permits an offering on a
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continuous or delayed basis, and provided, further, that applicable
rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (1) includes any prospectus required by Section
10(a)(3) of the Securities Act or (2) reflects facts or events
representing a material or fundamental change in the information set
forth in the Registration Statement, the incorporation by reference of
information required to be included in (1) and (2) above to in
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange
Act in the Registration Statement.
(ii) If a Warrant Holder Exercise Registration,
prepare and file with the SEC a Registration Statement on Form S-3
within 120 days of each Warrant Holder Exercise Registration, use its
reasonable good faith efforts to cause such Registration Statement on
Form S-3 to become effective within 180 days of each Warrant Holder
Exercise Registration (the "Warrant Holder Exercise Initial Effective
Date"), and keep such Registration Statement effective for the lesser
of (A) 180 days and (B) until the distribution contemplated by the
Registration Statement on Form S-3 is completed but in no event beyond
the date upon which the shares included therein cease to be
Registrable Securities of Warrant Holder as provided in Section 15.11
of this Warrant, provided, however, that (1) the period referred to
above shall be extended for a period of time equal to the period
Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock,
Additional Shares of Common Stock or other securities of the Company;
and (2) in the case of any registration of Registrable Securities of
Warrant Holder on Form S-3 which are intended to be offered on a
continuous or delayed basis, the period referred to above shall be
extended, if necessary, to keep the Registration Statement effective
until all such Registrable Securities of Warrant Holder are sold, but
in no event greater than 180 days, provided that Rule 405, or any
successor rule under the Securities Act, permits an offering on a
continuous or delayed basis, provided, further, that applicable rules
under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (i) includes any prospectus required by Section
10(a)(3) of the Securities Act or (ii) reflects facts or events
representing a material or fundamental change in the information set
forth in the Registration Statement, the incorporation by reference of
information required to be included in (i) and (ii) above to in
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange
Act in the Registration Statement; and provided, further, that,
notwithstanding the foregoing, if the Company shall furnish to Holder
an affidavit signed by an executive officer of the Company (including,
among others, the president, the chief executive officer, a vice
president in charge of a principal business unit and any other officer
of the Company who performs a policymaking function) stating that, in
the good faith business judgment of the board of directors of the
Company, it would be seriously detrimental to the Company and its
shareholders for the Warrant Holder Registration to be filed and the
Registration Statement relating thereto to be declared effective on
the Warrant Holder Initial Effective Date or for shares to be
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sold under the Warrant Holder Registration and it is, therefore,
essential to defer the filing and intended declaration of
effectiveness thereof or the sale of shares thereunder, the Company
shall have the right to defer taking action with respect to such
filing or the Warrant Holder Registration for a period of not more
than 90 days from the date of such Warrant Holder Initial Effective
Date (the "Qualified Warrant Exercise Extension Right"); provided,
however, the Company may not use the Qualified Warrant Exercise
Extension Right more than once in any 12 month period (which 12 month
period shall commence on the date of the applicable Warrant Holder
Initial Effective Date and terminate at midnight on the day preceding
the first anniversary of such Warrant Holder Initial Effective Date).
(b) Prepare and file with the SEC such amendments
and supplements to each such Registration Statement and the prospectus used in
connection with each such Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by each such Registration Statement.
(c) Concurrently with production thereof, furnish to
Holder copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such additional
copies and other documents, instruments, records and papers as Holder may
reasonably request in order to facilitate the disposition of all Registrable
Securities of Warrant Holder.
(d) Use its good faith and commercially reasonable
efforts to register and qualify the securities covered by such Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by Holder, provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business, subject itself to taxation, or, except as required
under the Securities Act, file a general consent to service of process in any
such jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the one or more underwriters of
such offering. If Holder participates in such underwriting Holder shall also
enter into and perform its obligations under such an agreement.
(f) Notify Holder in writing at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act of the happening of any act, omission, event or circumstance as a result of
which the prospectus included in each such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish to Holder, on each date any Registrable
Securities of Warrant Holder are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 5, if such securities
are being sold through one or more underwriters, or,
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if such securities are not being sold through one or more underwriters, on the
date that the Registration Statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to Holder, and (ii) a letter, dated such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to Holder.
(h) Cause all Registrable Securities of Warrant
Holder registered pursuant to Section 5.1 or Section 5.2 to be listed on each
securities exchange or automated quotation system on which similar securities
issued by the Company are then listed.
(i) Subject to the provisions of this Warrant,
including, without limitation, Subsections 5.3(a), (d) and (e) such further
acts or steps which are (i) reasonably requested by Holder so as to effectuate
the registration of the Registrable Securities of Warrant Holder or (ii)
required to carry out the intention and facilitate the consummation of the
transactions contemplated by this Section 5.
5.4 Furnish Information. Holder shall furnish to the Company
such information regarding itself, the Registrable Securities of Warrant Holder
held by it, and the method of disposition of such securities as shall be
required to effect the registration of the Registrable Securities of Warrant
Holder.
5.5 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock,
the Company shall not be required under Section 5.2 to include any of the
Registrable Securities of Warrant Holder in such underwriting unless Holder
accepts the terms of the underwriting as agreed upon between or among the
Company and the one or more underwriters selected by it (or by other persons
entitled to select the one or more underwriters), and then only in such
quantity as will not, in the opinion of such one or more underwriters, be
reasonably likely to jeopardize the success of the offering by the Company. If
the total amount of securities, including the Registrable Securities of Warrant
Holder, requested by shareholders to be included in such offering exceeds the
amount of securities to be sold other than by the Company that the underwriters
reasonably believe to be compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of
securities, including Registrable Securities of Warrant Holder, which the
underwriters determine are not reasonably likely to jeopardize the success of
the offering (the securities so included to be apportioned pro rata among the
selling shareholders other than the Company according to the total amount of
securities entitled to be included therein owned by each selling shareholder
other than the Company or in such proportions as shall mutually be agreed to by
or among such selling shareholders other than the Company).
5.6 Delay of Registration. Holder shall not have any right to
obtain or seek an injunction restraining or otherwise delaying any registration
contemplated by this Article 5 as the
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result of any controversy that might arise with respect to the interpretation
or implementation of this Article 5.
5.7 Indemnification. In the event any Registrable Securities
of Warrant Holder are included in a Registration Statement:
(a) To the extent permitted by law, the Company will
indemnify, pay, protect, advance monies and hold harmless Holder, any
"underwriter" (as defined in the Securities Act) for such Holder and each
person, if any, who "controls" (is "controlled" by or under "common control"
with) Holder or such underwriter within the meaning of the Securities Act or
the Exchange Act from against any losses, claims, damages or liabilities (joint
or several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
law (each such item referred to in clauses (i), (ii) and (iii) being referred
to as a "Violation"); and the Company will pay as incurred to Holder,
underwriter or controlling person, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Subsection 5.7(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld, conditioned or delayed), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by Holder or any such underwriter
or controlling person and provided, further, that the Company will not be
liable to any underwriter, or Holder, or any directors, officers, employees or
agents of such underwriter or Holder or any person controlling such underwriter
or Holder or who "controls" (is "controlled" by or under "common control" with)
such underwriter or Holder with respect to any loss, claim, liability, expense,
charge or damage arising our based on an untrue statement or alleged untrue
statement or omission or alleged omission to state a material fact in any
preliminary prospectus which is corrected in any prospectus (or the prospectus,
as supplemented or amended) if the person asserting such loss, claim,
liability, charge or damage purchased Common Stock from such underwriter or
Holder but was not sent or given a copy of the prospectus (or the prospectus,
as supplemented or amended) at or prior to the written confirmation of the sale
of such Common Stock to such Person.
(b) To the extent permitted by law, Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, each person, if any, who
controls (or is controlled by or under common control with)
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the Company within the meaning of the Securities Act, any underwriter, and any
controlling person of any such underwriter against any losses, claims, damages,
or liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by Holder expressly
for use in connection with such registration; and Holder will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Subsection 5.7(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Subsection
5.7(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of Holder (which consent shall not be unreasonably conditioned, withheld or
delayed); and provided, further, that in no event shall any indemnity under
this Subsection 5.7(b) exceed the net proceeds from the offering of Registrable
Securities of Warrant Holder that are actually received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 5.7 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 5.7,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain one law firm of its choice, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 5.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
5.7.
(d) The obligations of the Company to Holder under
this Subsection 5.7 shall survive the completion of any offering of Registrable
Securities of Warrant Holder in a Registration Statement under this Section 5,
and otherwise.
5.9 Reports Under Exchange Act. With a view to making
available to Holder the benefits of Rule 144 promulgated under the Securities
Act and any other rule or regulation of the SEC that may at any time permit
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
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(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times
after the date hereof;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) furnish to Holder, so long as Holder owns any
right, title and interest in, to or under this Warrant, forthwith upon
request (i) a written statement by the Company that it has then
complied with the reporting requirements of SEC Rule 144, the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any
time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be
reasonably requested in availing Holder of any rule or regulation of
the SEC which permits the selling of any such securities without
registration or pursuant to such form.
5.10 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities of Warrant Holder pursuant to
this Section 5 may be assigned, conveyed, designated, nominated, transferred
and otherwise set over by Holder to any one or more transferees, nominees,
designees or assignees who are selected by Holder, in its sole discretion.
Holder will give the Company written notice if it makes any assignment,
conveyance, designation, nomination or transfer contemplated by this Subsection
5.10.
5.11 "Market Stand-Off" Agreement. So long as the Registrable
Securities of Warrant Holder that are held by Holder are included within a
Registration Statement that is being filed with the SEC, Holder agrees that it
shall not, during such period or duration as may be specified by the Company
and any underwriter of Company (to the extent requested by the Company and such
underwriter), sell or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any Common Stock that is acquired by Holder
pursuant to an exercise of this Warrant; provided, however, that:
(a) such agreement shall be applicable only to a
Registration Statement of the Company which covers Common Stock (or
other securities) to be sold on behalf of the Company to the public in
an underwritten offering;
(b) all officers and directors of the Company and
all other persons owning securities included in such Registration
Statement enter into similar and not less restrictive agreements; and
(c) such market stand-off time shall not exceed 180
days.
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Notwithstanding the foregoing, the obligations described in
this Section 5.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-8 or Form S-1 or a similar form which may be
promulgated by the SEC in the future, or a registration relating solely to an
SEC Rule 145 transaction on Form S-15 or S-14 or a similar form which may be
promulgated by the SEC in the future.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Holder of this
Warrant that as of the date of this Warrant:
6.1 Organization and Capitalization of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock $0.01 par value. As of
October 31, 1997, there were 13,795,029 shares of Common Stock issued and
outstanding, and no shares of the Company's capital stock are held in its
treasury. The Company has authorized the issuance of 1,000,000 shares of
Preferred Stock, $0.01 par value. As of the date hereof, no shares of Preferred
Stock are issued and outstanding. There are no preemptive rights in effect with
respect to the issuance of any shares of the Common Stock. All the outstanding
shares of the Company's capital stock have been validly issued without
violation of any preemptive or similar rights and are fully paid and
non-assessable. To the best knowledge of the Company, the issued and
outstanding shares of Common Stock has not, in any material respect, changed
between October 31, 1997, and the date hereof.
6.2 Authority. The Company has full corporate power and
authority to execute and deliver this Warrant and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof have
been duly authorized by all necessary corporate action on its part. This
Warrant has been duly executed on behalf of the Company and constitutes the
legal, valid and binding obligation of the Company enforceable in accordance
with its terms.
6.3 No Legal Bar. Neither the execution, delivery or
performance of this Warrant will (a) conflict with or result in a violation of
the certificate of incorporation or by-laws of the Company, (b) conflict with
or result in a violation of any law, statute, regulation, order or decree
applicable to the Company or any affiliate of the Company, (c) require any
consent or authorization or filing with, or other act by or in respect of, any
governmental authority, or (d) result in a breach of, constitute a default
under or constitute an event creating rights of acceleration, termination or
cancellation under any mortgage, lease, contract, franchise, instrument or
other agreement to which the Company is a party or by which it is bound, other
than applicable restrictions contained in any of such documents relating to
indebtedness of the Company.
Section 7. VARIOUS COVENANTS OF THE COMPANY.
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7.1 No Impairment or Amendment. The Company shall not by any
action including, without limitation, amending its certificate of
incorporation, any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate to protect the rights of the holder hereof against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock issuable upon the exercise
of this Warrant above the amount payable therefor upon such exercise; (b) take
all such action as may be necessary or appropriate in order that the Company
may validly issue fully paid and non-assessable shares of Common Stock upon the
exercise of this Warrant; (c) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant
if and at such times such authorizations, exemptions or consents from such
public regulatory bodies are required to be obtained, provided, however, the
foregoing shall not be construed to enlarge or expand upon the registration
rights granted to Holder pursuant to Section 5 of this Warrant; (d) not
undertake any reverse stock split, combination, reorganization or other
reclassification of the capital stock which would have the effect of making
this Warrant exercisable for a number of shares of Common Stock that would be
less than four and ninety-nine hundredths of a percent (4.99%) of the
outstanding shares of Common Stock as of the date of this Warrant; and (e) upon
the request of Holder, at any time during the period this Warrant is
outstanding, acknowledge in writing, in form satisfactory to Holder, the
continued validity of this Warrant and the Company's obligations hereunder.
7.2 Listing on Securities Exchange. If the Company shall list
any shares of Common Stock on any securities exchange it will, at its expense,
list thereon, maintain and increase when necessary such listing of, all Warrant
Stock so long as any shares of Common Stock shall be so listed. The Company
will also so list on each securities exchange, and will maintain such listing
of, any other securities which the holder of this Warrant shall be entitled to
receive upon the exercise thereof if at the time any securities of the same
class shall be listed on such securities exchange by the Company.
7.3 Availability of Information. The Company will cooperate
with Holder of Warrant Stock in supplying such information as may be necessary
for Holder to complete and file any information reporting forms presently or
hereafter required by the Securities and Exchange Commission as a condition to
the availability of an exemption from the Securities Act for the sale of this
Warrant or such Warrant Stock.
Section 8. ADJUSTMENT OF WARRANT PRICE
8.1. Issuance of Additional Shares of Common Stock. If the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including the Additional Shares of
Common Stock that would be deemed to be issued pursuant to Section 8.2 or 8.3
of this Warrant) without consideration or for consideration per
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share less than the Market Price in effect immediately prior to the date of
such issue or sale, then, and in each such case, subject to Section 8.6 of this
Warrant, the Warrant Price shall be reduced, concurrently with such issue or
sale, to a price determined by multiplying such Warrant Price by a fraction,
(a) the numerator of which shall be (i) the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus (ii) the number of
shares of Common Stock which the aggregate consideration received by the
Company for the total number of Additional Shares of Common Stock so issue or
sold would purchase at such Market Price, and (b) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after
such issue or sale.
8.2. Adjustment for Stock Dividends. If the Company shall pay
any dividend or make any other distribution on the class of capital stock of
the Company in shares of Common Stock, the Warrant Price in effect at the close
of business on the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying
such Warrant Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator of which shall be the sum of such
number of shares and the total number of shares of Common Stock constituting
such dividend or other distribution, such reduction to become effective
immediately prior to the opening of business on the day following the date
fixed for such determination. For purposes of this Section 8.2, the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company.
8.3. Adjustments for Issuance of Rights or Warrants. If the
Company shall issue rights or warrants generally to holders of its Common Stock
or any other class of capital stock convertible into Common Stock, entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the Market Price per share of the Common Stock on the date fixed for
the determination of stockholders entitled to receive such rights or warrants,
the Warrant Price in effect at the close of business on the date fixed for such
determination shall be reduced by multiplying such Warrant Price by a fraction,
the numerator of which shall be (a) the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination,
plus (b) the number of shares of Common Stock that the aggregate of the
offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at the Market Price, and the
denominator of which shall be the number of shares of Common Stock so offered
for subscription or purchase, such reduction to become effective immediately
prior to the opening of business on the date following the date fixed for such
determination. For the purpose of this Section 8.3, the issuance of rights or
warrants to subscribe for or purchase securities convertible into Common Stock
shall be deemed to be the issuance of rights or warrants to purchase the number
of shares of Common Stock into which such securities are convertible at an
aggregate offering price equal to the aggregate of the offering price of such
securities plus the minimum aggregate amount (if any) payable upon conversion
of such securities into Common Stock. For purposes of this Section 8.2, the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company.
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8.4. Adjustment for Stock Subdivisions and Combinations. If
the outstanding shares of Common Stock are subdivided into a greater number of
shares of Common Stock, the Warrant Price in effect at the close of business on
the day upon which such subdivision becomes effective shall be proportionately
reduced and, conversely, if the outstanding shares of Common Stock are combined
into a smaller number of shares of Common Stock, the Warrant Price in effect at
the opening of business on the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as
the case may be, to become effective immediately prior to the opening of
business on the day following the day upon which such subdivision or
combination becomes effective.
8.5 Computation of Adjusted Warrant Price. Whenever the
Warrant Price is adjusted as provided in this Section 8, (a) the Company shall
compute the adjusted Warrant Price to the nearest one-hundredth of one cent in
accordance with this Section 8 and shall prepare a certificate, signed by the
Chief Financial Officer or Treasurer of the Company, setting forth the adjusted
Warrant Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed at the
office of the Company that is maintained in accordance with Section 3.3 of this
Warrant, and (b) a written notice stating that the Warrant Price had been
adjusted and setting forth the adjusted Warrant Price shall, as soon as
practicable, be given to Holder; provided, however, the failure of the Company
to file the notice contemplated by Section 8.5(a) or give the notice
contemplated by Section 8.5(b) shall not deprive Holder of any benefit accruing
to it on account of the transactions contemplated thereby.
8.6. Minimum Adjustment; Limitation. No adjustment in the
Warrant Price shall be required under this Section 8 unless such adjustment
would require an increase or decrease of at least one percent (1%) in such
price; provided, however, any adjustments that by reason of this Section 8.6
are not required to be made shall be carried forward and taken into account and
given effect in connection with any subsequent adjustment. All calculations
made under this Section 8 shall be made to the nearest one-hundredth of one
cent or to the nearest one-hundredth of a share of Common Stock, as the case
may be. Notwithstanding the foregoing provisions of this Section 8, in no event
shall the Warrant Price be reduced below the minimum amount for which the
Common Stock may lawfully be issued pursuant to applicable law; provided,
however, upon the occurrence of any event that would, but for the foregoing,
give rise to an adjustment of the Warrant Price pursuant to this Section 8,
solely for the purposes of determining the number of Warrants pursuant to
Section 1 above, the Warrant Price shall be taken into consideration and given
effect as if adjusted to the full extent provided for in this Section 8,
without regard to the limitation set forth herein.
Section 9. REPLACEMENT OF WARRANTS.
Upon (a) surrender of this Warrant in mutilated form or
receipt of evidence satisfactory to the Company of the loss, theft or
destruction of this Warrant and (b) in the case of any loss, theft or
destruction of this Warrant, receipt of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company, then, in the absence
of actual notice
17
<PAGE>
to the Company that this Warrant has been acquired by a bona fide purchaser,
the Company, at its expense, shall execute and deliver, in lieu of this
Warrant, a new Warrant identical in form to this Warrant.
Section 10. REMEDIES.
The Company stipulates that the remedies at law of Holder in
the event of any breach or threatened breach by the Company of the terms of
this Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by injunctive relief or a declaratory judgment against a
breach of any of the terms hereof or otherwise.
Section 11. TRANSFER.
This Warrant and the shares of Common Stock issuable
hereunder shall not be sold, transferred, pledged, or hypothecated (other than
to an affiliate of the Bank, as defined in Rule 405 under the Securities Act)
unless the proposed disposition is (a) the subject of a currently effective
Registration Statement under the Securities Act or (b) the Company has received
an opinion of counsel, in form and substance reasonably satisfactory to the
Company, to the effect that such registration is not required in connection
with such disposition. In the case of such a sale, transfer, pledge or
hypothecation (except by the aforesaid affiliate of the Bank), or in the event
of the exercise hereof if the Warrant Stock so acquired is not registered under
the Securities Act, the Company may require a written statement that this
Warrant or Warrant Stock, as the case may be, are being acquired for investment
and not with a view to the distribution thereof, and any certificate
representing Warrant Stock issued pursuant to such exercise shall bear a legend
in substantially the form set forth on the face hereof. Subject to the first
two sentence of this Section, this Warrant and all rights hereunder are
transferable, in whole or in part, but to no more than three transferees in the
aggregate (including the transferor if it retains a part of this Warrant), at
the office or agency of the Company by the registered holder thereof in person
or by a duly authorized attorney, upon surrender of this Warrant together with
an assignment hereof properly endorsed. Until transfer hereof on the
registration books of the Company, the Company may treat the existing
registered holder hereof as the owner hereof for all purposes. Any transferee
of this Warrant and any rights hereunder, by acceptance thereof, agrees to
assume all of the obligations of Holder and to be bound by all of the terms and
provisions of this Warrant. Any such transferee may transfer all of this
Warrant to any other transferee, subject to the terms and conditions of this
Warrant.
Section 12. NOTICES.
Where this Warrant provides for notice of any event, such
notice shall be given (unless otherwise herein expressly provided) in writing
and either (i) delivered personally or (ii) sent by certified or registered
mail, postage prepaid, return receipt requested, and shall be deemed given when
so delivered personally or so mailed. Notices shall be addressed, if to Holder,
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<PAGE>
to the address of Holder to PNC Recovery Corp., 249 Fifth Avenue, Pittsburgh,
Pennsylvania 5222-2707, Attention: Mr. Thomas J. McCool, Senior Vice President
(with a copy concurrently to Pitney, Hardin, Kipp & Szuch, 200 Campus Drive,
Florham Park, New Jersey 07932-0950, Attention: Peter A. Forgosh, Esq.) or, if
to the Company, to 1735 Jersey Avenue, North Brunswick, New Jersey 08902,
Attention: Treasurer (with a copy concurrently to Fulbright & Jaworski, L.L.P.,
666 Fifth Avenue, New York, New York 10103-3198, Attention: Sheldon G.
Nussbaum, Esq.), or to such other address as a party shall have given notice of
as aforesaid.
Section 13. SURVIVAL.
The provisions of Section 5 shall survive the termination or
expiration of this Warrant if the Warrant has become exercisable prior to its
termination and shall continue to be effective with respect to any Warrant
Stock issued. The provisions of Section 2 shall survive the termination of this
Warrant upon exercise in full, but shall terminate in any event on the
Expiration Date.
Section 14. MISCELLANEOUS.
14.1 This Warrant shall be binding upon the Company and
Holder and their respective legal representatives, successors and assigns.
14.2 If any provision of this Warrant shall be invalid,
illegal, or unenforceable, in whole or in part, the provision shall be enforced
to the extent, if any, that it may legally be enforced and the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
14.3 This Warrant and any term hereof may be changed, waived,
discharged or terminated only by a statement in writing signed by Holder and
the Company.
14.4 The headings and section names in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. This Warrant shall take effect as an instrument under seal.
14.5 Except as otherwise contemplated in the immediately
succeeding sentence with respect to direct and actual damages, in the event
that a claim or adjudication is made that Holder has acted unreasonably or
unreasonably delayed acting in any case where by law or under this Warrant, it
has an obligation to act reasonably or without unreasonable delay, Holder shall
not be liable for any monetary damages, and the Company's remedies shall be
limited to injunctive relief or declaratory judgment. To the fullest extent
permitted or not prohibited by law, neither Holder nor any party related to
Holder (including any of its present or future officers, directors,
shareholders or other Person or Holder's affiliates and subsidiaries) shall
assert, and the Company hereby waives, any claim it may have against Holder and
such aforesaid Persons on any theory of liability for special, indirect,
consequential and punitive damages (as opposed to direct and actual damages) in
connection with, or as a result of, this Warrant and the transactions
contemplated hereby.
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<PAGE>
14.6 The failure of Holder to insist upon strict performance
of any term hereof shall not be deemed to be a waiver of any term of this
Warrant. The Company shall not be relieved of any of its obligations hereunder
by reason of (a) the failure of Holder to comply with any request of the
Company that is not expressly set forth in this Warrant, (b) the release,
regardless of consideration, of the whole or any part of any one or more of the
PNC Loan Documents or of any Person liable for the PNC Debt or any portion
thereof, or (c) any agreement or stipulation by Holder extending the time of
payment or otherwise modifying or supplementing this Warrant or any one or more
of the other Loan Documents. The Bank may resort for the payment of the PNC
Debt to any security held by the Bank in such order and manner as the Bank, in
its sole discretion, may elect, regardless of whether or not it or any
subsequent Holder exercises any rights under this Warrant. The Bank may take
action to recover the PNC Debt, or any portion thereof, or to enforce any
covenant thereof without prejudice to the rights of the Bank or any subsequent
Holder under this Warrant. The rights and remedies of the Bank under the PNC
Loan Documents shall be separate, distinct and cumulative and none shall be
given effect to the exclusion of the others. No act of the Bank shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. The Bank shall not be limited exclusively to
the rights and remedies stated in the PNC Loan Documents but shall be entitled
to every right and remedy now or hereafter afforded at law or in equity.
14.7 Unless the context clearly indicates a contrary intent
or unless otherwise specifically provided herein, words used in this Warrant
may be used interchangeably in singular or plural form. Whenever the context
may require, the singular includes the plural, the plural includes the singular
and the use of any gender includes all genders.
14.8 WITH RESPECT TO ANY ACTION, SUIT OR PROCEEDING RELATING
TO THIS WARRANT, THE COMPANY IRREVOCABLY (A) SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW JERSEY; AND (B) WAIVES ANY OBJECTION WHICH THE
COMPANY MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR
PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH PROCEEDING
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO
OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER THE COMPANY. NOTHING IN THIS WARRANT SHALL PRECLUDE HOLDER
FROM BRINGING AN ACTION, SUIT OR PROCEEDING IN ANY OTHER JURISDICTION NOR WILL
THE BRINGING OF ANY ACTION, SUIT OR PROCEEDING IN ANY ONE OR MORE OTHER
JURISDICTIONS PRECLUDE THE BRINGING OF AN ACTION, SUIT OR PROCEEDING IN ANY
OTHER JURISDICTION. THE COMPANY FURTHER AGREES AND CONSENTS THAT, IN ADDITION
TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL
SERVICE OF PROCESS IN ANY ACTION, SUIT OR PROCEEDING IN ANY SUCH COURT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, RETURN RECEIPT
REQUESTED, DIRECTED TO THE COMPANY AT THE ADDRESS SET
20
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FORTH IN SUBSECTION 1.1(A), AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS
AFTER BEING SO MAILED.
14.9 THIS WARRANT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW JERSEY (WITHOUT GIVING
EFFECT TO THE SUCH JURISDICTION'S PRINCIPLES OF CONFLICTS OF LAWS). TO EXPEDITE
THE RESOLUTION OF ANY DISPUTES WHICH MAY ARISE UNDER THIS WARRANT AND IN LIGHT
OF THE COMPLEXITY OF THE TRANSACTIONS CONTEMPLATED HEREBY, THE COMPANY HEREBY
EXPRESSLY AND UNCONDITIONALLY WAIVES THE RIGHT TO INJUNCTIVE RELIEF, SET-OFF,
HAVING ANY ACTION, SUIT OR PROCEEDING BROUGHT BY HOLDER CONSOLIDATED WITH ANY
OTHER SEPARATE ACTION, SUIT OR PROCEEDING (BUT THE FOREGOING SHALL NOT BE
CONSTRUED AS INTENDING TO PROHIBIT THE COMPANY FROM BRINGING ANY SUCH ACTION,
SUIT OR PROCEEDING), OR COUNTERCLAIM (SAVE ANY MANDATORY OR COMPULSORY
COUNTERCLAIMS UNDER APPLICABLE LAW), AS WELL AS THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT TO WHICH IT
MAY BE A PARTY OR A MATERIAL WITNESS, AND THE COMPANY ACKNOWLEDGES THAT THIS
WAIVER OF TRIAL BY JURY HAS BEEN SPECIFICALLY NEGOTIATED FOR AS A PART OF THIS
WARRANT.
14.10 Anything in this Warrant or the other PNC Loan
Documents to the contrary notwithstanding, the Company expressly acknowledges
that the relationship between the Bank and the Company, is solely that of a
debtor and creditor and nothing shall be deemed or construed as creating any
partnership, joint venture, joint tenancy, tenancy in common, or similar
relationship between the Bank and the Company. The Company represents and
warrants to the Bank that it shall not make any assertion inconsistent with the
acknowledgment contained in the immediately preceding sentence in the event of
any action, suit, or proceeding, either at law or in equity, relating to this
Warrant or the other PNC Loan Documents, and that this sentence may be pleaded,
and shall be construed and deemed to be, a complete bar to and estoppel against
any assertion by the Company that is inconsistent with the immediately
preceding sentence.
14.11 The forms of Assignment, Subscription, Certificate of
Reduction, and form for the Cashless Exercise attached to this Warrant together
with this Warrant may, in addition to the procedures provided in Articles 1 and
12 of this Warrant, be delivered by facsimile to the Company at any facsimile
number of the Company that is known to Holder and delivery of the Assignment,
Subscription, Certificate of Reduction, this Warrant and form for the Cashless
Exercise by facsimile shall be tantamount to delivery as otherwise provided for
herein; provided, however, the foregoing shall not be deemed to modify the
notice provisions of Article 12 with respect to other notices that may be given
pursuant to this Warrant; and, provided, further, that prior to issuance of the
Warrant Shares or any subsequently issued Warrant the Company may
21
<PAGE>
require Holder to deliver to it the original signature copies of the
Assignment, Subscription, Certificate of Reduction, this Warrant and form for
the Cashless Exercise, as applicable.
14.12 This warrant is an amendment and restatement of the
Original Warrant and is not intended as a new or additional Warrant but only as
an amendment and replacement of the Original Warrant.
14.13 Time is of the essence as to all dates set forth in
this Warrant, including, among others, the First Calculation Date, the Second
Calculation Date and the Third Calculation Date.
Section 15. DEFINITIONS.
As used herein, the following terms, unless the context
otherwise requires, have the following respective meanings:
15.1 The term "Additional Shares of Common Stock" shall mean
all shares of Common Stock, including shares of treasury stock, issued or sold
by the Company after the date hereof, other than shares of Common Stock issued
pursuant to the exercise of Warrants, existing warrants to purchase Common
Stock, stock options granted to employees, directors, officers or consultants
of the Company or any of its subsidiaries, or warrants granted in the ordinary
course of business or warrants (or other convertible securities) or Common
Stock granted, issued or sold to persons, joint venturers, participating
entities or other companies or institutions with which the Company has a
business relationship, or Common Stock issued to the Company's former or
present shareholders in connection with the settlement of the sole class action
proceeding pending against the Company on the date of the execution and
delivery of this Warrant..
15.2 The term "Common Stock" shall mean the duly authorized,
validly issued, fully-paid and non-assessable common stock of the Company,
$0.01 par value per share, all of which issued and outstanding shares of Common
Stock are free of preemptive rights.
15.3 The term "Exchange Act" means the Securities Exchange
Act of 1933, or any successor Federal statute, and the rules and regulations of
the Securities and Exchange Commission (or of any other Federal agency then
administering the Securities Act) hereunder, all as the same shall be in effect
at the time.
15.4 The term "Form S-3" means such form under the Securities
Act as in effect on the date hereof or any registration form under the
Securities Act that is subsequently adopted by the SEC which permits inclusion
or incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
15.5 The term "indefeasibly paid in full" shall mean, with
respect to the PNC Debt, that the Bank shall have received lawful funds of the
United States of America which at the time of payment is legal tender for the
payment of public and private debts and there is no law, rule, regulation or
other matter of like import then being imposed on the Bank that would require
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<PAGE>
the Bank to disgorge, repay or return to the Company or any other Person,
including any trustee or receiver of the Company, any payment that has
previously been received by the Bank.
15.6 The term "Market Price" shall mean the closing price for
the day in question. The closing price for such day shall be (a) the last
reported sales price or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices, in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, on the National Association of
Securities Dealers Automated Quotation National Market or Small Cap Market
System, (b) if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on such National Market or Small Cap
Market System, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
reasonably selected from time to time by the Company for that purpose, or (c)
if the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted on such National Market and the average price
cannot be determined as contemplated by clause (b), the fair market value as
reasonably determined in good faith by the Company's board of directors or in
any manner reasonably prescribed by the Company's board of directors. In the
event that the Market Price is determined by the method set forth in subsection
"(c)" of the immediately foregoing sentence and Holder objects to the result of
such determination, then, at the direction of Holder, the Company shall
forthwith upon receipt of such notice engage a consulting firm or investment
banking firm jointly selected by Holder and the Company to prepare an
independent appraisal of the fair market value of an outstanding share of
Common Stock, which appraised fair market value shall be the "Market Price"
hereunder, the costs of which shall be borne in equal proportion by the Company
and Holder unless it is determined by the order or judgment of a court of
competent jurisdiction not subject to further appeal that the Market Price was
determined in a manner that is inconsistent with the Company's requirements
under the foregoing clause "c," in which event the costs of which shall be
borne solely by the Company. For the purposes of this Section 15.5, the term
"Business Day" shall mean any day other than a Saturday, Sunday, public holiday
or its equivalent generally on which (a) commercial banks in the State of New
Jersey and (b) stock exchanges in the United States of America in which the
Common Stock is traded are open and authorized to do business (or not required
to be closed).
15.7 The term "Original Warrant" shall mean the Warrant
issued to PNC Bank, National Association dated February 25, 1998.
15.8 The term "PNC Debt" shall mean those certain obligations
of the Company (including any commitments to lend by PNC Bank) to pay to PNC
Bank, National Association the sum of up to Forty Million ($40,000,000.00)
Dollars as evidenced by the Amended and Restated Secured Revolving Promissory
Note in the amount of $10,000,000.00, the Amended and Restated Secured Capital
Expenditure Note in the amount of $20,000,000.00 and the Amended and Restated
Secured Bridge Note in the amount of $10,000,000.00, all dated February 25,
1998 as the same may be amended, substituted, renewed or extended from time to
time.
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15.9 The term "PNC Loan Documents" shall mean all documents,
instruments, records and papers evidencing, securing, guaranteeing,
indemnifying, documenting or otherwise relating to the PNC Debt.
15.10 The term "Person" shall mean an individual,
partnership, corporation, association, trust, joint venture, unincorporated
organization or any government, governmental department or agency or political
subdivision thereof.
15.11 The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act and the subsequent declaration
or ordering of the effectiveness of such Registration Statement.
15.12 The term "Registrable Securities of Warrant Holder"
means the Warrant Shares that may be or are acquired pursuant to any one or
more exercises of this Warrant including (a) the Common Stock issued or
issuable upon exercise of this Warrant, and (b) any other shares of Common
Stock issued in respect of such shares by way of a stock dividend, or stock
split, or in connection with a combination of shares, recapitalization, merger
or consolidation or reorganization, provided, however, that shares of Common
Stock shall only be treated as Registrable Stock if and so long as they (i) may
not be sold in a sale transaction in the public market pursuant to the
provisions of Rule 144, as amended, or any successor thereto, promulgated by
the Securities and Exchange Commission, (ii) have not been sold to or through a
broker or dealer or underwriter in a public distribution, or a public
securities transaction, or (iii) have not been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities
Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect to such Common Stock are removed upon the
consummation of such sale and the seller and purchaser of such Common Stock
receive an opinion of counsel for the Company, which shall be in form and
content reasonably satisfactory to the seller and buyer and their respective
counsel, to the effect that such Common Stock in the hands of the purchaser is
freely transferable without restriction or registration under the Securities
Act in any public or private transaction.
15.13 The term "Registration Statement" means a Registration
Statement filed by the Company with the Securities and Exchange Commission for
a public offering and sale of securities of the Company (other than a
Registration Statement on Form S-8, Form S-4, or successor forms, any
Registration Statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation, any other form of
Registration Statement not available for registering the Registrable Stock or
any Registration Statement relating solely to employee Stock Option, stock
purchase, benefit or similar plans).
15.14 The term "Securities Act" means the Securities Act of
1933, or any successor Federal statute, and the rules and regulations of the
Securities and Exchange Commission (or of any other Federal agency then
administering the Securities Act) hereunder, all as the same shall be in effect
at the time.
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15.15 The term "Warrant Stock" shall mean any equity security
issued upon exercise of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officer and its corporate seal to be impressed
hereon on August 14, 1998.
USA DETERGENTS, INC.,
A Delaware Corporation
By: /s/ Uri Evan
---------------------------
Name: Uri Evan
Title: Chairman & CEO
(CORPORATE SEAL)
25
<PAGE>
FORM
OF
SUBSCRIPTION
(To be signed only on exercise of Common Stock Purchase Warrant)
TO: USA DETERGENTS, INC.
The undersigned, the holder of the within Common Stock
Purchase Warrant, hereby irrevocably elects to exercise this Common Stock
Purchase Warrant for, and to purchase thereunder, ___________________ shares of
Common Stock of USA Detergents, Inc. (the "Company") and herewith makes payment
of $___________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to, _______________________, whose address
is _______________________________________________________________________.
---------------------------------------------------
(Signature must conform in all respects
to name of Holder as specified on the face
of the Warrant)
---------------------------------------------------
(Address)
- ---------------------------
* Insert here the number of shares (all or part of the number of shares called
for in the Common Stock Purchase Warrant) as to which the Common Stock Purchase
Warrant is being exercised without making any adjustment for any other stock or
other securities or property or cash that, pursuant to the adjustment
provisions of the Common Stock Purchase Warrant, may be deliverable on
exercise.
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FORM
OF
ASSIGNMENT
(To be signed only on transfer of Common Stock Purchase Warrant)
TO: USA DETERGENTS, INC.
_________For value received, the undersigned hereby sells, assigns and
transfers unto _____________________________ of ___________________________ the
right represented by the within Common Stock Purchase Warrant to purchase
___________ shares of Common Stock of USA Detergents, Inc. (the "Company") to
which the within Common Stock Purchase Warrant relates, and appoints
_______________________, Attorney, to transfer such right on the books of USA
Detergents, Inc. with full power of substitution in the premises.
---------------------------------------------------
(Signature must conform in all respects
to name of Holder as specified on the face
of the Warrant)
---------------------------------------------------
(Address)
Signed in the presence of:
- -------------------------------
27
<PAGE>
FORM
OF
CERTIFICATE OF REDUCTION
(To be signed only on exercise of Common Stock Purchase Warrant)
TO: USA DETERGENTS, INC.
The capitalized terms used in this Certificate of Reduction,
if not otherwise defined, shall have the meanings ascribed to them in that
certain Common Stock Purchase Warrant (the "Warrant"), dated January ___, 1998,
from USA DETERGENTS, INC. (the "Company"), to PNC BANK, NATIONAL ASSOCIATION
(the "Bank").
Reference is made to Section 1.1(a) of the Warrant, wherein
the Warrant Price for the shares of Common Stock that are deliverable by the
Company to Holder may be paid by virtue of this Certificate of Reduction in
lieu of a certified or official bank check or wire transfer.
The Bank hereby certifies to the Company that the PNC Debt is
hereby reduced by $ __________, which is the amount that is required to be paid
for the Warrant Price for the number of shares of Common Stock for which the
Warrant is now being exercised by Holder and which amount equals or exceeds the
presently outstanding amount of the PNC Debt.
IN WITNESS WHEREOF, this Certificate of Reduction has been
executed and delivered by the Bank on __________ ___, _______.
PNC BANK, NATIONAL ASSOCIATION
By: ________________________________
Name:
Title:
28
<PAGE>
FORM
FOR
CASHLESS EXERCISE ELECTION
(To be signed only on exercise of Common Stock Purchase Warrant)
TO: USA DETERGENTS, INC.
The capitalized terms used in this Cashless Exercise
Election, if not otherwise defined, shall have the meanings ascribed to them in
that certain Common Stock Purchase Warrant (the "Warrant"), dated January ___,
1998, from USA DETERGENTS, INC. (the "Company"), to PNC BANK, NATIONAL
ASSOCIATION (the "Bank").
Reference is made to Section 1.1(a)(ii) of the Warrant,
wherein Holder is entitled to effectuate a Cashless Election.
If the Holder of the Warrant is other than the Bank, the
undersigned represents and warrants to the Company that is the true and lawful
owner and holder of the Warrant.
Pursuant to Section 1.1(a)(ii) of the Warrant, Holder hereby
elects to enter into a Cashless Election and is exchanging the Warrant
delivered herewith to the Company for that number of shares of Common Stock to
which the Holder is entitled pursuant to Section 1.1(a)(ii). Holder hereby
waives any obligation to pay all or any portion of the Warrant Price.
IN WITNESS WHEREOF, this Cashless Exercise Election has been
executed and delivered by the Holder on __________ ___, _______.
-----------------------------
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<PAGE>
SECOND AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This is a SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT,
dated the 14th day of August, 1998, made by and between PNC BANK, NATIONAL
ASSOCIATION ("Lender"), having offices at Two Tower Center Boulevard, East
Brunswick, New Jersey 08816, and USA DETERGENTS, INC., a corporation organized
and existing under the laws of the State of Delaware ("Borrower"), having its
principal place of business at 1735 Jersey Avenue, North Brunswick, New Jersey
08902.
W I T N E S S E T H
WHEREAS, Lender and Borrower have previously entered into a commercial
lending relationship as evidenced by the Amended and Restated Loan and Security
Agreement dated February 25, 1998 (the "Loan Agreement"); and
WHEREAS, Borrower has or is about to refinance a portion of its
Obligations with Finova Capital Corporation as agent for itself and other
lenders (collectively, the "New Lender") and repay Lender on or before August
15, 1998 the principal sum of Twenty Five Million ($25,000,000.00) Dollars; and
WHEREAS, Lender has agreed that upon receipt of the Pay Down (as
hereinafter defined) it shall consent to a partial refinancing of Borrower's
Obligations to Lender and the termination of its interest in certain of the
Collateral and release the Guaranty of the Individual Guarantors; and
WHEREAS, Lender is the holder of a warrant to acquire certain common
stock of Borrower dated February 25, 1998 (the "Original Warrant") and has
agreed that, upon receipt of the Pay Down, the Original Warrant shall be
amended as herein provided; and
WHEREAS, Lender and Borrower are desirous of amending and restating
the terms and conditions of the Loan Agreement as herein provided.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration,
receipt of which is hereby acknowledged, it is agreed as follows:
1. DEFINITIONS
<PAGE>
Section 1 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
The definitions of the following terms shall have the meaning ascribed
to them in the preambles to this Agreement:
Borrower
Lender
Loan Agreement
New Lender
Original Warrant
"Affiliate" - any Person, which directly or indirectly through one or
more intermediaries controls, is controlled by, or is under common control
with, any other Person; for the purposes of this definition, "control" when
used with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" - this Second Amended and Restated Loan and Security
Agreement.
"Banking Day" - any day other than a Saturday, Sunday or legal holiday
for banks under the laws of the State wherein the New Jersey office of the
Lender as set forth above is located.
"Bridge Loan" - the loan of Lender to Borrower evidenced by the Bridge
Note.
"Bridge Loan Agreement" - the Security Agreement dated March 31, 1997
entered into between Borrower and Lender.
"Bridge Note" - the Amended and Restated Secured Bridge Note dated
February 25, 1998 executed by Borrower and payable to Lender.
"Capital Expenditure Loan" or "Capital Expenditure Loans" - the loan
of Lender to Borrower evidenced by the Capital Expenditure Note.
"Capital Expenditure Note" - the Amended and Restated Secured Capital
Expenditure Note dated February 25, 1998 executed by Borrower and payable to
Lender.
"Collateral" - (i) the Real Estate Collateral, (ii) the unlimited
continuing corporate guarantees of Chicago Management Powder Corp., Big Cloud
Powder Corporation and Chicago Contract Powder Corporation; (iii) all policies
or certificates of insurance related to the Real Estate Collateral and all
claims of Borrower against third parties for loss of or damage to, or otherwise
relating to, any of the Collateral and (iv) all rights and remedies which
Borrower might exercise with respect to any of the foregoing but for the
execution of this Agreement.
"December 1996 Loan Agreement" - the Loan Agreement dated December 17,
1996 entered into between Borrower and Lender.
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"Default Rate" - a rate of interest two (2%) percent per annum in
excess of the then applicable rate.
"Encumbrance" - any security interest, mortgage, charge, claim,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
capitalized lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the UCC) in, upon,
or against Borrower or any asset of Borrower, whether or not voluntarily given.
"Environmental Claim" - any claim, suit, notice, order, demand or
other communication made by any Person, including Borrower, with respect to
Borrower or any of its properties, whether owned or leased, that: (i) asserts a
violation of an Environmental Law; (ii) asserts a liability under an
Environmental Law; (iv) demands information under an Environmental Law; (v)
alleges personal injury or property damage resulting from Hazardous Substances;
or (vi) alleges that there is or may be contamination.
"Environmental Law" - any Governmental Rule concerning protection or
regulation of the discharge of substances into the environment, including but
not limited to those concerning air emissions, water discharges and treatment,
storage tanks, and the handling, generation, treatment, storage and disposal of
waste materials, chemical substances, pollutants, contaminants, toxic
substances, pathogens, radioactive materials or hazardous substances of any
kind, whether solid, liquid or gaseous, including without limitation the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.6901 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. ss.1251 et seq.,; the Clean Air
Act, 42 U.S.C. ss.7401 et seq.; the Hazardous Materials Transportation Act of
1975, 49 U.S.C. ss.ss.1801-1812; the Toxic Substances Control Act, 15 U.S.C.
ss.2601 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. ss.136 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.300 et seq.;
and each as amended and as now or hereinafter in effect, and their state and
local counterparts or equivalents, including any regulations promulgated
thereunder.
"Equipment" - all of Borrower's equipment, machinery, fixtures,
motors, compressors, apparatus, fittings, lighting, electrical, plumbing,
heating and air-conditioning systems, and communications systems, building
supplies and materials, and all other tangible property similar to any of the
foregoing, which become fixtures now or hereafter located upon or related,
appurtenant or affixed to the Real Estate Collateral and usable in connection
with the present or future operation of the Real Estate Collateral and all
repairs, modifications, alterations, replacements, additions, parts and
accessories thereto.
"ERISA" - the provisions of the Employee Retirement Income Security
Act of 1974, as amended, and the related provisions of the Internal Revenue
Code, and with all regulations and published interpretations issued thereunder
by the United States Treasury Department, the United States Department of Labor
and the Pension Benefit Guaranty Corporation.
"Event of Default"- as defined in Section 9.
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"Existing Loans" - all of the following: (i) a Revolving Loan of up to
$10,000,000.00; (ii) a Capital Expenditure Loan of up to $20,000,000.00; and
(iii) a Bridge Loan of $10,000,000.00.
"GAAP" - generally accepted accounting principles in effect in the
United States of America, consistently applied from reporting period to
reporting period.
"Governmental Authority" - any (i) nation, state, government,
jurisdiction or jurisdictional authority (domestic, foreign or international),
any political subdivision thereof, and any governmental, quasi-governmental,
judicial, public, statutory, administrative or regulatory body, agency,
department, bureau, authority, court, commission, board, office,
instrumentality, administrative tribunal or other entity of any of the
foregoing and any official thereof and (ii) any arbitrator, arbitration
tribunal or other non-governmental entity which has jurisdiction over Borrower
as a result of (A) the consent of Borrower or (B) being vested with such
jurisdiction by any Governmental Authority.
"Governmental Rule" - any constitutional provision, law, statute,
code, act, rule, regulation, permit, license, treaty, ordinance, order, writ,
injunction, decree, judgment, guideline, award, standard, directive, decision,
determination, demand or holding of any Governmental Authority, whether in
existence on the date hereof or whether issued, enacted or adopted hereafter,
and any change therein or in the interpretation or application thereof
following the date hereof.
"Guarantor" or "Guarantors" - Chicago Management Powder Corp., Big
Cloud Powder Corporation, Chicago Contract Powder Corporation and their
successors and assigns and any other Person who, at any time, shall agree to
guaranty and be a surety for the Obligations.
"Individual Guarantors" - Mark Antebi, Daniel Bergman, Joseph Cohen,
Uri Evan and Frederick Horowitz.
"ISRA" - as defined in Section 4.9.
"Loans" - the Revolving Loan, the Capital Expenditure Loan and the
Bridge Loan, as the context may require, when not referred to by their full
titles.
"Missouri Property" - the real estate (and all buildings,
improvements, Equipment and appurtenances thereto) owned by the Borrower in the
City of Harrisonville, Cass County, Missouri, more particularly described in a
certain First Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing dated February 25, 1998.
"North Brunswick Property" - the real estate (and all buildings,
improvements, Equipment and appurtenances thereto) owned by the Borrower in
North Brunswick, County of Middlesex, New Jersey, more particularly described
in a certain Mortgage & Security Agreement dated February 25, 1998.
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"Notes" - the Amended and Restated Secured Capital Expenditure Note
and the Amended and Restated Secured Bridge Note, as the context may require,
when not referred to by their full titles.
"Obligations" - all the following: (i) all principal of and interest
on the Revolving Loan, the Capital Expenditure Loan and the Bridge Loan, and
all other sums payable by Borrower or any Related Entity under the terms of
this Agreement or any of the Relevant Documents; (ii) all other indebtedness,
liabilities, obligations and agreements of every kind and nature of Borrower or
any Related Entity to or with Lender or any affiliate of Lender whether
pursuant to this Agreement, any of the Relevant Documents or otherwise, whether
in the form of refinancing, letters of credit, bankers acceptances, interest
rate agreements, hedge or currency contracts, guarantees, loans, interest,
overdrafts charges, fees, expenses or otherwise, whether direct or indirect,
whether acquired outright, conditionally or as collateral security from
another, whether absolute or contingent, joint or several, liquidated or
unliquidated, secured or unsecured, and whether arising by operation of law or
otherwise. (iii) all guarantees of any of Borrower's indebtedness to Lender;
(iv) any participation or interest of Lender or any affiliate of Lender in any
indebtedness, liabilities or agreements of Borrower, any Related Entity or any
such guarantor to or with others; (v) all out-of-pockets costs and expenses
incurred by Lender in connection with this Agreement and the Relevant Documents
at any time, including, but not limited to the expenses and reasonable fees of
Lender's counsel, whether of outside counsel or the allocated cost of Lender's
in-house counsel; (vi) in each case whether now existing or hereafter created,
whether now or hereafter contemplated, and including without limitation any
future advances, renewals, extensions modifications or changes in form of, or
substitutions for, any of the items described in the preceding clauses (i)
through (v).
"Pay Down" - shall mean the payment to Lender in good funds of the
principal sum of Twenty Five Million ($25,000,000.00) Dollars on account of the
Loans on or before August 15, 1998, plus interest accrued to the date of
payment and costs (including reasonable legal fees).
"Permitted Encumbrance" - any one or combination of the following: (i)
The liens and security interests in the Real Estate Collateral granted to
Lender; (ii) Liens for taxes, assessments, governmental charges or levies on
Borrower or any of Borrower's properties, but only if such taxes, assessments,
governmental charges or levies (A) are at the time due and payable or if they
can thereafter be paid without penalty or are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which Borrower
has created adequate reserves; or (B) are not pursuant to any Environmental
Law; (iii) Pledges or deposits to secure payment of workers' compensation
obligations, unemployment insurance, deposits or indemnities to secure public
or statutory obligations or for similar purposes; (iv) Mechanics', carriers'
workmen's', repairmen's and other similar statutory liens incurred in the
ordinary course of Borrower's business, so long as the liability secured is not
overdue or, if overdue, is being contested in good faith by appropriate actions
or proceedings diligently conducted with respect to which Borrower has created
adequate reserves or has adequate insurance protection; provided, however, that
at no time may the aggregate amount of such liens exceed $100,000.00; (v)
Encumbrances existing on the date hereof and listed on Schedule 5.8 of this
Agreement; provided, however, that the amount of the indebtedness secured by
each such encumbrance shall not exceed the indebtedness secured by such
encumbrance existing on the date hereof; (vi) with regard to the
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North Brunswick Property, a second mortgage lien (the "Second Mortgage")
granted by the Borrower to 101 Realty Associates, L.L.C., a New Jersey limited
liability company formed by the Individual Guarantors to secure the principal
sum of $4,000,000.00, and interest thereon, dated the same date as this
Agreement, and (vii) liens and security interests granted to New Lender in
Borrower's assets other than the Real Estate Collateral.
"Person" - any individual, partnership, corporation, association,
trust, business trust, joint venture, joint stock company, limited liability
company, limited liability partnership, limited partnership, unincorporated
organization or enterprise or Governmental Authority.
"Personal Property" - all tangible and intangible personal property of
Borrower, excluding the Real Estate Collateral.
"Plan" - any employee benefit plan of Borrower relating to ERISA.
"Pledge" - collectively, the Pledge of Trademark as Security and the
General Pledge of Trademark as Security delivered by Borrower to Lender on
February 25, 1998 and all amendments, modifications, substitutions and
replacements thereto and thereof.
"Post-Closing Collateral" - a mortgage on the leasehold estate (and
all buildings, improvements, Equipment and appurtenances thereto) located at
6200 West 51st Street, Chicago (Clearing), Illinois (the "Chicago Property")
owned by Chicago Contract Powder Corporation ("Chicago Contract"), which Lender
recognizes requires the consent of the ground lessor, Witco Chemical
Corporation (the "Witco Consent"), and that such mortgage is not effective
until and unless the Witco Consent is obtained.
"Prime Rate" - the rate of interest announced from time to time by
Lender as its "prime rate" or "prime lending rate," which rate is determined
from time to time by Lender as a means of pricing some loans to its customers
and is neither tied to any external rate of interest or index nor necessarily
reflects the lowest rate of interest actually charged by Lender to any
particular class or category of customers.
"Real Estate Collateral" - shall mean the mortgages, collateral
assignments of leases or other liens granted by Borrower to Lender in and to
the North Brunswick Property and the Missouri Property together with any
leases, rents, issues or profits derived therefrom, or condemnation awards, or
proceeds of insurance policies relative thereto.
"Related Entity" - any corporate subsidiary of Borrower and any
unincorporated association or other Person through which Borrower conducts any
part of its business.
"Relevant Documents" - any and all documents and instruments delivered
to Lender pursuant or incident to this Agreement or any of the Loans (i) by
Borrower or any Related Entity; (ii) by any pledgor or grantor of a lien,
security interest or other right, or (iii) by any Guarantor of any of the
Obligations, including without limitation the guarantees of the Obligations of
Borrower executed by the Guarantors under even date.
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"Revolving Loan" or "Revolving Loans" - the loan of Lender to Borrower
evidenced by the Revolving Note.
"Revolving Note" - the Amended and Restated Secured Revolving Note
dated February 25, 1998 executed by Borrower and payable to Lender.
"Termination Date" - shall mean, in relation to the Bridge Loan and
the Capital Expenditure Loan (absent the existence of an Event of Default),
June 30, 1999.
"UCC" - the Uniform Commercial Code as in effect from time to time in
the State wherein Lender's office as set forth on the first page hereof is
located.
"Warrant" - the Amended and Restated Common Stock Purchase Warrant
delivered by Borrower to Lender dated the date hereof and all extensions,
renewals, amendments, modifications, substitutions and replacements thereto and
thereof.
2. CREDIT FACILITIES
Section 2 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
DEBT
2.1 PAY DOWN. Borrower hereby acknowledges that upon the payment of
the Pay Down there remains due and owing to Lender on account of the Loans, the
aggregate principal sum of $9,997,983.16 plus accrued and unpaid interest and
costs (including reasonable legal fees). It is understood and agreed that the
Pay Down shall be applied to the extent thereof first to interest due on the
Existing Loans, then to Lender's cost and expenses (including reasonable legal
fees), then to the principal of the Revolving Loan, then to the Capital
Expenditure Loan and then to the Bridge Loan.
2.2 REPAYMENT OF BALANCE OF LOANS. Borrower shall pay any unpaid
principal balance, interest and costs and expenses due to Lender on account of
the Loans in accordance with the terms of this Agreement, the Capital
Expenditure Note and the Bridge Note but in all events on or before the
Termination Date. Lender hereby acknowledges that the Revolving Loan has been
paid in full.
2.3 INTEREST RATE. The Loans shall bear interest at a fluctuating
interest rate per annum equal to the following: (i) three quarters (3/4) of one
percentage point above Lender's Prime Rate in effect from time to time from
June 1, 1998 through and including August 31, 1998; (ii) one (1) percentage
point above Lender's Prime Rate in the effect from time to time from September
1, 1998 through and including September 30, 1998; (iii) one and one quarter (1
1/4) percentage points above Lender's Prime Rate in effect from time to time
from October 1, 1998 through and including October 31, 1998; (iv) one and one
half (1 1/2) percentage points above Lender's Prime Rate in effect from time to
time from November 1, 1998 through and including
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November 30, 1998; (v) two (2) percentage points above Lender's Prime Rate in
effect from time to time from December 1, 1998 through and including June 30,
1999. Each change in such fluctuating interest rate to take effect
simultaneously with the corresponding change in the Prime Rate, without notice
to Borrower.
2.4 REPAYMENT. Interest on the Loans shall be due at the end of each
calendar month and shall be payable immediately. Any failure or delay by Lender
in presenting invoices for interest payments shall not discharge or relieve
Borrower of the obligation to make such interest payments. The Loans plus all
accrued and unpaid interest and fees thereon, shall be payable (x) on the
Termination Date, or (y) at such other time as is provided in Section 10,
Section 12 or elsewhere in this Agreement, whichever of (x) or (y) shall first
occur.
2.5 ADDITIONAL PROVISIONS RE: INTEREST, FEES AND PAYMENTS ON ALL LOANS
2.5(1) INTEREST CALCULATION; LAWFUL RATE. Interest on the
Loans shall be calculated on a daily basis upon the unpaid principal balance,
with each day representing 1/360th of a year. If the interest rate calculated
in accordance with any provision of this Agreement for any of the Loans would
at any time exceed the maximum permitted by any law then applicable to such
Loans, then for such period as such rate would exceed the maximum permitted by
such law (and no longer), the rate of interest payable on the Loans shall be
reduced to the maximum permitted by such law.
2.5(2) CHARGING PRINCIPAL AND INTEREST PAYMENTS. Lender may,
at its discretion, charge the amount of any payment of principal or interest on
any of the Loans to any checking or loan account of Borrower, deduct such
amount from any future Loan to Borrower or other funds received by Lender
against payment of such amount. Borrower hereby consents to all such charges.
Anything herein to the contrary notwithstanding, Lender shall not make any such
charge against an account or funds otherwise pledged to the New Lender as agent
or any other Person.
2.5(3) DEFAULT RATE. Upon the occurrence and during the
continuance of any Event of Default hereunder, the Loans shall, at the option
of Lender, bear interest at the Default Rate.
2.5(4) NON-BANKING DAYS. If any payment pursuant to this
Agreement or any of the Relevant Documents shall be stated to be due on a day
other than a Banking Day, such payment may be made on the next succeeding
Banking Day and such extension of time shall be included in computation of the
interest or other payment due.
2.5(5) REIMBURSEMENT OF INCREASED COST TO LENDER. If any law,
regulation or guideline, or change in any law, regulation or guideline or in
the interpretation thereof, or any order or ruling by any Governmental
Authority, or compliance by the Lender, with any Governmental Rule of any such
Governmental Authority, shall impose, modify, or deem applicable to Lender any
reserve, capital, special deposit or other requirement or condition in respect
of this Agreement or any of the Loans, which results in an increased cost or
reduced
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benefit to Lender in maintaining any of the Loans (as determined by reasonable
allocation of the aggregate of such increased costs or reduced benefits to
Lender resulting from such event), then Borrower shall pay to Lender from time
to time, upon demand, additional amounts sufficient to compensate Lender for
such increased costs or reduced benefits. Interest shall be due and payable on
each such amount if not paid within ten (10) days after the date of such demand
until payment in full thereof at the Default Rate. A certificate setting forth
in reasonable detail such increased cost incurred or reduced benefit realized
by Lender as a result of any such event shall be conclusive as to the amount
thereof, absent manifest error.
2.6 EXISTING LOANS. Borrower hereby acknowledges that:
A. the Existing Loans are due from the Borrower to
Lender without any defense, offset or counterclaim whatsoever;
B. the Existing Loans shall henceforth be governed
and paid pursuant to this Agreement; and
C. all Existing Loans shall be secured by the
Collateral set forth herein.
3. SECURITY INTEREST
Section 3 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following
COLLATERAL
3.1 PERSONAL PROPERTY. Effective upon receipt of the Pay Down in good
funds, the Lender's security interest in the Personal Property and Post Closing
Collateral of the Borrower is hereby released and terminated and Lender shall
thereupon cease to have a lien on the Personal Property of the Borrower and
shall retain a lien only on the Real Estate Collateral. In furtherance thereof,
Lender shall execute and deliver to Borrower on the date of the Pay Down (a)
Uniform Commercial Code termination statements relevant thereto for the state
filing offices in which Lender has filed a lien, including, but not limited to,
the offices set forth in Exhibit "A" attached hereto and made a part hereof,
and (b) a discharge of the assets subject to the Pledge. Lender shall execute
and deliver such additional documents as Borrower may reasonably request from
time to time to effectuate the termination of Lender's security interest in the
Personal Property, at the Borrower's sole cost and expense.
3.2 INDIVIDUAL GUARANTORS. Effective upon receipt of the Pay Down in
good funds by the Lender, the Individual Guarantors shall be deemed released of
their obligations to Lender under the terms of the guarantees executed by them.
3.3 OTHER COLLATERAL. As security for the due and punctual payment and
performance of all of the Obligations, whether pursuant to this Agreement or
otherwise,
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Borrower has mortgaged and granted assignments of leases and rents to Lender in
the Real Estate Collateral.
3.4 FURTHER ASSURANCES. Borrower shall execute and deliver such other
documents (in form and substance satisfactory to Lender) and take such other
actions as Lender may reasonably request from time to time in order to create,
perfect or continue the mortgage and assignment of lease interests and other
liens provided for by this Agreement in the Real Estate Collateral. All Real
Estate Collateral shall be retained by Lender to secure the repayment of the
Loans in accordance with the terms of this Agreement, the Capital Expenditure
Note and the Bridge Note.
4. REPRESENTATIONS AND WARRANTIES.
Section 4 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender that the following
statements are true and accurate.
4.1 ORGANIZATION AND QUALIFICATION
4.1(1) Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction stated at the
beginning of this Agreement.
4.1(2) Borrower has the power and authority, and all
necessary licenses or other authorizations, to own its properties and to carry
on its business as now conducted, and is duly qualified and in good standing in
each jurisdiction wherein the nature of the property owned or used or of the
business conducted requires such qualification, except where the failure to
satisfy such requirements would not have a material adverse effect on the
Borrower's operations, financial condition, or ability to perform under the
terms of this Agreement.
4.2 DUE AUTHORIZATION; NO DEFAULT
4.2(1) The execution, delivery and performance by Borrower of
this Agreement, the Notes and the Relevant Documents are within Borrower's
powers, have been duly authorized by all necessary action on the part of
Borrower, and do not and will not (a) violate Borrower's Certificate of
Incorporation or By-Laws, or any Governmental Rule of any Governmental
Authority, (b) constitute a breach of, or default under, any agreement,
undertaking or instrument to which Borrower is a party or by which it may be
affected, or (c) result in the imposition of any lien, Encumbrance or
restriction on any assets of Borrower.
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4.2(2) Borrower has delivered to Lender true and complete
copies of Borrower's resolutions necessary to authorize the transactions
contemplated by this Agreement, and of Borrower's Certificate of Incorporation
and By-Laws, all as in effect on the date hereof and certified by a duly
authorized officer of Borrower.
4.2(3) This Agreement, upon its execution and delivery, shall
be a legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms, and the Notes and Relevant Documents
remain legal, valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms.
4.3 NO PROCEEDINGS. Except as forth in Schedule 4.3 to this Agreement,
there are no pending or threatened claims, actions, proceedings or
investigations before any Governmental Authority that may, singly or in the
aggregate, have a material adverse effect on (a) the validity or enforceability
of this amendment to the Loan Agreement, any of the Notes or any of the
Relevant Documents, or the ability of Borrower to perform any of its
Obligations, or (b) the financial condition or the properties or operations of
Borrower.
4.4 NO CHANGE IN FINANCIAL CONDITION; SOLVENCY.
4.4(1) There has been no material adverse change in
Borrower's financial condition since February 25, 1998.
4.4(2) Borrower's assets, at a fair valuation, exceed
Borrower's liabilities (including, without limitation, contingent liabilities),
Borrower has the capacity to pay its debts, and Borrower has capital and assets
sufficient to carry on its business.
4.5 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.5 of this
Agreement, Borrower is in compliance in all material respects with all
Governmental Rules applicable to its ownership or use of properties or the
conduct of its business; Borrower has not received any notice of violation of
any of the foregoing; and Borrower is not in violation of any judgment, order
or decree of any Governmental Rule.
4.6 NO OTHER VIOLATIONS. Borrower is not in violation of any term of
its Certificate or Articles of Incorporation or Bylaws.
4.7 TAXES AND ASSESSMENTS. Except as set forth on Schedule 4.7(A) of
this Agreement, Borrower has filed all federal, state and local tax returns and
other reports it is required to file to the date hereof (or has obtained valid,
written extensions as to any not so filed), has paid all taxes, assessments,
and other governmental charges due and payable to the date hereof, and has made
adequate provision for the payment of such taxes, assessments and charges
accrued but not yet payable. Borrower has no knowledge of any deficiency or
additional assessment in a materially important amount in connection with any
taxes, assessments or other governmental charges not provided for or disclosed
in the financial statements set forth on Schedule 4.7(B) of this Agreement.
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4.8 OTHER REPRESENTATIONS AND WARRANTIES. Except as otherwise set
forth herein, all other representations and warranties of the Borrower as set
forth in the Loan Agreement are true accurate and correct as of the date hereof
and do not as of this date contain any material fact or omit to state any
material fact necessary to make such representation or warranty not misleading
in light of the circumstances under which it has been made.
4.9 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 4.9 to this
Agreement: (a) no property owned or used by Borrower and located in the State
of New Jersey is an "industrial establishment" within the meaning of the New
Jersey Industrial Site Recovery Act ("ISRA") or is or has been used for the
generation, manufacture, refining, transportation, treatment, storage handling
or disposal of any "hazardous substances" or "hazardous wastes" within the
meaning of ISRA; (b) the following are all of the Standard Industrial
Classification Codes applicable to the properties and operations of Borrower:
2841; (c) Borrower is in compliance with all applicable Environmental Laws; (d)
there has been no contamination or release of hazardous substances, at, upon,
under or within any property owned or, to the best of Borrower's knowledge, at,
upon, or within any property leased by Borrower, and there has been no
contamination (as defined in any applicable Environmental Law) or release of
hazardous substances (as defined in any applicable Environmental Law) on any
other property that has migrated or threatens to migrate to any property owned
by Borrower or, to the best of Borrower's knowledge, to any property leased by
Borrower; (e) there are not now and never have been above-ground or underground
storage tanks at any property owned by Borrower or, to the best of Borrower's
knowledge, at any property leased by Borrower; (f) there are no transformers,
capacitors, or other items of Equipment containing polychlorinated biphenyls at
levels in excess of 49 parts per million, violative of applicable Environmental
Law, at any property owned by Borrower or, to the best of Borrower's knowledge,
at any property leased by Borrower; (g) other than materials used or produced,
held, transported and disposed of in accordance with Environmental Laws,
Borrower has not used its operations for, and properties owned or leased by
Borrower are not now and have never been used by Borrower (or, to the best
knowledge of Borrower after due inquiry, by any predecessor in possession or
other Person) for treatment, generation, storage, recycling, or disposal of
hazardous substances; (h) no hazardous substances are present at any property
owned by Borrower or, to the best of Borrower's knowledge, at any property
leased by Borrower, nor will any hazardous substances be present upon any such
property or utilized in the operation thereof by Borrower except which are
transported, used, stored, disposed of and otherwise handled in accordance with
all Environmental Laws, in proper storage containers; (i) all permits and
authorizations required under Environmental Laws for all operations of Borrower
have been duly issued and are in full force and effect, including but not
limited to those for air emissions, water discharges and treatment, storage
tanks and the generation, treatment, storage and disposal of hazardous
substances; (j) there are no pending or threatened Environmental Claims against
Borrower or any property owned or leased by Borrower; and Borrower has not
created or caused any condition or occurrence with respect to any property
owned or leased by Borrower that could reasonably be anticipated (x) to form
the basis of an Environmental Claim against Borrower or its properties or (y)
to cause any property owned or leased by Borrower to be subject to any
restrictions on its ownership, occupancy or transferability under any
Environmental Law; (k) no notice relating to hazardous substances is contained
in any deed relating to any property owned by Borrower or, to the best of
Borrower's
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knowledge, in any deed relating to any property leased by Borrower and there
are no facts or conditions on any such property that would require that such a
notice be placed in the deed to any such property; (l) no portion of any
property owned by Borrower or, to the best of Borrower's knowledge, any
property leased by Borrower, contains asbestos-containing material that is or
threatens to become friable; and (m) the representations and warranties set
forth in this Section 4.9 shall survive repayment of the Obligations and the
termination of this Agreement and the Relevant Documents.
5. AFFIRMATIVE COVENANTS
Section 5 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until full and final payment and
performance of the Loans and all other Obligations under this Agreement and the
Relevant Documents, Borrower shall, unless Lender shall otherwise consent in
writing:
5.1 MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Maintain and preserve
in full force and effect its existence and good standing and all other rights,
powers, franchises, licenses and qualifications necessary or desirable for its
ownership or use of properties material to, or the conduct of, its business.
5.2 PAYMENT OF TAXES AND OTHER OBLIGATIONS. Pay, before they become
delinquent, all taxes, assessments and governmental charges imposed upon the
Real Estate Collateral, except where the same is being contested in good faith.
5.3 MAINTENANCE OF PROPERTIES. Maintain its properties in good working
order and condition, normal wear and tear excepted.
5.4 NOTICE OF ADVERSE EVENTS. Promptly notify Lender in writing of the
occurrence or existence of any of the following: (a) any Event of Default as
defined in this Agreement or any event which, with the giving of notice, lapse
of time or other condition, would become such an Event of Default; (b) any
matter or event which has resulted in, or may result in, a material adverse
change in the financial condition or any property or operations of Borrower;
(c) any material claim, action, proceeding or investigation filed or instituted
against Borrower, or any adverse determination in any material pending action,
proceeding or investigation affecting it; (d) any loss from casualty or theft
in excess of $250,000.00, whether or not insured, affecting property of
Borrower; (e) whether or not otherwise reportable under this Section 5.4, any
complaint, citation, order or other notice of a violation of a claim involving
any of the following, if the liability or penalty therefor may exceed $100,000
singly or in the aggregate: any applicable Governmental Rules relating to air
emissions, water discharge, noise emissions, solid or liquid disposal,
hazardous waste or substances, or other environmental health or safety matters
(the notice to Lender to include, along with other relevant information, the
name of the complainant or
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claimant and the nature and potential amount of the claim); (f) any event or
condition described in Section 9.13 of this Agreement relating to ERISA; or (g)
if any of the representations and warranties contained in this Agreement, or in
any of the Relevant Documents or any other writing delivered to Lender by
Borrower in connection with this Agreement or any of the transactions
contemplated thereby, ceases to be true, correct and complete in any material
respect.
5.5 INFORMATION AND DOCUMENTS TO BE FURNISHED TO LENDER. Furnish to
Lender in form and substance satisfactory to it:
5.5(1) REPORTING REQUIREMENTS. Upon request, such information
and statements as Lender shall reasonably request from time to time regarding
Borrower's business affairs, financial condition and the results of its
operations. Without limiting the generality of the foregoing, Borrower shall
provide Lender with:
(i) for each month other than December in each year, within
thirty (30) days after the end of each month, unaudited financial statements
with respect to the prior month prepared on a basis consistent with such
statements prepared in prior months and otherwise in accordance with GAAP,
provided that (a) no such monthly reports will be required until January, 1999,
and (b) for the months of January and February 1999, unaudited financial
statements within forty-five (45) days after the end of such months and for
each of March, June and September of each fiscal year of Borrower, Borrower may
deliver such unaudited financial statements in accordance with paragraph (ii)
below.
(ii) within fifty (50) days after the end of each quarter but
in no event more than five (5) days after the date of filing with the
Securities and Exchange Commission, unaudited financial statements with respect
to the prior quarter prepared on a basis consistent with such statements
prepared in prior quarters and otherwise in accordance with GAAP, it being
acknowledged that Borrower's delivery of its 10Q report will satisfy the
foregoing reporting requirement.
(iii) audited annual financial statements, prepared in
accordance with GAAP, including balance sheets, income and cash flow
statements, accompanied by the unqualified report thereon of independent
certified public accountants reasonably acceptable to Lender as soon as
available, and, in any event, within one hundred (100) days after the end of
each fiscal year of Borrower, it being acknowledged that Borrower's delivery of
its 10K report will satisfy the foregoing reporting requirement, together with
the management letter, in the form provided to the auditors and shareholders of
Borrower within one hundred fifty (150) days after the end of each fiscal year
of Borrower.
(iv) at least fifteen (15) days prior to the end of each
fiscal year of Borrower, annual operating budget (including income statement,
balance sheet and cashflow statement, by month) for the upcoming fiscal year of
Borrower; and
(v) such certificates relating to the foregoing as Lender may
reasonably request, including, without limitation, a certificate from the
president or the chief financial officer
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of Borrower ("Compliance Certificate") monthly with regard to all covenants, in
each case also stating whether any Event of Default has occurred or event
which, with giving of notice or the passage of time, or both, would constitute
an Event of Default, and if so, the steps being taken to prevent or cure such
Event of Default, and such other certificates relating to the reporting
requirements set forth in this Section 5.5(1) as Lender shall reasonably
request. All reports or financial statements submitted by Borrower shall be in
reasonable detail and shall be certified by the chief financial officer of
Borrower as being complete and correct.
5.5(2) PUBLIC COMPANY REPORTING. In addition to the reporting
requirements under Section 5.5(1) above, Borrower shall deliver to Lender, (i)
all press releases made available general by Borrower or any of its Related
Entities to the public concerning material developments in the business of
Borrower or any such Related Entity and all notifications received from the
Securities and Exchange Commission by Borrower or its Related Entities which
are of public record pursuant to the Security Exchange Act of 1934 and the
rules promulgated thereunder, and (ii) true and complete copies of all
financial statements, reports, notices and documents set or made available by
Borrower to its securities holders or publicly filed with the Securities and
Exchange Commission, any other federal agency at any time administering United
States securities laws and with any other governmental agency (including,
without limitation, 10Q reports, 10K reports, proxy statements and registration
statements), within five (5) Business Days after such reports are filed, but in
no event more than five (5) Business Days after the due date of such documents.
5.5(3) ACCOUNTANT'S CERTIFICATE/RELIANCE LETTER.
Simultaneously with the delivery of the annual financial statements referred to
in Section 5.5(1), a certificate of the certified public accountant preparing
such statements stating his/her acknowledgment of Lender's reliance upon such
financial statements in providing financial accommodations to Borrower which
certificate shall also include an affirmative acknowledgment by Borrower that
Borrower has knowledge of the submission of such financial statements to Lender
and of Lender's reliance thereon.
5.5(4) ERISA DOCUMENTS. As soon as filed or distributed, all
ERISA reports, notices, returns and other documents filed as required by or in
compliance with ERISA, whether to the Internal Revenue Service, the Department
of Labor, the Pension Benefit Guaranty Corporation or any other appropriate
agency.
5.5(5) VIOLATIONS. Immediately, a copy of any complaint,
citation, order or other notice of a violation or claim required to be reported
pursuant to Subsection 5.4 of this Agreement.
5.5(6) OTHER DOCUMENTS. Promptly upon demand:
(A) A certificate executed by an officer of Borrower
satisfactory to Lender stating that there then exists no Event of Default
hereunder and no event which, with the giving of notice or lapse of time or
other condition, would constitute an Event of Default;
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(B) Photocopies of documents evidencing right to
payment (and if an Event of Default occurs, all original documents evidencing
right to payment, including but not limited to invoices, original orders, and
shipping and delivery receipts); and
(C) Such other documents or information as Lender
may reasonably request, including financial projections and cash flow analysis.
5.6 ACCESS TO PROPERTY. At any time and from time to time, upon
request by Lender, give any representative of Lender access, during normal
business hours, to inspect any of Borrower's properties.
5.7 INSURANCE.
5.7(1) LIABILITY AND PROPERTY INSURANCE. Maintain at
Borrower's expense (with such insurers, in such amounts and with such
deductibles (not greater than $10,000.00) as is reasonably satisfactory to
Lender, public liability and third party property damage insurance and
insurance on the Real Estate Collateral (including without limitation,
insurance against fire, explosion, boiler damage, theft, burglary, pilferage,
loss in transit and all other hazards and risks ordinarily insured against by
other owners or users of such properties in similar businesses), which
insurance shall be evidenced by policies (i) in form and substance reasonably
satisfactory to Lender, (ii) designating Lender and its assigns as mortgagee,
additional co-insureds and loss payees as their interests may appear from time
to time, (iii) containing a "breach of warranty clause" whereby the insurer
agrees that (1) a breach of the insuring conditions or any act or neglect of
Borrower or any other named insured, (2) the foreclosure or other proceedings
or notice of sale or enforcement of any lien or security relating to the
property of the Borrower, (3) the occupation of the premises wherein such
property is located for purposes more hazardous than are permitted by the
policy of insurance, or (4) any errors, omissions, or improper or incorrect
reporting by the named insured, shall not invalidate the insurance as to Lender
and its assigns, and (iv) requiring at least thirty (30) days' prior written
notice to Lender and its assigns before cancellation or any material change
shall be effective.
5.7(2) COPIES OF POLICIES. Upon demand, deliver to Lender a
photocopy of each policy (and if an Event of Default has occurred, the original
of each policy) evidencing insurance required by this Section 5.7, together
with evidence of payment of all premiums therefor.
5.7(3) NOTICE AND PROOF OF LOSS. In the event of loss or
damage, forthwith notify Lender and file proofs of loss satisfactory to Lender
with the appropriate insurer, but without limiting the rights of Lender
pursuant to Subsection 8.1(5).
5.7(4) PROCEEDS. Forthwith upon receipt, endorse and deliver
insurance proceeds (for any loss or property damage to the Collateral) to
Lender, but without limiting the rights of Lender pursuant to Subsection
8.1(5).
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In no event shall Lender be required either to (i)
ascertain the existence of or examine any insurance policy, or (ii) advise
Borrower in the event such insurance coverage shall not comply with the
requirements of this Agreement.
5.8 CONDITION OF COLLATERAL; NO LIENS. Maintain the Collateral in good
condition and repair at all times (normal wear and tear excepted), preserve the
Real Estate Collateral from loss, damage, or destruction of any nature
whatsoever, and keep the Collateral free and clear of any Encumbrance, except
Permitted Encumbrances including any identified on Schedule 5.8 to this
Agreement .
5.9 RECORDS. Maintain complete and accurate books and records of the
Collateral.
5.10 FURTHER ASSURANCES. From time to time, execute and deliver such
further documents and take such further actions as Lender may reasonably
request in order to carry out the purposes of this Agreement, the Relevant
Documents and any other instruments, documents and agreements which shall be
executed concurrently herewith or thereafter with regard to the transactions
contemplated by this Agreement.
5.11 RELATED ENTITIES. Cause each Related Entity to comply with the
covenants stated in this Section 5, to the extent relevant to such entity, as
if stated with reference to such entity.
5.12 ENVIRONMENTAL SITE ASSESSMENTS. In the event the Loans have not
been paid by February 1, 1999, then in that event, at the request of Lender,
Borrower shall deliver to Lender, upon demand, Phase I environmental site
assessments for all real property owned or leased by Borrower, in form and
substance satisfactory to Lender, and such additional reports that may be
requested following the completion of any remediation or further investigation
recommended by such site assessment, in a manner satisfactory to Lender.
6. NEGATIVE COVENANTS
Section 6 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
NEGATIVE COVENANTS
Borrower covenants and agrees that, until full and final payment and
performance of the Loans and all other Obligations under this Agreement and the
Relevant Documents, Borrower shall not, unless Lender shall otherwise consent
in writing:
6.1 NO CONSOLIDATION, MERGER, ACQUISITION, LIQUIDATION. Enter into any
merger, consolidation, reorganization or recapitalization; take any steps in
contemplation of dissolution or liquidation; conduct any part of Borrower's
business through any corporate subsidiary, unincorporated association or other
entity not disclosed on Schedule 6.1 to this Agreement; or acquire the stock or
assets of any person, firm, joint venture, partnership, corporation or other
entity, whether by merger, consolidation, purchase of stock or otherwise.
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6.2 DISPOSITION OF COLLATERAL. Sell, lease, or otherwise transfer or
dispose of any or all of the Real Estate Collateral.
6.3 OTHER LIENS. incur, create or permit to exist, in an aggregate
amount at any time exceeding $100,000.00 in excess of Permitted Encumbrances,
any Encumbrance, conditional sale or other title retention agreement, lease
having substantially the same effect as any of the foregoing, or other
preferential arrangement of any type, in each case upon or with respect to Real
Estate Collateral of Borrower, except Permitted Encumbrances.
6.4 LOANS. Make advances, loans or extensions of credit to, or invest
in, any Person except for loans or cash advances to employees (i) in the amount
of $341,000 until December 31, 1998, and (ii) as of January 1, 1999 and
thereafter, not in excess of an aggregate amount of $205,000 in any fiscal year
of Borrower on a consolidated basis with its Affiliates.
6.5 GUARANTIES; CONTINGENT LIABILITIES. Except as set forth in Section
6.3, assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person or entity (except a subsidiary
of Borrower), except by the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business.
6.6 DIVIDENDS AND OTHER DISTRIBUTIONS. Declare or pay any cash
dividend or make any distribution on, or redeem, retire or otherwise acquire
directly or indirectly, any share of its stock, or make any distribution of
assets to its stockholders without the prior written consent of Lender.
6.7 MODIFICATION OF GOVERNING DOCUMENTS. Change, alter or modify, or
permit any change, alteration or modification of, its Certificate of
Incorporation or Bylaws (or partnership agreement) or other governing
documents.
6.8 CHANGE BUSINESS. Cause or permit a material change in the nature
of its business as conducted on the date of this Agreement.
6.9 CHANGE OF ACCOUNTING PRACTICES. Change its present accounting
principles or practices in any material respect, except as may be required or
permitted by changes in or pursuant to GAAP.
6.10 INCONSISTENT AGREEMENT. Enter into any agreement containing any
provision that would be violated by the performance of the Obligations or
Borrower's obligations under any of the Relevant Documents or under any
document delivered or to be delivered by it in connection therewith.
7. CONDITIONS TO MAKING EXTENSIONS OF CREDIT
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Section 7 of the Loan Agreement is hereby deleted in its entirety.
8. ADDITIONAL POWERS OF LENDER
Section 8 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
ADDITIONAL POWERS OF LENDER
8.1 POWERS OF ATTORNEY. Borrower hereby constitutes and appoints
Lender (and any employee or agent of Lender, with full power of substitution)
its true and lawful attorney and agent in fact to take any or all of the
actions described below in Lender's or Borrower's name and at Borrower's
expense.
8.1(2) EVIDENCE OF LIENS. Lender may execute such financing
statements and other documents and take such other actions as Lender deems
reasonably necessary or proper in order to create, perfect or continue the
mortgage liens provided for by this Agreement or any of the Relevant Documents,
and Lender may file the same in any appropriate governmental office.
8.1(3) PRESERVATION OF COLLATERAL. Lender, acting in good
faith, may take any and all actions that it deems necessary or proper to
preserve its interest in the Collateral, including without limitation the
payment of debts of Borrower that might impair the Collateral or Lender's
security interest therein, the purchase of insurance on the Real Estate
Collateral, the repair or safeguarding of the Real Estate Collateral, or the
payment of taxes, assessments or other liens thereon. All sums so expended by
Lender shall be added to the Obligations, shall be secured by the Collateral,
and shall be payable on demand with interest at the Default Rate from the
respective dates such sums are expended.
8.1(4) LENDER'S RIGHT TO CURE. In the event Borrower fails to
perform any of its Obligations, then Lender may perform the same but shall not
be obligated to do so. All sums so expended by Lender shall be added to the
Obligations, shall be secured by the Collateral, and shall be payable on demand
with interest at the Default Rate from the respective dates such sums are
expended.
8.1(5) INSURANCE. Lender may file proofs of loss and claim
with respect to any of the Real Estate Collateral with the appropriate insurer,
and may endorse in its own and Borrower's name any checks of drafts
constituting insurance proceeds.
8.2 IRREVOCABILITY; LENDER'S DISCRETION. Borrower covenants and agrees
that any action described in Section 8.1 may be taken at Lender's sole and
absolute discretion, acting in good faith, at any time and from time to time,
and (unless stated specifically to the contrary in Section 8.1 with respect to
any power) whether prior or subsequent to an Event of Default, and Borrower
hereby ratifies and confirms at actions so taken. Borrower further covenants
and agrees that the power of attorney granted by Section 8.1 are coupled with
an interest and shall be
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irrevocable until full and final payment and performance of the Loans and all
other Obligations under this Agreement and the Relevant Documents; that said
powers are granted solely for the protection of Lender's interest and Lender
shall have no duty to exercise any thereof; that the decision whether to
exercise any of such powers, and the manner of exercise, shall be solely within
Lender's discretion; and that neither Lender nor any of its directors,
officers, employees or agents shall be liable for any act of omission or
commission, or for any mistake or error of judgment, in connection with any
such powers.
9. EVENTS OF DEFAULT
Section 9 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an Event of
Default:
9.1 FAILURE TO PAY. Borrower fails to pay when due any principal of or
interest on any Revolving Loan, Capital Expenditure Loan or Bridge Loan or any
other sum owing to Lender, including without limitation any of the Obligations
arising under this Agreement or any of the Relevant Documents or under any
other agreement with Lender;
9.2 FAILURE TO PERFORM. Borrower fails to perform or observe any
covenant, term or condition of this Agreement or any of the Relevant Documents,
and such default is not cured within three (3) business days following written
notification of such violation;
9.3 CROSS DEFAULT; DEFAULT ON OTHER DEBT. (a) Any other default on any
of the Obligations or under any of the Relevant Documents occurs, after
applicable notice and cure periods, if any, or (b) default occurs under any
indebtedness for borrowed money of Borrower, or of any Guarantor of any of the
Obligations, to any third party which in the aggregate exceeds One Hundred
Thousand ($100,000.00) Dollars, and such third party declares such indebtedness
or other obligation due prior to its date of maturity.
9.4 FALSE REPRESENTATION OR WARRANTY. Any representation, warranty or
statement contained in this Agreement, in any of the Relevant Documents or in
any other writing delivered to Lender in connection with the Collateral, this
Agreement or any of the transactions contemplated thereby, proves to have been
incorrect in any material respect when made;
9.5 CESSATION OF BUSINESS. Borrower ceases to do business as a going
concern;
9.6 CHANGE IN CONDITION. There occurs any material and adverse change
in the condition or affairs, financial or otherwise, of Borrower or of any
endorser, guarantor or surety for any of the Obligations, which in the
reasonable opinion of Lender impairs Lender's security or increases its risks;
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9.7 LIQUIDATION OR DISSOLUTION. Borrower takes any action to authorize
its liquidation or dissolution;
9.8 INABILITY TO PAY DEBTS. Borrower (a) becomes unable or fails to
pay its debts generally as they become due, (b) admits in writing its inability
to pay its debts, or (c) proposes or makes a composition agreement with
creditors, a general assignment for the benefit of creditors, or a bulk sale;
9.9 BANKRUPTCY; INSOLVENCY. Any proceeding is instituted by or against
Borrower (a) seeking to adjudicate it bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or (b) seeking appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property, or Borrower takes
any action to authorize or consent to any action described in this Section 9.9
and not stayed or dismissed within sixty (60) days.
9.10 JUDGMENTS. One or more judgments or orders (other than
shareholder litigation) for the payment of money exceeding $250,000.00 in the
aggregate in any fiscal year are rendered against Borrower and/or its Related
Entities that are not covered by insurance, and any such judgment(s) or
order(s) continue(s) unsatisfied and not effectively discharged or stayed for a
period of forty-five (45) consecutive days from the entry thereof;
9.11 ATTACHMENT. Any part of the Real Estate Collateral becomes
subject to attachment, execution, levy or like process which shall not have
been effectively stayed;
9.12 CONDEMNATION. Any governmental agency, or other entity with power
to do so, commences proceedings to condemn, seizes or expropriates the Real
Estate Collateral (unless Borrower obtains an injunction against such actions
within thirty (30) days from the date of their commencement) necessary for the
conduct of Borrower's business as conducted on the date of this Agreement,
without material change, or Borrower abandons the Real Estate Collateral or
suspends operation thereof for a period of thirty (30) consecutive days;
9.13 ERISA. With respect to any Plan, there occurs or exists any of
the events or conditions described in the following clauses (a) through (h) and
such event or condition, together with all like events or conditions, could in
the opinion of Lender subject Borrower to any tax, penalty or other liability
that might, singly or in the aggregate, have a material adverse effect on the
financial condition or the properties or operations of Borrower: (a) a
reportable event as defined in Section 4043 of ERISA, (b) a prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code, (c) termination of the Plan or filing of notice of intention to
terminate, (d) institution of the Pension Benefit Guaranty Corporation of
proceedings to terminate, or to appoint a trustee to administer, the Plan, or
circumstances that constitute grounds for any such proceedings, (e) complete or
partial withdrawal from a multi-employer Plan, or the reorganization,
insolvency or termination of a multi-employer Plan, (f) an accumulated funding
deficiency within the meaning of ERISA, (g) violation of the reporting,
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disclosure or fiduciary responsibility requirements of ERISA or the Internal
Revenue Code, or (h) any act or condition which could result in direct,
indirect or contingent liability to any Plan or the Pension Benefit Guaranty
Corporation; or
9.14 GUARANTY. Any guaranty of any of the Obligations by the
Guarantors ceases to be effective or any Guarantor denies liability thereunder.
10. REMEDIES
Section 10 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
REMEDIES
10.1 RIGHTS IN GENERAL. Automatically upon the occurrence of an Event
of Default described in Section 9, and at the option of Lender upon the
occurrence of any other Event of Default, (a) the principal and accrued
interest of the Loans, all other amounts payable under this Agreement and all
other Obligations shall become and be immediately due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by Borrower, and (b) Lender shall be entitled to
exercise forthwith (to the extent and in such order as Lender may elect, in its
sole and absolute discretion) any or all rights and remedies provided for in
this Agreement, the mortgages, the assignment of leases, the Capital
Expenditure Note, the Bridge Note or any Relevant Documents, all rights and
remedies of a secured party under the UCC, and all other rights and remedies
that may otherwise be available to Lender by agreement or at law or in equity.
10.2 SPECIFIC RIGHTS REGARDING COLLATERAL. In addition to the rights
as stated generally in Section 10.1, Borrower agrees that, upon the occurrence
of an Event of Default, Lender shall be entitled to the rights and remedies,
and Borrower shall have the obligations, set forth below:
10.2(1) Lender may enter upon the Real Estate Collateral and
take possession thereof.
10.2(2) Any cash proceeds of sale, lease or other disposition
of Collateral shall be applied as follows:
First: To the expenses of collecting, enforcing,
safeguarding, holding and disposing of Collateral, and to
other expenses of Lender in connection with the enforcement
of this Agreement, any of the Notes, any of the Relevant
Documents, or any other agreement relating to any of the
Obligations (including without limitation court costs and the
fees and expenses of attorneys, accountants and
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appraisers), together with interest at the Default Rate from
the respective dates such sums are expended;
Second: Any surplus then remaining to the payment of interest
and principal of the Loans and other sums payable as part of
the Obligations, in such order as Lender elects; and
Third: Any surplus then remaining to Borrower or whoever may
be lawfully entitled thereto.
10.3 CUMULATIVE REMEDIES; NO WAIVER BY LENDER. No remedy referred to
in this Agreement is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to in this Agreement or otherwise
available to Lender by agreement or at law or in equity, and Lender may
exercise its remedies concurrently, independently, or successively. No express
or implied waiver by Lender of any default or Event of Default shall in any way
be, or be construed to be, a waiver of any future or subsequent default or
Event of Default. The failure or delay of Lender in exercising any rights
granted it hereunder upon any occurrence of any of the contingencies set forth
herein shall not constitute a waiver of any such right upon the continuation or
recurrence of any such contingency or similar contingencies, and any single or
partial exercise of any particular right by Lender shall not exhaust the same
or constitute a waiver of any other right.
10.4 WAIVERS AND AGREEMENTS RELATING TO REMEDIES. In connection with
any action or proceeding arising out of or relating in any way to this
Agreement, any of the Notes, any of the Loans, any of the Relevant Documents,
any other agreement relating to any of the Obligations, any of the Collateral,
or any act or omission relating to any of the foregoing:
10.4(1) Borrower agrees that all of the Collateral
constitutes equal security for all of the Obligations, and agrees that Lender
shall be entitled to sell, retain or otherwise deal with any or all of the
Collateral, in any order or simultaneously as Lender shall determine in its
sole and absolute discretion, free of any requirement for the marshaling of
assets or other restriction upon Lender in dealing with the Collateral; and
10.4(2) Borrower agrees that Lender may proceed directly
against Borrower for collection of any or all of the Obligations without first
selling, retaining or otherwise dealing with any of the Collateral.
11. ADDITIONAL WAIVERS AND CONSENTS OF BORROWER
Section 11 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
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ADDITIONAL WAIVERS AND CONSENTS OF BORROWER
11.1 WAIVERS. Borrower waives demand, presentment, notice of dishonor
or protest of any instruments either of Borrower or others which may be
included in the Collateral.
11.2 CONSENTS. Borrower consents to (a) any extension, postponement of
time of payment or other indulgence, (b) any substitution, exchange or release
of Collateral, (c) any addition to, or release of, any party or person
primarily or secondarily liable, and (d) after the occurrence of an Event of
Default, any acceptance of partial payments on any Accounts or instruments and
the settlement, compromising or adjustment thereof.
11.3 APPLICATIONS OF PAYMENTS. Borrower consents and agrees that,
whether or not an Event of Default shall have occurred, Lender shall be
entitled to apply the proceeds of any payment on account of the Loans made to
Lender by or on behalf of Borrower, including, without limitation, any and all
proceeds arising from any of the Collateral securing the obligations of
Borrower to Lender, in the manner and against the Obligation or Obligations as
determined in the sole and absolute discretion of Lender.
12. TERMINATION OF AGREEMENT
Section 12 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
TERMINATION OF AGREEMENT
12.1 TERMINATION CHARGE. On the Termination Date or if this Agreement
is terminated at any time and for any reason, Borrower shall pay to Lender:
(i) The principal and interest due on the Loans; plus
(ii) All other Obligations under this Agreement and the
Relevant Documents; plus
(iii) The sum of Two Hundred Fifty Thousand Dollars
($250,000.00).
12.2 RIGHTS UPON TERMINATION. Notwithstanding the termination of this
Agreement as herein provided, Lender's mortgages on the Real Estate Collateral,
assignment of leases and liens on the Collateral, together with its rights and
remedies herein set forth shall remain in full force and effect until all
Borrower's Obligations are paid in full.
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12.3 RELEASE. IN CONSIDERATION OF LENDER'S ENTERING INTO THIS
AGREEMENT, BORROWER AND GUARANTORS HEREBY RELEASE THE LENDER, ITS SUCCESSORS
AND ASSIGNS, ATTORNEYS, AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES, FROM ANY AND
ALL CLAIMS THEY OR ANY OF THEM HAVE, HAD OR MAY CLAIM TO HAVE, AT ANY TIME,
AGAINST THE LENDER RELATING TO, ARISING OUT OF OR RESULTING FROM THE DECEMBER
1996 LOAN AGREEMENT, BRIDGE LOAN AGREEMENT, ANY DOCUMENTS AND/OR INSTRUMENTS
RELATING THERETO OR SECURING THE OBLIGATIONS, THE LOAN AGREEMENT, THIS
AGREEMENT AND ANY AMENDMENTS HERETO OR THERETO, AT ANY TIME FROM THE BEGINNING
OF TIME THROUGH THE DATE HEREOF. LENDER SHALL NOT BE LIABLE OR RESPONSIBLE TO
BORROWER OR GUARANTORS FOR ANY ACTS OR OMISSIONS NOR FOR ANY ERROR OF JUDGMENT
OR MISTAKE OF LAW OR FACT EXCEPT FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
13. COSTS, EXPENSES AND TAXES
Section 13 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
COSTS, EXPENSES AND TAXES
Borrower agrees to pay on demand: (a) all costs and expenses in
connection with the preparation, execution, delivery and administration of this
Agreement, the Notes, the Relevant Documents, and the other documents to be
delivered in connection with this Agreement or any amendments to any of the
foregoing (including, without limitation, the fees and out-of-pocket expenses
of the attorneys for Lender, whether outside counsel or the allocated costs of
Lender's internal counsel and the cost of appraisals and reappraisals of the
Real Estate Collateral); (b) all losses, costs and expenses incurred by Lender
in connection with the enforcement of this Agreement, any of the Notes, any of
the Relevant Documents, or any other agreement relating to any of the
Obligations, or in the preservation of any rights of Lender under any thereof,
or in connection with legal advice relating to the rights or responsibilities
of Lender under any thereof (including with limitation court costs and the fees
and expenses of attorneys, accountants and appraisers), and any expenditure
made by Lender in accordance with this Agreement; and (c) any and all stamp and
other taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement, any of the Notes, or any of the
Relevant Documents, and all liabilities to which Lender may become subject as
the result of delay in paying or omission to pay such taxes. With respect to
any amount advanced by Lender and required to be reimbursed by Borrower
pursuant to the foregoing provisions of this Section 13, Borrower shall also
pay Lender interest on such amount at the Default Rate. Borrower's obligations
under this Section 13 shall survive termination of the other provisions of this
Agreement.
14. INDEMNIFICATION BY BORROWER/WAIVER OF CLAIMS
Section 14 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
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INDEMNIFICATION BY BORROWER/WAIVER OF CLAIMS
14.1 INDEMNIFICATION. Borrower hereby covenants and agrees to
indemnify, defend and hold harmless Lender and its officers, directors,
employees and agents from and against any and all claims, damages, liabilities,
costs and expenses (including without limitation, the reasonable fees and
out-of-pocket expenses of counsel) which may be incurred by or asserted against
Lender or any such other individual or entity in connection with: (a) any
investigation, action or proceeding arising out of or in any way relating to
this Agreement, any of the Notes, any of the Loans, any of the Relevant
Documents, any other agreement relating to any of the Obligations, any of the
Collateral, or any act or omission relating to any of the foregoing; (b) any
taxes (other than income taxes applicable to the Lender), liabilities, claims
or damages relating to the Collateral or Lender's liens thereon; (c) the
correctness, validity or genuineness of any instruments or documents that may
be released or endorsed to Borrower by Lender (which shall automatically be
deemed to be without recourse to Lender in any event), or the existence,
character, quantity, quality, condition, value or delivery of any goods
purporting to be represented by any such documents; or (d) any broker's
commission, finder's fee or similar charge or fee in connection with the Loans
and the transactions contemplated in this Agreement. It being further
understood and agreed that, excluded from the indemnification set forth above,
are any claims attributable to the gross negligence or willful misconduct of
the Lender and such indemnified person.
To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section 14.1 may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all matters referred to under this Section. It is
further understood and agreed that, to the extent a claim indemnified by the
Borrower set forth hereunder is in fact paid by the Borrower and/or an insurer
under a policy of insurance maintained by the Borrower, the Borrower and/or
such insurer, as the case may be, shall be subrogated to the extent of such
payment to the rights and remedies of the indemnified person on whose behalf
such claim was paid with respect to the transaction or event giving rise to
such claim; provided further that such right of subrogation shall not extend to
any insurance policy maintained by or on behalf of the Lender or any
indemnified person.
14.2 WAIVER OF CLAIMS. To the extent permitted by applicable law, no
claim may be made by Borrower or any other person against Lender or any of its
affiliates, directors, officers, employees, agents, attorneys or consultants
for any special, indirect, consequential or punitive damages in respect of any
claim for breach of contract, tort or any other theory of liability arising out
of or related to the transactions contemplated by this Agreement or any act,
omission or event occurring in connection therewith; and Borrower hereby
waives, releases and agrees not to sue upon any claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor. Neither Lender nor any of its affiliates, directors, officers, employees
or agents shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement or the transactions
contemplated hereby, except for its or their own gross negligence or willful
misconduct.
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14.3 CLAIMS PROCEDURE. The Lender and such indemnified person shall
promptly notify the Borrower of any claim as to which indemnification is
sought, provided that the failure to provide such notice shall not release the
Borrower from any of its obligations to indemnify hereunder, so long as such
failure does not in any way prejudice the rights of the Borrower with respect
to the availability or extent of coverage of insurance or otherwise result in
any material adverse consequence to the Borrower. Subject to the rights of
insurers under policies of insurance maintained by the Borrower, the Borrower
shall have the right to investigate, and a right in its sole discretion to
defend or compromise any claim for which indemnification is sought under this
Section 14, and the Lender or such indemnified person shall cooperate with all
reasonable requests of the Borrower in connection therewith. Nothing contained
in this Section 14 shall be deemed to require the Lender or such indemnified
person to contest any claim or to assume responsibility for or control of any
judicial proceeding with respect thereto.
15. MISCELLANEOUS
Section 15 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
MISCELLANEOUS
15.1 ENTIRE AGREEMENT; AMENDMENTS; LENDER'S CONSENT. This Agreement
(including the Exhibits and Schedules thereto), the Revolving Note, the Capital
Expenditure Note, the Bridge Note and the Relevant Documents supersede, with
respect to their subject matter, all prior and contemporaneous agreements,
understandings, inducements or conditions between the respective parties,
whether express or implied, oral or written. No amendment or waiver of any
provision of this Agreement, any of the Notes or any of the Relevant Documents,
nor consent to any departure by Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
15.2 NOTICES. All notices and other communications relating to this
Agreement or any of the Notes (or to any of the Relevant Documents, unless
otherwise specified therein) shall be in writing, and addressed as follows and
sent by hand delivery, registered or certified mail, recognized overnight
courier service or telecopier with confirmation of delivery:
If to Lender: PNC Bank, National Association
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Attention: Thomas J. McCool, Senior Vice President
With a copy to: Peter A. Forgosh, Esq. Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
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Morristown, NJ 07962-1945
If to Borrower: USA Detergents, Inc.
1735 Jersey Avenue
North Brunswick, New Jersey 08902
Attention: Richard Coslow, Chief Financial Officer
With a copy to: Sheldon Nussbaum, Esq.
Fulbright & Jaworski, LLP
666 Fifth Avenue
New York, New York 10013
(The failure to transmit a copy of the notice to the
foregoing shall not constitute defective notice to the Borrower.)
or to such other address as the respective party or its successors or
assigns may subsequently designate by proper notice. All notices shall be
deemed effective (i) upon receipt of same (whether by personal delivery or
transmittal by facsimile/telecopier with confirmation thereof); or (ii) two (2)
Banking Days after deposit with an overnight courier; or (iii) three (3)
Banking Days if sent by registered or certified mail, postage prepaid,
whichever is earlier.
15.3 GENDER. Throughout this Agreement, the masculine shall include
the feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
15.4 JOINT BORROWERS. If more than one party executes this Agreement
as Borrower, then for the purpose of this Agreement the term Borrower shall be
read to mean each such party and each party shall be jointly and severally
liable as Borrower for the Obligations as defined herein without regard to
which party receives the proceeds of any of the Loans. Each such party hereby
acknowledges that it expects to derive economic advantage from each of the
Loans.
15.5 CROSS DEFAULT; CROSS COLLATERAL. Borrower hereby agrees that (a)
all other agreements between Borrower and Lender or any of Lender's affiliates
are hereby amended so that a default (after applicable notice and cure periods,
if any,) under this Agreement is a default under all other agreements and a
default (after applicable notice and cure periods, if any,) under any one of
the other agreements is a default under this Agreement, and (b) the Collateral
under this Agreement secures the Obligations now or hereafter outstanding under
all other agreements between Borrower and Lender or any of Lender's affiliates
and the collateral pledged under any other agreement with Lender or any of its
affiliates secures the Obligations under this Agreement.
15.6 BINDING EFFECT; GOVERNING LAW. This Agreement shall be binding
upon and inure to the benefit of Borrower and Lender and their respective
successors and assigns, except that Borrower shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent
of Lender. This Agreement, the Notes, the Relevant Documents and the
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other documents delivered in connection with this Agreement shall be governed
by, and construed in accordance with, the laws of the State of New Jersey.
15.7 FURTHER ASSURANCES. The Borrower shall execute and deliver from
time to time hereafter, such additional instruments, certificates and
documents, and shall take all actions, as the Lender shall reasonably request
for the purpose of implementing or effectuating the provisions of this
Agreement, the Notes, or any other Relevant Documents, and upon the exercise by
the Lender of any power, right, privilege or remedy pursuant to this Agreement,
or any other Relevant Documents, which require any consent, approval,
registration, qualification or authorization of any governmental authority,
execute and deliver all applications, certifications, instruments and other
documents and papers that the Lender that may be so required to obtain.
15.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.
15.9 SEVERABILITY OF PROVISIONS. Any provision of this Agreement, any
of the Notes or any of the Relevant Documents that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, such Notes or such
Relevant Documents or affecting the validity or enforceability of such
provision in any other jurisdiction.
15.10 TABLE OF CONTENTS; HEADINGS. The table of contents and headings
preceding the text of this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement nor affect its
meaning, construction or effect.
15.11 EXHIBITS AND SCHEDULES. All of the Exhibits and Schedules to
this Agreement are hereby incorporated by reference herein and made a part
hereof.
15.12 FURTHER ACKNOWLEDGMENTS AND AGREEMENTS OF BORROWER AND LENDER.
Borrower and Lender acknowledge and agree that they (i) have
independently reviewed and approved each and every provision of this Agreement,
including the Exhibits and Schedules attached hereto and any and all other
documents and items as they or their counsel have deemed appropriate, and (ii)
have entered into this Agreement and have executed the closing documents
voluntarily, without duress or coercion, and have done all of the above with
the advice of their legal counsel or have knowingly and voluntarily elected to
proceed without advice of legal counsel.
15.13 GENERAL LIMITATION ON AMOUNT OF LIABILITY. Notwithstanding any
other provisions of this Agreement, the obligations of Borrower hereunder shall
be limited to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States
Bankruptcy Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving
effect to all other
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liabilities of Borrower, contingent or otherwise, that are relevant under the
Fraudulent Transfer Laws (specifically excluding, however, any liabilities of
Borrower in respect of intercompany indebtedness to the Affiliates of the
Borrower to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by Borrower hereunder) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, contribution,
reimbursement, indemnity or similar rights of Borrower pursuant to (i)
applicable law or (ii) any agreement providing for an equitable allocation
among Borrower and other Affiliates of the Borrower of obligations arising
under any security provided by such parties.
16. WAIVER OF JURY TRIAL, CONSENT TO JURISDICTION.
Section 16 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
WAIVER OF JURY TRIAL, CONSENT TO JURISDICTION.
16.1 WAIVER OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE AND AGREE
THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR
INSTITUTED BY BORROWER OR LENDER ON OR WITH RESPECT TO ANY LOANS, LETTERS OF
CREDIT, THE OBLIGATIONS OR THE RELEVANT DOCUMENTS OR THE DEALINGS OF THE
PARTIES WITH RESPECT HERETO OR THERETO SHALL BE TRIED ONLY BY COURT AND NOT BY
A JURY AND EACH PARTY HEREBY WAIVES THE RIGHT TO TRIAL BY JURY. BORROWER AND
LENDER AGREE THAT THIS SECTION IS A MATERIAL AND SPECIFIC ASPECT OF THIS
AGREEMENT AND LENDER WOULD NOT CONTINUE TO EXTEND CREDIT IF THE WAIVER SET
FORTH IN THIS SECTION WAS NOT A PART OF THIS AGREEMENT.
16.2 CONSENT TO JURISDICTION; SERVICE OF PROCESS.
16.2(1) Borrower and Lender consent to the jurisdiction of
any court of the State wherein the office of Lender set forth in the first page
hereof is located and of any federal court located in such State and waive any
right to object to such court as an inconvenient forum.
16.2(2) Borrower waives personal service of any summons,
complaint or other process in connection with any such action or proceeding and
agrees that service thereof may be made as Lender may elect, by certified mail
directed to Borrower at the location provided in Section 15.2 for notices to
Borrower or, in the alternative, in any other form or manner permitted by law.
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17. ACKNOWLEDGMENT OF WAIVERS.
Section 17 of the Loan Agreement is hereby deleted in its entirety and
replaced with the following:
ACKNOWLEDGMENT OF WAIVERS. THIS AGREEMENT PROVIDES FOR THE WAIVER OF
RIGHTS AND REMEDIES. BORROWER ACKNOWLEDGES THAT IT IS REPRESENTED BY COUNSEL
(OR HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL) AND THAT SUCH COUNSEL HAS
REVIEWED AND EXPLAINED THE MEANING OF THESE WAIVERS TO BORROWER.
18. CONSENT AND WAIVER. With respect to the proposed lending arrangement about
to be entered into between Borrower and New Lender, Lender hereby consents to
Borrower granting a lien to the New Lender in and to the Personal Property of
Borrower other than the Real Estate Collateral.
19. WARRANT. It is further understood and agreed that the terms of the Original
Warrant shall be amended and restated contemporaneously herewith to provide
that if, and only if, prior to August 15, 1998, a portion of the PNC Debt (as
defined in the Original Warrant) has been indefeasibly repaid such that the
outstanding principal amount of the PNC Debt is less than $10,000,000.00, the
Warrant Number (as defined in the Original Warrant) shall, automatically and
without the need for further action by the Borrower or the Lender, be reduced
to the number of shares constituting 1.0% of the number of shares of Common
Stock (as defined in the Original Warrant) issued and outstanding as at the
date the Original Warrant was initially issued.
20. DEBT TO INDIVIDUAL GUARANTORS. As of the date hereof, the Borrower owes 101
Realty Associates, L.L.C. the aggregate principal sum of Four Million
($4,000,000.00) Dollars (the 101 Realty Debt"). Borrower hereby covenants and
agrees that it will not repay any portion of the 101 Realty Debt until the
Obligations of Borrower to Lender have been paid in full.
21. AMENDMENT AND RESTATEMENT. It is understood and agreed that this is an
amendment and restatement of the Loan Agreement and to that end replaces the
Loan Agreement in all respects except as herein specifically provided.
SIGNATURES ON NEXT PAGE
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IN WITNESS WHEREOF, the undersigned have set their hands and seals or
caused these presents to be executed by their proper corporate officers and
sealed with their seal the day and year first above written.
USA DETERGENTS, INC., Borrower
By: /s/ Uri Evan
---------------------------
Name: Uri Evan
Title: Chairman & CEO
PNC BANK, NATIONAL ASSOCIATION,
Lender
By: /s/ Unintelligible
---------------------------
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[GRAPHIC OMITTED]
FINANCIAL INNOVATORS
LOAN AND SECURITY AGREEMENT
USA Detergents, Inc., a Delaware corporation ("USA")
Big Cloud Powder Corporation, a Delaware corporation ("POWDER")
Chicago Management Powder Corp., a Delaware corporation ("MANAGEMENT")
Chicago Contract Powder Corporation, an Illinois corporation ("CONTRACT")
BORROWER
1735 Jersey Avenue
North Brunswick, NJ 08902
ADDRESS
USA 11-2935430
Powder 36-4057601
Management 36-4057601
Contract 36-4052817
BORROWER FED ID TAX NO.
FINOVA Capital Corporation, a Delaware corporation
as AGENT AND LENDER
and the other LENDERS named herein
$48,500,000
CREDIT LIMIT
AUGUST 14, 1998
DATE
<PAGE>
CORPORATE FINANCE
- -------------------------------------------------------------------------------
THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule to Loan
Agreement (the "SCHEDULE") attached hereto, the "AGREEMENT") dated the date set
forth on the cover page, is entered into by and between the coborrowers named
on the cover page (individually and collectively and jointly and severally, the
"BORROWER"), whose address is set forth on the cover page and FINOVA Capital
Corporation, in its capacity as contractual representative for itself and the
other Lenders from time to time a party hereto, whose address is 355 South
Grand Avenue, Suite 2400, Los Angeles, California 90071.
1. DEFINITIONS.
1.1 DEFINED TERMS. As used in this Agreement, the following terms have
the definitions set forth below:
"ADA" has the meaning set forth in Section 4.1(x) hereof.
"ADDITIONAL SUMS" has the meaning set forth in Section 2.9(a) hereof.
"AFFILIATE" means any Person controlling, controlled by or under
common control with Borrower. For purposes of this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of any Person, whether through
ownership of common or preferred stock or other equity interests, by contract
or otherwise. Without limiting the generality of the foregoing, each of the
following shall be an Affiliate: any executive officer or director of Borrower,
and any subsidiary of Borrower.
"AGENCY AGREEMENT" means that certain Agency Agreement of even date
herewith by and among the Lenders, Agent and Borrower.
"AGENT" means FINOVA in its capacity as contractual representative, on
behalf of itself, as a Lender and the other institutions from time to time a
party hereto as Lenders, pursuant to the terms of the Agency Agreement and any
successor Agent appointed in accordance therewith.
"AGENT'S FEE" has the meaning set forth in the Schedule.
"AGREEMENT" has the meaning set forth in the preamble.
"APPLICABLE USURY LAW" has the meaning set forth in Section 2.9(b)
hereof.
"BLOCKED ACCOUNT" has the meaning set forth in Section 2.10(c) hereof.
"BUSINESS DAY" means any day on which commercial banks in Los Angeles,
California, Phoenix, Arizona and Philadelphia, Pennsylvania are open for
business.
"CAPITAL EXPENDITURES" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto, except replacements and substitutions which
are (i) expensed in accordance with GAAP, or (ii) paid for with insurance
proceeds under Section 3.4 hereof and which has a useful life of more than ONE
(1) year and including, without limitation, those arising in connection with
Capital Leases.
"CAPITAL LEASE" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes
and reflected as a liability on the balance sheet of Borrower.
"CHANGE OF CONTROL" means (i) a "Person" or a "group" (within the
meaning of Sections 13(d) and 14(d)(ii) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), other than existing management and any Person
who was an officer or director of Borrower within twenty-four (24) months prior
to the Closing Date, becomes the ultimate "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power
of the voting stock of the Borrower on a fully diluted basis or (ii) a majority
of the Board of Directors of the Borrower then in office shall not consist of
individuals who on the Closing Date constitute the Board of Directors of the
Borrower or new directors whose election or whose nomination for election
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by stockholders, was approved by at least two thirds of the members of the
Board of Directors then in office who were either members of the Board of
Directors on the Closing Date or whose election or nomination was previously so
approved.
"CHICAGO FACILITY" shall mean that certain manufacturing facility
owned by Contract, located at 6200 West 51st Street, Chicago, IL 60638 and
which is located on the real property subject to the Chicago Lease.
"CHICAGO LEASE" shall mean all of Borrower's interest, as assignee of
the tenant, in that certain ground lease for the Chicago Facility between Witco
Chemical Corporation and Purex Corporation, assigned to Contract by Purex
Corporation's successor on December 28th, 1995.
"CLOSING DATE" means the earlier of (i) the date of the initial Loan
advance made by the Lenders pursuant to this Agreement, or (ii) the date set
forth on the cover page of this Agreement.
"CLOSING FEE" has the meaning set forth in the Schedule.
"CODE" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
"COLLATERAL" has the meaning set forth in
Section 3.1 hereof.
"COLLATERAL MONITORING FEE" has the meaning set
forth in the Schedule.
"COMMITMENT" means the Dollar Commitment and Commitment Percentage set
forth opposite each Lender's name on the respective signature pages hereof
under the caption "Commitment".
"COMMITMENT PERCENTAGE" means the percentage set forth below each
Lender's name on the respective signature pages hereof under the caption
"Commitment".
"COMPLIANCE CERTIFICATE" has the meaning set
forth in Section 9.1(b) hereof.
"CONSOLIDATED" means each of USA, Powder, Management, Contract, NJMO,
NJMO Holdings and any Subsidiary of any one of them, taken together on a
consolidated basis.
"CURRENT ASSETS" at any date means the amount at which the current
assets of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP, provided that amounts due from any
unconsolidated Affiliates and investments in Affiliates shall be excluded
therefrom.
"CURRENT LIABILITIES" at any date means the amount at which the
current liabilities of Borrower would be shown on a balance sheet of Borrower
as at such date, prepared in accordance with GAAP.
"DEPOSIT ACCOUNTS" has the meaning set forth in
Section 9-105 of the Code.
"DILUTION RESERVE" means a Loan Reserve established by Agent in an
amount equal to the product of (x) the amount by which dilution in respect of
Borrower's Receivables exceeds five percent (5%) (expressed as a percentage
with one decimal place), based upon a three (3) month rolling average, or such
other period as the Borrower and the Agent shall agree, with such amount to be
calculated based upon the results of each audit examination by Agent,
multiplied by (y) the aggregate of Borrower's Eligible Receivables then
outstanding (based upon Borrower's monthly Collateral reports); which amount
shall reduce the amount of Revolving Credit Loans which would otherwise be
available to Borrower under the formula set forth in Section 2.2 of the
Schedule to this Agreement.
"DISCOUNTED VALUE" has the meaning set forth in
the Schedule.
"DOCUMENT CHECKLIST" means that certain Document Checklist listing the
Loan Documents and other documents, instruments and certificates to be
delivered to Agent on the Closing Date.
"DOLLAR COMMITMENT" means the dollar amounts set forth below each
Lender's name on the respective signature pages hereof under the caption
"Commitment".
"DOMINION ACCOUNT" has the meaning set forth
in Section 2.10(c) hereof.
"EDA" means the Economic Development
Authority of the State of New Jersey.
"EDA RESERVE" a Loan Reserve established by Agent in the amount of
$1,100,000 (or such other amount reasonably determined by Agent in the event
that such
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Indebtedness is paid later than September 3, 1998) in respect of the aggregate
Indebtedness of Borrower to EDA pursuant to that certain payoff letter of the
EDA to Borrower dated on or prior to the Closing Date; which amount shall
reduce the amount which would otherwise be available to Borrower under the
lending formulas provided in Section 2.2 hereof.
"ELIGIBLE DOMESTIC RECEIVABLES" means Receivables arising in the
ordinary course of Borrower's business from the sale of goods or rendition of
services, which Agent, in its Permitted Discretion, shall deem eligible based
on such considerations as Agent may from time to time deem appropriate. Without
limiting the foregoing, a Receivable shall not be deemed to be an Eligible
Domestic Receivable if (i) the account debtor has failed to pay the Receivable
within a period of SIXTY (60) days after due date or failed to pay the
Receivable within ONE HUNDRED TWENTY (120) days after invoice date (or in the
case of Receivables for Borrower's Country Air air freshener or candle line
products, ONE HUNDRED FIFTY (150) days after invoice date), to the extent of
any amount remaining unpaid after such periods; (ii) the account debtor has
failed to pay more than 50% of all outstanding Receivables owed by it to
Borrower within ONE HUNDRED TWENTY (120) days after invoice date; (iii) the
account debtor is an Affiliate of Borrower (except as otherwise permitted by
Agent in writing); (iv) the goods relating thereto are placed on consignment,
guaranteed sale, "bill and hold," "COD" or other terms pursuant to which
payment by the account debtor may be conditional; (v) the account debtor is not
located in the United States, Puerto Rico or Ontario, Canada, unless the
Receivable is supported by a letter of credit or other form of guaranty,
security or credit insurance (to the extent Agent in writing approves the
underlying policy of credit insurance) in each case in form and substance
reasonably satisfactory to Agent; (vi) the account debtor is the United States
or any department, agency or instrumentality thereof or any State, city or
municipality of the United States, except to the extent that the requirements
of Section 6.1.12 have been satisfied; (vii) Borrower is or may become liable
to the account debtor for goods sold or services rendered by the account debtor
to Borrower (up to the amount that Borrower is liable to the account debtor);
(viii) the account debtor's total obligations to Borrower exceed 15% of all
Eligible Receivables (or in the case of each of Wal-Mart, K-Mart and Walgreens,
20% of all Eligible Receivables), to the extent of such excess; (ix) the
account debtor disputes liability or makes any claim with respect thereto (up
to the amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance (i.e.
"credits in prior") more than SIXTY (60) days past due; (xii) the face amount
thereof exceeds $20,000, unless accompanied by evidence of shipment of the
goods relating thereto satisfactory to Agent in its Permitted Discretion;
(xiii) the invoice constitutes a progress billing on a project not yet
completed, except that the final billing at such time as the matter has been
completed and delivered to the customer may be deemed an Eligible Receivable;
(xiv) the amount thereof is not yet represented by an invoice or bill issued in
the name of the applicable account debtor; (xv) the account debtor is located
in Puerto Rico and/or the goods were shipped to Puerto Rico; or (xvi) such
Receivable is not at all times subject to Agent's duly perfected, first
priority, security interest.
"ELIGIBLE INVENTORY" means all Eligible Product Inventory and all
Eligible Packaging Inventory.
"ELIGIBLE PACKAGING INVENTORY" means Packaging Inventory which Agent,
in its Permitted Discretion, deems Eligible Packaging Inventory, based on such
considerations as Agent may from time to time deem appropriate. Without
limiting the generality of the foregoing, no Packaging Inventory shall be
Eligible Packaging Inventory unless, in Agent's Permitted Discretion, such
Packaging Inventory (i) consists of Packaging Inventory in good, new and
salable condition which is not obsolete or unmerchantable and is not comprised
of labels or supplies (including, without limitation, pallets, stretch wrap,
shrink film, hot melt, glue, machine tape, air bags, spare parts, material
handling equipment, machinery and solar salt); (ii) meets all standards imposed
by any governmental agency or authority; (iii) conforms in all respects to the
warranties and representations set forth herein; (vi) is at all times subject
to Agent's duly perfected, first priority security interest; and (v) is at a
location leased or owned by Borrower (and not a third party processor location)
for which Borrower has delivered to Agent an executed landlord or mortgagee
waiver, in form and substance satisfactory to Agent.
"ELIGIBLE PRODUCT INVENTORY" means Product Inventory which Agent, in
its Permitted Discretion, deems Eligible Product Inventory, based on such
considerations as Agent may from time to time deem appropriate. Without
limiting the generality of the foregoing, no Product Inventory shall be
Eligible Product Inventory unless, in Agent's Permitted Discretion, such
Product
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Inventory (i) consists of raw materials and finished goods, in good, new and
salable condition which are not obsolete or unmerchantable, and are not
comprised of work in process, packaging materials, supplies or "finished goods
rework" such as cartons or cases of finished goods that have been damaged and
are awaiting rework; (ii) meets all standards imposed by any governmental
agency or authority; (iii) conforms in all respects to the warranties and
representations set forth herein; (iv) is at all times subject to Agent's duly
perfected, first priority security interest; and (v) is at a location leased or
owned by Borrower (and not a third party processor location) for which Borrower
has delivered to Agent an executed landlord or mortgagee waiver, in form and
substance satisfactory to Agent.
"ELIGIBLE PUERTO RICO RECEIVABLES" means any Receivable which would
have been an Eligible Domestic Receivable except for the fact that the
Receivable was excluded solely by subsection "(xv)" under the definition of
Eligible Domestic Receivable (i.e. the account debtor was located in Puerto
Rico and/or the goods were shipped to Puerto Rico.)
"ELIGIBLE RECEIVABLES" means all Eligible Domestic Receivables and all
Eligible Puerto Rico Receivables.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other
tangible personal property (other than Inventory) of every kind and description
used in Borrower's operations or owned by Borrower (excluding fixtures deemed
to be a part of the real property under applicable law) and any interest in any
of the foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"ERISA" means the Employer Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"EVENT OF DEFAULT" means any of the events set forth in Section 7.1 of
this Agreement.
"EXAMINATION FEE" has the meaning set forth in the Schedule.
"EXCESS AVAILABILITY" means, as of the date of determination thereof,
the amount by which the average daily total principal balance of the Revolving
Credit Loans which Borrower would have been permitted to have outstanding over
the prior THIRTY (30) days (and as of the proposed date of any subject
payment), based on the formulas and reserves set forth in the Schedule, exceeds
the sum of the Receivable Loans and the Inventory Loans then actually
outstanding, such excess then being reduced by an amount necessary to provide
for the payment of all accounts payable of Borrower which are more than THIRTY
(30) days past due date and all book overdrafts, excluding all such accounts
payable owing to Owens-Illinois Plastics Products, Inc. and its affiliates.
"EXCESS CASH FLOW" means Operating Cash Flow/Permitted less Senior
Contractual Debt Service.
"FINOVA" means FINOVA Capital Corporation, a Delaware corporation, and
its successors and assigns.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for the financial covenants referred to in Section 6.1.13 of this
Agreement, GAAP shall be determined on the basis of such principles in effect
on the date hereof and consistent with those used in the preparation of the
audited financial statements delivered to Agent prior to the date hereof,
except to any extent otherwise set forth in the Schedule.
"GENERAL INTANGIBLES" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
Trademarks, Licenses and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or
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hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims of
Borrower against any Lender or Agent, rights to purchase or sell real or
personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, proprietary information, purchase orders, and all insurance
policies and claims (including without limitation credit, liability, property
and other insurance) tax refunds and claims, computer programs, discs, tapes
and tape files, claims under guaranties, security interests or other security
held by or granted to Borrower to secure payment of any of the Receivables by
an account debtor, all contractual rights, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables
and applications for any tradename, trademark, copyright and patent).
"INDEBTEDNESS" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
Capital Leases or conditional sales contract or other title retention agreement
with respect to property used or acquired by Borrower, even though the rights
and remedies of the lessor, seller or lender are limited to repossession
(excluding operating leases), (iv) all unfunded pension fund obligations and
liabilities and (v) deferred tax liabilities.
"INDEBTEDNESS FOR BORROWED MONEY" means without duplication, all
Indebtedness: (i) in respect of borrowed money (including, without limitation,
pursuant to the Loan Documents or any Capital Leases), (ii) evidenced by a
note, debenture, or other like written obligation to pay money (including,
without limitation, all interest on the Obligations), (iii) for the deferred
purchase price of property (other than trade payables arising in the ordinary
course of business), or (iv) in respect of obligations under conditional sales
or other title retention agreements; and all guaranties of any or all of the
foregoing.
"INITIAL TERM" has the meaning set forth in the Schedule.
"INVENTORY" means, collectively, all Product Inventory and all
Packaging Inventory.
"INVENTORY LOANS" has the meaning set forth in the Schedule.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"L/C FEE" has the meaning set forth in Section 2.4 hereof.
"L/C ISSUER" means FINOVA Capital Corporation or any other Lender, to
the extent agreed by Agent and Borrower as provided in Section 2.4 hereof.
"L/C ISSUER FEE" has the meaning set forth in Section 2.4 hereof.
"LENDER" or "LENDERS" means the lending institutions, severally, from
time to time parties to this Agreement as lenders (as listed on the signature
pages hereto) and their respective successors and assigns individually and
collectively, as the context requires.
"LENDERS' AFFILIATE" has the meaning set forth in Section 9.22 hereof.
"LETTERS OF CREDIT" has the meaning set forth in Section 2.4. hereof.
"LOAN PARTY" means Borrower and each other party liable for the
Obligations (other than the Lenders or Agent) to any Loan Document.
"LOAN DOCUMENTS" means, collectively, this Agreement, any note or
notes executed by Borrower and payable to the Lenders, and any other present or
future agreement entered into in connection with this Agreement, including,
without limitation, the documents identified on the Document Checklist,
together with all alterations, amendments, changes, extensions, modifications,
refinancings, refundings, renewals, replacements, restatements, or supplements,
of or to any of the foregoing.
"LOAN RESERVES" means, as of any date of determination, such amounts
as Agent may from time to time establish and revise in its Permitted Discretion
reducing the amount of Revolving Credit Loans and Letters of Credit which would
otherwise be available to Borrower under the lending formula(s) provided in
Section 2.2 of the Schedule: (a) to reflect events, conditions,
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contingencies or risks which, as determined by Agent in good faith, do or may
affect either (i) the Collateral or any other property which is security for
the Obligations or its value, (ii) the assets, business or prospects of
Borrower or (iii) the security interests of Agent, for its benefit and the
benefit of the Lenders and other rights of Agent or any Lender in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect reserves for accrued interest or (c) to reflect Agent's good
faith belief that any collateral report or financial information furnished by
or on behalf of Borrower to Agent or any Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (d) in respect of any state
of facts which Agent determines in good faith constitutes an Event of Default
or may, with notice or passage of time or both, constitute an Event of Default;
Loan Reserves shall include without limitation, the Shareholder Matters Reserve
and the Dilution Reserve.
"LOAN YEAR" means each twelve month period commencing on the Closing
Date.
"LOANS" or "LOAN" has the meaning set forth in Section 2.2 hereof.
"MAKE WHOLE PREMIUM" has the meaning set forth in the Schedule.
"MAXIMUM INTEREST RATE" has the meaning set forth in Section 2.9(c)
hereof.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of
Borrower or any ERISA Affiliate.
"NET WORTH" at any date means the Borrower's net worth as determined
in accordance with GAAP.
"OBLIGATIONS" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to Agent or any Lender whether evidenced by this Agreement, any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Agent or any
Lender in Borrower's debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, attorney's fees, expert witness fees, Examination Fees, L/C Fees,
Collateral Monitoring Fees, Closing Fees, facility fees, Agent's Fees, Unused
Line Fees, Termination Fees and any other sums chargeable to Borrower hereunder
or under any of the Loan Documents.
"OPERATING CASH FLOW/ACTUAL" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following items,
to the extent deducted from or added to the revenues of Borrower in the
calculation of net income or loss: (i) depreciation; (ii) amortization and
other non-cash charges; (iii) interest expense paid or accrued; and (iv) total
federal and state income tax expense determined as the accrued liability of
Borrower in respect of such period, regardless of what portion of such expense
has actually been paid by Borrower during such period, and after deduction for
each of (a) federal and state income taxes, to the extent actually paid during
such period; (b) any non-cash income; and (c) all actual Capital Expenditures
made during such period and not financed.
"OPERATING CASH FLOW/PERMITTED" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following items,
to the extent deducted from or added to the revenues of Borrower in the
calculation of net income or loss: (i) depreciation; (ii) amortization and
other non-cash charges; (iii) interest expense paid or accrued; and (iv) total
federal and state income tax expense determined as the accrued liability of
Borrower in respect of such period, regardless of what portion of such expense
has actually been paid by Borrower during such period; and after deduction for
each of (a) federal and state income taxes, to the extent actually paid during
such period; (b) any non-cash income; and (c) all permitted Capital
Expenditures (without regard to any waiver given by the Agent with respect to
any violation of the limitation on such Capital Expenditures set forth in
Section 6.2 of the Schedule) actually made during such period and not financed.
"OVERADVANCE" has the meaning set forth in Section 2.3.
"OVERLINE" has the meaning set forth in Section 2.3.
"OWENS COMFORT LETTER" shall have the meaning ascribed thereto under
the heading "Additional Provisions" set forth in the Schedule.
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"PNC WARRANT" means that certain Amended and Restated Warrant for
purchase of common stock of USA, having an effective date of February 25, 1998,
of USA in favor of PNC Bank, National Association.
"PACKAGING INVENTORY" means all corrugated boxes, printed cardboard
boxes, bottles, caps, sprayers, labels, jars and other packaging materials now
owned and hereafter acquired, wherever located, which are intended to be used
or consumed in Borrower's business and all documents of title and other
documents relating thereto.
"PBGC" means the Pension Benefit Guarantee Corporation.
"PENSION PLAN" means any plan described in ERISA Section 3(2) which is
subject to Title IV of ERISA or Section 412 of the IRC which is maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"PERMITTED DISCRETION" means Agent's judgment exercised in good faith
based upon its consideration of any factor which Agent believes in good faith:
(i) could reasonably be expected to adversely affect the value of any
Collateral, the enforceability or priority of Agent's liens thereon or the
amount which Agent or any Lender would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral; (ii) suggests that any collateral report or financial
information delivered to Agent or any Lender by any Person on behalf of the
Borrower is incomplete, inaccurate or misleading in any material respect; (iii)
materially increases the likelihood of a bankruptcy, reorganization or other
insolvency proceeding involving the Borrower, any Loan Party or any of the
Collateral, or (iv) creates or reasonably could be expected to create an Event
of Default. In exercising such judgment, Agent may consider such factors
already included in or tested by the definition of Eligible Receivables or
Eligible Inventory, as well as any of the following: (i) the financial and
business climate of the Borrower's industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Receivables, (iii) changes in demand for, and pricing of, Inventory, (iv)
changes in any concentration of risk with respect to Receivables and/or
Inventory, and (v) any other factors that change the credit risk of lending to
the Borrower on the security of the Receivables and Inventory. The burden of
establishing lack of good faith hereunder shall be on the Borrower.
"PERMITTED ENCUMBRANCE" means, collectively, the following: (i) liens,
security interests or other encumbrances for taxes, worker's compensation,
unemployment or social security insurance, assessments and other governmental
charges or levies arising by operation of law in the ordinary course of
business for sums which are not yet due and payable and the enforcement of
which are, at all times, effectively and fully stayed or are being contested in
good faith by appropriate proceedings (with written notice thereof to Agent)
diligently conducted, and for which reserves as required under GAAP shall have
been established by Borrower and Loan Reserves have been established to the
extent reasonably required by Agent in respect thereof; (ii) liens arising in
the ordinary course of business in respect of claims or demands of landlords,
carriers, warehousemen, mechanics, laborers, materialmen, workers, repairmen
and other similar Persons, whether arising by operation of law, contractually
or otherwise, provided that the amounts respectively secured thereby are not
past due or if past due, the enforcement of any such liens are, at all times,
stayed, and such liens are being contested in good faith by appropriate
proceedings (with written notice thereof to Agent) diligently conducted and
reserves as required under GAAP shall have been established by Borrower and
Loan Reserves have been established to the extent reasonably required by Agent
in respect thereof; and (iii) liens securing Capital Leases and purchase money
Indebtedness to the extent permitted by Section 6.2.10 hereof as set forth in
the Schedule.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"PLAN" means any plan described in ERISA Section 3(2) which is
maintained for employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan or a Pension Plan.
"PREPARED FINANCIALS" means (i) the audited financial statements of
Borrower dated DECEMBER 31, 1997, (ii) the financial statements filed with the
Securities and Exchange Commission (including without limitation 10Q reports
and 10K reports) thereafter but prior to the Closing Date, and (iii) all
financial statements (audited and filed with the Securities and Exchange
Commission) which as of each subsequent date are delivered to Agent and the
Lenders from time to time pursuant to Section 9.1 hereof, and the related
statements of operations, changes in
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stockholder's equity and changes in cash flow for the periods ended on such
dates.
"PRIME RATE" has the meaning set forth in the Schedule.
"PRODUCT INVENTORY" means, excluding all Packaging Inventory, all of
Borrower's now owned and hereafter acquired goods, merchandise or other
personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials (including, without
limitation, wick assemblies, chemicals, dyes, fragrances, bleach, liquid
detergent, household cleaners and soap products), work in process (including,
without limitation, all chemicals in the mixing area), finished goods
(including, without limitation, all trays of candles and finished glass
cleaner, liquid detergent, pine spray, bleach powder soap and other household
chemicals), and materials and supplies of any kind, nature or description which
are intended to be used or consumed in Borrower's business or used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, merchandise or other personal property, and all
documents of title and other documents relating thereto.
"PROHIBITED TRANSACTION" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"REAL ESTATE SUBSIDIARIES" means, collectively, NJMO Management
Company LLC, a Delaware limited liability company, and NJMO Holding Company
LLC, a Delaware limited liability company, and such other entities as may be
approved by Agent from time to time in its reasonable discretion.
"RECEIVABLE LOANS" has the meaning set forth in
the Schedule.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), proceeds of any letters of
credit naming Borrower as beneficiary, contract rights, chattel paper,
instruments, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, whether secured or
unsecured, all merchandise returned to or repossessed by Borrower, and all
rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
"REINVESTMENT YIELD" has the meaning set forth in the Schedule.
"REMAINING SCHEDULED PAYMENT AMOUNT" has the meaning set forth in the
Schedule.
"RENEWAL TERM" has the meaning set forth in the Schedule.
"REPORTABLE EVENT" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan or Pension
Plan described in Section 4063 of ERISA, or a cessation of operations described
in Section 4068(f) of ERISA.
"REVOLVING CREDIT LIMIT" has the meaning set forth in the Schedule.
"REVOLVING CREDIT LOANS" has the meaning set forth in the Schedule.
"REVOLVING INTEREST RATE" has the meaning set forth in the Schedule.
"SCHEDULE" has the meaning set forth in the preamble.
"SEC INVESTIGATION" means that certain pending formal investigation by
the United States Securities and Exchange Commission in connection with the
restatement by USA of its fiscal 1996 financial statements.
"SENIOR CONTRACTUAL DEBT SERVICE" means, for any period, the sum of
payments made or required to be made by Borrower during such period for (i)
interest, fees and scheduled principal payments due on the Term Loans
(excluding voluntary prepayment and payments made from Borrower's Excess Cash
Flow, as required pursuant to the Schedule), (ii) interest only payments due on
the Revolving Credit Loans facility plus the Collateral Monitoring Fee, the
Agent's Fee and the Unused Line Fee, Examination Fees and any other fees due to
the Agent for its account or the account of the lenders and (iii) scheduled
interest and principal payments due on any Indebtedness for Borrowed Money
(including without limitation the Indebtedness permitted in clauses "(iii)",
"(v)" and "(vi)" of Section 6.2.10 hereof).
"SHAREHOLDER LITIGATION" means that certain litigation in the U.S.
District Court of New Jersey, captioned In re USA Detergents, Inc. Securities
Litigation, Master File No. 97-CV-2459 (MTB) and all other claims
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brought against the Borrower predicated on the same or similar factual
allegations.
"SHAREHOLDER MATTERS RESERVE" means a Loan Reserve in connection with
the Shareholder Litigation and the SEC Investigation, as described in paragraph
2 under the heading "Additional Provisions" set forth in the Schedule.
"START DATE" has the meaning set forth in the Schedule.
"STOCK PLEDGE AGREEMENTS" has the meaning set forth in Section 4.1(y)
hereof.
"STOCK PLEDGORS" has the meaning set forth in Section 4.1(y) hereof.
"SUBSIDIARIES" or "SUBSIDIARY" means, with respect to any Person, any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding capital stock having ordinary voting power to elect a majority of
the Board of Directors of such corporation (irrespective of whether, at the
time, stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned, legally or beneficially, by such
Person and/or one or more Subsidiaries of such Person, including, without
limitation, the following Subsidiaries of USA Detergents, Inc., a Delaware
corporation ("USA"): Big Cloud Powder Corporation, a Delaware corporation
("POWDER"), Chicago Management Powder Corp., a Delaware corporation
("MANAGEMENT"), Chicago Contract Powder Corporation, an Illinois corporation
("CONTRACT"), NJMO Management Company LLC, a Delaware limited liability company
("NJMO") and NJMO Holding Company LLC, a Delaware limited liability company
("NJMO Holdings").
"TERM LOANS" has the meaning set forth in the Schedule.
"TERMINATION FEE" has the meaning set forth in Section 9.2(d) hereof.
"TOTAL FACILITY" has the meaning set forth in the Schedule.
"TRADEMARKS, COPYRIGHTS, LICENSES AND PATENTS" means all of Borrower's
right, title and interest in and to, whether now owned or hereafter acquired:
(i) trademarks, trademark registrations, trade names, trade name registrations,
including without limitation, such as are listed in the Schedule or any of the
other Loan Documents, as the same may be amended from time to time, and (a)
renewals thereof, (b) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including without
limitation, damages and payments for past or future infringements thereof, (c)
the right to sue for past, present and future infringements thereof, (d) all
rights corresponding thereto throughout the world, and (e) the goodwill of the
business operated by Borrower connected with and symbolized by any trademarks
or trade names; (ii) copyrights and copyright registrations, including without
limitation such as are listed in the Schedule or any of the other Loan
Documents, as the same may be amended from time to time, and (a) renewals
thereof, (b) all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including without limitation, damages and
payments for past or future infringements thereof, (c) the right to sue for
past, present and future infringements thereof, and (d) all rights
corresponding thereto throughout the world; (iii) license agreements, including
without limitation such as are listed in the Schedule attached hereto and made
a part hereof, and the right to prepare for sale, sell and advertise for sale
any Inventory now or hereafter owned by Borrower and now or hereafter covered
by such licenses; and (iv) patents registered or pending, including without
limitation such as are listed in the Schedule or any of the other Loan
Documents, together with all income, royalties, shop rights, damages and
payments thereto, the right to sue for infringements thereof, and all rights
thereto throughout the world and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof.
"UNUSED LINE FEE" has the meaning set forth in the Schedule.
"WATER COMPANY LITIGATION" means all claims made by the North
Brunswick Water Company against the Borrower.
"WEIGHTED AVERAGE LIFE TO MATURITY" has the meaning set forth in the
Schedule.
1.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
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2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, each Lender severally and not jointly agrees to
make available to Borrower that Lender's Commitment Percentage of (i) the
Revolving Credit Loans and (ii) the Term Loans up to the maximum amount of that
Lender's Dollar Commitment as set forth on the signature pages hereto, subject
to deduction of such other Loan Reserves as Agent deems proper from time to
time in its Permitted Discretion, and less amounts Agent or any Lender may be
obligated to pay in the future on behalf of Borrower. The Schedule is an
integral part of this Agreement and all references to "herein", "herewith" and
words of similar import shall for all purposes be deemed to include the
Schedule.
2.2 Loans; Joint and Several Obligations. Advances under the Total
Facility ("LOANS" and individually, a "LOAN") shall be comprised of the amounts
shown in the Schedule. Each of the following corporations shall be jointly and
severally liable for the Loans and all other Obligations hereunder: (i) USA,
(ii) Powder, (iii) Management and (iv) Contract. References in this Agreement
and any other Loan Document to "Borrower" shall mean each of the foregoing
corporations, jointly and severally, as co-borrowers, individually and
collectively, as the context requires. USA, Powder, Management and Contract are
together engaged in a collective business enterprise which relies upon the
particular contributions of each corporation thereto including, without
limitation, the manufacturing operations of Management, the fixed assets of
Contract and the manufacturing, distribution and administrative operations of
USA. The parties acknowledge that the Lenders would not make the Loans
available to any one of the Co-Borrowers separately and independently and that
it is the collective enterprise of the co-borrowers which has induced the
Lenders to make the Loans available to the co-borrowers.
2.3 Overlines; Overadvances. If at any time or for any reason the
outstanding amount of advances (including all Letters of Credit) extended or
issued pursuant hereto exceeds any of the dollar limitations ("OVERLINE") or
percentage limitations ("OVERADVANCE") in the Schedule, then Borrower shall,
upon Agent's demand, immediately pay, in cash, to Agent, for the ratable
benefit of the Lenders, the full amount of such Overline or Overadvance which,
at Agent's option, may be applied to reduce the outstanding principal balance
of the Loans and/or cash collateralize all or any part of any outstanding
Letters of Credit. Without limiting Borrower's obligation to repay to Agent,
for the ratable benefit of the Lenders, on demand the amount of any Overline or
Overadvance, Borrower agrees to pay to Agent, for the ratable benefit of the
Lenders, interest on the outstanding principal amount of any Overline or
Overadvance, on demand, at the rate set forth in the Schedule and applicable to
the Loan or Loans in respect to which any Overline or Overadvance exists.
2.4 Letters of Credit. At the request of Borrower, Agent may arrange
for the issuance of letters of credit for the account of Borrower and
guarantees of payment of such letters of credit, by the L/C Issuer, in each
case in form and substance satisfactory to the L/C Issuer and Agent
(collectively, "LETTERS OF CREDIT"). As of the Closing Date, no Letters of
Credit shall be outstanding. The aggregate face amount of all outstanding
Letters of Credit from time to time shall not exceed an amount to be mutually
agreed between Agent and Borrower from time to time, and shall be reserved
against the availability of Revolving Credit Loans as provided in Section 2.2
set forth in the Schedule. Borrower shall pay all bank charges and fees for the
issuance of Letters of Credit, as determined by the L/C Issuer and reasonably
acceptable to Agent (the "L/C ISSUER FEE"), together with an additional fee to
the Lenders equal to that percentage of the aggregate face amount of each
Letter of Credit outstanding from time to time during the term of this
Agreement as mutually determined by Agent and Borrower (the "L/C FEE"). The L/C
Fee shall be deemed to be fully earned upon the issuance of each Letter of
Credit and shall be due and payable on the first Business Day of each month
following a month during which any Letter of Credit is outstanding, pro rated
for any partial month. Any advance by any Lender, or Agent for the account of
the Lenders, under or in connection with a Letter of Credit shall constitute an
Obligation hereunder. Each Letter of Credit shall have an expiry date no later
than THIRTY (30) days prior to the last day of the Initial Term or, if issued
during any Renewal Term no later than THIRTY (30) days prior to the last day of
such Renewal Term. Immediately upon any termination of this Agreement, Borrower
shall either: (i) provide cash collateral to Agent, for the benefit of the L/C
Issuer, in an amount equal to 105% of the maximum amount of all obligations of
the L/C Issuer under or in connection with all then outstanding Letters of
Credit, or (ii) cause to be delivered to the L/C Issuer releases of all the L/C
Issuer's obligations under outstanding Letters of Credit. At
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Agent's discretion, any proceeds of Collateral received by Agent may be held as
the cash collateral required by this Section 2.4. Borrower hereby agrees to
indemnify, save, and hold Agent, the L/C Issuer and the Lenders harmless from
any loss, cost, expense, or liability, including payments made by Agent, the
L/C Issuer or any Lender, expenses, and reasonable attorneys' fees incurred by
Agent, the L/C Issuer or any Lender arising out of or in connection with any
Letters of Credit. Borrower agrees to be bound by the L/C Issuer's regulations
and any reasonable interpretations of any Letters of Credit opened for
Borrower's account and Borrower understands and agrees that none of the Agent,
any L/C Issuer nor any Lender shall be liable for any error, negligence, or
mistake, whether of omission or commission, in following Borrower's
instructions or those contained in the Letters of Credit or any modifications,
amendments, or supplements thereto, other than gross negligence or willful
misconduct. Borrower understands that the L/C Issuer may indemnify the bank
issuing a Letter of Credit for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify and hold the L/C Issuer, Agent and the Lenders harmless with respect
to any loss, cost, expense, or liability incurred by the L/C Issuer, Agent or
any Lender under any such indemnification by the L/C Issuer, Agent or any
Lender to any issuing bank.
2.5 Loan Account. All advances made hereunder (including without
limitation all advances made by the L/C Issuer, or by Agent for the account of
the L/C Issuer or the Lenders, under or in connection with any Letter of
Credit) shall be added to and deemed part of the Obligations when made. Agent
may from time to time charge all Obligations of Borrower to Borrower's loan
account.
2.6 Interest; Fees. Borrower shall pay to Agent, for the ratable
benefit of the Lenders, interest on the daily outstanding balance of the
Obligations at the per annum rate and payable monthly as set forth in the
Schedule, together with the Unused Line Fees and any L/C Fees, Termination
Fees, and Make Whole Premiums, to the extent applicable. Borrower shall also
pay to Agent, for its sole benefit, the Collateral Monitoring Fee, Agent's Fees
and Examination Fees as set forth in the Schedule.
2.7 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall pay to Agent, for the
ratable benefit of the Lenders, interest on the daily outstanding balance of
the Obligations and any L/C Fee at a rate per annum which is TWO PERCENT (2%)
in excess of the rate which would otherwise be applicable thereto pursuant to
the Schedule.
2.8 Examination Fee. Borrower agrees to pay to Agent, for its sole
account, the Examination Fee in the amount set forth in the Schedule in
connection with each audit or examination of Borrower performed by Agent prior
to or after the date hereof provided that, as set forth in the Schedule, so
long as no Event of Default exists, Borrower shall be required to pay the
Examination Fee for only one audit or examination in each fiscal quarter of
Borrower. Without limiting the generality of the foregoing, Borrower shall pay
to Agent, for its sole account, an initial Examination Fee in an amount equal
to the amount set forth in the Schedule. Such initial Examination Fee shall be
deemed fully earned at the time of payment and due and payable upon the closing
of this transaction, and shall be deducted from any good faith deposit paid by
Borrower to Agent prior to the date of this Agreement.
2.9 Excess Interest.
(a) The contracted for rate of interest of the Loans contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rate set forth in the Schedule, calculated and applied to the principal balance
of the Obligations in accordance with the provisions of this Agreement; (ii)
interest after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all Additional
Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. The Examination Fees, attorneys' fees, expert witness fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees,
Termination Fees, Minimum Interest Charges, other charges, goods, things in
action or any other sums or things of value paid or payable by Borrower
(collectively, the "ADDITIONAL SUMS"), whether pursuant to this Agreement or
any other documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that under
any applicable law may be deemed to be interest with respect to this lending
transaction, for the purpose of any applicable law that may limit the maximum
amount of interest to be charged with respect to this lending transaction,
shall be payable by Borrower as, and shall be deemed to be, additional interest
and for such purposes only, the agreed upon and "contracted for rate of
interest" of this lending transaction shall be deemed to be increased
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by the rate of interest resulting from the inclusion of the Additional Sums.
(b) It is the intent of the parties to comply with the usury laws of
the State of Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed
that notwithstanding any provisions to the contrary in this Agreement, or in
any of the documents securing payment hereof or otherwise relating hereto, in
no event shall this Agreement or such documents require the payment or permit
the collection of interest in excess of the maximum contract rate permitted by
the Applicable Usury Law (the "MAXIMUM INTEREST RATE"). In the event (a) any
such excess of interest otherwise would be contracted for, charged or received
from Borrower or otherwise in connection with the loan evidenced hereby, or (b)
the maturity of the Obligations is accelerated in whole or in part, or (c) all
or part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other Person now or hereafter liable
for the payment of the Obligations shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount of the Obligations or refunded
to Borrower, at Agent's option, and (4) the effective rate of interest shall be
automatically reduced to the Maximum Interest Rate. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made
for the purpose of determining whether such rate would exceed the Maximum
Interest Rate shall be made by amortizing, prorating, allocating and spreading
during the period of the full stated term of the loan evidenced hereby, all
interest at any time contracted for, charged or received from Borrower or
otherwise in connection with such loan; and (y) in the event that the effective
rate of interest on the loan should at any time exceed the Maximum Interest
Rate, such excess interest that would otherwise have been collected had there
been no ceiling imposed by the Applicable Usury Law shall be paid to Agent, for
its benefit and the benefit of the Lenders, as applicable, from time to time,
if and when the effective interest rate on the loan otherwise falls below the
Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the Maximum Interest Rate, until the entire amount
of interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
2.10 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to any Lender specifically containing
payment provisions which are in conflict with this Section 2.10 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable by Borrower to Agent, for the ratable benefit
of the Lenders, immediately upon the earliest of (i) the receipt by Agent or
Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of which
the Agent elects to accelerate the maturity and payment of such Loans, or (iii)
any termination of this Agreement pursuant to Section 9.2 hereof; provided,
however, that any Overadvance or Overline shall be payable on demand pursuant
to the provisions of Section 2.3 hereof.
(b) Collections. Until Agent notifies Borrower to the contrary,
Borrower may make collection of all Receivables for Agent by directing all
account debtors and other third parties to remit all payments owing to Borrower
to the lockbox established in connection with the Blocked Account. In the event
Borrower shall nevertheless directly receive any payments or other financial
proceeds of any Collateral, Borrower shall receive all payments in trust for
Agent and Lenders and immediately deliver all payments to Agent, for its
benefit and the ratable benefit of the Lenders, in their original form as set
forth below, duly endorsed in blank or cause the same to be deposited into a
Blocked Account or Dominion Account. Agent or its designee may, at any time
during the existence of an Event of Default, notify account debtors that the
Receivables have been assigned to Agent, for its benefit and the benefit of the
Lenders, and of Agent's security interest therein, and
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may collect the Receivables directly and charge the collection costs and
expenses to Borrower's loan account. Borrower agrees that, in computing the
charges under this Agreement, all items of payment shall be deemed applied by
Agent on account of the Obligations TWO (2) Business Days after receipt by
Agent of good funds which have been credited to Agent's account, whether such
funds are received directly from Borrower or from the Blocked Account bank or
the Dominion Account bank, pursuant to Section 2.10(c) hereof, and this
provision shall apply regardless of the amount of the Obligations outstanding
or whether any Obligations are outstanding; provided, that if any such good
funds are received after 2:00 P.M. Eastern time on any Business Day or at any
time on any day not constituting a Business Day, such funds shall be deemed
received on the immediately following Business Day. Agent may charge Borrower's
loan account for the amount of any item of payment which is returned to Agent
unpaid.
(c) Establishment of a Lockbox Account or Dominion Account. Unless
Borrower shall be otherwise directed by Agent in writing, Borrower shall cause
all proceeds of Collateral to be deposited into a lockbox account, or such
other "blocked account" as Agent may require (each, a "BLOCKED ACCOUNT")
pursuant to an arrangement with such bank as may be selected by Borrower and be
acceptable to Agent which proceeds, unless otherwise provided herein, shall be
applied in payment of the Obligations in such order as set forth in Section
2.12 hereof. Borrower shall issue to any such bank an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to Agent,
either to any account maintained by Agent at said bank or by wire transfer to
appropriate account(s) of Agent. All funds deposited in a Blocked Account shall
immediately become the sole property of Agent, for its benefit and the benefit
of the Lenders, and Borrower shall obtain the agreement by such bank to waive
any offset rights against the funds so deposited. Neither Agent, nor any
Lender, assumes any responsibility for any Blocked Account arrangement,
including without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. Alternatively, Agent
may establish depository accounts in the name of Agent, for its benefit and the
benefit of the Lenders, at a bank or banks for the deposit of such funds (each,
a "DOMINION ACCOUNT") and Borrower shall deposit all proceeds of Receivables
and all cash proceeds of any sale of Inventory or, to the extent permitted
herein, Equipment or cause same to be deposited, in kind, in such Dominion
Accounts of Agent, for its benefit and the benefit of the Lenders, in lieu of
depositing same to Blocked Accounts, and, unless otherwise provided herein, all
such funds shall be applied by Agent to the Obligations as provided in Section
2.12 hereof.
(d) Payments Without Deductions. Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other Loan
Document, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event Borrower repays the
Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to Borrower's loan account TWO (2)
Business Days after Agent's receipt
thereof.
(f) Monthly Accountings. Agent shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Agent or any Lender),
unless Borrower notifies Agent in writing to the contrary within THIRTY (30)
days after each account is rendered, describing the nature of any alleged
errors or omissions.
2.11 Application of Collateral. Except as otherwise provided herein,
Agent shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations as provided in
Section 2.12 hereof. To the extent that Borrower makes a payment or Agent or
any Lender receives any payment or proceeds of the Collateral for Borrower's
benefit which is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to any Person, including
without limitation, a trustee, debtor in possession, receiver or any other
party under any bankruptcy law, common law or equitable cause, or otherwise,
then, to such extent, the Obligations or part thereof intended to be satisfied
shall be revived and continue as if such payment or proceeds had not been
received by Agent, and Agent may adjust the balance of the Loans as Agent, in
its sole discretion, deems appropriate under the circumstances.
2.12 Application of Payments. The amount of all payments or amounts
received by Agent with respect to the Loan shall be applied as set forth in
Section 4.2 of the Agency Agreement. In calculating interest and applying
payments as set forth above: (a) interest shall be calculated
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and collected through the date a payment is actually applied by Agent under the
terms of this Agreement; (b) interest on the outstanding balance shall be
charged during any grace period permitted hereunder; (c) at the end of each
month, all accrued and unpaid interest and other charges provided for hereunder
shall be added to the principal balance of the Revolving Credit Loan; and (d)
to the extent that Borrower makes a payment or Agent receives any payment or
proceeds of the Collateral for Borrower's benefit that is subsequently
invalidated, set aside or required to be repaid to any other Person, then, to
such extent, the Obligations intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent and
Agent may adjust the Loan balances as Agent, in its sole discretion, deems
appropriate under the circumstances.
2.13 Notification of Closing. Borrower shall provide Agent with at
least forty-eight (48) hours prior written notice of the Closing Date, to
enable Agent to arrange for the availability of funds with the Lender. In the
event the closing does not take place on the date specified in Borrower's
notice to Agent, other than through the fault of Agent or the Lenders, Borrower
agrees to reimburse Agent and the Lenders for Agent's and the Lenders' costs to
maintain the necessary funds available for the closing, at the applicable
interest rate described in the Schedule for each respective Loan which is to be
made on the Closing Date, for the number of days which elapse between the
earlier of the date specified in Borrower's notice and the date upon which the
closing actually occurs (which number of days shall not include the date
specified in Borrower's notice, but shall include the Closing Date) and two (2)
days after any subsequent notification of a later Closing Date.
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to Agent, for
its benefit and the benefit of the Lenders, a first priority security interest
(subject only to Permitted Encumbrances) in all of Borrower's now owned or
hereafter acquired or arising Inventory, Equipment, Receivables, life insurance
policies and the proceeds thereof, Trademarks, Copyrights, Licenses and
Patents, Investment Property (as defined in Section 9-115 of the Code) and
General Intangibles, including, without limitation, all of Borrower's interest
in the Chicago Lease of the Chicago Facility and all of Borrower's Deposit
Accounts, money, fixtures, any and all property now or at any time hereafter in
Agent or any Lender's possession (including claims and credit balances), and
all proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties), all products and all books and
records and computer data related to any of the foregoing (all of the
foregoing, together with all other property in which Agent, for its benefit and
the benefit of the Lenders, may be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral"). Borrower and Agent
hereby acknowledge and agree that the security interest granted herein in the
Collateral is intended to attach on the date that this Agreement is executed by
the Borrower and delivered to Agent, for its benefit and the benefit of the
Lenders, and that such security interest shall attach to Collateral acquired by
Borrower thereafter on the date that such Collateral is acquired by Borrower.
3.2 Perfection and Protection of Security Interest. Borrower shall, at
its expense, take all actions requested by Agent at any time to perfect,
maintain, protect and enforce Agent's first priority security interest and
other rights in the Collateral and the priority thereof from time to time,
including, without limitation, (i) executing and filing financing or
continuation statements and amendments thereof and executing and delivering
such documents and titles in connection with motor vehicles as Agent shall
require, all in form and substance reasonably satisfactory to Agent, (ii)
maintaining a perpetual inventory and complete and accurate inventory stock
records, (iii) upon the request of Agent, delivering to Agent warehouse
receipts covering any portion of the Collateral located in warehouses and for
which warehouse receipts are issued, and transferring Inventory to warehouses
designated by Agent, (iv) placing notations on Borrower's books of account to
disclose Agent's security interest therein and (v) delivering to Agent all
letters of credit on which Borrower is named beneficiary, upon the request of
Agent. Agent (or any Lender, if directed by Agent) may file, for its benefit
and the benefit of the Lenders, without Borrower's signature, one or more
financing statements disclosing Agent's security interest under this Agreement.
Borrower agrees that a carbon, photographic, photostatic or other reproduction
of this Agreement or of a financing statement is sufficient as a financing
statement. If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of Borrower's agents or processors, Borrower shall
notify such Person of Agent's security interest in such Collateral and, upon
Agent's request, instruct them to hold all such Collateral for Agent's and the
Lenders' account subject to Agent's instructions. From time to time, Borrower
shall, upon Agent's request, execute and deliver confirmatory
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written instruments pledging the Collateral to Agent, for its benefit and the
benefit of the Lenders, but Borrower's failure to do so shall not affect or
limit Agent's security interest or other rights in and to the Collateral. Until
the Obligations have been fully satisfied and each Lender's obligation to make
further advances hereunder has terminated, Agent's security interest in the
Collateral, for its benefit and the benefit of the Lenders shall continue in
full force and effect.
3.3 Preservation of Collateral. Agent may, in its Permitted
Discretion, at any time discharge any lien or encumbrance on the Collateral or
bond the same, pay any insurance, maintain guards, pay any service bureau,
obtain any record or take any other action to preserve the Collateral and
charge the cost thereof to Borrower's loan account as an Obligation.
3.4 Insurance. Borrower will maintain and deliver evidence to Agent of
such insurance as is required by Agent, written by insurers, in amounts, and
with lender's loss payee, additional insured, and other endorsements,
reasonably satisfactory to Agent and cause Agent for its benefit and the
benefit of the Lenders to be named as an additional insured on all liability
policies. All premiums with respect to such insurance shall be paid by Borrower
as and when due. Accurate copies of the policies shall be delivered by Borrower
to Agent (and if requested by Agent, certified copies of such policies shall be
delivered to Agent). If Borrower fails to comply with this Section, Agent may
(but shall not be required to) procure such insurance and endorsements at
Borrower's expense and charge the cost thereof to Borrower's loan account as an
Obligation. The net proceeds of any property or casualty insurance and
endorsements insuring the Collateral, after deducting all costs and expenses
(including attorneys' fees) of collection (to the extent such proceeds exceed
$250,000 in the aggregate or in any single instance in any fiscal year of
Borrower), shall be applied at Agent's option, either toward replacing or
restoring the Collateral, in a manner and on terms satisfactory to Agent and
acceptable to Borrower, in accordance with good business practice, or toward
payment of the Obligations in accordance with Section 2.12 hereof. Any proceeds
applied to the payment of Obligations shall be applied in such manner as Agent
may elect in its sole discretion. In no event shall such application relieve
Borrower from payment in full of all installments of principal and interest
which thereafter become due in the order of maturity thereof.
3.5 Collateral Reporting; Inventory.
(a) Invoices. Borrower shall not re-date any invoice or sale from the
original date thereof or make sales on extended terms beyond those customary in
Borrower's industry, or otherwise extend or modify the term of any Receivable
(except to the extent consistent with customary and good business practice). If
Borrower becomes aware of any matter materially adversely affecting any
material Receivable, including information affecting the credit of the account
debtor thereon, Borrower shall promptly notify Agent in writing.
(b) Instruments. In the event any Receivable is or becomes evidenced
by a promissory note, trade acceptance or any other instrument for the payment
of money, Borrower shall immediately upon the request of Agent deliver such
instrument to Agent appropriately endorsed to Agent, for its benefit and the
benefit of the Lenders.
(c) Physical Inventory. Borrower shall conduct a physical count of the
Inventory (i) at quarterly intervals prior to December 31, 1998, (ii) annually
thereafter, and (iii) at such interval as Agent requests during the existence
of an Event of Default; and promptly supply Agent with a copy of such accounts
accompanied by a report of the value (calculated at the lower of cost or market
value on a first in, first out basis) of the Inventory and such additional
information with respect to the Inventory as Agent may request from time to
time.
(d) Returns. For so long as no Event of Default has occurred and is
continuing and subject to the provisions of Section 3.6(b), if any account
debtor returns any Inventory to Borrower in the ordinary course of its
business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the account debtor (sending a copy to
Agent if the amount thereof exceeds $20,000 in any one incident) in the
appropriate amount. In the event any attempted return occurs after the
occurrence and during the continuance of any Event of Default, Borrower shall
upon the request of Agent (i) hold the returned Inventory in trust for Agent,
for its benefit and the benefit of the Lenders, (ii) segregate all returned
Inventory from all of Borrower's other property, (iii) conspicuously label the
returned Inventory as Agent's property, and (iv) immediately notify Agent of
the return of any Inventory, specifying the reason for such return, the
location and condition of the returned Inventory, and on Agent's request
deliver such returned Inventory to Agent, for its benefit and the benefit of
the Lenders.
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(e) Borrower shall not consign any Inventory.
3.6 Receivables.
(a) Eligibility. (i) Borrower represents and warrants that each
Receivable covers and shall cover a bona fide sale or lease and delivery by it
of goods or the rendition by it of services in the ordinary course of its
business, and shall be for a liquidated amount and Agent's security interest
shall not be subject to any offset, deduction, counterclaim, rights of return
or cancellation, lien or other condition (other than chargebacks). If any
representation or warranty herein is breached as to any Receivable or any
Receivable ceases to be an Eligible Receivable for any reason other than
payment thereof, then Agent may, in addition to its other rights hereunder,
designate any and all Receivables owing by that account debtor as not Eligible
Receivables, except to the extent otherwise provided in the definition of
Eligible Domestic Receivables; provided, that Agent shall in any such event
retain, for its benefit and the benefit of the Lenders, its security interest
in all Receivables, whether or not Eligible Receivables, until the Obligations
have been fully satisfied and each Lender's obligation to provide loans
hereunder has terminated.
(ii) Agent at any time shall, in the exercise of its Permitted
Discretion, be entitled to (i) establish and increase or decrease Loan Reserves
against Eligible Receivables and Eligible Inventory, (ii) reduce the advance
rates set forth in the Schedule or restore such advance rates to any level
equal to or below the advance rates set forth in the Schedule or (iii) impose
additional restrictions (or eliminate the same) to the standards of eligibility
set forth in the definitions of "Eligible Receivables" and "Eligible
Inventory," in the exercise of its Permitted Discretion. Agent may but shall
not be required to rely on the schedules and/or reports delivered to Agent in
connection herewith in determining the then eligibility of Receivables and
Inventory. Reliance thereon by Agent from time to time shall not be deemed to
limit the right of Agent to revise advance rates or standards of eligibility as
provided above.
(b) Disputes. Borrower shall notify Agent promptly of all disputes or
claims and settle or adjust such disputes or claims at no expense to Agent or
any Lender, but no discount, credit or allowance shall be granted to any
account debtor and no returns of merchandise shall be accepted by Borrower
without Agent's consent, in all instances except for disputes, claims,
settlements, adjustments, discounts, credits and allowances made or given in
the ordinary course of Borrower's business which are not material. Agent may,
at any time after the occurrence of an Event of Default, settle or adjust
disputes or claims directly with account debtors for amounts and upon terms
which Agent considers advisable in its reasonable credit judgment and, in all
cases, Agent shall credit Borrower's loan account with only the net amounts
received by Agent in payment of any Receivables.
3.7 Equipment. Borrower shall keep and maintain the Equipment in good
operating condition and repair and make all necessary replacements thereto to
maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrower's past practice, ordinary wear and tear excepted.
Borrower shall not permit any item of Equipment to become a fixture (other than
a trade fixture) to real estate or an accession to other property, except to
the extent otherwise determined by applicable law.
3.8 Other Liens; No Disposition of Collateral. Borrower represents,
warrants and covenants that (a) all Collateral is and shall continue to be
owned by it free and clear of all liens, claims and encumbrances whatsoever,
except for Agent's security interest, Permitted Encumbrances, and such other
liens, claims and encumbrances as may be permitted by the Agent in its sole
discretion from time to time in writing, and (b) Borrower shall not, without
Agent's prior written approval, sell, encumber or dispose of or permit the
sale, encumbrance or disposal of any Collateral or all or any substantial part
of any of its other assets (or any interest of Borrower therein), except for
(i) the sale of Inventory in the ordinary course of Borrower's business, (ii)
and the replacement of Equipment deemed by Borrower in good faith to be
commercially obsolete to Borrower's business and (iii) the sale of up to
$100,000 of Equipment, in the aggregate in any fiscal year of Borrower. In the
event the Agent gives any such prior written approval with respect to any such
sale of Collateral, the same may be conditioned on the sale price being equal
to, or greater than, an amount reasonably acceptable to the Agent. The proceeds
of any such sales of Collateral shall be remitted to the Agent pursuant to this
Agreement for application to the Obligations in accordance with Section 2.12
hereof.
3.9 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. Agent may, in its sole discretion, (a) exchange,
enforce, waive or release any of the Collateral, and (b) during the existence
of an Event of Default (i) apply Collateral and direct the
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order or manner of sale thereof as it may determine, and (ii) settle,
compromise, collect or otherwise liquidate any Collateral in any manner without
affecting its right to take any other action with respect to any other
Collateral.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of the Lenders to make the initial
advance hereunder is subject to the fulfillment, to the satisfaction of Agent
and the Lenders, and their respective counsel, of each of the following
conditions on or prior to the Closing Date:
(a) Loan Documents. Agent shall have received each of the following
Loan Documents: (i) this Agreement fully and properly executed by Borrower;
(ii) promissory notes, in such amounts and on such terms and conditions as
Agent shall specify, executed by Borrower; (iii) such security agreements,
intellectual property assignments, pledge agreements, mortgages and deeds of
trust as Agent may require with respect to this Agreement, executed by each of
the parties thereto and, if applicable, duly acknowledged for recording or
filing in the appropriate governmental offices; (iv) such Blocked Account,
Dominion Account and other account agreements as it shall determine; and (v)
such other documents, instruments and agreements in connection herewith as
described in the Document Checklist and as Agent shall require, executed,
certified and/or acknowledged by such parties as Agent shall designate;
(b) Minimum Excess Availability. Borrower shall have Excess
Availability (as of the Closing Date and not calculated on a thirty (30) day
average) under the Revolving Credit Loans of not less than $1,750,000, after
giving effect to (i) the initial advance hereunder, (ii) any applicable Loan
Reserves against borrowing availability under the Revolving Credit Loans, and
(iii) payment in full of all of Borrower's accounts payable outstanding more
than THIRTY (30) days from due date and all book overdrafts (but excluding
amounts owed to Owens-Illinois Plastics Products, Inc. and its affiliates).
(c) Terminations by Existing Lender. Borrower's existing lender(s)
shall have executed and delivered UCC termination statements and other
documentation evidencing the termination of its liens and security interests in
the assets of Borrower (other than real property) in form and substance
reasonably satisfactory to Agent in its sole discretion; with respect to PNC
Bank, Borrower shall (i) terminate all notes, options, warrants (other than the
PNC Warrant), capital stock holdings and other instruments of Borrower held by
PNC Bank, (ii) pay all prepayment penalties, fees and other amounts due PNC
Bank, (iii) deliver to Agent executed UCC termination statements terminating
all personal property liens (excluding real property) of record in any
jurisdiction naming PNC Bank (or its predecessors in interest) as secured party
and Borrower as debtor, and (iv) deliver to Agent executed instruments
terminating all trademark and intellectual property liens held by PNC Bank;
(d) Charter Documents. Agent shall have received copies of the By-laws
and Articles or Certificate of Incorporation, as applicable, of Borrower as
amended, modified, or supplemented to the Closing Date, certified by the
Secretary or other officer, as applicable;
(e) Good Standing. Agent shall have received a certificate of
corporate or partnership status with respect to Borrower dated within FIFTEEN
(15) Business Days of the Closing Date, by the Secretary of State of the state
of organization of Borrower, which certificate shall indicate that Borrower is
in good standing in such state;
(f) Foreign Qualification. Agent shall have received certificates of
corporate or partnership status with respect to Borrower, each dated within
FIFTEEN (15) Business Days of the Closing Date, issued by the Secretary of
State of each state in which such party's failure to be duly qualified or
licensed would have a material adverse effect on its financial condition or
assets, indicating that such party is in good standing;
(g) Authorizing Resolutions and Incumbency. Agent shall have received
a certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors, (and shareholders if necessary),
authorizing the borrowing of money from the Lenders and execution and delivery
of this Agreement and the other Loan Documents to which Borrower is a party,
and authorizing specific officers of Borrower to execute same, and (ii) the
authenticity of original specimen signatures of such officers;
(h) Insurance. Agent shall have received the insurance certificates
and certified copies of policies to the extent required by Section 3.4 hereof,
in form and substance satisfactory to Agent and its counsel, together with an
additional insured endorsement in favor of Agent, for its benefit and the
benefit of the Lenders with respect to all liability policies and a lender's
loss payable endorsement in favor of Agent, for its benefit and the benefit of
the Lenders with respect to all casualty and
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business interruption policies, each in form and substance reasonably acceptable
to Agent and its counsel;
(i) Searches; Certificates of Title. Agent shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests
granted to Agent;
(j) Landlord, Bailee and Mortgagee Waivers. Agent shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees and/or
mortgagees of all locations where any material Collateral is located;
(k) Fees. Borrower shall have paid all fees payable by it on the
Closing Date pursuant to this Agreement;
(l) Opinion of Counsel. Agent shall have received an opinion of
Borrower's counsel covering such matters as Agent shall determine in its sole
discretion;
(m) Officer Certificate. Agent shall have received a certificate of
the Senior Vice President or the Chief Financial Officer or similar official of
Borrower, attesting to the accuracy of each of the representations and
warranties of Borrower set forth in this Agreement and the fulfillment of all
conditions precedent to the initial advance hereunder;
(n) Solvency Certificate. Agent shall have received a signed
certificate of the Borrower's duly elected Chief Financial Officer concerning
the solvency and financial condition of Borrower, on Agent's standard form;
(o) Blocked Account and/or other Account Agreements. The Blocked
Account and other accounts referred to in Section 2.10(c) hereof shall have
been established to the satisfaction of Agent in its sole discretion;
(p) Environmental Assessment. If required by Agent, Borrower shall
have caused a Phase I Environmental Assessment to be conducted on the property
or properties owned or occupied by Borrower, all at Borrower's own expense and
the results of such assessment(s) shall have been in form and substance
satisfactory to Agent in its sole discretion. Such assessment(s) shall have
included, in Agent's discretion, core samplings, and shall have been conducted
by an environmental engineer acceptable to Agent;
(q) Environmental Certificate. Agent shall have received an
Environmental Certificate from Borrower, in form and substance satisfactory to
Agent in its discretion, with respect to all locations of Collateral;
(r) Search and References. Agent shall have received and approved the
results of (i) UCC, tax lien, litigation, judgment, and bankruptcy searches,
and (ii) customer, vendor and credit reference checks, each with respect to
Borrower, members of the management of Borrower and other Loan Parties (as
determined by Agent);
(s) No Material Adverse Changes. Prior to the Closing Date, there
shall have occurred no material adverse change in the financial condition,
operations, assets or business of Borrower, or in the condition of the
Collateral, from that shown on the most recent financial statements for
Borrower, including, without limitation, the Prepared Financials. At the
closing, Borrower shall deliver to Agent an officer's certification confirming
that Borrower is unaware of the existence of any such material adverse change;
(t) Pending Litigation. Agent and the Lenders shall have received and
found acceptable, in its sole discretion, information and documents pertaining
to all pending litigation to which Borrower is a party as of the Closing Date,
which pending litigation is described in Exhibit F to the Schedule; and in
addition, counsel to Borrower shall have provided to Agent and the Lenders
summaries of the Shareholder Litigation and the Water Company Litigation and
such summaries shall include, without limitation, a description of the claim
and any defenses thereto Borrower intends to pursue and an estimate of the
potential loss in the event of an unfavorable outcome;
(u) Material Agreements. Agent shall have received, reviewed and
approved all material agreements to which Borrower shall be a party, (as of the
Closing Date);
(v) Projections. Borrower shall submit cash flow projections and pro
forma balance sheet with adjusting entries (i) showing that the proposed
financing will provide sufficient funds for the Borrower's projected working
capital needs, and (ii) showing: (1) that the Borrower will have reasonably
sufficient capital for the conduct of its business following the initial
funding, and
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(2) that the Borrower will not incur debts beyond its ability to pay such debts
as they mature;
(w) ADA Compliance. As of the Closing Date, with respect to all real
property owned or leased by Borrower involving a "public accommodation" within
the meaning of the Americans with Disabilities Act of 1990 ("ADA"), each such
real property is and shall be in compliance with the provisions of the ADA to
the extent applicable to such property;
(x) Stock Pledge. Each of USA and Powder, as pledgors ("STOCK
PLEDGORS") under separate Stock Pledge Agreements of even date herewith ("STOCK
PLEDGE AGREEMENTS") shall have executed and delivered the Stock Pledge
Agreements, pledging in favor of Agent, for its benefit and the benefit of the
Lenders, all of the issued and outstanding common capital stock of Powder,
Management and Contract. Agent shall be in possession on the Closing Date of
original stock certificates evidencing the shares of stock so pledged to Agent,
and of undated stock Powers and Assignments Apart from Certificate, executed in
blank by Stock Pledgors with respect to all such shares;
(y) Asset Appraisal. Borrower shall have provided to Agent, at
Borrower's sole cost and expense, an asset appraisal of all Borrower's fixed
assets upon which Agent shall be granted a first priority lien and security
interest, for its benefit and the benefit of the Lenders, which appraisal must
be acceptable to Agent in all respects;
(z) Owens Comfort Letter. Borrower shall have delivered to Agent a
copy of the fully executed Owens Comfort Letter;
(aa) PNC Bank Documents. Borrower shall have entered into, and
delivered to Agent, true and complete copies of modification and termination
documents pertaining to its Indebtedness to PNC Bank, N.A., in form and
substance acceptable to Agent;
(bb) EDA Payoff Letter. Borrower shall have delivered to Agent a copy
of a payoff letter executed by EDA, in form and substance reasonably
satisfactory to Agent, describing the amount required to be paid to the EDA to
extinguish all Indebtedness of Borrower to EDA as of a date not more than sixty
(60) days after the Closing Date and including a statement by the EDA that it
will release all liens in any property of Borrower in connection with such
payoff; and
(cc) Other Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed and recorded and shall be in form and substance
satisfactory to Agent and its counsel including, without limitation, each of
the documents listed on the Document Checklist.
4.2 Subsequent Advances. The obligation of the Lenders to make any
advance or the L/C Issuer to issue or cause any Letter of Credit to be issued
hereunder shall be subject to the further conditions precedent that, on and as
of the date of such advance or Letter of Credit issuance: (a) the
representations and warranties of Borrower set forth in this Agreement shall be
accurate, before and after giving effect to such advance or issuance and to the
application of any proceeds thereof; (b) no Event of Default and no event
which, with notice or passage of time or both, would constitute an Event of
Default has occurred and is continuing, or would result from such advance or
issuance or from the application of any proceeds thereof; (c) no material
adverse change has occurred in the Borrower's business, operations, financial
condition, in the condition of the Collateral or other assets of Borrower or in
the prospect of repayment of the Obligations; and (d) Agent shall have received
such other approvals, opinions or documents as Agent shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State set forth in the
Schedule, is qualified and authorized to do business and is in good standing in
all states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property (except when the failure to
be so qualified would not individually or in the aggregate materially and
adversely affect Borrower's financial condition, assets, the Collateral or
Borrower's ability to repay the Obligations), and has all requisite power and
authority to conduct its business as presently conducted, to own its property
and to execute and deliver each of the Loan Documents to which it is a party
and perform all of its Obligations thereunder, and has not taken any steps to
wind-up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Borrower has not, during the preceding FIVE (5)
years, been known by or used any
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other corporate or fictitious name except as set forth in the Schedule, nor has
Borrower been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person during such time;
5.3 Due Authorization. The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party have been authorized by
all necessary corporate action and do not and shall not constitute a violation
of any applicable law or of Borrower's Articles or Certificate of Incorporation
or By-Laws, or other organizational or governing documents, as applicable, or
any other document, agreement or instrument to which Borrower is a party or by
which Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which Borrower
is a party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms except as may be limited by
principles of equity and bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally;
5.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications
and trade names for the present conduct of its business without any known
conflict with the rights of others, and each is valid and has been duly
registered or filed with the appropriate governmental authorities; as of the
Closing Date, Borrower has no patents, patent rights, patent applications or
patent licenses and Borrower shall notify Agent in writing in the event that
after the Closing Date Borrower acquires any patents, patent rights, patent
applications or patent licenses, and execute and deliver to Agent, for its
benefit and the benefit of the Lenders, security agreements and related
documents evidencing the lien of Agent thereon; and each of Borrower's
copyrights, trademarks and trademark applications which have been registered or
filed with any governmental authority (including the U.S. Patent and Trademark
Office and the Library of Congress) are listed by name, date and filing number
in Exhibit A to the Schedule;
5.6 Capital. Borrower has capital sufficient to conduct its business,
is able to pay its debts as they mature, and owns property having a fair
salable value greater than the amount required to pay all of its debts as
required to be accounted for under GAAP;
5.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of Agent's interests therein, except for
the Shareholder Litigation and the Water Company Litigation;
5.8 Title; Security Interests of Agent. Borrower has good,
indefeasible and merchantable title to the Collateral and, upon the execution
and delivery of the Loan Documents, the filing of UCC-1 Financing Statements,
delivery of the certificate(s) evidencing any pledged securities, the filing of
any collateral assignments or security agreements regarding Borrower,
Trademarks, Copyrights, Licenses and/or Patents, if any, with the appropriate
governmental offices, in each case in the appropriate offices, this Agreement
and such documents shall create in Agent, for its benefit and the benefit of
the Lenders, valid and perfected first priority liens in the Collateral,
subject only to Permitted Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. Borrower is not a party
or subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, (except for documents
pertaining to EDA and Indebtedness secured by real property). In addition, no
labor contract (other than employment agreements with individual employees) is
scheduled to expire during the Initial Term of this Agreement, except as
disclosed to Agent in writing prior to the date hereof and Borrower is not
party to any labor dispute;
5.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise;
5.11 Consents. Borrower has obtained or caused to be obtained or
issued any required consent of a governmental agency or other Person in
connection with the financing contemplated hereby;
5.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other material agreement to
which it is a party or by which it or its assets are bound, nor has any
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event occurred which, with the giving of notice or the lapse of time, or both,
would cause such a default, except with respect to the EDA documents;
5.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such
other Persons described therein as of the date thereof in accordance with GAAP;
there are no material omissions from the Prepared Financials or other facts or
circumstances not reflected in the Prepared Financials; and there has been no
material and adverse change in such financial condition or operations since the
date of the initial Prepared Financials delivered to Agent and the Lenders
hereunder;
5.14 ERISA. None of Borrower, any ERISA Affiliate, any Plan or Pension
Plan is or has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate received
any notice to such effect, which has resulted or will result in a material
liability. No notice of intent to terminate a Pension Plan has been filed under
Section 4041 of ERISA, nor has any Plan or Pension Plan been terminated under
ERISA. The PBGC has not instituted proceedings to terminate, or appointed a
trustee to administer, a Pension Plan. No lien upon the assets of Borrower has
arisen with respect to a Pension Plan. Except as described in Exhibit B to the
Schedule (i) no prohibited transaction with respect to a Plan or Pension Plan,
and no Reportable Event (for which notice is required) with respect to a
Pension Plan, has occurred, (ii) neither Borrower nor any ERISA Affiliate has
incurred any withdrawal liability with respect to any Multiemployer Plan, (iii)
Borrower and each ERISA Affiliate have made all contributions required to be
made by them to any Plan, Pension Plan or Multiemployer Plan when due, and (iv)
there is no accumulated funding deficiency in any Pension Plan, whether or not
waived;
5.15 Taxes. Borrower has filed all tax returns and such other reports
as it is required by law to file and has paid or made adequate provision for
the payment on or prior to the date when due (including applicable extensions)
of all taxes, assessments and similar charges that are due and payable;
5.16 Locations; Federal Tax ID No. Borrower's chief executive office
and the offices and locations where it keeps the Collateral (except for
Inventory in transit) are only at the locations set forth in Exhibit C to the
Schedule, except to the extent that such locations may have been changed after
written notice to Agent in accordance with Section 9.12 hereof; Borrower's
federal tax identification number is as shown in the Schedule;
5.17 Business Relations. There exists no actual or threatened
termination, cancellation or limitation of, or, to the knowledge of Borrower,
any modification or change in, the business relationship between Borrower and
any customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower, or with any material
supplier, and, to the knowledge of Borrower, there exists no present condition
or state of facts or circumstances which would materially and adversely affect
Borrower or prevent Borrower from conducting such business after the
consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted;
5.18 Millennium Compliance. Borrower has commenced all action
necessary to assure that there will be no material adverse change to Borrower's
business by reason of the advent of the year 2000, including, without
limitation, that all computer-based systems, embedded microchips and other
processing capabilities will effectively recognize and process dates after
April 1, 1999; and
5.19 Reaffirmations. Each request for a Loan made by Borrower pursuant
to this Agreement shall constitute (i) an automatic representation and warranty
by Borrower to Agent and the Lenders that there does not then exist any Event
of Default and (ii) a reaffirmation as of the date of said request and each
Loan advance of all of the representations and warranties of Borrower contained
in this Agreement and the other Loan Documents.
6. COVENANTS.
6.1 Affirmative Covenants. Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate
provision for the payment of all taxes, assessments and other charges on or
prior to the date when due (including any extensions);
6.1.2 Notice of Litigation. Promptly notify Agent in writing
of any litigation, suit or administrative proceeding which may materially and
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adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
6.1.3 ERISA. Notify Agent in writing (i) promptly upon the
occurrence of any event described in, and for which notice is required under,
Section 4043 of ERISA, other than a termination, partial termination or merger
of a Pension Plan or a transfer of a Pension Plan's assets and (ii) prior to
any termination, partial termination or merger of a Pension Plan or a transfer
of a Pension Plan's assets;
6.1.4 Change in Location. Notify Agent in writing FORTY-FIVE
(45) days prior to any change in the location of Borrower's chief executive
office or the location of any Collateral, or Borrower's opening or closing of
any other place of business;
6.1.5 Corporate Existence. Maintain its corporate existence
and its qualification to do business and good standing in all states necessary
for the conduct of its business and the ownership of its property (except where
the failure to be so qualified would not individually or in the aggregate
materially and adversely affect Borrower's financial condition, assets, the
Collateral or Borrower's ability to repay the Obligations) and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names for
the conduct of its business;
6.1.6 Labor Disputes. Promptly notify Agent in writing of any
labor dispute (other than disputes in the ordinary course of business which are
not material to Borrower's labor relations) to which Borrower is or may become
subject and the expiration of any collective bargaining labor contract to which
Borrower is a party or bound;
6.1.7 Violations of Law. Promptly notify Agent in writing of
any violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to Borrower which may materially
and adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
6.1.8 Defaults. Notify Agent in writing within FIVE (5)
Business Days of Borrower's default under any note, indenture, loan agreement,
mortgage, lease or other agreement to which Borrower is a party or by which
Borrower is bound, or of any other default under any Indebtedness for Borrowed
Money of Borrower, in each case involving obligations of Borrower in excess of
$100,000;
6.1.9 Capital Expenditures. Promptly notify Agent in writing
of the making of any Capital Expenditure materially affecting Borrower's
business, assets, prospects, operations or condition, financial or otherwise,
except to the extent permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of
account with respect to its business activities in which proper entries are
made in accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide Agent with (i)
copies of all agreements between Borrower and any landlord, warehouseman or
bailee which owns any premises at which any Collateral may, from time to time,
be located (whether for processing, storage or otherwise), and (ii) without
limiting the landlord, bailee and/or mortgagee waivers to be provided pursuant
to Section 4.1(j) hereof, additional landlord, bailee and/or mortgagee waivers
in form acceptable to Agent with respect to (a) all locations where any
material Collateral is hereafter located, and (b) any location for which
Borrower has delivered to Agent a landlord, mortgagee or bailee agreement if
such landlord, mortgagee or bailee transfers its interests in the underlying
premises after the date of such delivery to Agent, in each case promptly after
Borrower's knowledge thereof;
6.1.12 Additional Documents. At Agent's request, promptly
execute or cause to be executed and delivered to Agent any and all documents,
instruments or agreements deemed necessary by Agent to facilitate the
collection of the Obligations or the Collateral or otherwise to give effect to
or carry out the terms or intent of this Agreement or any of the other Loan
Documents. Without limiting the generality of the foregoing, if any of the
Receivables with a face value in excess of $25,000 arises out of a contract
with the United States of America or any department, agency, subdivision or
instrumentality thereof, Borrower shall promptly notify Agent of such fact in
writing and, to the extent Borrower requests such Receivable to qualify as an
Eligible Receivable, shall execute any instruments and take any other action
required or requested by Agent to comply with the provisions of the Federal
Assignment of Claims Act;
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6.1.13 Financial Covenants. Comply with the financial
covenants set forth in the Schedule;
6.1.14 Millennium Compliance. Borrower shall take all action
necessary to assure that there will be no material adverse change to Borrower's
business by reason of the advent of the year 2000, including without limitation
that all computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after April 1, 1999. At
Agent's request, Borrower shall provide to Agent assurance reasonably
acceptable to Agent that Borrower's computer-based systems, embedded microchips
and other processing capabilities are year 2000 compatible;
6.1.15 Bank Accounts. Notify Agent in writing prior to
establishing any bank account not listed on Exhibit D to the Schedule, and
deliver to Agent, for its benefit and the benefit of the Lenders, an Assignment
of Bank Accounts Agreement, in form and substance reasonably satisfactory to
Agent, acknowledged by the bank at which such account is to be established; and
6.1.16 Rent Payments. Deliver to Agent a canceled check (or
certified check copy) or other evidence satisfactory to Agent, evidencing the
payment of Borrower's monthly rent for its facility at 1735 Jersey Avenue,
North Brunswick, New Jersey, on or prior to the fifteenth (15th) day of each
calendar month with respect to the immediately preceding calendar month,
commencing on October 15, 1998 and continuing for each month thereafter until
the earlier of (i) the date that all of the Obligations of Borrower have been
paid in full, or (ii) the date that Borrower delivers to Agent a Landlord
Agreement, in form and substance satisfactory to Agent (including, without
limitation, for a cure period in favor of Agent of at least thirty (30) days)
with respect to such facility.
6.1.17 Chicago Lease. With respect to the Chicago Lease for
the Chicago Facility (for which Borrower has delivered to Agent a Collateral
Assignment and Assumption Agreement and a Landlord Agreement), provide Agent
with a replacement acknowledgment by landlord to the Collateral Assignment and
Assumption Agreement and a replacement Landlord Agreement, each in form and
substance acceptable to Agent, if the landlord to the Chicago Lease transfers
or sells its interests in the Chicago Facility after the date hereof, promptly
(but not later than thirty (30) days) after Borrower's knowledge of any such
sale or transfer.
6.2 Negative Covenants. Without the prior written consent of Agent,
which consent Agent may withhold in its sole discretion, so long as any
Obligation remains outstanding and this Agreement is in effect, Borrower shall
not:
6.2.1 Mergers, Etc.. Merge or consolidate with or acquire any
other Person, create any Subsidiary, or make any other material change in its
capital structure or in its business or operations which might adversely affect
the repayment of the Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit to,
or invest in, any Person except for loans or cash advances to employees (i) in
the amount of $341,000 until December 31, 1998, and (ii) as of January 1, 1999
and thereafter, not in excess of an aggregate amount of $205,000 in any fiscal
year of Borrower, on a Consolidated basis;
6.2.3 Dividends. Declare or pay cash dividends upon any of
its stock or ownership interests or distribute any of its property or redeem,
retire, purchase or acquire directly or indirectly any of its stock or
ownership interests;
6.2.4 Adverse Transactions. Enter into any transaction which
materially and adversely affects the Collateral or its ability to repay the
Obligations in full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly or
contingently liable for the Indebtedness of any Person, on a Consolidated
basis, except by endorsement of instruments for deposit and except for the
existing guarantees made by Borrower prior to the date hereof if described in
Exhibit E to the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or any other repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other than
its corporate name as set forth in its Articles or Certificate of Incorporation
on the date hereof or as set forth in the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than (i)
trade payables, (ii) the Obligations, (iii) Indebtedness to EDA, provided that
all liens in any property and assets of Borrower are released by EDA
contemporaneously with such prepayment, and
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(iii) Indebtedness to PNC Bank and 101 Realty Associates, L.L.C., upon terms
and subject to replacement real estate financing satisfactory to Agent (as
provided in paragraph 5 of the "Additional Provisions" portion of the
Schedule), provided that all liens in any property and assets of Borrower are
released by such lender contemporaneously with such prepayment;
6.2.9 Capital Expenditure. Make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all
Capital Expenditures by Borrower in any fiscal year would exceed the amount set
forth in the Schedule;
6.2.10 Indebtedness. On a Consolidated basis, create, incur,
assume or permit to exist any Indebtedness other than (i) the Obligations, (ii)
trade payables and other contractual obligations to suppliers and customers and
operating leases, all incurred in the ordinary course of business, (iii)
Indebtedness in respect of Capital Leases and purchase money Indebtedness not
in excess of $50,000 in the aggregate in any fiscal year, (iv) Indebtedness
described in the Owens Comfort Agreement, (v) Indebtedness described in that
certain Forbearance Agreement with Sanwa Business Credit Corporation, dated
April 16, 1998, pertaining to that certain Installment Payment Agreement
(Number 119) re: Oracle Credit Corporation, (vi) Indebtedness secured by real
property, (vii) Indebtedness existing in connection with the Shareholder
Litigation including that certain promissory note of USA to be issued in
connection therewith pursuant to the June, 1998 Memorandum of Understanding
entered into by USA in connection with such Shareholder Litigation, and (viii)
other Indebtedness existing on the date of this Agreement and described in
Exhibit E to the Schedule (except Indebtedness paid on the date of this
Agreement from proceeds of the initial advances hereunder);
6.2.11 Affiliate Transactions. Except as set forth below,
sell, transfer, distribute or pay any money or property to any Affiliate, or
invest in (by capital contribution or otherwise) or purchase or repurchase any
stock or Indebtedness, or any property, of any Affiliate, or become liable on
any guaranty of the indebtedness, dividends or other obligations of any
Affiliate except loans and advances to employees to the extent permitted by
Section 6.2.2 hereof. If no Event of Default exists, Borrower may engage in
transactions with Affiliates in the normal course of business, in amounts and
upon terms which are fully disclosed to Agent and which are no less favorable
to Borrower than would be obtainable in a comparable arm's length transaction
with a Person who is not an Affiliate;
6.2.12 Nature of Business. Enter into any new unrelated
business or make any material change in any of Borrower's business objectives,
purposes or operations;
6.2.13 Agent's and Lenders' Names. Use the name of Agent or
any Lender in connection with any of Borrower's business or activities, except
in connection with (i) internal business matters, (ii) as required in dealings
with governmental agencies and financial institutions or with trade creditors
of Borrower, solely for credit reference purposes, (iii) public financial
reporting required by law, (iv) press releases with the prior approval of
Agent, which shall not be unreasonably withheld, and (v) investor relations in
the ordinary course of business;
6.2.14 Margin Security. Borrower will not (and has not in the
past) engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation G or Regulation U issued by the Board
of Governors of the Federal Reserve System), and no proceeds of any Loan or
other advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock, or
in any manner which might cause such Loan or other advance or the application
of such proceeds to violate (or require any regulatory filing under) Regulation
G, Regulation T, Regulation U, Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System, in each case as in effect on
the date or dates of such Loan or other advance and such use of proceeds.
Further, no proceeds of any Loan or other advance will be used to acquire any
security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934;
6.2.15 Real Property. Purchase or acquire any real property
without Agent's prior written consent. A condition precedent to any request for
such consent shall include delivery of appropriate environmental reports and
analysis, in form and substance satisfactory to Agent and its counsel;
6.2.16 PNC Warrant. With respect to USA, make any payment or
distribution, directly or indirectly, of cash or other property (other than
common
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stock) in respect of the exercise of the PNC Warrant other than as may be made
to all stockholders of USA generally;
6.2.17 Applications. Grant or permit to exist any lien or
security interest, in favor of any Person other than Agent, in any applications
for any tradename, trademark, copyright and patent; or
6.2.18 Non-Borrower Subsidiaries. Make any payment,
distribution or transfer of any money (including, without limitation, Loan
proceeds) from Borrower to NJMO, NJMO Holdings or any other Subsidiary of
Borrower which is not a Borrower under this Agreement, except rent and related
escrow payments from USA to NJMO Holdings (or another Real Estate Subsidiary
acceptable to Agent) in accordance with its lease agreement in an annual
aggregate amount of such rental payments and escrow amounts as is reasonably
acceptable to Agent; and no Real Estate Subsidiary shall have any assets or
operations or own any property or Collateral and shall not engage in any
business activity, other than (i) the ownership of all of the issued and
outstanding capital stock of another Real Estate Subsidiary, and (ii) the
operation and ownership of the fee ownership interest of Borrower in real
property, including, without limitation, the Okonite Distribution facility of
Borrower located in New Brunswick, New Jersey and the
manufacturing/distribution facility of Borrower located in Harrisonville,
Missouri; and any transfer of fee ownership real property interests by Borrower
to any Real Estate Subsidiary shall expressly exclude all personal property of
Borrower and the Collateral
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party (i) fails to perform any of the
covenants contained in Sections 6.1.2 (Notice of Litigation), 6.1.3 (ERISA),
6.1.6 (Labor Disputes), 6.1.7 (Violations of Law), 6.1.9 (Capital
Expenditures), 6.1.12 (Additional Documents), or 9.1(b) and 9.1(c) (Reporting
Requirements) of this Agreement and such failure shall continue for five (5)
Business Days; provided, however, that such period shall not apply in the case
of: (A) any failure to observe any such covenant which is not capable of being
cured at all or within such ten (10) day period or which has been the subject
of a prior failure within a six (6) month period or (B) an intentional breach
by Borrower or any other Loan Party of any such covenant, or (ii) fails or
neglects to perform, keep, or observe any Obligation including, but not limited
to, any term, provision, condition, covenant or agreement contained in any Loan
Document to which Borrower or such other Loan Party is a party, other than
those described in Sections 7.1(a), 7.1(b)(i);
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of Agent's security interest in the Collateral is materially
impaired;
(e) Any portion of Borrower's assets in excess of $25,000 is seized,
attached, subjected to a writ or distress warrant, is levied upon or comes into
the possession of any judicial officer, and is not released or terminated
within forty-five (45) days thereafter;
(f) Borrower or any Real Estate Subsidiary shall generally not pay its
debts as they become due or shall enter into any agreement (whether written or
oral), or offer to enter into any agreement, with all or a significant number
of its creditors regarding any moratorium or other indulgence with respect to
its debts or the participation of such creditors or their representatives in
the supervision, management or control of the business of Borrower or any Real
Estate Subsidiary;
(g) Any bankruptcy or other insolvency proceeding is commenced by
Borrower or any Real Estate Subsidiary or any such proceeding is commenced
against Borrower or any Real Estate Subsidiary and remains undischarged or
unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record (other
than Permitted Encumbrances) with respect to any of Borrower's assets in excess
of $25,000 is not released or terminated within forty-five (45) days after the
date of such filing;
(i) Any judgments (except in respect of the Shareholder Litigation)
are entered against Borrower in an aggregate amount exceeding $250,000 in any
fiscal year, on a Consolidated basis; that are not covered by insurance and all
such judgments shall not have been satisfied, stayed
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or bonded pending appeal within forty-five (45) days from the entry thereof,
provided that all rights of execution on any attachment or judgment lien or
other action by such judgment creditor against Borrower and the Collateral have
been discharged or stayed;
(j) Any default shall occur (after expiration of any applicable cure
period) under any material agreement between Borrower and any third party which
would result in a right by such third party to accelerate the maturity of any
Indebtedness of Borrower to such third party;
(k) Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to Agent or any Lender in
connection therewith shall prove to have been misleading in any material
respect;
(l) Except as described in Exhibit B to the Schedule (i) any
Prohibited Transaction with respect to a Plan or Pension Plan, or any
Reportable Event with respect to a Pension Plan, shall occur which could have a
material adverse effect on the financial condition of Borrower; any lien upon
the assets of Borrower in connection with any Pension Plan shall arise, (ii)
Borrower or any of its ERISA Affiliates shall fail to make full payment when
due of all amounts which Borrower or any of its ERISA Affiliates are required
to pay to any Plan, Pension Plan, or any Multiemployer Plan as one or more
contributions thereto, or (iii) Borrower or any of its ERISA Affiliates creates
or permits the creation of any accumulated funding deficiency, with respect to
a Pension Plan, whether or not waived;
(m) Borrower agrees to pay or pays amounts in connection with the
Shareholder Litigation which amounts are in excess of the payments permitted
under the "Shareholder Litigation Payment" provisions of Section 3 of the
"Additional Provisions" set forth in the Schedule;
(n) Borrower breaches or fails to comply with any payment obligations
or other material terms of the Owens Comfort Letter;
(o) Any transfer by USA of any issued and outstanding capital stock of
any direct or indirect Subsidiary of USA, except as between any one of them; or
(p) Any Change of Control of USA which after written notice thereof,
is not acceptable to Agent.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE LENDERS RESERVE
THE RIGHT TO CEASE MAKING ANY ADVANCES OR LOANS DURING ANY CURE PERIOD STATED
ABOVE, AND THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING.
7.2 Remedies. Upon the occurrence of an Event of Default, the Lenders
may, at their option and in their sole discretion and in addition to all other
rights under the Loan Documents, cease making Loans, terminate this Agreement
and/or declare all of the Obligations to be immediately payable in full.
Borrower agrees that Agent and the Lenders shall also have all of its rights
and remedies under applicable law, including, without limitation, the default
rights and remedies of a secured party under the Code, and upon the occurrence
of an Event of Default Borrower hereby consents to the appointment of a
receiver by Agent in any action initiated by Agent pursuant to this Agreement
and to the jurisdiction and venue set forth in Section 9.25 hereof, and
Borrower waives notice and posting of a bond in connection therewith. Further,
Agent may, at any time, take possession of the Collateral and keep it on
Borrower's premises, at no cost to Agent or any Lender, or remove any part of
it to such other place(s) as Agent may desire, or Borrower shall, upon Agent's
demand, at Borrower's sole cost, assemble the Collateral and make it available
to Agent at a place reasonably convenient to Agent. Agent may sell and deliver
any Collateral at public or private sales, for cash, upon credit or otherwise,
at such prices and upon such terms as Agent deems advisable, at Agent's
discretion, and may, if Agent deems it reasonable, postpone or adjourn any sale
of the Collateral by an announcement at the time and place of sale or of such
postponed or adjourned sale without giving a new notice of sale. Borrower
agrees that neither the Agent nor any Lender has any obligation to preserve
rights to the Collateral or marshall any Collateral for the benefit of any
Person. Agent, for its benefit and the benefit of the Lenders, is hereby
granted a license or other right to use, without charge, Borrower's labels,
patents, copyrights, name, trade secrets, trade names, trademarks and
advertising matter, or any similar property, in completing production,
advertising or selling any Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to Agent, for its benefit and the
benefit of the Lenders. Any requirement of reasonable notice shall be met if
such notice is mailed postage prepaid to Borrower at its address set forth in
the heading to this Agreement at least FIVE (5) days before sale or other
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disposition. The proceeds of sale shall be applied, first, to all attorneys
fees and other expenses of sale, and second, to the Obligations in such order
as Agent shall elect, in its sole discretion. Agent shall return any excess to
Borrower and Borrower shall remain liable for any deficiency to the fullest
extent permitted by law.
7.3 Standards for Determining Commercial Reasonableness. Borrower and
Agent and each Lender agree that the following conduct by Agent with respect to
any disposition of Collateral shall conclusively be deemed commercially
reasonable (but other conduct by Agent, including, but not limited to, Agent's
use in its sole discretion of other or different times, places and manners of
noticing and conducting any disposition of Collateral shall not per se be
deemed unreasonable): Any public or private disposition: (i) as to which on no
later than the FIFTH (5TH) calendar day prior thereto written notice thereof is
mailed or personally delivered to Borrower and, with respect to any public
disposition, on no later than the FIFTH (5TH) calendar day prior thereto notice
thereof describing in general non-specific terms, the Collateral to be disposed
of is published once in a newspaper of general circulation in the county where
the sale is to be conducted (provided that no notice of any public or private
disposition need be given to the Borrower or published if the Collateral is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market); (ii) which is conducted at any place
designated by Agent, with or without the Collateral being present; and (iii)
which commences at any time between 8:00 A.M. and 5:00 P.M. Without limiting
the generality of the foregoing, Borrower expressly agrees that, with respect
to any disposition of accounts, instruments and general intangibles, it shall
be commercially reasonable for Agent to direct any prospective purchaser
thereof to ascertain directly from Borrower any and all information concerning
the same, including, but not limited to, the terms of payment, aging and
delinquency, if any, the financial condition of any obligor or account debtor
thereon or guarantor thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES.
8.1 Expenses. Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall promptly
reimburse Agent and each Lender for all reasonable costs, fees and expenses
incurred by Agent in connection with the negotiation, preparation, execution,
delivery, administration of each of the Loan Documents, and incurred by Agent
and the Lenders in connection with the enforcement of each of the Loan
Documents, including, but not limited to, the attorneys' and paralegals' fees
of in-house and outside counsel, expert witness fees, lien, title search and
insurance fees, appraisal fees, all charges and expenses incurred in connection
with any and all environmental reports and environmental remediation
activities, and all other costs, expenses, taxes and filing or recording fees
payable in connection with the transactions contemplated by this Agreement,
including without limitation all such costs, fees and expenses as Agent shall
incur or for which Agent shall become obligated in connection with (i) any
inspection or verification of the Collateral, (ii) any proceeding relating to
the Loan Documents or the Collateral, (iii) actions taken with respect to the
Collateral and Agent's security interest therein, including, without
limitation, the defense or prosecution of any action involving Agent, or any
Lender, and Borrower or any third party, (iv) enforcement of any of Agent's and
the Lenders' rights and remedies with respect to the Obligations or Collateral
and (v) consultation with Agent's and the Lender's attorneys and participation
in any workout, bankruptcy or other insolvency or other proceeding involving
any Loan Party or any Affiliate, whether or not suit is filed or the issues are
peculiar to federal bankruptcy or state insolvency laws in all instances in
accordance with the terms hereof. Borrower shall also pay Agent, for its
benefit and the ratable benefit of the Lenders, charges in connection with bank
wire transfers, forwarding of loan proceeds, deposits of checks and other items
of payment, returned checks, establishment and maintenance of lockboxes and
other Blocked Accounts, and all other bank and administrative matters, in
accordance with Agent's schedule of bank and administrative fees and charges in
effect from time to time.
8.2 Environmental Matters.
The Environmental Certificate dated on or about the date of this
Agreement is incorporated herein for all purposes as if fully stated in this
Agreement.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. Agent and the Lenders shall at all reasonable times
and with reasonable notice to Borrower (unless an Event of Default shall then
exist) have full access to and the right to examine, audit, make abstracts and
copies from and inspect Borrower's records, computer data, files, books of
account and all other documents, instruments and agreements relating to the
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Collateral and the right to check, test and appraise the Collateral, using good
faith efforts to minimize disruption to Borrower's business. Borrower shall
deliver to Agent and the Lenders any instrument necessary for Agent and the
Lenders to obtain records from any service bureau maintaining records for
Borrower. All instruments and certificates prepared by Borrower showing the
value of any of the Collateral shall be accompanied, upon request, by copies of
related purchase orders and invoices. Agent may, at any time after the
occurrence and during the continuance of an Event of Default, remove from
Borrower's premises Borrower's books and records (or copies thereof) or require
Borrower to deliver such books and records or copies to Agent. Agent may,
without expense to Agent or the Lenders, use such of Borrower's personnel,
supplies and premises as may be reasonably necessary for maintaining or
enforcing Agent's security interest.
(b) Reporting Requirements. Borrower shall furnish Agent and the
Lenders, upon request, such information and statements as Agent and the Lenders
shall reasonably request from time to time regarding Borrower's business
affairs, financial condition and the results of its operations. Without
limiting the generality of the foregoing, Borrower shall provide Agent with:
(i) at least as frequently as Borrower requests Revolving Credit
Loans, but not less frequently than on a weekly basis, Agent's standard form
collateral and loan report, together with accounts receivable certifications
and notice of assignment documents together with cash receipt and revenue
reports;
(ii) upon Agent's request, copies of sales journals, cash receipt
journals, deposit slips, copies of invoices, customer statements and credit
memoranda issued, remittance advices and reports, evidence of billing and
copies of shipping and delivery documents;
(iii) within TEN (10) Business Days after the end of each month, (1)
monthly agings (aged from due date) and reconciliations of Receivables (with
listings of concentrated accounts and reconciliations to collateral reports),
(2) monthly agings (aged from due date) of accounts payable, with outstanding
and held check registers and (3) monthly perpetual inventory reports for the
Inventory valued on a first-in, first-out basis at the lower of cost or market
(in accordance with GAAP) or such other inventory reports as are reasonably
requested by Agent;
(iv) for each month other than December in each year, within THIRTY
(30) days after the end of each month, Consolidated unaudited financial
statements with respect to the prior month prepared on a basis consistent with
such statements prepared in prior months and otherwise in accordance with GAAP,
provided that (A) no such monthly reports will be required until January, 1999,
and (B) for the months of January and February 1999, unaudited financial
statements within FORTY-FIVE (45) days after the end of such months and for
each of March, June and September of each fiscal year of Borrower, Borrower may
deliver such Consolidated unaudited financial statements in accordance with
subparagraph "(v)" below;
(v) within FIFTY (50) days after the end of each quarter but in no
event more than FIVE (5) days after the date of filing with the Securities and
Exchange Commission, Consolidated unaudited financial statements with respect
to the prior quarter prepared on a basis consistent with such statements
prepared in prior quarters and otherwise in accordance with GAAP, it being
acknowledged that Borrower's delivery of its 10Q report will satisfy the
foregoing reporting requirement;
(vi) audited annual Consolidated financial statements, prepared in
accordance with GAAP applied on a basis consistent with the most recent
Prepared Financials provided to Agent by Borrower, including balance sheets,
income and cash flow statements, accompanied by the unqualified report thereon
of independent certified public accountants reasonably acceptable to Agent as
soon as available, and in any event, within ONE HUNDRED (100) days after the
end of each fiscal year of Borrower, it being acknowledged that Borrower's
delivery of its 10K report will satisfy the foregoing reporting requirement,
together with the management letter, in the form provided to the auditors and
shareholders of Borrower within ONE HUNDRED FIFTY (150) days after the end of
each fiscal year of Borrower;
(vii) at least FIFTEEN (15) days prior to the end of each fiscal year
of Borrower, annual operating budgets (including income statements, balance
sheets and cashflow statements, by month) for the upcoming fiscal year of
Borrower; and
(viii) such certificates relating to the foregoing as Agent may
reasonably request, including, without limitation, a certificate from the
president or the chief financial officer of Borrower ("COMPLIANCE CERTIFICATE")
QUARTERLY with regard to Borrower's compliance with each of the financial
covenants set forth in this Agreement (as
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required by Section 6.1.13 of the Schedule), and MONTHLY with regard to all
other covenants, in each case also stating whether any Event of Default has
occurred or event which, with giving of notice or the passage of time, or both,
would constitute an Event of Default, and if so, the steps being taken to
prevent or cure such Event of Default, and such other certificates relating to
the reporting requirements set forth in this Section 9.1 as Agent shall
reasonably request. All reports or financial statements submitted by Borrower
shall be in reasonable detail and shall be certified by the chief financial
officer of Borrower as being complete and correct.
(c) Public Company Reporting. In addition to the reporting
requirements under Section 9.1(b) above, Borrower shall deliver to Agent, (i)
all press releases made available generally by USA or any of its Subsidiaries
to the public concerning material developments in the business of USA or any
such Subsidiary and all notifications received from the Securities and Exchange
Commission by USA or its Subsidiaries which are of public record pursuant to
the Securities Exchange Act of 1934 and the rules promulgated thereunder, and
(ii) true and complete copies of all financial statements, reports, notices and
documents sent or made available by USA to its securities holders or publicly
filed with the Securities and Exchange Commission, any other federal agency at
any time administering United States securities laws and with any other
governmental agency (including, without limitation, 10Q reports, 10K reports,
proxy statements and registration statements), within FIVE (5) Business Days
after such reports are filed; but in no event more than FIVE (5) Business Days
after the due date of such documents.
9.2 Term; Termination.
(a) Term. The initial term of this Agreement shall be as set forth in
the Schedule (the "INITIAL TERM") and shall be automatically renewed for one or
more successive periods of ONE (1) year (each, a "RENEWAL TERM"), unless
earlier terminated as provided herein.
(b) Prior Notice. Each party shall have the right to terminate this
Agreement effective at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than SIXTY (60) days
prior to the effective date of such termination, by registered or certified
mail.
(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the procedure
set forth in Section 9.2(b), Borrower may terminate this Agreement at any time
but only upon SIXTY (60) days' prior written notice and prepayment of the
Obligations. Upon any such early termination by Borrower or any termination of
this Agreement by the Lenders upon the occurrence of an Event of Default, then,
and in any such event, Borrower shall pay to Agent, for the ratable benefit of
the Lenders, upon the effective date of such termination a fee (the
"TERMINATION FEE") in an amount equal to the amount set forth in the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination of
this Agreement; recourse to security shall not be required at any time.
Borrower waives presentment and protest of any instrument and notice thereof,
notice of default and, to the extent permitted by applicable law, all other
notices to which Borrower might otherwise be entitled.
9.4 No Waiver by Agent or Lenders. Neither Agent's nor any Lenders
failure to exercise any right, remedy or option under this Agreement, any
supplement, the Loan Documents or other agreement between Agent, and/or any
Lender, and Borrower nor any delay by Agent or any Lender in exercising the
same shall operate as a waiver. No waiver by Agent nor any waiver by the
Lenders shall be effective unless in writing and then only to the extent
stated. No waiver by Agent nor any Lender shall affect their right to require
strict performance of this Agreement. The rights and remedies of Agent and the
Lenders shall be cumulative and not exclusive.
9.5 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind the
respective representatives, successors and assigns of Borrower, Agent and the
Lenders.
9.6 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower,
Agent, and the Lenders to the extent required by the Agency Agreement. Borrower
may not sell, assign or
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transfer any interest in this Agreement or any other Loan Document, or any
portion thereof, including, without limitation, any of Borrower's rights,
title, interests, remedies, powers and duties hereunder or thereunder. Borrower
hereby consents to any Lender's participation, sale, assignment, transfer or
other disposition, at any time or times hereafter, of this Agreement and any of
the other Loan Documents, or of any portion hereof or thereof, including,
without limitation, such Lender's rights, title, interests, remedies, powers
and duties hereunder or thereunder in accordance with the provisions of the
Agency Agreement. In connection therewith, the Lenders may disclose all
documents and information which the Lenders now or hereafter may have relating
to Borrower or Borrower's business.
9.8 Integration. This Agreement, together with the Schedule (which is
a part hereof) and the other Loan Documents, reflect the entire understanding
of the parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this Agreement
or of any guaranty of the Obligations shall affect or impair the powers,
obligations, duties, rights, representations, warranties or liabilities of the
parties hereto and all shall survive such termination.
9.10 Evidence of Obligations. Each Obligation may be evidenced by
notes or other instruments issued or made by Borrower to the Lenders. If not so
evidenced, such Obligation shall be evidenced solely by entries upon the books
and records of the Lenders.
9.11 Loan Requests. Each oral or written request for a loan by any
Person who purports to be any employee, officer or authorized agent of Borrower
shall be made to Agent on or prior to 11:00 A.M., Eastern time, on the Business
Day on which the proceeds thereof are requested to be paid to Borrower and
shall be conclusively presumed to be made by a Person authorized by Borrower to
do so and the crediting of a loan to Borrower's operating account shall
conclusively establish Borrower's obligation to repay such loan. Unless and
until Borrower otherwise directs Agent in writing, all loans shall be wired to
Borrower's operating account set forth in the Schedule.
9.12 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and Agent at their addresses set forth at the
beginning of this Agreement; and
with respect to notice to Borrower, with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
Attn: Sheldon Nussbaum, Esq.
Fax: (212) 752-5958
and with respect to Agent, with a copy to:
FINOVA Capital Corporation
1850 North Central Avenue--MS1141
Phoenix, AZ 85004
Attn: Group Counsel--Corporate Finance
Fax: (602) 207-5036
All notices to the Lenders shall be directed to the address for each Lender set
forth on the signature page hereof or in any Assignment and Acceptance
Agreement in connection herewith. Notices hereunder shall be deemed received on
the earlier of receipt, whether by mail, personal delivery, facsimile, or
otherwise, or upon deposit in the United States mail, postage prepaid.
9.13 Brokerage Fees. Borrower represents and warrants to Agent and the
Lenders that, with respect to the financing transaction herein contemplated, no
Person is entitled to any brokerage fee or other commission, except for the
fees of First Capital Advisors, which shall be paid by Borrower on the Closing
Date and thereafter as described in the Broker Estoppel Letter. Borrower agrees
to indemnify and hold Agent and the Lenders harmless against any and all such
claims.
9.14 Disclosure. No representation or warranty made by Borrower in
this Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not
disclosed to Agent and the Lenders in writing with respect to the transactions
contemplated by this Agreement which materially and adversely affects the
business, assets, operations, prospects or condition (financial or otherwise),
of Borrower.
31
<PAGE>
9.15 Publicity. The Lenders are hereby authorized to issue appropriate
press releases and to cause a tombstone to be published announcing the
consummation of this transaction and the aggregate amount thereof. Borrower may
issue appropriate press releases pertaining to the Loans and the transactions
contemplated by this Agreement with the prior approval and review of Agent, not
to be unreasonably withheld.
9.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its Obligations under
this Agreement, any remedy at law may prove to be inadequate relief to Agent
and the Lenders. Therefore, Agent and the Lenders, if requested, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute one
and the same instrument, admissible into evidence. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile shall
also deliver a manually executed counterpart of this Agreement, but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
9.19 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement, have participated jointly in the
negotiation and drafting of this Agreement and hereby agree that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any amendments or exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against Agent, the Lenders or any of their respective
directors, officers, employees, agents, accountants or attorneys, based upon,
arising from, or relating to this Agreement, or any other present or future
agreement, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, whether or
not relating hereto or thereto, occurred, done, omitted or suffered to be done
by Agent, the Lenders or any of their respective directors, officers,
employees, agents, accountants or attorneys, whether sounding in contract or in
tort or otherwise, shall be barred unless asserted by Borrower by the
commencement of an action or proceeding in a court of competent jurisdiction by
the filing of a complaint within one year after the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based and service of a summons and complaint on an officer of Agent or any
Lender, as applicable, or any other Person authorized to accept service of
process on behalf of Agent or any Lender, as applicable, within THIRTY (30)
days thereafter. Borrower agrees that such one-year period of time is a
reasonable and sufficient time for Borrower to investigate and act upon any
such claim or cause of action. The one-year period provided herein shall not be
waived, tolled, or extended except by a specific written agreement of Agent or
any Lender. This provision shall survive any termination of this Loan Agreement
or any other agreement.
9.22 Liability. None of the Lenders, Agent nor any Affiliate of any
one of them shall be liable for any indirect, special, incidental or
consequential damages in connection with any breach of contract, tort or other
wrong relating to this Agreement or the Obligations or the establishment,
administration or collection thereof (including without limitation damages for
loss of profits, business interruption, or the like), whether such damages are
foreseeable or unforeseeable, even if Agent or any Lender has been advised of
the possibility of such damages. None of the Lenders, Agent, nor any Affiliate
of any one of them shall be liable for any claims, demands, losses or damages,
of any kind whatsoever, made, claimed, incurred or suffered by the Borrower
through the ordinary negligence of Agent, any Lender, or any Affiliate of any
one of them. "LENDERS' AFFILIATE" shall mean Agent's and each Lender's
directors, officers, employees, agents, attorneys or any other Person or entity
affiliated with or representing Agent or any Lender.
9.23 Notice of Breach by Agent or Lender. Borrower agrees to give
Agent written notice of (i) any action or inaction by Agent, or any Lender, or
any attorney of Agent, or any Lender, in connection with any Loan Documents
that may be actionable against Agent, or any Lender, or any attorney of Agent,
or any Lender, or (ii) any
32
<PAGE>
defense to the payment of the Obligations for any reason, including, but not
limited to, commission of a tort or violation of any contractual duty or duty
implied by law. Borrower agrees that unless such notice is fully given as
promptly as possible (and in any event within NINETY (90) days) after Borrower
has actual knowledge, or with the exercise of reasonable diligence should have
had knowledge, of any such action, inaction or defense, Borrower shall not
assert, and Borrower shall be deemed to have waived, any claim or defense
arising therefrom.
9.24 Power of Attorney. Borrower appoints Agent and its designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that
come into Agent's possession; during the continuance of an Event of Default, to
sign Borrower's name on any invoice or bill of lading relating to any
Receivable, on drafts against customers, on assignments of Receivables, on
notices of assignment, financing statements and other public records, on
verifications of accounts and on notices to customers or account debtors;
during the continuance of an Event of Default, to send requests for
verification of Receivables to customers or account debtors; during the
continuance of an Event of Default, to notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated by
Agent and to open and dispose of all mail addressed to Borrower; and to do all
other things Agent deems reasonably necessary or desirable to carry out the
terms of this Agreement. Borrower hereby ratifies and approves all acts of such
attorney. Neither Agent nor any Lender, nor any of their designees shall be
liable for any acts or omissions nor for any error of judgment or mistake of
fact or law while Agent is acting as Borrower's attorney except for gross
negligence and wilful misconduct. This power, being coupled with an interest,
is irrevocable until the Obligations have been fully satisfied and the
obligations of the Lenders to provide loans hereunder shall have terminated
9.25 GOVERNING LAW; WAIVERS. THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE
SOLE OPTION OF AGENT, IN ANY OTHER COURT IN WHICH AGENT OR ANY LENDER SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF
FORUM NON CONVENIENS AND VENUE. BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE
IN THE MANNER SET FORTH IN SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE.
BORROWER FURTHER WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK
ANY JUDGMENT ENTERED AGAINST IT.
9.26 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. AGENT, EACH LENDER AND
BORROWER EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS
AGREEMENT; (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN
AGENT, AND/OR ANY LENDER, AND BORROWER; OR (III) ANY CONDUCT, ACTS OR OMISSIONS
OF AGENT, AND/OR ANY LENDER, OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH AGENT, ANY
LENDER OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
9.27 Lien Termination. In recognition of Agent's and each Lender's
right to have all attorneys' fees and other expenses incurred in connection
with this Agreement secured by the Collateral, notwithstanding the payment in
full of the Obligations, Agent shall not be required to record any terminations
or satisfactions of any of its liens on the Collateral unless and until
Borrower and any other Loan Party (to the extent required by Agent) have
executed and delivered to Agent general releases of all claims against Agent,
each Lender and the Lenders' Affiliates, in form and substance satisfactory to
Agent.
[SIGNATURE PAGES FOLLOW]
33
<PAGE>
Signature Page to Loan and Security Agreement
BORROWER: USA DETERGENTS, INC., a Delaware corporation;
BIG CLOUD POWDER CORPORATION, a Delaware
corporation;
CHICAGO MANAGEMENT POWDER CORP., a
Delaware corporation
CHICAGO CONTRACT POWDER CORPORATION, an
Illinois corporation
By /s/ Uri Evan
-------------------------------
Uri Evan, President and Chief
Executive Officer of, and intending
to legally bind, each of the above
corporations.
[Notary certification for Borrower attached]
<PAGE>
Signature Page to Loan and Security Agreement
AGENT:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By /s/ Ilene M. Gerber
-------------------------------
Vice President
LENDERS:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By /s/ Ilene M. Gerber
--------------------------------
Vice President
Notice Address: 1060 First Avenue--Suite 100
King of Prussia, PA 194063
Attn: Mr. Francis Monzo
Tel. No.: (610) 354-8462
Fax No.: (610) 354-8476
with a copy to: FINOVA Capital Corporation
Attn: Group Counsel - Corporate
Finance
1850 North Central Avenue
Mail Station 1141
Phoenix, Arizona 85002-2209
Fax No.: (602) 262-1553
COMMITMENT
REVOLVING CREDIT LOANS: $16,494,845
TERM LOAN A LOAN: $ 2,639,175
TERM LOAN B LOAN: $ 865,979
TOTAL DOLLAR COMMITMENT: $20,000,000
COMMITMENT PERCENTAGE: 41.24%
TAX I.D. NO. _______________________________
35
<PAGE>
Foothill
Signature Page to Loan and Security Agreement
Foothill Capital Corporation
By /s/ Unintelligible
---------------------------------
Vice President
Notice Address: 11111 South Monica Boulevard
Suite 1500
Los Angeles, CA 90025-3333
Attn: Lalaine Pechayco
Tel. No.: (310) 996-7042
Fax No.: (310) 477-8225
with a copy to: Robert Colton, Esq.
Buchalter, Nemer, Fields
& Younger
601 S. Figueroa Street
Suite 2400
Los Angeles, California 90017
Tel. No.: (213) 891-5070
Fax No.: (213) 896-0400
COMMITMENT
REVOLVING CREDIT LOANS: $ 9,072,165
TERM LOAN A LOAN: $ 1,451,546
TERM LOAN B LOAN: $ 476,289
TOTAL DOLLAR COMMITMENT: $ 11,000,000
COMMITMENT PERCENTAGE: 22.68%
TAX I.D. NO. 95-2689288
<PAGE>
First Source
Signature Page to Loan and Security Agreement
First Source Financial LLP
By: First Source Financial, Inc.
Its Agent/Manager
By /s/ John P. Thacker
---------------------------------
Senior Vice President
Notice Address: 2850 West Golf Road, 5th Floor
Rolling Meadows, IL 60008
Attn: Kelly M. Schmidt
Tel. No.: (847) 734-2056
Fax No.: (847) 734-7912
with a copy to: Edward Szarkowicz, Esq.
Senior Counsel
First Source Financial LLP
2850 W. Golf Road, 5th Floor
Rolling Meadows, IL 60008
COMMITMENT
REVOLVING CREDIT LOANS: $ 8,247,423
TERM LOAN A LOAN: $ 1,319,588
TERM LOAN B LOAN: $ 432,990
TOTAL DOLLAR COMMITMENT: $ 10,000,000
COMMITMENT PERCENTAGE: 20.62%
TAX I.D. NO. 36-3991240
<PAGE>
Merrill Lynch
Signature Page to Loan and Security Agreement
Merrill Lynch Business Financial Services, Inc.
By /s/ Unintelligible
--------------------------------------
Vice President
Notice Address: 33 West Monroe Street
22nd Floor
Chicago, IL 60603
Attn: Dan McHugh
Tel. No.: (312) 267-4425
Fax No.: (312) 641-3421
with a copy to: Lisa F. Raush, Esq.
Merrill Lynch Business Financial
Services, Inc.
33 West Monroe Street
22nd Floor
Chicago, IL 60603
COMMITMENT
REVOLVING CREDIT LOANS: $6,185,567
TERM LOAN A LOAN: $ 989,691
TERM LOAN B LOAN: $ 324,742
TOTAL DOLLAR COMMITMENT: $7,500,000
COMMITMENT PERCENTAGE: 15.46%
TAX I.D. NO. _______________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
1. DEFINITIONS..................................................................................................1
1.1 DEFINED TERMS.............................................................................1
1.2 Other Terms................................................................................9
2. LOANS; INTEREST RATE AND OTHER CHARGES.......................................................................9
2.1 Total Facility.............................................................................9
2.2 Loans; Joint and Several Obligations.......................................................9
2.3 Overlines; Overadvances....................................................................9
2.4 Letters of Credit.........................................................................10
2.5 Loan Account..............................................................................10
2.6 Interest; Fees............................................................................10
2.7 Default Interest Rate.....................................................................10
2.8 Examination Fee...........................................................................11
2.9 Excess Interest...........................................................................11
2.10 Principal Payments; Proceeds of Collateral...............................................12
2.11 Application of Collateral................................................................13
2.12 Application of Payments...................................................................13
2.13 Notification of Closing...................................................................13
3. SECURITY....................................................................................................13
3.1 Security Interest in the Collateral.......................................................13
3.2 Perfection and Protection of Security Interest............................................13
3.3 Preservation of Collateral................................................................14
3.4 Insurance.................................................................................14
3.5 Collateral Reporting; Inventory...........................................................14
3.6 Receivables...............................................................................15
3.7 Equipment.................................................................................15
3.8 Other Liens; No Disposition of Collateral................................................15
3.9 Collateral Security.......................................................................16
4. CONDITIONS OF CLOSING.......................................................................................16
4.1 Initial Advance...........................................................................16
4.2 Subsequent Advances.......................................................................18
5. REPRESENTATIONS AND WARRANTIES..............................................................................18
5.1 Due Organization..........................................................................18
5.2 Other Names...............................................................................18
5.3 Due Authorization.........................................................................19
5.4 Binding Obligation........................................................................19
5.5 Intangible Property.......................................................................19
5.6 Capital...................................................................................19
5.7 Material Litigation.......................................................................19
5.8 Title; Security Interests of Agent........................................................19
<PAGE>
5.9 Restrictive Agreements; Labor Contracts...................................................19
5.10 Laws......................................................................................19
5.11 Consents..................................................................................19
5.12 Defaults..................................................................................19
5.13 Financial Condition.......................................................................19
5.14 ERISA.....................................................................................20
5.15 Taxes.....................................................................................20
5.16 Locations; Federal Tax ID No..............................................................20
5.17 Business Relations........................................................................20
5.18 Millennium Compliance.....................................................................20
5.19 Reaffirmations............................................................................20
6. COVENANTS...................................................................................................20
6.1 Affirmative Covenants.....................................................................20
6.1.1 Taxes....................................................................20
6.1.2 Notice of Litigation.....................................................20
6.1.3 ERISA....................................................................20
6.1.4 Change in Location.......................................................20
6.1.5 Corporate Existence......................................................21
6.1.6 Labor Disputes...........................................................21
6.1.7 Violations of Law........................................................21
6.1.8 Defaults.................................................................21
6.1.9 Capital Expenditures....................................................21
6.1.10 Books and Records........................................................21
6.1.11 Leases; Warehouse Agreements.............................................21
6.1.12 Additional Documents.....................................................21
6.1.13 Financial Covenants......................................................21
6.1.14 Millennium Compliance. ..................................................21
6.2 Negative Covenants........................................................................22
6.2.1 Mergers, Etc.............................................................22
6.2.2 Loans....................................................................22
6.2.3 Dividends................................................................22
6.2.4 Adverse Transactions.....................................................22
6.2.5 Indebtedness of Others...................................................22
6.2.6 Repurchase...............................................................22
6.2.7 Name.....................................................................22
6.2.8 Prepayment...............................................................22
6.2.9 Capital Expenditure......................................................22
6.2.10 Indebtedness.............................................................22
6.2.11 Affiliate Transactions...................................................23
6.2.12 Nature of Business.......................................................23
6.2.13 Agent's and Lenders' Names...............................................23
6.2.14 Margin Security..........................................................23
6.2.15 Real Property............................................................23
<PAGE>
6.2.16 PNC Warrant..............................................................23
7. DEFAULT AND REMEDIES........................................................................................24
7.1 Events of Default.........................................................................24
7.2 Remedies..................................................................................25
7.3 Standards for Determining Commercial Reasonableness.......................................25
8. EXPENSES AND INDEMNITIES....................................................................................26
8.1 Expenses..................................................................................26
8.2 Environmental Matters....................................................................26
9. MISCELLANEOUS...............................................................................................26
9.1 Examination of Records; Financial Reporting...............................................26
9.2 Term; Termination.........................................................................27
9.3 Recourse to Security; Certain Waivers.....................................................28
9.4 No Waiver by Agent or Lenders.............................................................28
9.5 Binding on Successor and Assigns..........................................................28
9.6 Severability..............................................................................28
9.7 Amendments; Assignments...................................................................28
9.8 Integration...............................................................................28
9.9 Survival..................................................................................28
9.10 Evidence of Obligations...................................................................28
9.11 Loan Requests.............................................................................28
9.12 Notices...................................................................................28
9.13 Brokerage Fees............................................................................29
9.14 Disclosure................................................................................29
9.15 Publicity.................................................................................29
9.16 Captions..................................................................................29
9.17 Injunctive Relief.........................................................................29
9.18 Counterparts; Facsimile Execution.........................................................29
9.19 Construction..............................................................................29
9.20 Time of Essence...........................................................................29
9.21 Limitation of Actions.....................................................................29
9.22 Liability.................................................................................30
9.23 Notice of Breach by Agent or Lender.......................................................30
9.24 Power of Attorney.........................................................................30
9.25 GOVERNING LAW; WAIVERS....................................................................30
9.26 MUTUAL WAIVER OF RIGHT TO JURY TRIAL......................................................31
9.27 Lien Termination..........................................................................31
</TABLE>
<PAGE>
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
CO-BORROWERS: USA DETERGENTS, INC., A DELAWARE CORPORATION ("USA")
Big Cloud Powder Corporation, a Delaware corporation ("POWDER")
Chicago Management Powder Corp., a Delaware corporation
("MANAGEMENT")
Chicago Contract Powder Corporation, an Illinois corporation
("CONTRACT")
ADDRESS: 1735 JERSEY AVENUE
NORTH BRUNSWICK, NJ 08902
DATE: AUGUST 14, 1998
THIS SCHEDULE FORMS AN INTEGRAL PART OF THE LOAN AND SECURITY AGREEMENT, DATED
THE ABOVE DATE, BETWEEN THE ABOVE CO-BORROWERS (INDIVIDUALLY AND COLLECTIVELY
AND JOINTLY AND SEVERALLY, THE "BORROWER"), the Lenders from time to time a
party thereto, and FINOVA Capital Corporation, in its capacity as contractual
representative for itself and the other Lenders, and all references herein and
therein to "THIS AGREEMENT" shall be deemed to refer to said Agreement and to
this Schedule.
- -------------------------------------------------------------------------------
TOTAL FACILITY (SECTION 2.1):
$48,500,000; consisting of (i) Revolving Credit Loans in a maximum aggregate
principal amount of $40,000,000, (ii) a Term Loan A in the original principal
amount of $6,400,000, and (iii) a Term Loan B in the original principal amount
of $2,100,000 (collectively, the "TOTAL FACILITY").
- -------------------------------------------------------------------------------
LOANS (SECTION 2.2):
10. REVOLVING CREDIT LOANS: A revolving line of credit consisting of loans
against Borrower's Eligible Receivables ("RECEIVABLE LOANS") and
against Borrower's Eligible Inventory ("INVENTORY LOANS") (the
Receivable Loans and the Inventory Loans shall be collectively
referred to as the "REVOLVING CREDIT LOANS") in an aggregate
outstanding principal amount not to exceed the lesser of (a) or (b)
below:
<PAGE>
10.1 FORTY MILLION DOLLARS ($40,000,000) (the "REVOLVING CREDIT LIMIT")
10.2 the sum of:
10.2.1 an amount equal to 85% of the net amount of Eligible
Domestic Receivables, plus
10.2.2 an amount equal to the lesser of (x) 85% of the net
amount of Eligible Puerto Rico Receivables and (y) $500,000; plus
10.2.3 the lesser of:
2.3.1 the sum of:
(x) 65% of the value of
Borrower's Eligible
Product Inventory,
calculated at the lower of
cost or market value and
determined on a first-in,
first-out basis, plus
(y) the lesser of:
(A) 25% of the value
of Borrower's
Eligible
Packaging
Inventory,
calculated at the
lower of cost or
market value and
determined on a
first-in,
first-out basis,
and
(B) $1,000,000, and
2.3.2 $15,000,000; less
10.2.4 the aggregate undrawn face amount of any Letters of
Credit issued under Section 2.4 of this Agreement; less
10.2.5 the Dilution Reserve, the Shareholder Matters Reserve,
the EDA Reserve and any other Loan Reserves.
The Obligations of Borrower in connection with the Revolving Credit
Loan shall be evidenced by certain Revolving Loan Notes, dated as of the date
hereof, of Borrower in favor of each of the Lenders.
11. TERM LOAN A: A $6,400,000 term loan ("TERM LOAN A"). The principal
outstanding under the Term Loan A will be amortized, as of the date
hereof, over a seven (7) year period on a straight-line basis,
resulting in FIFTY-NINE (59) equal monthly principal payments of
$76,190.48 each, which shall be paid on or before the first day of
each month hereafter commencing OCTOBER 1, 1998, together with accrued
interest on the unpaid principal thereof, commencing SEPTEMBER 1, 1998
and a final payment of $1,904,761.68. Borrower may be required to make
<PAGE>
additional principal payments in accordance with the Excess Cash Flow
Prepayment provisions under the heading "Additional Provisions" below.
All Obligations in connection with Term Loan A shall, if not earlier
paid in full, be due and payable on SEPTEMBER 1, 2003. The Obligations
of Borrower in connection with Term Loan A shall be evidenced by
certain Term Loan A Notes, dated as of the date hereof, of Borrower in
favor of each of the Lenders.
12. TERM LOAN B: A $2,100,000 term loan ("TERM LOAN B"). The principal
outstanding under the Term Loan B will be amortized, as of the date
hereof, over a five (5) year period on a straight-line basis,
resulting in SIXTY (60) equal monthly principal payments of $35,000
each, which shall be paid on or before the first day of each month
hereafter commencing OCTOBER 1, 1998, together with accrued interest
on the unpaid principal thereof, commencing SEPTEMBER 1, 1998.
Borrower may be required to make additional principal payments in
accordance with the Excess Cash Flow Prepayment provisions under the
heading "Additional Provisions" below. All Obligations in connection
with Term Loan B shall, if not earlier paid in full, be due and
payable on SEPTEMBER 1, 2003. The Obligations of Borrower in
connection with Term Loan B shall be evidenced by certain Term Loan B
Notes, dated as of the date hereof, of Borrower in favor of each of
the Lenders.
- -------------------------------------------------------------------------------
INTEREST AND FEES (SECTION 2.6):
1. REVOLVING INTEREST RATE. Borrower shall pay to Agent, for the ratable
benefit of the Lenders, interest on the daily outstanding balance of
Borrower's Revolving Credit Loans at a per annum rate that is THREE-
QUARTERS (.75%) of a percentage point in excess of the Prime Rate (the
"REVOLVING INTEREST RATE"). The Revolving Interest Rate will be
reduced, as set forth below, if Borrower achieves the following Senior
Debt Service Coverage Ratios for any twelve (12) month fiscal year
ending on or after December 31, 1999; provided that: (a) no Event of
Default, or event which, with the giving of notice or the passage of
time, or both, would constitute an Event of Default, shall have
occurred and be continuing, and (b) Borrower is in compliance with the
financial covenants set forth in Section 6.1.13 of this Agreement:
SENIOR DEBT SERVICE REVOLVING INTEREST
COVERAGE RATIO RATE
2.00 TO 1.00 PRIME RATE + .50%
PER ANNUM
3.00 TO 1.00 PRIME RATE + .25%
PER ANNUM
<PAGE>
Compliance with the foregoing requirements must be reflected in the most recent
annual audited financial statements and Compliance Certificate submitted to
Agent by Borrower pursuant to Section 9.1(a) of the Loan Agreement ("FINANCIAL
REPORTS") prior to the effectiveness of any reduction in the Revolving Interest
Rate. Any such reduction in the Revolving Interest Rate shall be effective as
of the first Business Day of the month immediately following the month in which
Borrower delivers the Financial Reports to Agent.
2. TERM LOAN A INTEREST RATE. Borrower shall pay to Agent, for the
ratable benefit of the Lenders, interest on the daily outstanding
balance of the Term Loan A at a per annum rate of 9.33% (the "TERM
LOAN A INTEREST RATE").
3. TERM LOAN B INTEREST RATE. Borrower shall pay to Agent, for the
ratable benefit of the Lenders, interest on the daily outstanding
balance of Borrower's Term Loan B at a per annum rate that is TWO
PERCENT (2%) of a percentage point in excess of the Prime Rate (the
"TERM LOAN B INTEREST RATE").
4. COLLATERAL MONITORING FEE. At the closing of this transaction and on
the first day of each calendar month thereafter, Borrower shall pay to
Agent, for its sole account, a collateral monitoring fee of THREE
THOUSAND DOLLARS ($3,000) ("COLLATERAL MONITORING FEE"), which shall
be pro rated for the number of days remaining in the month in which
the Closing Date occurs; provided however, that Borrower agrees and
acknowledges that each Loan Year a full year's fee shall be deemed
earned at the beginning of the respective Loan Year.
5. CLOSING FEE. On the Closing Date, Borrower shall pay to Agent, for its
sole account, a closing fee in an amount equal to $425,000 ("CLOSING
FEE"), which shall be deemed fully earned on the date such payment is
due. Borrower has previously paid to Agent a $50,000 portion of such
Closing Fee.
6. AGENT'S FEE. On the first anniversary of the date of this Agreement,
and on each subsequent anniversary of said date, if this Agreement is
in effect, Borrower shall pay to Agent, for its sole account, an
Agent's fee equal to ONE-QUARTER OF ONE PERCENT (.25%) per annum of
the amount of the Total Facility ("AGENT'S FEE"), which shall be
deemed fully earned on the date due and shall be non-refundable.
7. UNUSED LINE FEE. With respect to each fiscal quarter, or portion
thereof during the term of this Agreement, Borrower shall
unconditionally pay to Agent, for the ratable benefit of the Lenders,
a fee equal to THREE-EIGHTHS OF ONE PERCENT (.375%) per annum of the
difference between the Revolving Credit Limit and the average daily
outstanding balance of the Revolving Credit Loans during such quarter,
or portion thereof ("UNUSED LINE FEE"), which fee shall be calculated
by Agent and payable by Borrower quarterly, in arrears, and shall be
due and payable, commencing on the first Business Day of the
Borrower's first fiscal quarter following the Closing Date and
continuing on the first Business Day of each fiscal quarter
thereafter.
<PAGE>
8. CALCULATION OF INTEREST AND FEES. The "PRIME RATE" shall equal the
rate of interest announced publicly by Citibank, N.A. (or any
successor thereto), from time to time as its "prime rate," which may
not be such institution's lowest rate. The Revolving Interest Rate and
the Term Loan B Interest Rate shall be increased or decreased, as the
case may be, without notice or demand of any kind, upon the
announcement of any change in the Prime Rate. Each change in the Prime
Rate shall be effective hereunder on the first Business Day following
the announcement of such change. Interest charges and all other fees
and charges herein shall be computed on the basis of a year of 360
days and actual days elapsed and shall be payable in arrears on the
first day of each month.
- -------------------------------------------------------------------------------
EXAMINATION FEES (SECTION 2.8)
EXAMINATION FEE. Borrower agrees to pay to Agent, for its sole
account, an examination fee in the amount of $600 per person per day in
connection with each audit or examination of Borrower performed by Agent prior
to or after the date hereof, plus all costs and expenses incurred in connection
therewith (the "EXAMINATION FEE"), provided that, so long as no Event of
Default exists, Borrower shall not be required to pay for Examination Fees in
connection with more than one (1) audit examination of Borrower performed by
Agent in any fiscal quarter of Borrower, provided further that the foregoing
shall not restrict Agent from performing more audit examinations in any fiscal
quarter of Borrower to the extent no Event of Default exists, without cost and
expense to Borrower. Without limiting the generality of the foregoing, Borrower
shall pay to Agent an initial Examination Fee in an amount equal to $600 per
person per day, plus all costs and expenses incurred in connection therewith.
Such initial Examination Fee shall be deemed fully earned at the time of
payment and due and payable upon the closing of this transaction, and shall be
deducted from any good faith deposit paid by Borrower to Agent prior to the
date of this Agreement.
- -------------------------------------------------------------------------------
GENERAL REPRESENTATIONS AND WARRANTIES (SECTION 5)
State of Incorporation (Section 5.1):
USA Delaware
POWDER Delaware
MANAGEMENT Delaware
CONTRACT Illinois
Copyrights, patents, trademarks, and licenses (Section 5.5):
See EXHIBIT A attached hereto
<PAGE>
Fictitious Names/Prior Corporate Names (Section 5.2):
Prior Corporate Names:
USA USA Detergent, Inc. (8/95)
Powder acquired stock of Contract (6/97)
Fictitious Names: NONE
ERISA Matters (Section 5.14):
See EXHIBIT B attached hereto
Locations (Section 5.16):
See EXHIBIT C attached hereto
Federal Tax Identification Number (Section 5.16):
USA 11-2935430
POWDER 36-4052817
MANAGEMENT 36-4057601
CONTRACT 36-4052817
Bank Accounts (Section 6.1.15): See EXHIBIT D attached hereto
Indebtedness as of Closing Date (Section 6.2.5 and Section 6.2.10):
See EXHIBIT E attached hereto.
Pending Litigation and Investigations (Section 4.1(f)):
See EXHIBIT F attached hereto.
- -------------------------------------------------------------------------------
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrower shall, on a Consolidated basis, comply with all of the
following covenants. Compliance shall be determined as of the end of each
quarter, on March 31, June 30, September 30 and December 31, as specifically
provided below:
<PAGE>
Current Ratio. Borrower shall maintain a ratio of Current Assets to
Current Liabilities of not less than the following:
Period Ending
(tested at each
calendar quarter end) Current Ratio
- -------------------- -------------
09/30/98 1.0 to 1.0
12/31/98 1.0 to 1.0
03/31/99 1.0 to 1.0
06/30/99 1.0 to 1.0
09/30/99 1.0 to 1.0
12/31/99 and thereafter 1.3 to 1.0
provided that for purposes of this
calculation, Current Liabilities shall
exclude: (i) Indebtedness of Borrower to
EDA, and (ii) Indebtedness secured by real
property, and (iii) Obligations under the
Loans; but in each case shall include
regularly scheduled current portions of
long term Indebtedness for Borrowed Money.
For purpose of this computation, that
portion of obligations of Borrower under
loans that are classified as a current
liability for financial reporting purposes
under GAAP (i.e., balloon portion of Term
Loan A and the balance of the Revolving
Credit Loans in the year such obligations
become due), except for regularly scheduled
payments, are to be excluded.
DEBT TO NET WORTH. Borrower shall maintain a ratio of
Indebtedness for Borrowed Money to Net
Worth of not greater than the following for
each period set forth below:
<PAGE>
Period Ending
(tested at each
calendar quarter end) Debt to Net Worth
- -------------------- -----------------
09/30/98 2.6 to 1.0
12/31/98 2.4 to 1.0
03/31/99 2.2 to 1.0
06/30/99 2.0 to 1.0
09/30/99 1.8 to 1.0
12/31/99 and thereafter 1.6 to 1.0
NET WORTH. Borrower shall maintain Net Worth of not
less than the following amounts for each
period set forth below:
Period Ending
(tested at each
calendar quarter end) Net Worth
- -------------------- ---------
09/30/98 $15,500,000.00
12/31/98 $17,000,000.00
03/31/99 $19,000,000.00
06/30/99 $21,000,000.00
09/30/99 $23,000,000.00
12/31/99 and thereafter $25,000,000.00
SENIOR DEBT SERVICE
COVERAGE RATIO. As of the last day of each calendar
quarter ended March 31, June 30, September
30 or December 31, the ratio of Borrower's
Operating Cash Flow/Actual to Borrower's
Senior Contractual Debt Service for the
consecutive 12-month period ending as of
such date must be at least the following:
<PAGE>
1.05 to 1.0 for the period from August 1,
1998 through September 30, 1998;
1.20 to 1.0 for the period from August 1,
1998 through December 31, 1998;
1.20 to 1.0 for the period from August 1,
1998 through March 31, 1999;
1.20 to 1.0 for the period from August 1,
1998 through June 30, 1999;
1.5 to 1.0 thereafter.
- -------------------------------------------------------------------------------
NEGATIVE COVENANTS (SECTION 6.2):
CAPITAL EXPENDITURES: Borrower shall not make or incur any Capital
Expenditure if, after giving effect
thereto, the aggregate amount of all
Capital Expenditures by Borrower (i) for
the period from August 1, 1998 through
December 31, 1998, and (ii) in any fiscal
year thereafter, would exceed $2,000,000;
provided however, that such Capital
Expenditure limit may be increased to
$7,000,000 commencing with the 1999 fiscal
year and each year thereafter, in each case
if Borrower demonstrates to Agent in each
such year, on a pro-forma basis prior to
Borrower's making such increased Capital
Expenditures, Borrower will be in
compliance with the Senior Debt Service
Coverage Ratio requirements set forth
above, after adjustment for the higher
Capital Expenditures amount.
- -------------------------------------------------------------------------------
TERM; TERMINATION (SECTION 9.2):
1. INITIAL TERM; RENEWAL TERM. The initial term of this Agreement shall
be from the Closing Date until SEPTEMBER 1, 2003 (the "INITIAL TERM")
and shall be automatically renewed for successive periods of one (1)
year each (each, a "RENEWAL TERM"), unless earlier terminated as
provided in Section 7 or Section 9.2 or elsewhere in this Agreement.
2. REPAYMENT OF TERM LOANS OBLIGATIONS. In the event that the Revolving
Credit Loan is terminated prior to the expiration of the Initial Term,
or a Renewal Term, if applicable, the entire principal balance,
together with accrued and unpaid interest on the Term Loans then
outstanding shall be immediately due and payable on the effective date
of such termination and Borrower shall thereupon pay to Agent, for the
ratable benefit of the Lenders, all Termination Fees and other
Obligations of Borrower on such date.
3. TERMINATION FEES FOR REVOLVING CREDIT LOANS FACILITY. The Termination
Fee applicable to the Revolving Credit Loans facility provided for in
Section 9.2(d), payable to Agent for the ratable
<PAGE>
benefit of the Lenders, shall be an amount equal to the following
percentage of the Revolving Credit Limit:
3.1 THREE PERCENT (3%), if such early termination occurs on or prior
to the first anniversary of the date of this Agreement;
3.2 TWO PERCENT (2%), if such early termination occurs after the first
anniversary of the date of this Agreement but before the second anniversary
hereof;
3.3 ONE PERCENT (1%), if such early termination occurs after the
second anniversary of the date of this Agreement but before the third
anniversary hereof;
3.4 THREE-QUARTERS OF A PERCENT (3/4%), if such early termination
occurs after the third anniversary of the date of this Agreement but before the
fourth anniversary hereof; and
3.5 ONE-HALF OF A PERCENT (1/2%), if such early termination occurs
after the fourth anniversary of the date of this Agreement but before the fifth
anniversary hereof.
4. TERMINATION FEES FOR TERM LOAN A. The Termination Fee applicable to
the Term Loan A provided for in Section 9.2(d), payable to Agent for
the ratable benefit of the Lenders, shall be equal to the following
percentages of the principal amount then outstanding:
4.1 THREE PERCENT (3%), if such early termination occurs on or prior
to the first anniversary of the date of this Agreement;
4.2 TWO PERCENT (2%), if such early termination occurs after the first
anniversary of the date of this Agreement but before the second anniversary
hereof; and
4.3 ONE PERCENT (1%), if such early termination occurs after the
second anniversary of the date of this Agreement.
5. TERMINATION FEES FOR TERM LOAN B. The Termination Fee applicable to
the Term Loan B provided for in Section 9.2(d), payable to Agent for
the ratable benefit of the Lenders, shall be equal to the following
percentages of the principal amount then outstanding:
5.1 ONE PERCENT (1%), if such early termination occurs on or prior to
the second anniversary of the date of this Agreement; and
5.2 ONE-HALF OF A PERCENT (1/2%), if such early termination occurs
after the second anniversary of the date of this Agreement but before the third
anniversary hereof.
6. MAKE WHOLE PREMIUM. Any prepayment of the Term Loan A other than a
prepayment made pursuant to the Excess Cash Flow Prepayment described
below under "Additional Provisions,"
<PAGE>
shall also be accompanied by a payment, payable to Agent for the
ratable benefit of the Lenders, equal to the Make Whole Premium. The
following definitions shall apply:
6.1 "Make Whole Premium" means the positive difference, if any,
between (i) the Discounted Value immediately prior to any prepayment of that
portion of the Term Loan A which is being prepaid and (ii) the principal
balance of the Term Loan A being prepaid as of the date of any such prepayment.
6.2 "Discounted Value" means the amount determined by discounting the
Remaining Scheduled Payment Amounts from their respective due dates to the date
of the prepayment of the Term Loan A, at a discount factor equal to the
Reinvestment Yield.
6.3 "Remaining Scheduled Payment Amount" means the amount of each
scheduled payment of principal of and interest on Term Loan A that would be due
on or after the date of a prepayment of such Term Loan A if no payment of the
Term Loan A were made prior to its scheduled due date.
6.4 "Reinvestment Yield" means the rates shown under the column
heading "Ask YLD" for "Govt. Bonds & Notes" in the "Treasury Bonds, Notes &
Bills" section of the Wall Street Journal, Eastern Edition, published on the
Business Day prior to the date of any proposed prepayment of the Term Loan A
for the government bond or note with a maturity date having the closest
matching maturity to the Weighted Average Life to Maturity, or, if there is
more than one government bond or note with a maturity date having the closest
matching maturity to the Weighted Average Life to Maturity, the highest of the
rates shown in the "Ask YLD" column for any such bond or note, plus 4.00% with
respect to Term Loan A.
6.5 "Weighted Average Life to Maturity" means the number of years
(calculated to the nearest one-twelfth of a year) obtained by dividing (i) the
sum of the products obtained by multiplying each remaining scheduled payment of
principal under the Term Loan A by the number of years (calculated to the
nearest one-twelfth) which will elapse between the date of a prepayment of the
Term Loan A and the scheduled due date of such remaining scheduled principal
payments, by (ii) the outstanding principal balance of the Term Loan A on such
prepayment date.
- -------------------------------------------------------------------------------
DISBURSEMENT (SECTION 9.11):
Unless and until Borrower otherwise directs Agent in
writing, all loans shall be wired to Borrower's
following operating account:
<PAGE>
PNC Bank N.A.
Two Tower Center Blvd.
East Brunswick, NJ 08816
Acct. #8010802716
ABA #031207607
For the account of: USA Detergents, Inc.
Contact: Brad Sahler (732) 220-3010
- -------------------------------------------------------------------------------
ADDITIONAL PROVISIONS:
1. EXCESS CASH FLOW PREPAYMENTS. Within sixty (60) days following receipt
by Agent and the Lenders of Borrower's annual audited financial
statements, commencing with such financial statements for Borrower's
fiscal year ending December 31, 1998, Agent may deliver a notice to
Borrower requiring Borrower to prepay the Term Loans in an amount up
to FIFTY PERCENT (50%) of Borrower's Excess Cash Flow for such year.
Any prepayments required under this Section are strictly at the sole
option of Agent and the Lenders, and are payable within thirty (30)
days following the date of demand by Agent. All amounts paid pursuant
to this Section shall be applied as follows: first to Term Loan B and
then to Term Loan A, in the inverse order of maturity. No Termination
Fee or other form of prepayment premium shall be applied to any Excess
Cash Flow payments.
2. SHAREHOLDER MATTERS RESERVE. As of the Closing Date, Agent shall
establish a Loan Reserve under the Revolving Credit Loan ("SHAREHOLDER
MATTERS RESERVE") in the amount of $3,000,000, and after the Closing
Date, on each of September 1, 1998, October 1, 1998 and November 1,
1998, Agent shall increase the amount of the Shareholder Matters
Reserve in an amount equal to $333,333.33 for an aggregate Shareholder
Matters Reserve equal to $4,000,000 as of November 1, 1998. The
Shareholder Matters Reserve shall reduce the amount of Revolving
Credit Loans which would otherwise be available to Borrower under the
lending formulas provided in Section 2.2 hereof. The Shareholder
Matters Reserve shall continue until Borrower provides to Agent
evidence satisfactory to Agent (a) that any of the following (each, a
"Shareholder Litigation Conclusion Event") shall occur: (i) the
Shareholder Litigation has been settled by agreement with all parties,
and all claims asserted therein have been expressly released, or (ii)
any judgment entered in connection with the Shareholder Litigation is
fully and finally satisfied, or (iii) the Shareholder Litigation is
dismissed with prejudice and all time periods for appeal or
reinstatement have expired, and (b) that any indemnification
obligations of Borrower with respect to any former or current officer
or director have been satisfied or released (or shall be covered by
insurance), and the SEC Investigation has progressed to a stage where
any liability of Borrower has been ascertained or is otherwise at a
stage satisfactory to Agent, and all professional fees and expenses
related to the SEC Investigation have been paid; provided that if a
Shareholder Litigation Conclusion Event occurs during the time the SEC
Investigation is
<PAGE>
pending, the Shareholder Matters Reserve shall be reduced by
$3,000,000 and a Shareholder Matters Reserve in the amount of
$1,000,000 (or such lesser amount, if any, as Agent shall determine
based upon the status of the SEC Investigation at that time) shall
remain in effect until the date that Agent is satisfied, in its
discretion, with the status of the SEC Investigation Conclusion has
occurred.
3. SHAREHOLDER LITIGATION PAYMENTS. Borrower shall not agree to pay, or
pay, more than $4,000,000 in settlement of the Shareholder Litigation;
unless Borrower demonstrates on a pro forma basis prior to agreeing to
such a settlement, to Agent's satisfaction that Borrower, after giving
effect to such settlement payment, will: (a) have at least $2,000,000
in Excess Availability, and (b) be in compliance with the financial
covenants set forth in Section 6.1.13 of this Agreement. No payment
may be made by Borrower in settlement of the Shareholder Litigation at
any time during which an Event of Default has occurred and is
continuing under Section 7.1(a) or any Overadvance or Overline exists
under the Revolving Credit Loan, unless upon the making of such
payments, due to the contemporaneous termination of the Shareholder
Matters Reserve, such Overadvance or Overline shall no longer exist.
4. OWENS COMFORT LETTER. On or before the Closing Date, Borrower shall
have received a letter (the "OWENS COMFORT LETTER"), from
Owens-Illinois Plastics Products, Inc., in form and substance
satisfactory to Agent. In connection therewith, Borrower may pay to
Owens the proceeds of any federal income tax refunds paid to Borrower
in an amount of up to $9,000,000.
5. REAL ESTATE REFINANCING. (a) In connection with the refinancing of the
real estate secured Indebtedness of Borrower to PNC Bank and 101
Realty Associates, L.L.C., Borrower agrees that conditions precedent
to the consummation of such refinancing shall be that (i) the terms
and conditions of such refinancing shall be acceptable to the Required
Lenders (as that term is defined in the Agency Agreement), (ii) the
proceeds thereof payable by Borrower at the closing shall be no less
than the amount required to repay any outstanding Indebtedness of
Borrower to PNC Bank and/or 101 Realty Associates, L.L.C., plus all
related transactional costs and expenses, and that Borrower shall not
use any Loan proceeds in connection with the closing and payment of
any real estate related Indebtedness and expenses related to such
refinancing transactions, and (iii) all liens and security interests
of PNC Bank and 101 Realty Associates, L.L.C. in any property of
Borrower shall be terminated and released effective as of the date of
Borrower's payment of such Indebtedness, and (iv) no liens shall be
granted to any replacement real estate lender in any personal property
of Borrower or any of the Collateral.
(b) Borrower shall repay all Indebtedness of Borrower to EDA not later
than sixty (60) days after the Closing Date. With respect to the EDA, Borrower
shall upon the payment of Borrower's Indebtedness to EDA, (i) terminate all
notes, options, warrants, capital stock holdings and other instruments of
Borrower held by the EDA or First Union National Bank, (ii) pay all prepayment
penalties, fees and other amounts due EDA, (iii) deliver to Agent executed UCC
termination statements terminating all liens of record in any jurisdiction
naming EDA (or its predecessors in interest) or First Union National Bank as
secured party and Borrower as debtor, and (iv) deliver to Agent executed
instruments terminating all trademark and intellectual property liens held by
EDA.
<PAGE>
6. Environmental Matters. Within ninety (90) days after the Closing Date,
Borrower shall deliver to the "Environmental Contact" (as described
below) of Agent the following: (i) any and all reports, correspondence
or other documents relating to the soil and/or groundwater
contamination at the 1600 U.S. Route One North, North Brunswick, New
Jersey facility including, without limitation, a copy of a No Further
Action Letter from the New Jersey Department of Environmental
Protection ("NJDEP") confirming completion of the soil remediation
work at such facility, and a letter from the NJDEP approving a Natural
Attenuation Program for the groundwater contamination at such
facility; (ii) a copy of any and all reports, correspondence or other
documents relating to the subsurface investigation conducted in 1995
with respect to the Chicago facility of Borrower, together with copies
of correspondence between Dial Corporation with the Illinois
Environmental Protection Agency ("IEPA") relating to such subsurface
investigation and/or remediation of the Chicago facility; and (iii)
any administrative orders, consent orders, or other agreements by and
between the IEPA and Witco Corporation relating investigations,
remediation, or monitoring of the facility located at 6200 West 51st
Street, Chicago, Illinois. The "ENVIRONMENTAL CONTACT" of Agent to
whom such documents shall be delivered is:
FINOVA Capital Corporation
Attn: Ms. Karen Hrushka
1850 North Central Avenue
MS 1223
Phoenix, Arizona 85004
[SIGNATURE PAGES FOLLOWS]
<PAGE>
Signature Page to Schedule to Loan and Security Agreement
BORROWER: USA DETERGENTS, INC., a Delaware corporation
BIG CLOUD POWDER CORPORATION, a Delaware
corporation;
CHICAGO MANAGEMENT POWDER CORP., a Delaware
corporation
CHICAGO CONTRACT POWDER CORPORATION, an
Illinois corporation
By: /s/ Uri Evan
------------------------------------------
Uri Evan, President and Chief Executive Officer
of, and intending to legally bind, each of the
above corporations.
[Notary certification for Borrower attached]
<PAGE>
Signature Page to SCHEDULE to Loan and Security Agreement
AGENT: FINOVA CAPITAL CORPORATION
By: /s/ Ilene M. Gerber
------------------------------------------
Vice President
LENDERS: FINOVA CAPITAL CORPORATION
By: /s/ Ilene M. Gerber
------------------------------------------
Vice President
FOOTHILL CAPITAL CORPORATION
By: /s/ Unintelligible
------------------------------------------
Vice President
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.
Its Agent/Manager
By: /s/ Unintelligible
------------------------------------------
Senior Vice President
MERRILL LYNCH BUSINESS FINANCE SERVICES, INC.
By: /s/ Unintelligible
------------------------------------------
Vice President
<PAGE>
FINOVA
REVOLVING LOAN NOTE
$16,494,845
AUGUST 14, 1998
FOR VALUE RECEIVED, USA Detergents, Inc., a Delaware corporation, Big Cloud
Powder Corporation, a Delaware corporation, Chicago Management Powder Corp., a
Delaware corporation and Chicago Contract Powder Corporation, an Illinois
corporation, (individually and collectively, the "BORROWER"), promises, jointly
and severally, to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("PAYEE"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California, 90071, or at such other place or places as Payee may
from time to time designate in writing; the principal sum of SIXTEEN MILLION
FOUR HUNDRED NINETY-FOUR THOUSAND EIGHT HUNDRED FORTYFIVE DOLLARS
($16,494,845), or so much thereof as may be advanced from time to time,
together with accrued interest on the principal balance from time to time
remaining unpaid; payable monthly on the first day of each and every month,
beginning SEPTEMBER 1, 1998 and continuing on the first day of each and every
calendar month thereafter during the Initial Term and any Renewal Term. If not
sooner paid in full, the entire principal balance outstanding under this Note,
together with accrued interest thereon, shall be due and payable on SEPTEMBER
1, 2003.
Notwithstanding anything herein to the contrary, in the event that certain Loan
and Security Agreement, of even date herewith (the "LOAN AGREEMENT"), by and
between Borrower, the Lenders (as defined below) and Payee, as the contractual
representative ("AGENT"), for itself and certain other institutions from time
to time parties thereto as lenders (collectively, the "LENDERS") is terminated
by Borrower, by the Lenders or by any other person at any time for any reason
whatsoever, then the entire unpaid principal balance of this Note, together
with all accrued and unpaid interest hereon, shall become immediately due and
payable in full on the effective date of such termination, without presentment,
notice or demand of any kind. To the extent provided in the Loan Agreement, a
prepayment and/or termination fee may be due and payable upon prepayment or
termination of this Note. For administrative purposes, all payments due
hereunder will be paid directly to the Agent, unless Payee otherwise notifies
the Borrower.
This Note is issued pursuant to the Loan Agreement and is entitled to the
benefit and security of the Loan Agreement and all of the documents,
instruments and certificates issued and delivered in connection therewith. All
of the terms, covenants and conditions of the Loan Agreement and the other Loan
Documents are hereby made a part of this Note and are
<PAGE>
deemed incorporated herein in full. This Note is secured by the Collateral
described in the Loan Agreement. In the event of any inconsistency between this
Note and the Loan Agreement, the Loan Agreement shall control. Capitalized
terms which are not defined herein shall have the meanings set forth in the
Loan Agreement.
Interest shall be computed on the basis of a 360-day year for the actual number
of days elapsed and shall be paid on the daily outstanding balance of the
Revolving Credit Loans outstanding under the Loan Agreement; at the rate per
annum which is THREE-QUARTERS (.75) of a percentage point in excess of the rate
of interest per annum announced publicly by Citibank, N.A. (or any successor
thereto), from time to time, as its "prime rate" ("PRIME RATE"), which may not
be such institution's lowest rate; provided, however, (i) such rate may be
reduced if Borrower achieves certain Senior Debt Service Coverage Ratios, as
provided in Section 2.6 of the Schedule to the Loan Agreement, and (ii) upon
the occurrence and during the continuance of an Event of Default (as defined in
the Loan Agreement), interest shall accrue on the outstanding principal balance
of this Note at a default rate (the "DEFAULT RATE") per annum which is two (2)
percentage points in excess of the rate which would otherwise be applicable
thereto and shall be payable on demand. As of the date of this Note, the Prime
Rate is EIGHT AND ONE-HALF PERCENT (8 1/2%) per annum. The applicable rate of
interest assessed hereunder will be increased or decreased from time to time
hereafter in an amount equal to any increase or decrease hereafter made in the
Prime Rate. Each change in the Prime Rate shall be effective hereunder on the
first Business Day following the announcement of such change.
It is the intent of the parties to comply with the usury law of the State of
Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the maximum contract rate permitted by the Applicable
Usury Law, as provided in Section 2.9 of the Loan Agreement.
Borrower warrants and represents to Payee that Borrower will use the loans and
advances represented by this Note solely for business purposes, and consistent
with all applicable laws and statutes.
The occurrence of any Event of Default set forth in Section 7.1 of the Loan
Agreement shall constitute an "Event of Default" under this Note.
-2-
<PAGE>
Upon the occurrence of any Event of Default hereunder, (a) the entire unpaid
amount of all of the Obligations may, in accordance with Section 7.1 of the
Loan Agreement, become immediately due and payable without demand, notice or
legal process of any kind; (b) Payee and Agent may, at their option, without
demand, notice or legal process of any kind, exercise any and all rights and
remedies granted to them, respectively, by the Loan Agreement, the Loan
Documents or by any other agreement now or hereafter existing between Lenders
and/or the Agent and Borrower or between Lenders and/or the Agent and any
guarantor of part or all of Borrower's Obligations; and (c) Agent may at its
option exercise from time to time any other rights and remedies available to it
under the Uniform Commercial Code or other law of the State of Arizona.
The remedies of Agent and Payee as provided herein and in the Loan Agreement
shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of the Agent or the Lenders
as provided in the Loan Agreement. No act of omission or commission of Agent or
the Lenders, including specifically any delay or failure to exercise any right,
remedy or recourse, shall be deemed to be a waiver or release of the same, such
waiver or release to be effected only through a written document executed by
Agent or Lenders, as applicable, and then only to the extent specifically
recited therein. A waiver or release with reference to any one event shall not
be construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to a subsequent event.
Borrower waives presentment, demand and protest, notice of protest, notice of
presentment and all other notices and demands in connection with the
enforcement of Agent's and Payee's rights hereunder, except as specifically
provided and called for by this Note, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration, of
any collateral or of any person liable for payment of this Note. Any delay or
failure of Payee or Agent to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
Borrower hereby agrees to pay all costs of collection, foreclosure fees,
attorneys' fees and expert witness fees incurred by the holder of this Note,
whether or not suit is filed hereon, and all of the fees, costs and expenses
provided in the Loan Agreement.
Payee may at any time transfer this Note in accordance with the Loan Agreement
and Payee's rights in any or all Collateral securing this Note, and Payee
thereafter shall be relieved from all liability with respect to such Collateral
arising after the date of such transfer.
-3-
<PAGE>
This Note shall be binding upon Borrower and its legal representatives,
successors and assigns. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Note shall be prohibited by, or be invalid under
such law, such provision shall be severable, and shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Note.
THIS NOTE SHALL BE INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT
THE CONFLICT OF LAWS RULES) OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF
MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF PAYEE, IN ANY OTHER
COURT IN WHICH PAYEE SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER WAIVES
ANY OBJECTION OF FORUM NONCONVENIENS AND VENUE. BORROWER FURTHER WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL
DIRECTED TO BORROWER AT THE ADDRESS SET FORTH BELOW AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR UPON THE DATE
THAT THE SAME SHALL HAVE BEEN POSTED TO BORROWER'S ADDRESS. BORROWER FURTHER
WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT
ENTERED AGAINST IT. EACH OF PAYEE AND BORROWER IRREVOCABLY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS NOTE.
[SIGNATURE PAGE FOLLOWS]
-4-
<PAGE>
REVOLVING LOAN NOTE SIGNATURE PAGE
FINOVA
BORROWER:
USA DETERGENTS, INC.,
a Delaware corporation,
BIG CLOUD POWDER CORPORATION,
a Delaware corporation;
CHICAGO MANAGEMENT POWDER CORP.,
a Delaware corporation; and
CHICAGO CONTRACT POWDER CORPORATION,
an Illinois corporation.
1735 Jersey Avenue
North Brunswick, NJ 08902
By: /s/ Uri Evan
-------------------------------------------------------------------
Uri Evan, as the President and Chief Executive Officer of, and
intending to legally bind, each of the above corporations
<PAGE>
FINOVA
TERM LOAN A NOTE
$2,639,175
AUGUST 14, 1998
FOR VALUE RECEIVED, USA Detergents, Inc., a Delaware corporation, Big Cloud
Powder Corporation, a Delaware corporation, Chicago Management Powder Corp., a
Delaware corporation and Chicago Contract Powder Corporation, an Illinois
corporation, (individually and collectively, the "Borrower"), promises, jointly
and severally, to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("PAYEE"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as Payee may
from time to time designate in writing; the principal sum of TWO MILLION SIX
HUNDRED THIRTY-NINE THOUSAND ONE HUNDRED SEVENTY-FIVE DOLLARS ($2,639,175),
payable in FIFTY-NINE (59) equal monthly installments of principal in the
amount of THIRTY-ONE THOUSAND FOUR HUNDRED EIGHTEEN AND 75/100 DOLLARS
($31,418.75), on or before the first day of each month hereafter commencing
OCTOBER 1, 1998; together with payments of accrued interest on the principal
balance from time to time remaining unpaid, commencing on the first day of
SEPTEMBER, 1998 and continuing on the first day of each calendar month
thereafter through and including SEPTEMBER 1, 2003. If not sooner paid in full,
the entire principal balance outstanding under this Note, together with accrued
interest thereon, shall be due and payable on SEPTEMBER 1, 2003.
Notwithstanding anything herein to the contrary, in the event that certain Loan
and Security Agreement, of even date herewith (the "LOAN AGREEMENT"), by and
between Borrower, the Lenders (as defined below) and Payee, as contractual
representative ("AGENT"), for itself and certain other institutions from time
to time parties thereto as lenders (collectively, the "LENDERS") is terminated
by Borrower, by the Lenders or by any other person at any time for any reason
whatsoever, then the entire unpaid principal balance of this Note, together
with all accrued and unpaid interest hereon, shall become immediately due and
payable in full on the effective date of such termination, without presentment,
notice or demand of any kind. To the extent provided in the Loan Agreement, a
prepayment and/or termination fee may be due and payable upon prepayment or
termination of this Note. For administrative purposes, all payments due
hereunder will be paid directly to the Agent, unless Payee otherwise notifies
the Borrower.
<PAGE>
To the extent provided in the Loan Agreement, additional principal payments may
be required under this Note, out of Borrower's Excess Cash Flow, as described
in the Schedule to the Loan Agreement.
This Note is issued pursuant to the Loan Agreement and is entitled to the
benefit and security of the Loan Agreement and all of the documents,
instruments and certificates issued and delivered in connection therewith. All
of the terms, covenants and conditions of the Loan Agreement and the other Loan
Documents are hereby made a part of this Note and are deemed incorporated
herein in full. This Note is secured by the Collateral described in the Loan
Agreement. In the event of any inconsistency between this Note and the Loan
Agreement, the Loan Agreement shall control. Capitalized terms which are not
defined herein shall have the meanings set forth in the Loan Agreement.
Interest shall be computed on the basis of a 360-day year for the actual number
of days elapsed and shall be paid on the daily outstanding balance of the Term
A Loan outstanding under the Loan Agreement; at the rate of NINE AND 33/100
PERCENT (9.33%) per annum, computed on the basis of a 360-day year; provided,
however, upon the occurrence and during the continuance of an Event of Default
(as defined in the Loan Agreement), interest shall accrue on the outstanding
principal balance of this Note at a default rate (the "DEFAULT RATE") per annum
which is two (2) percentage points in excess of the rate which would otherwise
be applicable thereto and shall be payable on demand.
It is the intent of the parties to comply with the usury law of the State of
Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the maximum contract rate permitted by the Applicable
Usury Law, as provided in Section 2.9 of the Loan Agreement.
Borrower warrants and represents to Payee that Borrower will use the loans and
advances represented by this Note solely for business purposes, and consistent
with all applicable laws and statutes.
The occurrence of any Event of Default set forth in Section 7.1 of the Loan
Agreement shall constitute an "EVENT OF DEFAULT" under this Note.
-2-
<PAGE>
Upon the occurrence of any Event of Default hereunder, (a) the entire unpaid
amount of all of the Obligations may, in accordance with Section 7.1 of the
Loan Agreement, become immediately due and payable without demand, notice or
legal process of any kind; (b) Payee and Agent may, at their option, without
demand, notice or legal process of any kind, exercise any and all rights and
remedies granted to them, respectively, by the Loan Agreement, the Loan
Documents or by any other agreement now or hereafter existing between Lenders
and/or the Agent and Borrower or between Lenders and/or the Agent and any
guarantor of part or all of Borrower's Obligations; and (c) Agent may at its
option exercise from time to time any other rights and remedies available to it
under the Uniform Commercial Code or other law of the State of Arizona.
The remedies of Agent and Payee as provided herein and in the Loan Agreement
shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of the Agent or the Lenders
as provided in the Loan Agreement. No act of omission or commission of Agent or
the Lenders, including specifically any delay or failure to exercise any right,
remedy or recourse, shall be deemed to be a waiver or release of the same, such
waiver or release to be effected only through a written document executed by
Agent or Lenders, as applicable, and then only to the extent specifically
recited therein. A waiver or release with reference to any one event shall not
be construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to a subsequent event.
Borrower waives presentment, demand and protest, notice of protest, notice of
presentment and all other notices and demands in connection with the
enforcement of Agent's and Payee's rights hereunder, except as specifically
provided and called for by this Note, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration, of
any collateral or of any person liable for payment of this Note. Any delay or
failure of Payee or Agent to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
Borrower hereby agrees to pay all costs of collection, foreclosure fees,
attorneys' fees and expert witness fees incurred by the holder of this Note,
whether or not suit is filed hereon, and all of the fees, costs and expenses
provided in the Loan Agreement.
Payee may at any time transfer this Note in accordance with the Loan Agreement,
and Payee's rights in any or all Collateral securing this Note, and Payee
thereafter shall be relieved from all liability with respect to such Collateral
arising after the date of such transfer.
-3-
<PAGE>
This Note shall be binding upon Borrower and its legal representatives,
successors and assigns. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Note shall be prohibited by, or be invalid under
such law, such provision shall be severable, and shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Note.
THIS NOTE SHALL BE INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT
THE CONFLICT OF LAWS RULES) OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF
MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF PAYEE, IN ANY OTHER
COURT IN WHICH PAYEE SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER WAIVES
ANY OBJECTION OF FORUM NONCONVENIENS AND VENUE. BORROWER FURTHER WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL
DIRECTED TO BORROWER AT THE ADDRESS SET FORTH BELOW AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR UPON THE DATE
THAT THE SAME SHALL HAVE BEEN POSTED TO BORROWER'S ADDRESS. BORROWER FURTHER
WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT
ENTERED AGAINST IT. EACH OF PAYEE AND BORROWER IRREVOCABLY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS NOTE.
[SIGNATURE PAGE FOLLOWS]
-4-
<PAGE>
TERM LOAN A NOTE SIGNATURE PAGE
FINOVA
BORROWER:
USA DETERGENTS, INC.,
a Delaware corporation,
BIG CLOUD POWDER CORPORATION,
a Delaware corporation;
CHICAGO MANAGEMENT POWDER CORP.,
a Delaware corporation; and
CHICAGO CONTRACT POWDER CORPORATION,
an Illinois corporation.
By: /s/ Uri Evan
-------------------------------------------------------------------
Uri Evan, as the President and Chief Executive Officer of, and
intending to legally bind, each of the above corporations
<PAGE>
FINOVA
TERM LOAN B NOTE
$865,979
AUGUST 14, 1998
FOR VALUE RECEIVED, USA Detergents, Inc., a Delaware corporation, Big Cloud
Powder Corporation, a Delaware corporation, Chicago Management Powder Corp., a
Delaware corporation and Chicago Contract Powder Corporation, an Illinois
corporation, (individually and collectively, the "BORROWER"), promises, jointly
and severally, to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("PAYEE"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California, 90071, or at such other place or places as Payee may
from time to time designate in writing; the principal sum of EIGHT HUNDRED
SIXTY-FIVE THOUSAND NINE HUNDRED SEVENTY-NINE DOLLARS ($865,979), payable in
SIXTY (60) equal monthly installments of principal in the amount of FOURTEEN
THOUSAND FOUR HUNDRED THIRTY-TWO AND 98/100 DOLLARS ($14,432.98), on or before
the first day of each month hereafter commencing October 1, 1998; together with
payments of accrued interest on the principal balance from time to time
remaining unpaid, commencing on the first day of SEPTEMBER, 1998 and continuing
on the first day of each calendar month thereafter through and including
SEPTEMBER 1, 2003. If not sooner paid in full, the entire principal balance
outstanding under this Note, together with accrued interest thereon, shall be
due and payable on SEPTEMBER 1, 2003.
Notwithstanding anything herein to the contrary, in the event that certain Loan
and Security Agreement, of even date herewith (the "LOAN AGREEMENT"), by and
between Borrower, the Lenders (as defined below) and Payee, as contractual
representative ("AGENT"), for itself and certain other institutions from time
to time parties thereto as lenders (collectively, the "LENDERS") is terminated
by Borrower, by the Lenders or by any other person at any time for any reason
whatsoever, then the entire unpaid principal balance of this Note, together
with all accrued and unpaid interest hereon, shall become immediately due and
payable in full on the effective date of such termination, without presentment,
notice or demand of any kind. To the extent provided in the Loan Agreement, a
prepayment and/or termination fee may be due and payable upon prepayment or
termination of this Note. For administrative purposes, all payments due
hereunder will be paid directly to the Agent, unless Payee otherwise notifies
the Borrower.
To the extent provided in the Loan Agreement, additional principal payments may
be required under this Note, out of Borrower's Excess Cash Flow, as described
in the Schedule to the Loan Agreement.
<PAGE>
This Note is issued pursuant to the Loan Agreement and is entitled to the
benefit and security of the Loan Agreement and all of the documents,
instruments and certificates issued and delivered in connection therewith. All
of the terms, covenants and conditions of the Loan Agreement and the other Loan
Documents are hereby made a part of this Note and are deemed incorporated
herein in full. This Note is secured by the Collateral described in the Loan
Agreement. In the event of any inconsistency between this Note and the Loan
Agreement, the Loan Agreement shall control. Capitalized terms which are not
defined herein shall have the meanings set forth in the Loan Agreement.
Interest shall be computed on the basis of a 360-day year for the actual number
of days elapsed and shall be paid on the daily outstanding balance of the Term
Loan B outstanding under the Loan Agreement; at the rate per annum which is TWO
(2%) PERCENTAGE POINTS in excess of the rate of interest per annum announced
publicly by Citibank, N.A. (or any successor thereto), from time to time, as
its "prime rate" ("PRIME RATE"), which may not be such institution's lowest
rate; provided, however, upon the occurrence and during the continuance of an
Event of Default (as defined in the Loan Agreement), interest shall accrue on
the outstanding principal balance of this Note at a default rate (the "DEFAULT
RATE") per annum which is TWO (2) percentage points in excess of the rate which
would otherwise be applicable thereto and shall be payable on demand. As of the
date of this Note, the Prime Rate is EIGHT AND ONE-HALF PERCENT (8 1/2%) per
annum. The applicable rate of interest assessed hereunder will be increased or
decreased from time to time hereafter in an amount equal to any increase or
decrease hereafter made in the Prime Rate. Each change in the Prime Rate shall
be effective hereunder on the first Business Day following the announcement of
such change.
It is the intent of the parties to comply with the usury law of the State of
Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the maximum contract rate permitted by the Applicable
Usury Law, as provided in Section 2.9 of the Loan Agreement.
Borrower warrants and represents to Payee that Borrower will use the loans and
advances represented by this Note solely for business purposes, and consistent
with all applicable laws and statutes.
The occurrence of any Event of Default set forth in Section 7.1 of the Loan
Agreement shall constitute an "EVENT OF DEFAULT" under this Note.
-2-
<PAGE>
Upon the occurrence of any Event of Default hereunder, (a) the entire unpaid
amount of all of the Obligations may, in accordance with Section 7.1 of the
Loan Agreement, become immediately due and payable without demand, notice or
legal process of any kind; (b) Payee and Agent may, at their option, without
demand, notice or legal process of any kind, exercise any and all rights and
remedies granted to them, respectively, by the Loan Agreement, the Loan
Documents or by any other agreement now or hereafter existing between Lenders
and/or the Agent and Borrower or between Lenders and/or the Agent and any
guarantor of part or all of Borrower's Obligations; and (c) Agent may at its
option exercise from time to time any other rights and remedies available to it
under the Uniform Commercial Code or other law of the State of Arizona.
The remedies of Agent and Payee as provided herein and in the Loan Agreement
shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of the Agent or the Lenders
as provided in the Loan Agreement. No act of omission or commission of Agent or
the Lenders, including specifically any delay or failure to exercise any right,
remedy or recourse, shall be deemed to be a waiver or release of the same, such
waiver or release to be effected only through a written document executed by
Agent or Lenders, as applicable, and then only to the extent specifically
recited therein. A waiver or release with reference to any one event shall not
be construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to a subsequent event.
Borrower waives presentment, demand and protest, notice of protest, notice of
presentment and all other notices and demands in connection with the
enforcement of Agent's and Payee's rights hereunder, except as specifically
provided and called for by this Note, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration, of
any collateral or of any person liable for payment of this Note. Any delay or
failure of Payee or Agent to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
Borrower hereby agrees to pay all costs of collection, foreclosure fees,
attorneys' fees and expert witness fees incurred by the holder of this Note,
whether or not suit is filed hereon, and all of the fees, costs and expenses
provided in the Loan Agreement.
Payee may at any time transfer this Note in accordance with the Loan Agreement,
and Payee's rights in any or all Collateral securing this Note, and Payee
thereafter shall be relieved from all liability with respect to such Collateral
arising after the date of such transfer.
-3-
<PAGE>
This Note shall be binding upon Borrower and its legal representatives,
successors and assigns. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Note shall be prohibited by, or be invalid under
such law, such provision shall be severable, and shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Note.
THIS NOTE SHALL BE INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT
THE CONFLICT OF LAWS RULES) OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF
MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF PAYEE, IN ANY OTHER
COURT IN WHICH PAYEE SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER WAIVES
ANY OBJECTION OF FORUM NONCONVENIENS AND VENUE. BORROWER FURTHER WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL
DIRECTED TO BORROWER AT THE ADDRESS SET FORTH BELOW AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR UPON THE DATE
THAT THE SAME SHALL HAVE BEEN POSTED TO BORROWER'S ADDRESS. BORROWER FURTHER
WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT
ENTERED AGAINST IT. EACH OF PAYEE AND BORROWER IRREVOCABLY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS NOTE.
[SIGNATURE PAGE FOLLOWS]
-4-
<PAGE>
TERM LOAN B NOTE SIGNATURE PAGE
FINOVA
BORROWER:
USA DETERGENTS, INC.,
a Delaware corporation,
BIG CLOUD POWDER CORPORATION,
a Delaware corporation;
CHICAGO MANAGEMENT POWDER CORP.,
a Delaware corporation; and
CHICAGO CONTRACT POWDER CORPORATION,
an Illinois corporation.
By: /s/ Uri Evan
-------------------------------------------------------------------
Uri Evan, as the President and Chief Executive Officer of, and
intending to legally bind, each of the above corporations
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL INNOVATORS
AGENCY AGREEMENT
FINOVA Capital Corporation, a Delaware corporation
as AGENT AND LENDER
and the other LENDERS named herein
USA Detergents, Inc., a Delaware corporation ("USA")
Big Cloud Powder Corporation, a Delaware corporation ("POWDER")
Chicago Management Powder Corp., a Delaware corporation ("MANAGEMENT")
Chicago Contract Powder Corporation, an Illinois corporation ("CONTRACT")
BORROWER
$48,500,000
CREDIT LIMIT
AUGUST 14, 1998
DATE
- -------------------------------------------------------------------------------
CORPORATE FINANCE
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
1. Definitions..............................................................................................1
1.1 Definitions.....................................................................................1
2. Commitments and Commitment Percentages...................................................................5
2.1 Commitments to Make Revolving Credit Loans......................................................5
2.2 Commitment to Make Term Loans...................................................................5
2.3 Commitments to Participate in L/C Drawings......................................................5
2.4 Nature of Obligations of Lenders................................................................5
2.5 Commitments: Dollar Commitments and Commitment Percentages.....................................6
3. Funding and Distributions................................................................................6
3.1 Funding Procedures; Settlement..................................................................6
3.2 Agent Advances..................................................................................7
3.3 Cover Loans by Agent............................................................................8
3.4 Distributions of Payments......................................................................8
4. Applications of Payments, Etc............................................................................9
4.1 Setoff; Ratable Payments........................................................................9
4.2 Application of Payments........................................................................10
5. The Agent...............................................................................................10
5.1 Appointment of Agent; Nature of Relationship...................................................10
5.2 Powers of Agent................................................................................11
5.3 General Immunity...............................................................................11
5.4 Relations Among Lenders........................................................................11
5.5 Reliance by Agent; Right of Non-Action.........................................................12
5.6 Agents Rights as a Lender......................................................................12
5.7 No Responsibility for Certain Matters..........................................................12
5.8 Non-Reliance on Agent and Other Lenders........................................................12
5.9 Employment of Agents and Counsel...............................................................13
5.10 Distributions of Notices and of Documents......................................................13
5.11 Concerning Collateral..........................................................................13
5.12 Concerning Distributions.......................................................................14
5.13 The Agent's Reimbursement and Indemnification..................................................15
5.14 Resignation of Agent...........................................................................15
5.15 Actions Affecting Agent........................................................................16
6. Amendments -- Waivers...................................................................................16
6.1 Amendments and Waivers.........................................................................16
6.2 Take-Out Of Lender.............................................................................17
<PAGE>
7. Assignments and Participations..........................................................................17
7.1 In General.....................................................................................17
7.2 Assignments....................................................................................18
7.3 Participations.................................................................................19
8. Miscellaneous...........................................................................................20
8.1 Confidential Information.......................................................................20
8.2 Dispute Resolution; WAIVER OF JURY TRIAL.......................................................20
8.3 Notices........................................................................................21
</TABLE>
<PAGE>
AGENCY AGREEMENT
THIS AGREEMENT is made as of August 14, 1998, among:
FINOVA Capital Corporation, Foothill Capital Corporation,
First Source Financial, L.L.C. and Merrill Lynch Business
Financial Services, Inc.; and those other Persons (if any)
who become "LENDERS" as provided in, and pursuant to, Section
7, below;
And
FINOVA Capital Corporation, a Delaware corporation, as
contractual representative AGENT for such "Lenders" having
offices at 355 South Grand Avenue, Suite 2400, Los Angeles,
California 90071;
And
The BORROWER named on the cover page hereof, jointly and
severally
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
Recitals:
(i) Borrower has entered into that certain Loan and Security
Agreement dated as of August 14, 1998 with FINOVA Capital Corporation, in its
capacity as Agent (as hereinafter defined) for itself and the Lenders; and
(ii) Borrower has selected Agent to seek and arrange
additional commitments from such Lenders to provide pro rata shares of the
Loans comprising the $48,500,000 Total Facility described in the Loan
Agreement; and
(iii) The Lenders under the Loan Agreement desire to enter
into this Agreement with Agent in connection with the Loan Agreement.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
1.1 Definitions. Terms defined in the Loan Agreement (defined below) and used
herein have the respective meanings given those terms therein and the following
terms have the following meanings:
"AGENT": FINOVA Capital Corporation, in its capacity as contractual
representative for itself and the Lenders as set forth in Section 5.1 of this
Agreement, and any successor Agent appointed pursuant to the provisions of
Section 5.14 hereof.
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"AGENT ADVANCES": Individually and collectively, Agent Administrative
Advances and Agent Availability Advances, as described in Section 3.2 hereof.
"AGENT ADMINISTRATIVE ADVANCES": Defined in Section 3.2(A).
"AGENT AVAILABILITY ADVANCES": Defined in Section 3.2(B).
"ASSIGNEE LENDER": Defined in Section 7.2.
"ASSIGNING LENDER": Defined in Section 7.2.
"ASSIGNMENT EFFECTIVE DATE": Defined in Section 7.2.
"AVAILABILITY": With respect to Revolving Credit Loans, the amount
determined, on any day, in accordance with Section 2.2 of the Schedule to the
Loan Agreement.
"BORROWER": USA Detergents, Inc., a Delaware corporation, Big Cloud
Powder Corporation, a Delaware corporation, Chicago Management Powder Corp., a
Delaware corporation and Chicago Contract Powder Corporation, an Illinois
corporation, jointly and severally, as coborrowers; and references to
"Borrower" herein shall mean each of the foregoing corporations individually
and collectively, as the context requires; collectively having their principal
executive offices at 1735 Jersey Avenue, North Brunswick, New Jersey 08902.
"COLLATERAL": Has the meaning set forth in Section 3.1 of the Loan
Agreement.
"COMMITMENT": The referenced "Dollar Commitment" and "Commitment
Percentage" as indicated in Section 2.5, below (as such amounts may change in
accordance with Section 7, below).
"COMMITMENT PERCENTAGE": As indicated in Section 2.5, below (as such
Percentage may change in accordance with Section 7.2, below).
"CONCENTRATION ACCOUNT": That certain Blocked Account or Dominion
Account established by Agent pursuant to Section 2.10 of the Loan Agreement.
"CONSENT": Actual consent given by a Lender to the Agent or the
passage of Seven (7) days from a Lender's receipt of notice from the Agent of a
proposed course of action to be followed by the Agent without such Lender
giving the Agent written notice of the Lender's objection to such course of
action.
"COVER LOANS": The amount which the Agent makes available to the
Borrower, as provided in Section 3.2, below, which amount a Lender was
obligated to provide to the Agent in accordance with Section 2.5, below.
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"DELINQUENT LENDER": Defined in Section 3.3.
"DOLLAR COMMITMENT": As indicated in Section 2.5 (as such amount may
change in accordance with Section 7, below).
"ELIGIBLE ASSIGNEE": A bank, insurance company, or other company
engaged in the business of making commercial loans, that has combined capital
and surplus of at least $250 million, and either (i) is an entity created or
organized under the laws of the United States of America, or any political
subdivision thereof, or (ii) is an entity entitled to receive payments of
interest hereunder without deduction or withholding of United States of America
federal income tax.
"FEES": Collectively, the Unused Line Fees, and any L/C Fees,
Termination Fees and Make Whole Premiums, to the extent applicable, all as set
forth in the Schedule to the Loan Agreement.
"INDEBTEDNESS": As defined in the Loan Agreement.
"L/C DRAWING": Any honoring of any L/C by the L/C Issuer.
"L/C FEE": As defined in the Loan Agreement.
"L/C ISSUER": FINOVA Capital Corporation or any other Lender, as
provided in Section 2.4 the Loan Agreement.
"L/C ISSUER FEE": As defined in the Loan Agreement.
"LENDERS", "LENDER": In the plural: Collectively, those Persons who
are or become "Lenders" as provided in, and pursuant to, Section 7, below. In
the singular: Each of the Lenders.
"LETTER OF CREDIT": Any letter of credit to be issued by L/C Issuer,
as provided in the Loan Agreement.
"LOAN": Any loan or advance under the Total Facility, as described in
the Loan Agreement.
"LOAN AGREEMENT": The Loan and Security Agreement dated of even date
herewith, together with the Schedule thereto among the Borrowers, on the one
hand, and the Agent and the Lenders on the other, as may be amended or modified
from time to time.
"LOAN DOCUMENTS": Defined in the Loan Agreement.
"NOTE": Any promissory note evidencing any portion of any of the
Loans.
"NOTICE ADDRESS": With respect to the Agent and FINOVA Capital
Corporation, as provided in Section 8.3. With respect to the other Lenders and
any other Person who becomes a "Lender"
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pursuant to Section 7, below, as provided (i) on the signature page hereto, or
(ii) in the Notice of Assignment, as such address is changed from time to time
in accordance with Section 8.3.
"NOTICE OF ASSIGNMENT": Defined in Section 7.2(B).
"OBLIGATIONS": Defined in the Loan Agreement.
"PARTICIPANTS": Defined in Section 7.3.
"PERSON": Defined in the Loan Agreement.
"REGISTER": Defined in Section 7.2(C).
"REQUIRED LENDERS" means Lenders whose Commitment Percentages, in the
aggregate, are greater than fifty percent (50%); provided, however, that, if
any of the Lenders shall then be a Delinquent Lender, "Required Lenders" means
Lenders whose Commitment Percentages represent greater than fifty percent (50%)
of the aggregate Commitment Percentages of such Lenders excluding Delinquent
Lenders; provided further, however, that, if the Commitments have been
terminated pursuant to the terms of the Loan Agreement, "Required Lenders"
means Lenders whose ratable shares are greater than fifty percent (50%) of the
aggregate principal balance of all Loans then outstanding excluding any
outstanding Loans of any Delinquent Lenders.
"REVOLVING CREDIT LOAN": Collectively, (i) any Loan described as a
Revolving Credit Loan in Section 2.2 of the Schedule to Loan Agreement, and
(ii) any Loan described as an Agent Advance in Section 3.2 hereof.
"SETTLEMENT DATE": Defined in Section 3.1.
"SCHEDULE": That certain Schedule to Loan and Security Agreement,
attached to and forming an integral part of the Loan Agreement.
"TERM LOAN": Collectively, (i) that certain Term Loan A, in the
original principal amount of $6,400,000, and (ii) that certain Term Loan B, in
the original principal amount of $2,100,000, as described in Section 2.2 of the
Schedule to the Loan Agreement.
"TOTAL FACILITY": Loans in an aggregate maximum principal amount of
$48,500,000, consisting of (i) Revolving Credit Loans in a maximum aggregate
principal amount of $40,000,000, (ii) a Term Loan A in the original principal
amount of $6,400,000, and (iii) a Term Loan B in the original principal amount
of $2,100,000, as set forth in Section 2.1 of the Schedule to the Loan
Agreement.
"TRANSFER": Wire transfer pursuant to the wire transfer system
maintained by the Board of Governors of the Federal Reserve Board, or as
otherwise may be agreed to from time to time by the
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<PAGE>
Agent and the subject Lender. Such wire transfer to the Agent and FINOVA
Capital Corporation shall be in accordance with the following wire instructions
or, with respect to the other Lenders or any other Person who becomes a
"Lender" pursuant to Section 7, below the wire instructions given by such
Lender or Person to the Agent (which instructions, in each instance, may be
revised by written notice given, with respect to such wire instructions, by
that Person to the Agent):
To the Agent: Chase Manhattan Bank
ABA #021000021
for account of: FINOVA Capital Corporation
Acct. #808-011812
Ref: USA Detergents, Inc.
Lender Name: [___________]
Attn: Maureen Brown
2. COMMITMENTS AND COMMITMENT PERCENTAGES
2.1 Commitments to Make Revolving Credit Loans. On and after the Closing Date
and during the Initial Term and any Renewal Term, each Lender shall make
available to the Borrower, through the Agent, as provided herein, that Lender's
Commitment Percentage of the Revolving Credit Loans, up to the maximum amount
of that Lender's Dollar Commitment as set forth in Section 2.5(A) below.
2.2 Commitment to Make Term Loans. On the Closing Date, each Lender shall make
available to Borrower, through the Agent, as provided herein, that Lender's
Dollar Commitment equal to the amount set forth in Section 2.5(A) below for
each of Term Loan A and Term Loan B.
2.3 Commitments to Participate in L/C Drawings. Each Lender shall make
available to the Borrower, through the Agent, as provided herein, that Lender's
Commitment Percentage of each L/C Drawing (to the extent that such L/C Drawing
is not "covered" by, or reserved under, the Revolving Credit Loan as provided
in the Loan Agreement).
2.4 Nature of Obligations of Lenders. The obligations of the Lenders hereunder
are several. The failure of any Lender to fulfill that Lender's obligations
hereunder shall not result in any other Lender becoming obligated to advance
more than its Commitment Percentage or Dollar Commitment of the Revolving
Credit Loans or Term Loans or its Commitment Percentage of any L/C Drawing.
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2.5 Commitments: Dollar Commitments and Commitment Percentages.
(a) The following table sets forth the "Dollar Commitment" and
"Commitment Percentage" for each of the parties hereto:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Dollar Commitment
- -------------------------------------------------------------------------------------------------------------------
Revolving
Credit Term Term Commitment
Lender Loans Loan A Loan B Total Percentage
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINOVA Capital
Corporation $16,494,846 $2,639,175 $865,979 $20,000,000 41.24%
- -------------------------------------------------------------------------------------------------------------------
Foothill Capital
Corporation $9,072,165 $1,451,546 $476,289 $11,000,000 22.68%
- -------------------------------------------------------------------------------------------------------------------
First Source
Financial LLP $8,247,422 $1,319,588 $432,990 $10,000,000 20.62%
- -------------------------------------------------------------------------------------------------------------------
Merrill Lynch
Business
Financial
Services, Inc. $6,185,567 $989,691 $324,742 $7,500,000 15.46%
- -------------------------------------------------------------------------------------------------------------------
Total $40,000,000 $6,400,000 $2,100,000 $48,500,000 100.00%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) The Dollar Commitments, and Commitment Percentages of each Lender
are subject to change as provided in Section 7.2, below.
3. FUNDING AND DISTRIBUTIONS
3.1 Funding Procedures; Settlement.
(a) The Agent shall advise each of the Lenders, no later than 3:00 PM,
that a Revolving Credit Loan is to be made on that date. Such advice, in each
instance, may be by telephone, provided that any such telephonic advice shall
be confirmed in writing on the same business day and shall include reference
(as applicable) to the amount of the proposed Revolving Credit Loan.
(b) The Agent shall advise the L/C Issuer of each request by the
Borrower for the issuance of an L/C.
(c) The amount of each Lender's Revolving Credit Loans and Term Loans
shall be computed WEEKLY (or more frequently in the Agent's discretion) net of
repayments received by the Agent as of 5:00 P.M. on the last Business Day of
the period specified by the Agent (such date, the "SETTLEMENT DATE").
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(d) The Agent shall deliver to each of the Lenders promptly after the
Settlement Date a summary statement of the account of outstanding Revolving
Credit Loans, including, without limitation Agent Advances and Term Loans for
the period, the amount of repayments received for the period, and on a monthly
basis the amount allocated to each Lender of the interest and Fees for the
period.
(e) In accordance with the application of payments provisions set
forth in Section 4.2, as reflected on the summary statement, (i) the Agent
shall Transfer on a monthly basis to each Lender its pro rata share of interest
and Fees actually received; and (ii) each Lender shall Transfer to the Agent,
or the Agent shall Transfer to each Lender, on a weekly basis such amounts as
are necessary to insure that, after giving effect to all such Transfers, the
amount of Revolving Credit Loans and Term Loans made by each Lender shall be
equal to such Lender's Commitment Percentage of the aggregate amount of
Revolving Credit Loans and Term Loans, respectively, outstanding as of such
Settlement Date. If the summary statement requires Transfers to be made to the
Agent by the Lenders and is received by the Lenders prior to 12:00 noon on a
Business Day, such transfers shall be made in immediately available funds no
later than 3:00 P.M. that day; and, if received after 12:00 noon, then no later
than 3:00 P.M. on the next Business Day. The obligation of each Lender to
Transfer such funds is irrevocable, unconditional and without recourse to or
warranty by the Agent.
3.2 Agent Advances. The Agent is authorized by the Lenders, but is not
obligated, to make certain Revolving Credit Loans ("AGENT ADVANCES") in the
form of Agent Administrative Advances or Agent Availability Advances, which
shall be subject to periodic settlement with the Lenders in accordance with
Section 3.1(E) hereof, in the following circumstances:
(a) For administrative convenience, the Agent may, but is not
obligated to, make Agent Advances up to but not exceeding the amount of
Borrower's Availability ("AGENT ADMINISTRATIVE ADVANCES"), in reliance upon the
actual or deemed representations of Borrower pursuant to the Loan Agreement
that the conditions for Borrowing are satisfied.
(b) Agent may, but is not obligated to, make Agent Advances to
Borrower which result in the aggregate principal balance of the Revolving
Credit Loans exceeding the amount of Borrower's Availability ("AGENT
AVAILABILITY ADVANCES"), provided that in those circumstances, the principal
balance of the Revolving Credit Loans made in the form of Agent Availability
Advances may not exceed 10% of Availability at any time, and may not so exceed
Availability for more than ninety (90) consecutive Business Days, unless the
Required Lenders otherwise agree to extend such period. For purposes of
determining whether the principal balance of the Revolving Credit Loans so
exceeds Availability for more than ninety (90) consecutive Business Days, any
reduction of the Revolving Credit Loans to, or below, Availability must occur
for ten (10) consecutive Business Days in order for such reduction to terminate
the running of the ninety (90) day period.
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3.3 Cover Loans by Agent.
(a) In all circumstances, the Agent may (i) assume that each Lender
timely shall make available to the Agent that Lender's Commitment Percentage of
each Revolving Credit Loan, each Term Loan and, to the extent not "covered" by
or reserved under the Revolving Credit Loan, of each L/C Drawing, (ii) in
reliance upon such assumption, make available the corresponding amount to the
Borrower, and (iii) assume that each Lender timely shall make available to the
Agent all other amounts which that Lender is obligated to pay hereunder or
under the Loan Documents.
(b) In the event that, in reliance upon such assumptions, the Agent
makes available a Lender's Commitment Percentage of one or more Revolving
Credit Loans, Term Loans, L/C Drawings, or any other amount due hereunder or
under the Loan Documents, which amount a Lender (a "DELINQUENT LENDER") fails
to provide to the Agent within One (1) Business Day of written notice of such
failure, then (i) the amount which had been made available by the Agent is a
"Cover Loan", (ii) all interest paid by the Borrower on account of the
Revolving Credit Loan, Term Loans or coverage of the subject L/C Drawing which
consist of the Cover Loan shall be retained by the Agent, (iii) the Delinquent
Lender shall pay to the Agent, on demand, interest (based on a 360 day year and
actual days elapsed) at a rate equal to the Prime Rate on the principal balance
of the Cover Loan, from the date of the making of such Cover Loan until repaid,
(iv) the Agent shall succeed to (a "DELINQUENT LENDER SHARE") all rights to
payment to which the Delinquent Lender otherwise would have been entitled
hereunder in respect to the Delinquent Lender's share of all other Obligations
pursuant to the terms of this Agreement, and (v) the Delinquent Lender shall
not be relieved of any obligation of such Delinquent Lender hereunder (all and
each of which shall constitute continuing obligations on the part of any
Delinquent Lender) unless and until the aggregate of the following have been
Transferred to Agent by the Delinquent Lender (or otherwise paid through
payments or distributions from Borrower) at which time such Lender shall no
longer be deemed a Delinquent Lender hereunder: (x) the Cover Loan, plus (y)
the aggregate of the amount of interest payable under this Section 3.3(B)(III),
plus (z) any costs and expenses as may be incurred by the Agent in connection
therewith.
3.4 Distributions of Payments. Except as otherwise provided in Section 3.3
above (which relates to Cover Loans) and in Section 4.2 below (Application of
Payments) the Agent promptly shall distribute to the respective Lenders, as
provided in this Section, payments made by the Borrower pursuant to the Loan
Agreement, to the extent such payments are actually received and collected by
the Agent.
(a) The Agent shall distribute to each Lender, as and when received
and collected from the Borrower, to the respective extent of their pro rata
share therein, (i) interest on the Revolving Credit Loans, (ii) interest
payments on the Term Loans, and (iii) principal payments on the Term Loans, in
accordance with the settlement provisions of Section 3.1(E). For purposes of
calculating interest due to any Lender, (A) each Lender shall be entitled to
receive interest on the amount of Loans actually advanced by such Lender
(including Agent Advances) outstanding during the applicable period covered by
the interest payment made by the Borrower; and (B) interest shall accrue
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<PAGE>
from and including the date Loans are advanced, excluding the date such Loans
are either repaid by the Borrowers or, if later, actually settled under Section
3.1. Any net principal reductions and collections received by the Agent in
accordance with the Loan Documents prior to the Settlement Date shall not
reduce or increase any Lender's outstanding Revolving Credit Loans (other than
FINOVA Capital Corporation) until the Agent distributes to the Lender its pro
rata share thereof in accordance with the Settlement provisions of Section
3.1(E).
(b) The Agent shall distribute those closing fees due to the Lenders
in accordance with the arrangements agreed to by the Agent and each Lender
within two (2) Business Days after the Closing Date.
(c) The Agent shall distribute any payment to Agent of the Fees, to
Lenders based on their respective pro rata share in accordance with Section 2.6
of the Loan Agreement.
(d) No Lender shall have any interest in, or right to receive any part
of, the Agent's Fee, any Examination Fee or any Collateral Monitoring Fee to be
paid by the Borrower to Agent pursuant to the Loan Agreement or to any "float"
provided in Section 2.10(B) of the Loan Agreement.
(e) Any amount received by the Agent or by any Lender as reimbursement
for any cost or expense (including without limitation, attorneys' reasonable
fees) incurred with respect to, or on account of, the relationship contemplated
by the Loan Agreement shall be distributed to, or retained by, the Agent or the
Lenders on account of which such reimbursement was made.
4. APPLICATIONS OF PAYMENTS, ETC.
4.1 Setoff; Ratable Payments.
(a) In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Event of Default occurs and is continuing,
any indebtedness from any Lender to the Borrower (including all account
balances, whether provisional or final and whether or not collected or
available) may be offset and applied toward the payment of the Obligations
owing to such Lender, whether or not the Obligations, or any part hereof, shall
then be due. Each Lender exercising such rights shall notify the Agent thereof
and any amount received as a result of the exercise of such rights shall be
shared or reallocated pro rata by the Lenders in accordance with Section 4.1(B)
hereof.
(b) If any Lender, whether by setoff or otherwise, has payment made to
it upon its Loans in a greater proportion than its Commitment Percentage, such
Lender agrees, promptly upon demand, to purchase a portion of the Loans held by
the other Lenders so that after such purchase each Lender will hold its
Commitment Percentage of such Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such collateral
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<PAGE>
ratably in proportion to the obligations owing to them. In case any such
payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
4.2 Application of Payments. Agent shall apply all payments and prepayments in
respect of any Loans and all proceeds of Collateral in respect of the
Obligations in the following order:
(i) first, to the payment of (first) any Cover Loans and any
costs and expenses as may be incurred by the Agent in connection therewith, to
the full extent of the Delinquent Lender Shares, and (second) to the payment of
any Agent Advances then outstanding;
(ii) second, to pay Obligations in respect of any fees,
expense reimbursements or indemnities then due to the Agent;
(iii) third, to pay Obligations in respect of any Fees,
expenses, reimbursements or indemnities then due to the Lenders and any L/C
Issuer;
(iv) fourth, to the pro rata payment of accrued and unpaid
interest on (first) the Revolving Credit Loan, (second) Term Loan A, and
(third) Term Loan B;
(v) fifth, to the pro rata payment or prepayment of the
unpaid principal balance of the Revolving Credit Loan;
(vi) sixth, to provide required cash collateral, if required
pursuant to the Loan Agreement, for any Letters of Credit;
(vii) seventh, to the unpaid principal balance of (first)
Term Loan B, and (second) Term Loan A; and
(viii) eighth, as provided under applicable law.
The order of priority set forth in this Section 4.2 and the related provisions
of this Agreement are set forth solely to determine the rights and priorities
of the Agent, the Lenders and the L/C Issuer as among themselves. The order of
priority set forth in clauses (iii) through (vii) of this Section 4.2 may at
any time and from time to time changed by the Required Lenders (a) with the
consent of Borrower if no Event of Default exists, and (b) without the
necessity of notice to or Consent of or approval by the Borrower, or any other
Person during the existence of an Event of Default. The order of priority set
forth in clauses (i) through (ii) of this Section 4.2 may be changed only with
the prior written consent of the Agent.
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5. THE AGENT
5.1 Appointment of Agent; Nature of Relationship. FINOVA Capital Corporation is
hereby appointed and authorized by each of the Lenders to act as the
contractual administrative and collateral representative of such Lender and as
arranger and syndication representative (collectively, "Agent") with the rights
and duties expressly set forth in this Agreement in respect of the Loan
Agreement and the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express terms and conditions contained in
this Agreement. Notwithstanding the use of the defined term "Agent", it is
expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement and that the Agent
is merely acting as the contractual representative of the Lenders with only
those duties as are expressly set forth in this Agreement and the Loan
Documents. In its capacity as the Lenders' contractual representative, the
Agent (i) does not assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-105 of the
Uniform Commercial Code and (iii) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the Loan Documents. Each of the Lenders agrees to assert no claim
against the Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender hereby waives.
5.2 Powers of Agent. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties or any obligation to the Lenders to take any
action hereunder or under any of the Loan Documents except any action expressly
required to be taken by the Agent as set forth in this Agreement or any of the
Loan Documents. Without limiting the foregoing, the Agent is hereby authorized
to execute and deliver the Loan Agreement and the other Loan Documents and all
instruments and certificates relating thereto, in each case, in substantially
the same form as last distributed to the Lenders prior to the Closing Date, and
Agent is hereby authorized to enter into any amendments thereto on behalf of
each of the Lenders, subject to any applicable directions of the Lenders or the
Required Lenders pursuant to Section 6.1 hereof.
5.3 General Immunity. Neither the Agent, nor any of its directors, officers, or
employees shall be responsible for any action taken or omitted to be taken by
any of them nor for any action taken or omitted to be taken in connection
herewith, or with respect to the Loans contemplated by the Loan Agreement,
except for any action taken or omitted to be taken as to which a final judicial
determination has been or is made (in a proceeding in which such Person has had
an opportunity to be heard) that such Person had acted in a grossly negligent
manner or in willful misconduct.
5.4 Relations Among Lenders. The Agent shall have the exclusive right on behalf
of the Lenders to enforce the payment of the principal of and interest on any
Loan after the date such principal or interest has become due and payable
pursuant to the terms of the Loan Agreement or the other Loan Documents. Except
with respect to the exercise of set-off rights of any Lender in accordance with
Section 4.1(A) above, the proceeds of which shall be applied in accordance with
this Agreement, each
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<PAGE>
Lender agrees that it will not take any action, nor institute any actions or
proceedings, against the Borrower or with respect to any Collateral or any Loan
Document, it being understood and agreed that such rights and remedies may be
exercised solely by the Agent for the benefit of the Lenders, upon the terms
set forth in the Loan Documents. The Lenders are not partners or coventurers,
and no Lender shall be liable for the acts or omissions of, or (except as
otherwise set forth herein in case of the Agent) authorized to act for, any
other Lender.
5.5 Reliance by Agent; Right of Non-Action. The Agent shall be entitled to rely
upon any certificate, notice or other document (including any cable, telegram,
telex, or facsimile) believed by the Agent to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of attorneys, accountants and other experts selected
by the Agent. As to any matters not expressly provided for in this Agreement,
any Loan Document, or in any other document referred to therein, the Agent
shall in all events be fully protected in acting, or in refraining from acting,
in accordance with the Consent of the Required Lenders or Unanimous Consent, as
applicable. Instructions given with such Consent, as applicable, shall be
binding on all of the Lenders. The Agent shall be fully justified in failing or
refusing to take action under this Agreement or any Loan Document on behalf of
any Lender unless the Agent shall (i) receive such clear, unambiguous, written
instructions as the Agent deems appropriate, and (ii) be indemnified to the
Agent's satisfaction by the Lenders against any and all liability and expense
which may be incurred by the Agent by reason of taking or continuing to take
any such action, unless such action had been grossly negligent or in willful
misconduct.
5.6 Agents Rights as a Lender. The Lenders recognize that FINOVA Capital
Corporation is serving as Agent for the Lenders and that FINOVA Capital
Corporation itself is a Lender; and the Lenders consent to same and waive any
claims or defenses which they might have on account thereof, including, without
limitation, any claims of conflict of interest. The Agent, in its separate
capacity as a Lender, shall have the same rights and powers hereunder as any
other Lender.
5.7 No Responsibility for Certain Matters. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into, or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
thereunder; (ii) the performance or observance of any of the covenants or
agreements of Borrower under any Loan Document; or the satisfaction of any
condition specified in the Loan Agreement; (iii) the existence or possible
existence of any Event of Default or (iv) the validity, effectiveness or
genuineness of any Loan Document or any other instrument or writing furnished
in connection therewith. The Agent shall not be responsible to any Lender for
any recitals, statements, representations or warranties in any of the Loan
Documents, for the perfection or priority of any of the liens on any of the
Collateral, or for the execution, effectiveness, genuineness, validity,
legality, enforceability, collectibility, or sufficiency of any of the Loan
Documents or the transactions contemplated thereby, or for the financial
condition of Borrower or any of its Subsidiaries.
12
<PAGE>
5.8 Non-Reliance on Agent and Other Lenders.
(a) Each Lender represents to all other Lenders and to the Agent that
such Lender (i) independently and without reliance on any representation or act
by any Agent or by any other Lender, and based on such documents and
information as that Lender has deemed appropriate, has made such Lender's own
appraisal of the financial condition and affairs of the Borrowers and decision
to enter into this Agreement and the Loan Documents, and (ii) has relied upon
that Lender's review of the Loan Documents and such review of the Loan
Documents by counsel to that Lender as that Lender deemed appropriate under the
circumstances.
(b) Each Lender agrees that such Lender, independently and without
reliance upon any Agent or any other Lender, and based upon such documents and
information as such Lender shall deem appropriate at the time, will continue to
make such Lender's own appraisals of the financial condition and affairs of the
Borrower when determining whether to take or not to take any discretionary
action under this Agreement or any other Loan Document.
(c) The Agent, in the discharge of the Agent's duties hereunder, shall
not be required to make inquiry of, or to inspect the properties or books of,
any Person.
(d) Except for notices, reports, and other documents and information
expressly required to be furnished to the Lenders by the Agent hereunder (see
Section 5.10, below), the Agent shall not have any affirmative duty or
responsibility to provide any Lender with any credit or other information
concerning any Person, which information may come into the possession of the
Agent or any of its affiliates.
(e) Each Lender shall have reasonable access to all documents relating
to the Agent's performance of the Agent's duties hereunder at such Lender's
request.
5.9 Employment of Agents and Counsel. Agent may employ attorneys, accountants,
and other professionals and agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such attorneys,
accountants, and other professionals or agents or attorneys-in-fact selected by
the Agent with reasonable care. No such attorney, accountant, other
professional, agent or attorney in fact shall be responsible for any action
taken or omitted to be taken by another such Person.
5.10 Distributions of Notices and of Documents. The Agent will forward to each
Lender, promptly after the Agent's receipt thereof, a copy of each notice or
other documents furnished to the Agent pursuant to the Loan Documents other
than (i) routine communications associated with requests for Revolving Credit
Loans and/or the issuance of Letters of Credit, (ii) routine and nonmaterial
communications, (iii) any notice or document required by any of the Loan
Documents to be furnished to the Lenders by any Borrower, and (iv) any notice
or document of which the Agent has knowledge that such notice or document had
been forwarded to the Lenders other than by the Agent.
13
<PAGE>
5.11 Concerning Collateral.
(a) The Agent is hereby authorized on behalf of all of the Lenders,
without the necessity of any notice to or further consent from any Lender, from
time to time, to take any action with respect to any Collateral or Collateral
Documents which may be necessary to perfect and maintain perfected the security
interest in and liens upon the Collateral granted pursuant to the Collateral
Documents.
(b) The Lenders hereby authorize the Agent, at its option and in its
discretion, to release any lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment and satisfaction
of all of the Obligations at any time arising under or in respect of this
Agreement or the Loan Documents or the transactions contemplated hereby or
thereby, (ii) upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of the Loan Agreement, or consented to by the
Required Lenders, as applicable, and to execute such documents as may be
necessary to evidence the release of the liens granted to the Agent for the
benefit of the Lenders upon the Collateral that was sold or transferred;
provided that the Agent shall not be required to execute any such document on
terms which, in the Agent's opinion, would expose the Agent to liability or
create any obligation or entail any consequence other than the release of such
liens without recourse, representation or warranty. In the event of any sale or
transfer of Collateral, or any foreclosure with respect to any of the
Collateral, the Agent shall be authorized to deduct all of the expenses
reasonably incurred by the Agent from the proceeds of any such sale, transfer
or foreclosure.
(c) The Agent shall have no obligation whatsoever to the Lenders or to
any other Person to assure that the Collateral exists or is owned by Borrower
or is cared for, protected or insured or that the liens granted to the Agent
therein have been properly or sufficiently or lawfully created, perfected,
protected and enforced or are entitled to any particular priority, or to
exercise or to continue exercising at all or in any manner or under any duty of
care, disclosure or fidelity any of the rights, authorities and powers granted
or available to the Agent in this Agreement or any of the other Loan Documents,
it being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent's own interest in the
Collateral as one of the Lenders and that the Agent shall have no duty or
liability whatsoever to the Lenders, except for its gross negligence or willful
misconduct.
5.12 Concerning Distributions.
(a) The Agent, in the Agent's reasonable discretion based upon the
Agent's determination of the likelihood that additional payments will be
received, expenses incurred, and/or claims made by third parties to all or a
portion of proceeds of a payment received on account of the Obligations, may
delay the distribution of such payment or any portion thereof.
14
<PAGE>
(b) The Agent may disburse funds prior to determining that the sums
which the Agent expects to receive have been finally and unconditionally paid
to the Agent. If and to the extent that the Agent does disburse funds and it
later becomes apparent that the Agent did not then receive a payment in an
amount equal to the sum paid out, then any Lender to whom the Agent made the
funds available, on demand from the Agent, shall refund to the Agent the sum
paid to that Lender.
(c) If, in the opinion of the Agent, the distribution of any amount
received by the Agent in such capacity hereunder or under the Loan Documents
might involve the Agent in liability, or might be prohibited hereby, or might
be questioned by any Person, the Agent may refrain from making distribution
until the Agent's right to make distribution has been adjudicated by a court of
competent jurisdiction.
(d) The proceeds of any Lender's exercise of any right of, or in the
nature of, set-off shall be deemed, first, to the extent that Lender is
entitled to any distribution hereunder, to constitute such distribution and
second, shall be shared with the other Lenders pro rata based upon their
respective contributions to the then principal balance of the Borrower's
Obligations under the Loan Agreement (and shall be deemed distributions by the
Agent hereunder).
(e) In the event that a court of competent jurisdiction shall adjudge
that any amount received and distributed by the Agent is to be repaid or
disgorged, or the Lenders, acting by Required Lenders, determine to effect such
repayment or disgorgement, then each Lender to whom any such distribution shall
have been made shall repay to the Agent that Lender's Commitment Percentage of
the aggregate amount so adjudged to be repaid or disgorged.
(f) The Agent shall not have any responsibility in any event for more
funds than the Agent actually receives and collects.
5.13 The Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitment Percentages (i) for any amounts not reimbursed by the Borrower for
which the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever
(including attorneys' fees and expenses) which may be imposed on, incurred by
or asserted against the Agent in any way relating to or arising out of the Loan
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have arisen
from the gross negligence or willful misconduct of the Agent.
15
<PAGE>
5.14 Resignation of Agent.
(a) The Agent may resign at any time by giving 60 days prior written
notice thereof to the Lenders. Upon any such resignation, the Lenders shall
have the right to appoint a successor Agent by consent of the Required Lenders.
If no successor Agent shall have been so appointed by the Lenders and shall
have accepted such appointment within 30 days after the giving of notice by the
resigning Agent, then the resigning Agent, on behalf of the Lenders may appoint
a successor Agent, which shall be a financial institution having a combined
capital and surplus in excess of $500,000,000.00.
(b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor shall thereupon succeed to, and become vested
with, all the rights, powers, privileges, and duties of the (resigning) Agent
so replaced, and the (resigning) Agent shall be discharged from the (resigning)
Agent's duties and obligations hereunder, other than on account of any
responsibility for any action taken or omitted to be taken by the (resigning)
Agent as to which a final non-appealable judicial determination has been made
by a court of competent jurisdiction that such Agent acted in a grossly
negligent manner or with willful misconduct.
(c) After any resigning Agent's resignation, the provisions of this
Agreement shall continue in effect for the resigning Agent's benefit in respect
of any actions taken or omitted to be taken by it while it was acting as Agent
5.15 Actions Affecting Agent. Notwithstanding any other provision of this
Agreement, no action referenced herein which affects the rights, duties,
obligations, or liabilities of the Agent shall be effective without the written
consent of the Agent.
6. AMENDMENTS -- WAIVERS
6.1 Amendments and Waivers. No amendment, modification, termination or waiver
of any provision of the Loan Documents, or consent to any departure by the
Borrower therefrom, shall in any event be effective without the written consent
of the Required Lenders; provided, however, that no such amendment,
modification, termination, waiver or consent shall, without the consent of ALL
Lenders, have the effect of:
(a) reducing any amount otherwise payable to any Lender hereunder;
(b) decreasing any Fee or rate of interest payable by Borrower
pursuant to the Loan Documents;
16
<PAGE>
(c) extending or postponing the due date for any payment due under the
Loan Documents;
(d) releasing or subordinating the priority of any lien of Agent on
any material portion of the Collateral except in accordance with the terms
hereof or of the Loan Documents;
(e) reducing the percentage specified in the definition of Required
Lenders;
(f) increasing the Commitment Percentage or Dollar Commitment of any
Lender, subject to the provisions of Section 3.2 and 6.1(H);
(g) permitting the Borrower to assign its rights with respect to the
Obligations;
(h) permitting the making of any Revolving Credit Loan if, immediately
after the making of such Revolving Credit Loan, the principal balance of the
Revolving Credit Loans would exceed 110% of Availability, except that no
Consent shall be required (x) in connection with the making of any Revolving
Credit Loan to "cover" any honoring of a drawing under any Letter of Credit,
and (y) in connection with Revolving Credit Loans which may exceed 110% of
Availability due to changed circumstances beyond the control of the Agent (such
as a drop in Collateral value) or the need, as determined by the Agent in its
reasonable discretion, to make a Loan advance to protect the Agent's and
Lenders' rights against the Borrower or with respect to the Collateral; or
(i) changing the advance formula with respect to Eligible Receivables
or Eligible Inventory which would result in an increase in the percentage rate
of advance;
(j) materially adjusting the criteria for Eligible Receivables or
Eligible Inventory;
(k) increasing the Revolving Credit Limit (as set forth in Section 2.2
of the Schedule to the Loan Agreement); or
(l) amending this Section 6.1.
Notwithstanding any of the foregoing, no amendment, modification,
termination or waiver of any provision of this Agreement or the other Loan
Documents relating to the Agent including, without limitation, any affecting
the rights, duties, obligations or liabilities of the Agent, shall be effective
without the written consent of the Agent.
6.2 Take-Out Of Lender. In the event that a Lender does not provide its consent
to a proposal by the Agent to take action which requires Consent under Section
6.1 hereof, then one or more Lenders who provided Consent to such action may
require the assignment, without recourse, of the objecting Lender's Commitment
on fifteen (15) days written notice to the Agent and to the objecting Lender
and payment to the objecting Lender of its pro rata share of the principal and
interest of the Revolving Credit Loans, Term Loans, and of all Fees and L/C
Fees accrued to the date of such
17
<PAGE>
assignment, and any out-of-pocket costs and expenses for which such Lender is
entitled to reimbursement from the Borrower. In the event that more than one
(1) Lender wishes to require such assignment, the objecting Lender's Commitment
shall be divided amongst such Lenders, pro rata based upon their respective
Commitments, with the Agent coordinating such transaction.
7. ASSIGNMENTS AND PARTICIPATIONS
7.1 In General. The Agent may treat the payee of any Note as the owner thereof
for all purposes hereof unless and until such payee complies with Section 7.2
hereof in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with and accepted by the
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of this Agreement and the other Loan
Documents. Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
7.2 Assignments.
(a) Permitted Assignments. Any Lender (in this Section 7.2, an
"ASSIGNING LENDER") may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more Eligible
Assignees (in this Section 7.2, each an "ASSIGNEE LENDER") all or a portion of
its rights and obligations under the Loan Agreement (including, without
limitation, its Commitment and the same portion of the Loans at the time owing
it and all of its interest in any existing Letter of Credit and its obligation
to participate in any additional Letter of Credit hereunder) in accordance with
the provisions of this Section 7.2. Each assignment shall be of a constant, and
not a varying, ratable percentage of all of the Assigning Lender's rights and
obligations under this Agreement. Such assignment shall be substantially in the
form of Exhibit A hereto and shall not be permitted hereunder unless such
assignment is either (i) for all of such Assigning Lender's rights and
obligations under the Loan Documents or (ii) involves a Dollar Commitment in
the amount of at least $5,000,000, and (iii) following the time such assignment
becomes effective, the Assigning Lender's Dollar Commitment shall not be less
than $5,000,000. The written consent of the Agent (which consent shall not be
unreasonably withheld), shall be required prior to an assignment becoming
effective. Notwithstanding the foregoing, any Lender may at any time, without
the consent of the Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; provided, however, that no
such assignment shall release the Assigning Lender from its obligations
hereunder.
(b) Effect; Assignment Effective Date. Upon (i) delivery to the Agent
of a notice of assignment, substantially in the form attached as Appendix I to
Exhibit A hereto (a "NOTICE OF ASSIGNMENT"), together with any consent required
by Section 7.2(A) hereof, and (ii) payment of a $2,500 fee to the Agent for
processing such assignment, such assignment shall become effective (the
"ASSIGNMENT EFFECTIVE DATE") on the date specified in such Notice of
Assignment. The Notice of Assignment shall contain a representation by the
Assignee Lender to the effect that none of the consideration used to make the
purchase of the Commitment, Loans and Letter of Credit
18
<PAGE>
participations under the applicable assignment agreement are "plan assets" as
defined under ERISA and that the rights and interests of the Assignee Lender in
and under the Loan Documents will not be "plan assets" under ERISA. On and
after the Assignment Effective Date of such assignment, such Assignee Lender,
if not already a Lender, shall for all purposes be a Lender party to this
Agreement and to all Loan Documents executed by the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to the same
extent as if it were an original party, and no further consent or action by the
Borrower, the Lenders or the Agent shall be required to release the Assigning
Lender with respect to the percentage of the Commitment, Loans and Letter of
Credit participations assigned to such Assignee Lender. Upon the consummation
of any assignment to a Assignee Lender pursuant to this Section 7.2(B), the
Assigning Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such Assigning Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Assignee
Lender, in each case in principal amounts reflecting their Loans, as adjusted
pursuant to such assignment.
(c) The Register. The Agent shall maintain at its address referred to
in Section 8.3 a copy of each assignment delivered to and accepted by it
pursuant to this Section 7.2 and a register (the "REGISTER") for the
recordation of the names and addresses of the Lenders and the Commitment of and
principal amount of the Loans owing to, each Lender from time to time and
whether such Lender is an original Lender or the assignee of another Lender
pursuant to an assignment under this Section 7.2. The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and
the Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by any Lender at any
reasonable time and from time to time upon reasonable prior notice.
7.3 Participations.
(a) Permitted Participants; Effect. Subject to the terms set forth in
this Section 7.3 any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
financial institutions ("PARTICIPANTS") participating interests in all or a
portion of such Lender's rights and obligations in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender, any Letter
of Credit interest of such Lender or any other interest of such Lender under
the Loan Documents on a pro rata or non-pro rata basis. Written notice of such
participation to the Agent shall be required prior to any participation
becoming effective with respect to a Participant which is not a Lender or an
Affiliate thereof. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such Lender shall
remain the holder of any such Note for all purposes under the Loan Documents,
all amounts payable by the Borrower under this Agreement shall be determined as
if such Lender had not sold such participating interests, and the Borrower and
the Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Loan Documents.
19
<PAGE>
(b) Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver
of any provision of the Loan Documents other than any amendment, modification
or waiver which affects the Participant with respect to any Loan, Letter of
Credit or Commitment in which such Participant has an interest which (i)
forgives principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan, Letter of Credit or Commitment, (ii)
postpones any date fixed for any regularly scheduled payment of principal of,
or interest or fees on, any such Loan, Letter of Credit or Commitment, or (iii)
releases the Agent's security interest in all or substantially all of the
Collateral securing such Loan, Letter of Credit or Commitment, other than
pursuant to a transaction permitted under the Loan Documents.
(c) Benefit of Setoff. Each Participant shall be deemed to have the
right of setoff provided in Section 4.1 hereof in respect to its participating
interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under the Loan Documents, provided that each Lender shall retain the right of
setoff provided in Section 4.1 hereof with respect to the amount of
participating interests sold to each Participant except to the extent such
Participant exercises its right of setoff. Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided
in Section 4.1 hereof, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 4.1 hereof as if each Participant were a Lender.
8. MISCELLANEOUS
8.1 Confidential Information. Each Lender will maintain, as confidential, all
(i) proprietary approaches, techniques, and methods of analysis which are
applied by the Agent in the administration of the credit facility contemplated
by the Loan Agreement, and (ii) proprietary forms and formats utilized by the
Agent for the Loan Documents and in providing reports to that Lender pursuant
hereto, which forms or formats are not of general currency; provided that
nothing contained herein shall prohibit the disclosure of any such information
as may be required by judicial process or to regulatory authorities having
jurisdiction over any party.
8.2 Dispute Resolution; WAIVER OF JURY TRIAL. Any dispute amongst the Lenders
and/or the Agent concerning the interpretation, administration, or enforcement
of the financing arrangements contemplated by the Loan Documents or the
interpretation or administration of this Agreement which cannot be resolved
amicably shall be resolved in any state or Federal court located within the
County of Maricopa in the State of Arizona or, at the sole option of Agent, in
any other court in which Agent shall initiate legal or equitable proceedings
and which has subject matter jurisdiction over the matter in controversy, to
the jurisdiction of which courts all parties hereto hereby submit. This
Agreement shall be interpreted in accordance with the internal laws (and not
the conflict of laws rules) of the state of Arizona governing contracts to be
performed entirely within such state. EACH OF THE LENDERS AND THE AGENT HEREBY
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION INVOLVING THIS AGREEMENT.
20
<PAGE>
8.3 Notices.
(a) Except as otherwise expressly provided in this Agreement, all
notices and other communications made or required to be given pursuant to this
Agreement or the other Loan Documents shall be delivered to the following
addresses:
If to the Agent or FINOVA Capital FINOVA Capital Corporation
Corporation: Corporate Finance
1060 First Avenue, Suite 100
King of Prussia, Pennsylvania 19406
Attention: Account Executive - USA
Detergents
Fax: (610) 354-8476
With a copy to:
FINOVA Capital Corporation
1850 North Central Avenue
Mail Station 1141
Phoenix, Arizona 85004
Attention: Group Counsel -- Corporate
Finance
Fax: (602) 207-5036
If to a Lender: As provided in its Notice Address.
(b) Any party may change its Notice Address on not less than Seven (7)
days prior written notice to all others given by certified mail, return receipt
requested.
(c) Notices shall be deemed made, and correspondence received, by (i)
certified mail, the earlier of when actually received or three (3) days
following deposit in the United States mail, postage prepaid, (ii) nationally
recognized overnight express delivery, the Business Day following the day when
sent, (iii) hand delivery, if delivered during customary business hours on a
Business Day, when delivered, and otherwise at the opening of the then next
Business Day, and (iv) by facsimile transmission, if sent by 4:00 o'clock p.m.
on a Business Day (based upon the time in effect at the recipient of the
subject facsimile), on the Business Day when sent, and otherwise at the opening
of the next Business Day.
(d) All references to time is to then applicable eastern standard
time.
[SIGNATURES FOLLOW]
21
<PAGE>
SIGNATURE PAGE TO AGENCY AGREEMENT
AGENT:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By /s/ Terry Ward
-------------------------------
Vice President
LENDERS:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By /s/ Terry Ward
-------------------------------
Vice President
Notice Address: 1060 First Avenue, Suite 100
King of Prussia, PA 19406
Attn: Mr. Francis Monzo
Tel. No.: (610) 354-8462
Fax No.: (610) 354-8476
with a copy to: FINOVA Capital Corporation
Attn: Group Counsel - Corporate
Finance
1850 North Central Avenue
Mail Station 1141
Phoenix, Arizona 85002-2209
Fax No.: (602) 262-1553
COMMITMENT
REVOLVING CREDIT LOANS: $16,494,845
TERM LOAN A LOAN: $ 2,639,175
TERM LOAN B LOAN: $ 865,979
TOTAL DOLLAR COMMITMENT: $20,000,000
COMMITMENT PERCENTAGE: 41.24%
TAX I.D. NO. 94-1278569
<PAGE>
Foothill
SIGNATURE PAGE TO AGENCY AGREEMENT
Foothill Capital Corporation
By /s/ Unintelligible
------------------------------------
Vice President
Notice Address: 11111 South Monica Boulevard
Suite 1500
Los Angeles, CA 90025-3333
Attn: Lalaine Pechayco
Tel. No.: (310) 996-7042
Fax No.: (310) 477-8225
with a copy to: Robert Colton, Esq.
Buchalter, Nemer, Fields
& Younger
601 S. Figueroa Street
Suite 2400
Los Angeles, California 90017
Tel. No.: (213) 891-5070
Fax No.: (213) 896-0400
COMMITMENT
REVOLVING CREDIT LOANS: $ 9,072,165
TERM LOAN A LOAN: $ 1,451,546
TERM LOAN B LOAN: $ 476,289
TOTAL DOLLAR COMMITMENT: $11,000,000
COMMITMENT PERCENTAGE: 22.68%
TAX I.D. NO. 95-2689288
<PAGE>
First Source
SIGNATURE PAGE TO AGENCY AGREEMENT
First Source Financial LLP
By: First Source Financial, Inc.
Its Agent/Manager
By /s/ John P. Thacker
-----------------------------
Name: John P. Thacker
Title: Senior Vice President
Notice Address: 2850 West Golf Road, 5th Floor
Rolling Meadows, IL 60008
Attn: Kelly M. Schmidt
Tel. No.: (847) 734-2056
Fax No.: (847) 734-7912
with a copy to: Edward Szarkowicz, Esq.
Senior Counsel
First Source Financial, Inc.
2850 W. Golf Road, 5th Floor
Rolling Meadows, IL 60008
COMMITMENT
REVOLVING CREDIT LOANS: $ 8,247,423
TERM LOAN A LOAN: $ 1,319,588
TERM LOAN B LOAN: $ 432,990
TOTAL DOLLAR COMMITMENT: $10,000,000
COMMITMENT PERCENTAGE: 20.62%
TAX I.D. NO. 36-3991240
<PAGE>
Merrill Lynch
SIGNATURE PAGE TO AGENCY AGREEMENT
Merrill Lynch Business Financial Services, Inc.
By /s/ Unintelligible
----------------------------------
Vice President
Notice Address: 33 West Monroe Street
22nd Floor
Chicago, IL 60603
Attn: Dan McHugh
Tel. No.: (312) 267-4425
Fax No.: (312) 641-3421
with a copy to: Lisa F. Raush, Esq.
Merrill Lynch Business
Financial Services, Inc.
33 West Monroe Street
22nd Floor
Chicago, IL 60603
COMMITMENT
REVOLVING CREDIT LOANS: $6,185,567
TERM LOAN A LOAN: $ 989,691
TERM LOAN B LOAN: $ 324,742
TOTAL DOLLAR COMMITMENT: $7,500,000
COMMITMENT PERCENTAGE: 15.46%
TAX I.D. NO. ____________________________
<PAGE>
SIGNATURE PAGE TO AGENCY AGREEMENT
BORROWER: USA DETERGENTS, INC., a Delaware corporation
BIG CLOUD POWDER CORPORATION, a Delaware
corporation;
CHICAGO MANAGEMENT POWDER CORP., a Delaware
corporation
CHICAGO CONTRACT POWDER CORPORATION, an
Illinois corporation
By: /s/ Uri Evan
---------------------------------------
Uri Evan, as President and Chief
Executive Officer of, and intending
to legally bind, each of the above
corporations.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q for the quarter ended September 30, 1998, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,710
<SECURITIES> 0
<RECEIVABLES> 21,161
<ALLOWANCES> 1,257
<INVENTORY> 16,056
<CURRENT-ASSETS> 44,815
<PP&E> 58,510
<DEPRECIATION> 12,753
<TOTAL-ASSETS> 94,307
<CURRENT-LIABILITIES> 52,355
<BONDS> 0
0
0
<COMMON> 138
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<TOTAL-LIABILITY-AND-EQUITY> 94,307
<SALES> 52,709
<TOTAL-REVENUES> 52,709
<CGS> 34,794
<TOTAL-COSTS> 15,455
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<INTEREST-EXPENSE> 1,784
<INCOME-PRETAX> 676
<INCOME-TAX> 25
<INCOME-CONTINUING> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 651
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
