-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eg72rkVnFfg3YVHfi6f9Q/tAPydb1nZm94T31IdmUcUmSN6G3PC+mQ83NK3ASpSc uUe8uJoItSWmaqG03RaAqA== 0000906504-02-000013.txt : 20020422 0000906504-02-000013.hdr.sgml : 20020422 ACCESSION NUMBER: 0000906504-02-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020311 ITEM INFORMATION: Other events FILED AS OF DATE: 20020422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BONTEX INC CENTRAL INDEX KEY: 0000041052 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 221427551 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05200 FILM NUMBER: 02617199 BUSINESS ADDRESS: STREET 1: ONE BONTEX DR CITY: BUENA VISTA STATE: VA ZIP: 24416-0500 BUSINESS PHONE: 5402612181 MAIL ADDRESS: STREET 1: PO BOX 751 CITY: BUENA VISTA STATE: VA ZIP: 24416 FORMER COMPANY: FORMER CONFORMED NAME: GEORGIA BONDED FIBERS INC DATE OF NAME CHANGE: 19920703 8-K 1 frm8k302.txt FORM 8-K FOR 3/02 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - ------------------------------------------------------------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 - ------------------------------------------------------------------------------ Date of Report (Date of Earliest Event Reported): February 26, 2002 BONTEX, INC. (Exact name of Registrant as specified in its charter) Virginia 0-5200 54-0571303 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) ONE BONTEX DRIVE, BUENA VISTA, VIRGINIA 24416-1500 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 540-261-2181 - ------------------------------------------------------------------------------ (Former name or former address, if changed since last report) Item 5. Other Events. - ------ ------------ Bontex, Inc. (the "Company") has a secured term loan and credit facility (the "Debt") with Congress Financial Corporation ("Congress"). As previously reported by the Company in Form 8-Ks filed on December 21, 2001 and January 22, 2002, Congress does not intend to renew the Debt. Since January 26, 2002, Congress and the Company have entered into various agreements (the "Interim Agreements") extending the scheduled maturity date of the Debt to April 11, 2002. Effective April 12, 2002, Congress agreed to extend the scheduled maturity date of the Debt from April 12, 2002, to May 11, 2002 under the terms of an Amendment to Loan Modification, Reaffirmation and Forbearance Agreement and Note Amendment (the "Agreement" and, together with the Interim Agreements, the "Agreements"). Under the terms of the Agreements, among other things, (i) the interest rate increased two percent to a fluctuating rate per annum equal to the Prime Rate plus four percent and (ii) the monthly principal payment on the fixed portion of the Debt increased from $16,667 to $36,667. The Company has reduced the amount of indebtedness outstanding under the Debt from approximately $2.7 million as of June 30, 2001, to approximately $1.73 million as of April 11, 2002. As of April 11, 2002, approximately $5.3 million of current assets, consisting of accounts receivable and inventory, serve as the primary collateral for the Debt. Additionally, all of the Company's other assets, current and non-current, serve as the total collateral securing the Debt. Under the Company's current financing and debt structure, the Company's wholly-owned subsidiaries Bontex S.A. (Belgium) and Bontex Italia S.r.l. each have separate credit facilities with no cross-collateralization of assets. Management is focused on obtaining alternative financing to repay the Debt and provide an ongoing credit facility sufficient to meet the Company's future operating and capital requirements. Management is currently negotiating with several potential lenders to obtain alterative financing. In addition, the Company has retained an outside consulting firm to provide strategic assessment and related advice. If the Company is unable to refinance the Debt or is unable to pay its indebtedness to Congress in full by the maturity date, it would cause a material adverse impact on the Company's business, financial condition, liquidity and/or results of operations. The Company's common stock is listed on the Nasdaq SmallCap Market. A failure by the Company to obtain alternative financing or to meet Nasdaq listing requirements could result in a negative impact on the trading of the Company's common stock and/or the Company's listing status on the Nasdaq SmallCap Market. If the Company's common stock is delisted from the Nasdaq SmallCap Market, any trading in the common stock would thereafter be conducted in the over-the-counter market in what are commonly referred to as the "pink sheets." Consequently, the liquidity of the Company's common stock would likely be impaired, not only in the number of shares which could be bought and sold, but also through delays in the timing of transactions and a reduction in securities analyst and the news media coverage, if any, that the Company receives. As a result, holders of the Company's common stock might find it more difficult to trade their common stock promptly and at reasonable prices or to obtain accurate quotations as to its price. The foregoing discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Forward-looking statements include, without limitation, statements about financing plans, 2 cash flows, availability of capital, growth opportunities, benefits from new technologies, financial condition, capital expenditures, future results of operations or market conditions and involve certain risks, uncertainties and assumptions. The words "estimate," "project," "intend," "expect," "believe," and similar expressions are intended to identify forward-looking statements. These and other forward-looking statements are found at various places throughout this report, and you are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements should, therefore, be considered in light of various relevant factors. Actual results may differ materially from these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, excessive worldwide footwear inventories, a shrinking U.S. domestic market for the Company's products, decreased sales to key customers, increased competition from non-woven materials, the reduction of prices by competitors, the increase in the relative price of the Company's products due to foreign currency devaluations, increased pulp and latex prices, capital illiquidity, unexpected foreign tax liabilities, the impact of any unusual items resulting from ongoing evaluations of the Company's business strategies, decreases in the Company's borrowing base, trading of the Company's common stock at a level where closing bid prices are too low to remain listed on the Nasdaq SmallCap Market, increased funding requirements for the Company's pension plan, inability to recover deferred tax assets, an inability by the Company to renew its current credit facilities or obtain alternative financing, a market shift in demand from higher-quality products to more economical grade products with lower profit margins, higher energy prices, and increased costs of complying with environmental laws, and the impact of changes in political, economic or other factors, legal and regulatory changes or other external factors over which the Company has no control. 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits. 10(viii) Fourth Amendment to Loan and Security Agreement, dated February 26, 2002 between Congress Financial Corporation and Bontex, Inc. 10(ix) Loan Modification, Reaffirmation and Forbearance Agreement, dated March 11, 2002 between Congress Financial Corporation and Bontex, Inc. 10(x) Limited Guaranty, dated March 11, 2002, by James C. Kostelni in favor of Congress Financial Corporation. 10(xi) Amendment to Loan Modification, Reaffirmation and Forbearance Agreement and Note Amendment, dated April 10, 2002 between Congress Financial Corporation and Bontex, Inc. 4 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 hereunto duly authorized. BONTEX, INC. By /s/ James C. Kostelni --------------------- James C. Kostelni President and Chief Executive Officer Date: April 22, 2002 5 EX-10 2 frm8kex10viii.txt EXHIBIT 10(VIII) TO FORM 8-K Exhibit 10(viii) FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT This Fourth Amendment to Loan and Security Agreement is made this 26th day of February, 2002 by and between CONGRESS FINANCIAL CORPORATION, a Delaware corporation ("Lender") and BONTEX, INC., a Virginia corporation ("Borrower"). RECITALS Borrower and Lender entered into a certain Loan and Security Agreement dated January 26, 2000 (together with all amendments, modifications, addenda and supplements, the "Loan Agreement") and related documents, evidencing certain financing arrangements between Lender and Borrower as more particularly described therein. Borrower and Lender entered into an Amendment to Loan and Security Agreement on November 13, 2000, a Second Amendment to Loan and Security Agreement on September 12, 2001 and a Third Amendment to Loan and Security Agreement on January 22, 2002. Borrower has requested an extension of the Maturity Date under the Loan Agreement. Lender is willing to make the said modifications and to extend the Maturity Date, subject to the terms and conditions of this Amendment ("Amendment"). NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, as of the date hereof (unless an earlier date is specified herein), that the Loan Agreement is amended, as follows: 1. TERM. Section 11.1(a) of the Loan Agreement is hereby amended to read as follows: "(a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on March 11, 2002 ("Maturity Date"), provided, that, this Agreement and all other Financing Agreements must be terminated simultaneously. Upon the Maturity Date, Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations and shall furnish cash collateral to Lender in such amounts as Lender determines are reasonably necessary to secure Lender from loss, cost, damage or expense, including attorneys' fees and legal expenses, in connection with any contingent Obligations, including checks or other payments provisionally credited to the Obligations and/or as to which Lender has not yet received final and indefeasible payment. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to such bank account of Lender, as Lender may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until and including the next business day, if - 1 - the amounts so paid by Borrower to the bank account designated by Lender are received in such bank account later than 12:00 noon (Eastern Time)." 2. FEE. This Amendment is conditioned on the payment by Borrower to Lender of an extension fee of Two Thousand Dollars ($2,000), which shall be fully earned as of the date hereof. Borrower authorizes Lender to advance such fee as a Revolving Loan under the Loan Agreement. 3. CONFIRMATION OF INDEBTEDNESS. Borrower confirms and acknowledges that as of the close of business on January 31, 2002, it is indebted to Lender under the Loan Documents without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of $1,482,910.86 comprised of: (a) $882,910.74 outstanding with respect to the Revolving Loans, and (b) $600,000.12 outstanding with respect to the Term Loan, plus any accrued and unpaid interest and all fees, costs and expenses (including attorneys' fees) incurred to date in connection with the Loan Documents. 4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to, and covenants with, Lender as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, and the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Financing Agreements, being a continuing condition of the making of Loans by Lender to Borrower: (a) This Amendment has been duly executed and delivered by Borrower and is in full force and effect as of the date hereof and the agreements and obligations of Borrower contained herein constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms; (b) Borrower has taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment; (c) This Amendment is, or when executed by Borrower and delivered to Lender, will be, duly executed and constitute a valid and legally binding obligation of Borrower, enforceable against Borrower in accordance with its terms; and (d) The execution by Borrower and delivery to Lender of this Amendment is not and will not be in contravention of any order of any court or other agency of government, law or any other indenture or agreement to which wither Borrower is bound or the Articles of Incorporation or bylaws of Borrower to be in conflict with, or result in a breach of, or constitute (with due notice and/or passage of time) a default under any such indenture, agreement or undertaking or result in the imposition of any lien, charge, encumbrance of any nature on any property of Borrower. 5. REAFFIRMATION: Except as expressly amended herein, all of the terms, provisions and conditions of the Loan Agreement, as previously amended, are hereby reaffirmed and - 2 - ratified in all respects, and remain in full force and effect. Borrower reaffirms each of the representations and warranties under the Loan Agreement made by it, as if said representations and warranties were made and given on and as of the date hereof. 6. NO WAIVER BY LENDER: This Amendment does not and shall not be deemed to constitute a waiver by Lender of any breach or violation of any representation, warranty or covenant made or agreed to by any Borrower under the Loan Agreement as amended hereby, and all of Lender's claims and rights resulting from any such breach or misrepresentation by either Borrower, are expressly reserved by Lender. This Amendment does not obligate Lender to agree to any further extension or any other modification of the Loan Agreement nor does it constitute a waiver of any other rights or remedies of Lender. 7. INCORPORATION: This Amendment (including, without limitation, any covenants contained herein) shall amend, and is incorporated into and made part of, the Loan Agreement. All references contained in the Loan Agreement or other Loan Documents to the Loan Agreement shall be deemed, for all purposes, to mean the Loan Agreement as amended hereby. To the extent that any term or provision of this Amendment is or may be deemed expressly inconsistent with any term or provision in the Loan Agreement, the terms and provisions hereof shall control. 8. NO MODIFICATION: No modification of this Amendment or of any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought. 9. HEADINGS: The headings of any paragraph of this Amendment are for convenience only and shall not be used to interpret any provision of this Amendment. 10. SUCCESSOR AND ASSIGNS: This Amendment will be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. 11. GOVERNING LAW: This Amendment shall be governed by, and construed and enforced in accordance with the laws of the State of New York, excluding its conflict of laws rule. 12. SEVERABILITY: The provisions of this Amendment are to be deemed severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect. 13. COUNTERPARTS: This Amendment may be executed in any number of counterparts and by different parties on separate counterparts (including by facsimile transmission of executed signature pages hereto), each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement. This Amendment shall become effective upon the execution and delivery of a counterpart hereof by each of the parties hereof. - 3 - IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be duly executed on and as of the date and year first above written. LENDER BORROWER - ------ -------- CONGRESS FINANCIAL BONTEX, INC. CORPORATION By:Cindy B. Denbaum By: s/ James C. Kostelni Title: Vice President Title: C.E.O. Address: Address: - ------- ------- 1133 Avenue of the Americas One Bontex Drive New York, NY 10036 Buena Vista, Virginia 24116 - 4 - EX-10 3 frm8kex10.txt EXHIBIT 10 (IX) Exhibit 10(ix) LOAN MODIFICATION, REAFFIRMATION AND FORBEARANCE AGREEMENT This Loan Modification, Reaffirmation and Forbearance Agreement ("AGREEMENT") is made as of March 11, 2002, by and among Bontex, Inc., a Virginia corporation having its principal place of business at One Bontex Drive, Buena Vista, VA 24416 ( "BORROWER) and Congress Financial Corporation, a Delaware corporation ("LENDER"). BACKGROUND A. THE FACILITIES 1. Borrower and Lender entered into a certain Loan and Security Agreement dated January 26, 2000 (together with all amendments, modifications, addenda and supplements, the "Loan Agreement") and related documents, evidencing certain financing arrangements between Lender and Borrower as more particularly described therein. Borrower and Lender entered into an Amendment to Loan and Security Agreement on November 13, 2000, a Second Amendment to Loan and Security Agreement on September 12, 2001, a Third Amendment to Loan and Security Agreement on January 22, 2002 and a Fourth Amendment to Loan and Security Agreement on February 26, 2002. 2. All agreements and documents described or referred to in this Section A, as amended, this Agreement, as amended, all "Financing Agreements" (as that term is defined in the Loan Agreement) and all instruments, documents, and agreements related thereto or executed in connection therewith, are sometime referred to herein collectively as the "EXISTING LOAN DOCUMENTS." All capitalized Terms used herein and not defined herein shall have the meaning ascribed to such Term in the Existing Loan Documents. B. EXISTING DEFAULT 1. As of the date hereof, Borrower is and remains in default under the terms and conditions of the Existing Loan Documents by its failure to repay all Obligations on the maturity date thereof which coincides with the date of this Agreement ("EXISTING DEFAULT"). 2. Notwithstanding such Existing Default, Borrower has requested that Lender agree, in consideration of the undertakings and obligations of Borrower and Guarantor set forth herein, to make certain accommodations and to forbear for a specified period from the exercise of Lender's rights and remedies under the Existing Loan Documents. Lender has agreed to make such accommodations as and only to the extent set forth herein, and without waiving any of Lender's rights and remedies. 3. By reason of the Existing Default and by the scheduled maturity of all Obligations under the Existing Loan Documents, Borrower has acknowledged that all Obligations under the Existing Loan Documents are and continue to be immediately due and payable and Lender has the full legal right to exercise its rights and remedies under the Existing Loan Documents, including, but not limited to, the right to foreclose under any mortgages or deeds of trust, to enforce its remedies under the Uniform Commercial Code and other applicable laws, and take possession of and sell any Collateral described in the Existing Loan Documents. NOW THEREFORE, with the foregoing Background deemed incorporated by reference and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, covenant and agree as follows: Section 1. ACKNOWLEDGMENT OF INDEBTEDNESS, EVENTS OF DEFAULT, ETC. 1.1. Indebtedness Borrower confirms and acknowledges that as of the close of business on March 1, 2002, it is indebted to Lender under the Loan Documents without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of $1,548,951.72 comprised of: (a) $965,618.27 outstanding with respect to the Revolving Loans, and (b) $583,333.45 outstanding with respect to the Term Loan, plus any accrued and unpaid interest and all fees, costs and expenses (including attorneys' fees) incurred to date in connection with the Existing Loan Documents. 1.2. Existing Default. Borrower represents and warrants that as of the date hereof, no Event (s) of Default or event(s) which with the passage of time or giving of notice or both would constitute an Event of Default are outstanding under the Existing Loan Documents and this Agreement, other than Existing Default. 1.3. Existing Loan Documents Except to the extent and for the period hereby modified, Borrower hereby confirms and ratifies in all respects the Existing Loan Documents and the Obligations outstanding thereunder, and acknowledges that the Existing Loan Documents shall continue in full force and effect as therein written and that no claims, counterclaims, offsets or defenses arising out of or with respect to Borrowers Obligations under the Existing Loan Documents. Borrower hereby confirms its existing grant to Lender of a security interest in the Collateral. Borrower hereby confirms that all security interests at any time granted by it to Lender continue in full force and effect and secure and shall continue to secure the liabilities and Obligations of Borrower and any additional advances made pursuant to this Agreement (including, without limitation, the Obligations), so long as any such liabilities or obligations remain outstanding and that all property subject thereto remain free and clear of any liens or encumbrances other than (i) those in favor of Lender, and (ii) liens expressly permitted in the Existing Loan Documents and exhibits thereto. Section 2. FORBEARANCE 2.1 Grant of Forbearance. Subject to the terms and conditions, and satisfaction of the EFFECTIVENESS CONDITIONS of this Agreement, during the Forbearance Period and through the Termination Date (as defined below), Lender shall forbear from taking any action or exercising any rights or remedies under the Existing Loan Documents against Borrower, Borrower's property, Guarantor or the Collateral, due solely to the Existing Default. On the Termination Date, all forbearance with respect to the Existing Default shall cease and Lender may, in its discretion, and apart from its rights as a result of any new Event of Default, exercise rights and 2 remedies against Borrower, Borrower's property, Guarantor and the Collateral. The TERMINATION DATE shall be the date that is the earlier to occur of (i) the occurrence of an Event of Default (other than the Existing Default); (ii) the occurrence of any breach or default by Borrower or Guarantor of any covenant or obligation under this Agreement or any Existing Loan Document; or (iii) April 10, 2002. The term "FORBEARANCE PERIOD" shall mean the period commencing the date of the Agreement and expiring on the Termination Date. 2.2. Preservation of Rights. By agreeing to forbear from the exercise of its rights and remedies until the Termination Date, Lender does not waive any of the Existing Default. All Existing Default are preserved, pending fulfillment of Borrower's Obligations under this Agreement and under the Existing Loan Documents. The granting of the agreements of Lender hereunder shall not be deemed a waiver of Lender's rights and remedies or constitute a course of conduct or dealing on behalf of Lender. Subject only to the agreements of Lender described herein, Lender specifically reserves all rights and remedies available to it under the Existing Loan Documents, any instrument, document or agreement related thereto or otherwise available at law or equity, and expressly reserves its rights, without notice to Borrower or Guarantor, to take any and all actions to preserve and protect the Collateral and to accelerate payment of all amount outstanding under the Existing Loan Documents upon the occurrence of an Event of Default other than the Existing Default or a breach by Borrower of this Agreement. 2.3. Acknowledgements and Waivers. Borrower acknowledges and agrees that Lender is specifically and reasonably relying upon the representations, warranties, and agreements contained herein, and that this Agreement is being executed by Borrower and delivered to Lender as an inducement to Lender to forbear from exercising contractual remedies available to Lender under the Existing Loan Documents. Such forbearance by Lender is expressly conditioned on the accuracy and reliability of the representations, warranties, and agreements of Borrower that are set forth in this Agreement. Notwithstanding the foregoing, nothing in this Agreement shall prevent Lender from immediately, and without further notice or right of cure (all of which are hereby waived by Borrower), exercising its rights and remedies under the Loan Documents upon a subsequent Default, Event of Default, or breach by Borrower of any of the terms and conditions set forth therein, as such terms and conditions are modified and amended in this Agreement. Borrower further waives, to the extent permitted by law, for the Forbearance Period, any statute of limitations applicable to Lender's interest in the Obligations. Section 3. INTEREST RATE AND ADVANCES. 3.1 Interest. Notwithstanding any provision in the Existing Loan Documents to the contrary, including Lender's right to charge Default Interest, commencing the date first above mentioned all Obligations and other loans due or to become due to Lender under the Existing Loan Documents shall bear interest at a fluctuating rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Prime Rate plus four percent (4%). 3.2 Advances. Borrower and Lender acknowledge that the term of the Existing Loan Documents matured on March 11, 2002, that all Obligations thereunder are due and payable without further demand, and that, notwithstanding the execution and performance of this Agreement by Lender, Lender has no obligation to extend further credit or to make any further 3 revolving credit advances under the Existing Loan Documents, whether discretionary or otherwise. Notwithstanding the foregoing, Borrower agrees that if Lender shall, in its sole discretion, extend credit, such additional credit shall accrue interest on the unpaid principal balance thereof at the rate set forth in Section 3.1. All such additional loans and advances, and all accrued and unpaid interest thereon, shall constitute Obligations under the Existing Loan Documents and this Agreement, and shall be secured by the Collateral. Section 4. COLLATERAL 4.1. Affirmation of Existing Collateral. Borrower covenants, confirms and agrees that as security for the repayment of the Obligations, Lender has and shall continue to have, and is hereby granted a continuing lien on and security interest in the Collateral, whether now owned or hereafter acquired, created or arising, together with all proceeds, including insurance proceeds thereof. Borrower and Guarantor acknowledge and agree that nothing herein contained shall in any way impair Lender's rights and priority in the Collateral. 4.2 Further Assurances. Upon execution of this Agreement, and thereafter, Borrower shall take all action requested by Lender to effectuate the terms and intent of this Agreement and the Existing Loan Documents and in assuring continued, effective and proper perfection of the liens and security interests in the Collateral. Section 5. EFFECTIVENESS CONDITIONS 5.1. Conditions. Lender's undertakings hereunder are subject to satisfactory completion, as determined by Lender in its sole discretion, (all documents to be in form and substance satisfactory to Lender and its counsel) of the following conditions ("EFFECTIVENESS CONDITIONS"): (a) Borrower's execution and delivery of this Agreement; (b) Borrower shall have delivered to Lender a supplemental closing fee of Five Thousand Dollars ($5,000), by certified check, wire transfer or other immediately available funds which fee shall be fully earned and payable as of the date hereof; and (c) Lender shall have received a duly executed Limited Guaranty from James C. Kostelni ("Guarantor") in form and substance satisfactory to Lender. Section 6. REPRESENTATIONS AND WARRANTIES Borrower reconfirms, warrants and represents to Lender that: 6.1. Organization and Qualification. Borrower is duly organized and is a validly existing corporation under the laws of the state identified above, with full power and authority to own its properties and to transact its business as now transacted. Borrower is qualified to transact business in each jurisdiction where the ownership of its properties or the transaction of its business requires such qualification. 4 6.2. Authorization. The execution and delivery by Borrower of this Agreement and the performance by Borrower of the transactions herein contemplated (i) are and will be within their respective powers, (ii) has been authorized by all necessary corporate action, and (iii) are not and will not be in contravention of any order of court or other agency of government, of law or of any indenture, agreement or undertaking to which Borrower is a party or by which the property of Borrower is bound, or be in conflict with, result in a breach of or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or undertaking, or result in the imposition of any lien, charge or encumbrance of any nature on any of the properties of Borrower. 6.3 Valid, Binding and Enforceable. This Agreement and any assignment or other instrument, document or agreement executed and delivered in connection herewith, will be valid, binding and enforceable in accordance with their respective terms. 6.4. Litigation. Except as set forth in Schedule 6.4 attached hereto as a part hereof, there is no pending or threatened proceeding by or before any court or governmental agency against or affecting Borrower which, if adversely decided would have a material adverse effect on the business, operations or financial condition of Borrower or on the ability of Borrower to perform its obligations under this Agreement or the other Existing Loan Documents. 6.5. Title to Property. Borrower has good title to all property owned by it, including all properties reflected in the most recent audited balance sheet delivered to Lender (except as sold or otherwise disposed of in the ordinary course of business). 6.6. Taxes. Except as set forth in Schedule 6.6 attached hereto as part hereof, all tax returns required to be filed by Borrower have been properly prepared, executed and filed. All taxes, assessments, fees and other governmental charges upon Borrower or upon any of its properties, incomes, sales or franchises which are due and payable have been paid. 6.7. Financial Accounting Practice. Borrower make and keep its books, records and accounts which, in reasonable detail, accurately and fairly reflect Borrower's transactions and dispositions of its assets. 6.8. Power To Carry On Business. Borrower has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as presently planned to be conducted. 6.9. Compliance with Laws. Borrower is not in violation of any law, except for violations which in the aggregate do not have a material adverse effect on its business, operations or financial condition. Section 7. COVENANTS 7.1 Existing Covenants. Borrower covenants that on and after the date of execution of this Agreement and until the Obligations are indefeasibly paid and satisfied in full that, except as expressly modified hereby, Borrowers shall continue to observe and maintain compliance 5 with all covenants, representations and warranties arising in this Agreement and the Existing Loan Documents. 7.2. Additional Covenants. Borrower hereby covenants and agrees, in consideration for the accommodations contained herein, as follows: (a) Borrower will provide Lender with copies of any and all proposal letters and commitment letters for financing, including preliminary drafts, received by Borrower immediately upon Borrower's receipt of such documents, and of any and all responses by Borrower regarding such an agreement, including proposed "mark-ups," revisions or substitutes for such an agreement immediately upon Borrower giving such responses. (b) Borrower shall pay or reimburse Lender for its attorneys' fees and expenses in connection with the enforcement of Lender's rights under the Existing Loan Documents, and the reasonable fees and expenses incurred in the preparation, negotiation and execution of this Agreement and the documents provided for herein or related hereto, and the same shall be included within the Obligations. (c) Further Assurances. Borrower hereby agrees to take all such actions and to execute and/or deliver to Lender all such documents, assignments, financing statements and other documents, as Lender may reasonably require from time to time, to effectuate and implement the purposes of this Agreement. 7.3. Special Bankruptcy Provisions. Borrower hereby agrees that if Borrower shall: (a) file with any bankruptcy court or be the subject of any petition under Title 11 of the U.S. Code, as amended; (b) be the subject of any order for relief issued under such Title 11 of the U.S. Code, as amended; (c) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or other relief for debtors; (d) seek, consent to, or acquiesce in the appointment of any trustee, receiver, conservator, or liquidator; or (e) be the subject of any order, judgment, or decree entered by any court of competent jurisdiction approving a petition filed against Borrower for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or relief for debtors, that any such event shall constitute an incurable Event of Default hereunder, the Forbearance Period shall terminate automatically, and Borrower: (i) agrees that it will not contest, object to, 6 or interpose any defense, all of which are waived, with respect to any motion by Lender seeking relief from any automatic stay imposed by Section 362 of Title 11 of the U.S. Code, as amended, or from any other stay or suspension of remedies imposed in any other manner with respect to the exercise of the rights and remedies otherwise available to Lender with respect to the Collateral under the Existing Loan Documents, and (ii) acknowledges and stipulates that Borrower cannot provide Lender with adequate protection (as that term is defined in Section 361 of the Bankruptcy Code) and therefore it will not use or seek approval for continued use of, any of Lender's cash collateral (as that term is defined in Section 363 of the Bankruptcy Code), including any of the Collateral. The provisions of this section shall survive the termination or other expiration of the Forbearance Period. 7.4. NET WORTH COVENANT. Section 9.14 of the Loan Agreement is hereby amended, as of March 11, 2002, to read as follows: "9.14. Adjusted Tangible Net Worth. Borrower (excluding, for purposes of this covenant, foreign subsidiaries and affiliates) shall continuously maintain Adjusted Tangible Net Worth of not less than Four Million Nine Hundred Thousand Dollars ($4,900,000) from February 1, 2002 through February 28, 2002 and not less than Four Million Eight Hundred Thousand Dollars ($4,800,000) commencing March 1, 2002 and at all times thereafter." Section 8. DEFAULTS 8.1 Events of Default. The occurrence of one or more of the following described events is an Event of Default: (a) The occurrence of any Event of Default (except an Existing Default) under the Loan Agreement, or (b) Failure of Borrower to comply with its representations, warranties, covenants or other undertakings under this Agreement; or (c) Failure of Borrower to pay all Obligations upon expiration of the Forbearance Period. 8.2. Upon such Event of Default, Lender's undertakings under this Agreement may without notice to Borrower, immediately terminate and Lender may immediately proceed to enforce all rights and remedies produced by the Existing Loan Documents, and this Agreement, by contract or applicable law, without further notice to Borrower or Guarantor. 7 Section 9. MISCELLANEOUS 9.1. Counterparts. This Agreement may be executed in any number of counterparts, each of which will constitute an original and all of which together shall constitute one instrument. Signature by facsimile shall bind the parties hereto. 9.2. Third-Party Rights. No rights are intended to be created hereunder for the benefit of any third- party donee, creditor, or incidental beneficiary. 9.3. Modifications. No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought. 9.4. Indemnity. Borrower hereby agrees to indemnify Lender from and against all losses, costs, expense, demands and damages whatsoever which Lender may suffer or incur in respect of any claims which have or may be brought by any third party relating to this Agreement, the Existing Loan Documents or the transactions contemplated hereby or thereby. This indemnity shall continue in full force and effect after the Termination Date and notwithstanding the completion of the other matters referred to in this Agreement. This indemnification is in addition to and shall not limit any other indemnification agreement between Borrower and Lender, and shall be included within the Obligations. 9.5. Integrated Agreement. This Agreement shall be deemed incorporated into and made a part of the Existing Loan Documents. Except as expressly set forth herein, all of the terms, conditions and agreements of the Existing Loan Documents are ratified and confirmed. The Existing Loan Documents and this Agreement shall be construed as integrated and complementary of each other, and as augmenting and not restricting Lender's rights, remedies and security. If, after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall control. 9.6. Non-Waiver. No omission or delay by Lender in exercising any right or power under this Agreement, or the Existing Loan Documents or any related agreement will impair such right or power or be construed to be a waiver of any default or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and no waiver will be valid unless in writing and then only to the extent specified. Lender's rights and remedies are cumulative and concurrent and may be pursued singly, successively or together. 9.7. Headings. The headings of any paragraph of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement. 9.8 . Survival. All warranties, representations and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by them or on their behalf under this Agreement, shall be considered to have been relied upon by Lender. All statements in any such certificate or other instrument shall constitute warranties and representations by Borrower hereunder. All warranties, representations, 8 indemnities and covenants made by Borrower hereunder or under any other agreement or instrument shall be deemed continuing until the Obligations are indefeasibly paid and satisfied in full. 9.9. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. No delegation by Borrower of any duty or obligation of performance may be made or is intended to be made to Lender. No rights are intended to be created hereunder or under any related instruments, documents or agreements for the benefit of any third party donee, creditor, incidental beneficiary or affiliate of Borrower. 9.10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The provisions of this Agreement are to be deemed severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect. 9.11. Right of Setoff. In addition to all liens upon and rights of setoff against the money, securities or other property of either Borrower given to Lender by law, Lender shall have, with respect to Borrower's and Guarantor's obligations to Lender whether the Existing Loan Documents or otherwise and to the extent permitted by law, a contractual possessory security interest in and a right of setoff against, and Borrower and Guarantor hereby assigns, conveys, delivers, pledges and transfers to Lender all of Borrower's right, title and interest in and to, all deposits, moneys, securities and other property of Borrower now or hereafter in the possession of or on deposit with Lender whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise. Every such security interest and right of setoff may be exercised without demand upon or notice to Borrower or Guarantor. 9.12. WAIVER OF JURY TRIAL. BORROWER, GUARANTOR AND LENDER EACH HEREBY WAIVES ANY AND ALL RIGHTS ANY OF THEM MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST ANY OF THE PARTIES TO THIS AGREEMENT WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO UNDER THIS AGREEMENT OR UNDER THE EXISTING LOAN DOCUMENTS. 9.13. EXCLUSIVE JURISDICTION. BORROWER, GUARANTOR AND LENDER EACH IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER THE EXISTING LOAN DOCUMENTS. EACH BORROWER IRREVOCABLY AGREES TO SERVICE OF PROCESS BY CERTIFIED MAIL RETURN RECEIPT REQUESTED TO THE ADDRESS CURRENTLY CONTAINED IN LENDER'S RECORDS. 9.14. RELEASE. AS A MATERIAL INDUCEMENT TO LENDER TO ENTER INTO THIS AGREEMENT, BORROWER (I) DOES HEREBY REMISE, RELEASE, ACQUIT, SATISFY AND FOREVER DISCHARGE LENDER AND ALL OF ITS PAST, PRESENT AND FUTURE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, REPRESENTATIVES, PARTICIPANTS, HEIRS, SUCCESSORS AND ASSIGNS, FROM ANY AND ALL MANNER OF DEBTS, ACCOUNTING, BONDS, WARRANTIES, REPRESENTATIONS, COVENANTS, PROMISES, CONTRACTS, 9 CONTROVERSIES, AGREEMENTS, LIABILITIES, OBLIGATIONS, EXPENSES, DAMAGES, JUDGMENTS, EXECUTIONS, ACTIONS, CLAIMS, DEMANDS AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER, WHETHER AT LAW OR IN EQUITY, WHICH BORROWER HAS BY REASON OF ANY MATTER, CAUSE OR THING, FROM THE BEGINNING OF THE WORLD TO AND INCLUDING THE DATE OF THIS AGREEMENT WITH RESPECT TO ANY MATTERS, TRANSACTIONS, OCCURRENCES, AGREEMENT, ACTIONS, OR EVENTS ARISING OUT OF, IN CONNECTION WITH OR RELATING TO THE EXISTING LOAN DOCUMENTS; AND (II) DO HEREBY COVENANT AND AGREE NEVER TO INSTITUTE OR CAUSE TO BE INSTITUTED OR CONTINUE PROSECUTION OF ANY SUIT OR OTHER FORM OF ACTION OR PROCEEDING OF ANY KIND OR NATURE WHATSOEVER AGAINST LENDER, OR ANY OR ITS PAST, PRESENT OR FUTURE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, REPRESENTATIVES, PARTICIPANTS, HEIRS, SUCCESSORS OR ASSIGNS, BY REASON OF OR IN CONNECTION WITH ANY OF THE FOREGOING MATTERS, CLAIMS OR CAUSES OF ACTION. BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT THE FORBEARANCES AND OTHER INDULGENCES CONTAINED IN THIS AGREEMENT SHALL NOT BE CONSTRUED AS AN ADMISSION OF WRONGDOING, LIABILITY OR CULPABILITY ON THE PART OF LENDER OR THE EXISTENCE OF ANY CLAIMS OF BORROWER AGAINST LENDER. 9.15. Advice of Counsel. Borrower acknowledges that it has consulted with independent legal counsel concerning this Agreement and specifically regarding the effect and implications of Sections 7.3, 9.12, 9.13, and 9.14 above, and Borrower knowingly and voluntarily hereby waives the rights described therein or affected thereby. 10 IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the day and year first above written. LENDER CONGRESS FINANCIAL CORPORATION By: s/ Cindy B. Denbaum BORROWER BONTEX, INC. By: s/Jeffrey Kostelni 11 CONSENT OF GUARANTOR The undersigned guarantor hereby consents to the provisions of the foregoing Agreement and agrees that the undersigned's obligations under the Limited Guaranty shall be unimpaired by the said Agreement and that the undersigned has no defenses or set offs against Lender, its officers, directors, employees, agents or attorneys, with respect to the Limited Guaranty, and that all of the terms, conditions and covenants in the Limited Guaranty remain unaltered and in full force and effect and are hereby ratified and confirmed. The undersigned hereby certifies that the representations and warranties made in the Limited Guaranty are true and correct. THE UNDERSIGNED HEREBY RATIFIES AND CONFIRMS THE WAIVER OF JURY TRIAL PROVISION CONTAINED IN THE LIMITED GUARANTY. WITNESS the due execution hereof as a document under seal, as of March 11, 2002, intending to be legally bound hereby. BONTEX, INC. s/ James C. Kostelni C.E.O.(Seal) James C. Kostelni 12 CORPORATE ACKNOWLEDGMENT STATE OF VIRGINIA : : ss CITY OF BUENA VISTA : On this, the 14th day of March, 2002, before me, the undersigned Notary Public, personally appeared Jeffrey Kostelni, known to me (or satisfactorily proven) and says that he is the C.F.O. of Bontex, Inc., whose name is subscribed to the within instrument and who acknowledged that he executed the same for the purposes therein contained. WITNESS my hand and seal the day and year aforesaid. s/ Linda A. Floyd s/Jeffrey Kostelni Notary Public My Commission Expires: July 31, 2004 13 SCHEDULE 6.4 LITIGATION 14 SCHEDULE 6.6 TAXES 15 EX-10 4 frm8kex10x.txt EXHIBIT 10 (X) Exhibit 10 (x) LIMITED GUARANTY March 11, 2002 Congress Financial Corporation 1133 Avenue of the Americas New York, NY 10036 RE: BONTEX, INC. ( "BORROWER") Ladies and Gentlemen: Congress Financial Corporation ("Lender") and Borrower entered into certain financing arrangements pursuant to which Lender may make loans and advances and provide other financial accommodations to Borrower as set forth in the Loan and Security Agreement, dated January 26, 2000, by and among Borrower and Lender (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated, or replaced, the "Loan Agreement"), and other agreements, documents, and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Guaranty (all of the foregoing, together with the Loan Agreement and the Forbearance Agreement (as hereinafter defined and referred to), as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated, or replaced, being collectively referred to herein as the "Financing Agreements"). All Obligations under the Financing Agreements become due and payable, without further notice or demand, on the date hereof. Borrower has informed Lender that Borrower will be unable to repay the Obligations, and therefore Borrower is in default under the terms of the Financing Agreements. Borrower has requested Lender to forbear from exercising its rights under the Financing Agreements in order to permit Borrower to obtain financing from other financing sources in order to pay the Obligations. Lender is willing to forbear pursuant to the terms of a Loan Modification, Reaffirmation and Forbearance Agreement, of even date herewith (the "Forbearance Agreement"), which terms include, among other things, the execution and delivery of this Guaranty. Due to the close business and financial relationships between Borrower and the undersigned ("Guarantor"), in consideration of the benefits which will accrue to Guarantor, and as an inducement for and in consideration of Lender entering into the Forbearance Agreement, and for making loans and advances and providing other financial accommodations to Borrower pursuant to the Loan Agreement and the other Financing Agreements, Guarantor hereby agrees in favor of Lender as follows: 1. Guaranty. (a) Guarantor absolutely and unconditionally guarantees and agrees to be liable for the full and indefeasible payment and performance when due of the following (all of which are collectively referred to herein as the "Guaranteed Obligations"): (i) all obligations, liabilities, and indebtedness of any kind, nature, and description of Borrower to -1- Lender and/or its affiliates, including principal, interest, charges, fees, costs, and expenses, however evidenced, whether as principal, surety, endorser, guarantor, or otherwise, whether arising under the Loan Agreement, the other Financing Agreements, or otherwise, whether now existing or hereafter arising, whether arising before, during, or after the initial or any renewal term of the Loan Agreement or after the commencement of any case with respect to Borrower under the U.S. Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts that would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in any such case and including loans, interest, fees, charges, and expenses related thereto and all other obligations of Borrower or its successors to Lender arising after the commencement of such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Lender, and (ii) all expenses (including, without limitation, attorneys' fees and legal expenses) incurred by Lender in connection with the preparation, execution, delivery, recording, administration, collection, liquidation, enforcement, and defense of Borrower's obligations, liabilities, and indebtedness as aforesaid to Lender, the rights of Lender in any collateral or under this Guaranty and all other Financing Agreements or in any way involving claims by or against Lender directly or indirectly arising out of or related to the relationships among Borrower, Guarantor, or any other Obligor (as hereinafter defined) and Lender, whether such expenses are incurred before, during, or after the initial or any renewal term of the Loan Agreement and the other Financing Agreements or after the commencement of any case with respect to Borrower or Guarantor under the U.S. Bankruptcy Code or any similar statute. (b) This Guaranty is a guaranty of payment and not of collection. Guarantor agrees that Lender need not attempt to collect any Guaranteed Obligations from Borrower, Guarantor, or any other Obligor or to realize upon any collateral, but may require Guarantor to make immediate payment of all of the Guaranteed Obligations to Lender when due, whether by maturity, acceleration or otherwise, or at any time thereafter. Lender may apply any amounts received in respect of the Guaranteed Obligations to any of the Guaranteed Obligations, in whole or in part (including attorneys' fees and legal expenses incurred by Lender with respect thereto or otherwise chargeable to Borrower or Guarantor) and in such order as Lender may elect. (c) Payment by Guarantor shall be made to Lender at the office of Lender from time to time on demand as Guaranteed Obligations become due. Guarantor shall make all payments to Lender on the Guaranteed Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions, or conditions of any kind. One or more successive or concurrent actions may be brought hereon against Guarantor either in the same action in which Borrower or any other Obligor is sued or in separate actions. In the event any claim, action, or action on any judgment, based on this Guaranty is brought against Guarantor, Guarantor agrees not to deduct, set off, or seek any counterclaim for or recoup any amounts that are or may be owed by Lender to Guarantor. 2. Waivers and Consents. -2- (a) Notice of acceptance of this Guaranty, the making of loans and advances and providing other financial accommodations to Borrower, and presentment, demand, protest, notice of protest, notice of nonpayment or default, and all other notices to which Borrower or Guarantor is entitled are hereby waived by Guarantor. Guarantor also waives notice of and hereby consents to: (i) any amendment, modification, supplement, extension, renewal, or restatement of the Loan Agreement and any of the other Financing Agreements, including, without limitation, extensions of time of payment of or increase or decrease in the amount of any of the Guaranteed Obligations, the interest rate, fees, other charges, or any collateral, and the guaranty made herein shall apply to the Loan Agreement, the other Financing Agreements, and the Guaranteed Obligations as so amended, modified, supplemented, renewed, restated or extended, or increased or decreased; (ii) the taking, exchange, surrender and releasing of collateral or guaranties now or at any time held by or available to Lender for the obligations of Borrower or any other party at any time liable on or in respect of the Guaranteed Obligations or who is the owner of any property that is security for the Guaranteed Obligations (individually, an "Obligor" and collectively, "Obligors"); (iii) the exercise of, or refraining from the exercise of, any rights against Borrower or any other Obligor or any collateral; (iv) the settlement of, compromise or release of, or waiver of any default with respect to any of the Guaranteed Obligations; and (v) any financing by Lender of Borrower under Section 364 of the U.S. Bankruptcy Code or consent to the use of cash collateral by Lender under Section 363 of the U.S. Bankruptcy Code. Guarantor agrees that the amount of the Guaranteed Obligations shall not be diminished and the liability of Guarantor hereunder shall not be otherwise impaired or affected by any of the foregoing. (b) No invalidity, irregularity, or unenforceability of all or any part of the Guaranteed Obligations shall affect, impair, or be a defense to this Guaranty, nor shall any other circumstance that might otherwise constitute a defense available to, or a legal or equitable discharge of, Borrower in respect of any of the Guaranteed Obligations, or Guarantor in respect of this Guaranty, affect, impair, or be a defense to this Guaranty. Without limitation of the foregoing, the liability of Guarantor hereunder shall not be discharged or impaired in any respect by reason of any failure by Lender to perfect or continue perfection of any lien or security interest in any collateral or any delay by Lender in perfecting any such lien or security interest. As to interest, fees, and expenses, whether arising before or after the commencement of any case with respect to Borrower under the U.S. Bankruptcy Code or any similar statute, Guarantor shall be liable therefor, even if Borrower' liability for such amounts does not, or ceases to, exist by operation of law. Guarantor acknowledges that Lender has not made any representations to Guarantor with respect to Borrower, any other Obligor, or otherwise in connection with the execution and delivery by Guarantor of this Guaranty and Guarantor is not in any respect relying upon Lender or any statements by Lender in connection with this Guaranty. (c) Until full final and indefeasible payment of the Guaranteed Obligations, Guarantor hereby irrevocably and unconditionally waives and relinquishes all statutory, contractual, common law, equitable, and all other claims against Borrower, any collateral for the Guaranteed Obligations, or other assets of Borrower or any other Obligor, for subrogation, reimbursement, exoneration, contribution, indemnification, setoff, or other recourse in respect to sums paid or payable to Lender by Guarantor hereunder, and Guarantor hereby further irrevocably and unconditionally waives and relinquishes any and all other benefits that Guarantor might otherwise directly or indirectly -3- receive or be entitled to receive by reason of any amounts paid by or collected or due from Guarantor, Borrower, or any other Obligor upon the Guaranteed Obligations or realized from their property. 3. Subordination. Payment of all amounts now or hereafter owed to Guarantor by Borrower or any other Obligor is hereby subordinated in right of payment to the indefeasible payment in full to Lender of the Guaranteed Obligations and all such amounts and any security and guaranties therefor are hereby assigned to Lender as security for the Guaranteed Obligations. 4. Acceleration. Notwithstanding anything to the contrary contained herein or any of the terms of any of the other Financing Agreements, the liability of Guarantor for the entire Guaranteed Obligations shall mature and become immediately due and payable, even if the liability of Borrower or any other Obligor therefor does not, upon the occurrence of any act, condition, or event that constitutes an Event of Default as such term is defined in the Loan Agreement. 5. Account Stated. The books and records of Lender showing the account between Lender and Borrower shall be admissible in evidence in any action or proceeding against or involving Guarantor as prima facie proof of the items therein set forth, and the monthly statements of Lender rendered to Borrower, to the extent to which no written objection is made within thirty (30) days from the date of sending thereof to Borrower, shall be deemed conclusively correct and constitute an account stated between Lender and Borrower and be binding on Guarantor. 6. Termination. This Guaranty is continuing, absolute, and unconditional. All Guaranteed Obligations shall be conclusively presumed to have been created in reliance on this Guaranty. Guarantor shall continue to be liable hereunder until one of Lender's officers actually receives a written termination notice from Guarantor sent to Lender at its address set forth above by certified mail, return receipt requested, and thereafter as set forth below. Revocation or termination hereof by Guarantor shall not affect, in any manner, the rights of Lender or any obligations or duties of Guarantor under this Guaranty with respect to (a) Guaranteed Obligations that have been created, contracted, assumed, or incurred prior to the receipt by Lender of such written notice of revocation or termination as provided herein, including, without limitation, (i) all amendments, extensions, renewals, and modifications of such Guaranteed Obligations (whether or not evidenced by new or additional agreements, documents, or instruments executed on or after such notice of revocation or termination), (ii) all interest, fees, and similar charges accruing or due on and after revocation or termination, and (iii) all attorneys' fees and legal expenses, costs, and other expenses paid or incurred on or after such notice of revocation or termination in attempting to collect or enforce any of the Guaranteed Obligations against Borrower, Guarantor, or any other Obligor (whether or not suit be brought), or (b) Guaranteed Obligations that have been created, contracted, assumed, or incurred after the receipt by Lender of such written notice of revocation or termination as provided herein pursuant to any contract entered into by Lender prior to receipt of such notice. The sole effect of such revocation or termination by Guarantor shall be to exclude from this Guaranty the liability of Guarantor for those Guaranteed Obligations arising after the date of receipt by Lender of such written notice that are unrelated to Guaranteed Obligations arising or transactions entered into prior to -4- such date. Without limiting the foregoing, this Guaranty may not be terminated and shall continue so long as the Loan Agreement shall be in effect (whether during its original term or any renewal, substitution, or extension thereof). 7. Reinstatement. If after receipt of any payment of, or proceeds of collateral applied to the payment of, any of the Guaranteed Obligations, Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Guaranteed Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Guaranty shall continue in full force and effect as if such payment or proceeds had not been received by Lender. Guarantor shall be liable to pay to Lender, and does indemnify and hold Lender harmless for, the amount of any payments or proceeds surrendered or returned. This Section 7 shall remain effective notwithstanding any contrary action that may be taken by Lender in reliance upon such payment or proceeds. This Section 7 shall survive the termination, cancellation, or revocation of this Guaranty. 8. Amendments and Waivers. Neither this Guaranty nor any provision hereof shall be amended, modified, waived, or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender and by Guarantor. Lender shall not by any act, delay, omission, or otherwise be deemed to have expressly or impliedly waived any of its rights, powers, and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender of any right, power, and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power, and/or remedy that Lender would otherwise have on any future occasion, whether similar in kind or otherwise. 9. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver. (a) The validity, interpretation, and enforcement of this Guaranty and any dispute arising out of the relationship between Guarantor and Lender, whether in contract, tort, equity, or otherwise, shall be governed by the internal laws of the State of New York (without giving effect to principles of conflicts of law). (b) Guarantor hereby irrevocably consents and submits to the nonexclusive jurisdiction of the U.S. District Court for the Southern District of New York and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Guaranty or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of Guarantor and Lender in respect of this Guaranty, any of the other Financing Agreements, or the transactions related hereto or thereto, in each case whether now existing or hereafter arising and whether in contract, tort, equity, or otherwise, and agrees that any dispute arising out of the relationship between Guarantor or Borrower and Lender, or the conduct of any such persons in connection with this Guarantee, the other Financing Agreements, or otherwise shall be heard only in the courts described above (except that Lender shall have the right to bring any action or proceeding against Guarantor or his property in the courts of any other jurisdiction that Lender deems necessary or appropriate in order to realize on any collateral at any time granted by Borrower or Guarantor to Lender or otherwise to enforce its rights against Guarantor or his property). -5- (c) Guarantor hereby waives personal service of any and all process upon Guarantor and consents that all such service of process may be made by certified mail, return receipt requested, directed to his address set forth on the signature page hereof, and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Lender's option, by service upon Guarantor in any other manner provided under the rules of any court of competent jurisdiction. Within thirty (30) days after such service, Guarantor shall appear in answer to such process, failing which Guarantor shall be deemed in default and judgment may be entered by Lender against Guarantor for the amount of the claim and other relief requested. (d) GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTY OR ANY OF THE OTHER FINANCING AGREEMENTS, OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND LENDER IN RESPECT OF THIS GUARANTY, ANY OF THE OTHER FINANCING AGREEMENTS, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT GUARANTOR OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR AND LENDER HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY. (e) Lender shall not have any liability to Guarantor (whether in tort, contract, equity, or otherwise) for losses suffered by Guarantor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Guaranty, or any act, omission, or event occurring in connection herewith, unless it is determined by a final and nonappealable judgment or court order binding on Lender that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Lender shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of the Loan Agreement and the other Financing Agreements. 10. Notices. All notices, requests, and demands hereunder shall be in writing and (a) made to Lender at its address set forth above and to Guarantor at his address set forth below, or to such other address as either party may designate by written notice to the other in accordance with this provision, and (b) deemed to have been given or made (i) if delivered in person, immediately upon delivery; (ii) if by telex, telegram, or facsimile transmission, immediately upon sending and upon confirmation of receipt; (iii) if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; (iv) and if by certified mail, return receipt requested, five (5) days after mailing. -6- 11. Partial Invalidity. If any provision of this Guaranty is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Guaranty as a whole, but this Guaranty shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. 12. Entire Agreement. This Guaranty represents the entire agreement and understanding of this parties concerning the subject matter hereof, and supersedes all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers, and contracts concerning the subject matter hereof, whether oral or written. 13. Successors and Assigns. This Guaranty shall be binding upon Guarantor and his heirs, executors, administrators, successors, and assigns and shall inure to the benefit of Lender and its successors, endorsees, transferees, and assigns. 14. Construction. All references to the term "Guarantor" wherever used herein shall mean Guarantor and his heirs, executors, administrators, successors, and assigns (including, without limitation, any receiver, trustee, or custodian for Guarantor or any of his assets or Guarantor in his capacity as debtor or debtor-in-possession under the U.S. Bankruptcy Code). All references to the term "Lender" wherever used herein shall mean Lender and its successors and assigns and all references to the term "Borrower" wherever used herein shall mean Borrower and its successors and assigns (including, without limitation, any receiver, trustee, or custodian for Borrower or any of its assets, or Borrower in its capacity as debtor or debtor-in-possession under the U.S. Bankruptcy Code). All references to the term "Person" or "person" wherever used herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture, or other entity, or any government or any agency or instrumentality or political subdivision thereof. All references to the plural shall also mean the singular and to the singular shall also mean the plural where appropriate. 15. Limitation. Notwithstanding anything to the contrary contained in this Guaranty, the Guarantor's liability for the Guaranteed Obligations shall not exceed the amount of Two Hundred Fifty Thousand Dollars ($250,000) at any time outstanding, plus interest thereon and costs, expenses, and other charges related thereto (including, but not limited to, attorneys' fees and legal expenses), and said amount shall not be reduced or extinguished by reason of repayments by Borrower or disposition of collateral until such time as the Guaranteed Obligations are fully, finally, and indefeasibly paid. {SIGNATURE ON FOLLOWING PAGE.} -7- IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the day and year first above written. s/ James C. Kostelni (SEAL) James C. Kostelni Address: One Bontex Dr. Buena Vista, VA 24416 Facsimile: 540-261-3784 -8- STATE OF VIRGINIA ) ) ss.: CITY OF BUENA VISTA ) On this 11th day of March, 2002, before me personally came James C. Kostelni, to me known to be the individual described in and which executed the foregoing instrument. s/ Linda A. Floyd Notary Public My Commission Expires July 31, 2004 -9- EX-10 5 frm8kex10xi.txt EXHIBIT 10 (XI) Exhibit 10 (xi) AMENDMENT TO LOAN MODIFICATION, REAFFIRMATION AND FORBEARANCE AGREEMENT AND NOTE AMENDMENT This Amendment ("AGREEMENT") is made as of April 10, 2002, by and between Bontex, Inc., a Virginia corporation having its principal place of business at One Bontex Drive, Buena Vista, VA 24416 ( "BORROWER") and Congress Financial Corporation, a Delaware corporation ("LENDER"). BACKGROUND A. THE FACILITIES 1. Borrower and Lender entered into a certain Loan and Security Agreement dated January 26, 2000 (together with all amendments, modifications, addenda and supplements, the "Loan Agreement") and related documents, evidencing certain financing arrangements between Lender and Borrower as ignore particularly described therein including, without limitation, a certain Term Promissory Note in the principal face amount of $1,000,000 dated January 27, 2000 (the "Note"). Borrower and Lender entered into an Amendment to Loan and Security Agreement on November 13, 2000, a Second Amendment to Loan and Security Agreement on September 12, 2001, a Third Amendment to Loan and Security Agreement on January 22, 2002, a Fourth Amendment to Loan and Security Agreement on February 26, 2002 and a Loan Modification, Reaffirmation and Forbearance Agreement dated as of March 11, 2002 (the "Forbearance Agreement"). 2. All agreements and documents described or referred to in this Section A, as amended, this Agreement, all "Financing Agreements" (as that term is defined in the Loan Agreement) and all instruments, documents, and agreements related thereto or executed in connection therewith, are sometime referred to herein collectively as the "EXISTING LOAN DOCUMENTS." All capitalized terms used herein and not defined herein shall have the meaning ascribed to such term in the Existing Loan Documents. B. EXISTING DEFAULT 1. As of the date hereof, Borrower is and remains in default under the terms and conditions of the Existing Loan Documents by its failure to repay all Obligations on the maturity date thereof which coincides with the date of this Agreement ("EXISTING DEFAULT"). 2. Notwithstanding such Existing Default, Borrower has requested that Lender agree, in consideration of the undertakings and obligations of Borrower and Guarantor set forth herein, to extend the period within which Lender has agreed to forbear from the exercise of Lender's rights and remedies under the Existing Loan Documents. Lender has agreed to make such accommodations as and only to the extent set forth herein, and without waiving any of Lender's rights and remedies. 3. By reason of the Existing Default and by the scheduled maturity of all Obligations under the Existing Loan Documents, Borrower has acknowledged that all Obligations under the Existing Loan Documents are and continue to be immediately due and payable and Lender has the full legal right to exercise its rights and remedies under the Existing Loan Documents, including, but not limited to, the right to foreclose under any mortgages or deeds of trust, to enforce its remedies under the Uniform Commercial Code and other applicable laws, and take possession of and sell any Collateral described in the Existing Loan Documents. NOW THEREFORE, with the foregoing Background deemed incorporated by reference and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, covenant and agree as follows: SECTION 1. ACKNOWLEDGMENT OF INDEBTEDNESS. Borrower confirms and acknowledges that as of the close of business on April 1, 2002, it is indebted to Lender under the Loan Documents without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of $1,878,075.66 comprised of: (a) $1,328,075.55 outstanding with respect to the Revolving Loans, and (b) $550,000.11 outstanding with respect to the Term Loan, plus any accrued and unpaid interest and all fees, costs and expenses (including attorneys' fees) Incurred to date in connection with the Existing Loan Documents, SECTION 2. FORBEARANCE. Section 2. 1. of the Forbearance Agreement is hereby amended by deleting the term "April 10, 2002", and, in lieu thereof, substituting the term: "May 10, 2002." SECTION 3. EFFECTIVENESS CONDITIONS. Lender's undertakings hereunder are subject to satisfactory completion and performance, as determined by Lender in its sole discretion, (all documents to be in form and substance satisfactory to Lender and its counsel) of the following conditions ("EFFECTIVENESS CONDITIONS"): (a) Borrower's execution and delivery of this Agreement; (b) Borrower shall have delivered to Lender a supplemental closing fee of Five Thousand Dollars ($5,000), by certified check, wire transfer or other immediately available funds which fee shall be fully earned and payable as of the date hereof; and (c) Notwithstanding the provisions of the Note, the unpaid principal sum of the Note shall be repaid according to the following schedule: (i) one payment on April 15, 2002 in the amount of $20,000, followed by (ii) consecutive payments, each in the amount of $18,350, payable on the first day of each calendar month and on the fifteenth day of each calendar month, commencing May 1, 2002, with a final payment in the amount of the then entire unpaid principal balance of the Note on the Termination Date; all payments of principal to be paid together with interest as provided in the Existing Loan Documents. 2 SECTION 4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to, and covenants with, Lender as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, and the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Financing Agreements, being a continuing condition of the making of Loans by Lender to Borrower: (a) This Amendment has been duly executed and delivered by Borrower and is in full force and effect as of the date hereof and the agreements and obligations of Borrower contained herein constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms; (b) Borrower has taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment; (c) This Amendment is, or when executed by Borrower and delivered to Lender, will be, duly executed and constitute a valid and legally binding obligation of Borrower, enforceable against Borrower in accordance with its terms; and (d) The execution by Borrower and delivery to Lender of this Amendment is not and will not be in contravention of any order of any court or other agency of government, law or any other indenture or agreement to which wither Borrower is bound or the Articles of Incorporation or bylaws of Borrower to be in conflict with, or result in a breach of, or constitute (with due notice and/or passage of time) a default under any such indenture, agreement or undertaking or result in the imposition of any lien, charge, encumbrance of any nature on any property of Borrower. SECTION 5. REAFFIRMATION. Except as expressly amended herein, all of the terms, provisions and conditions of the Loan Agreement, as previously amended, the Note, and the Forbearance Agreement are hereby reaffirmed and ratified in all respects, and remain in full force and effect. Borrower reaffirms each of the representations and warranties under the Loan Agreement and the Forbearance made by it, as if said representations and warranties were made and given on and as of the date hereof. SECTION 6. MISCELLANEOUS 6.1. Counterparts. This Agreement may be executed in any number of counterparts, each of which will constitute an original and all of which together shall constitute one instrument. Signature by facsimile shall bind the parties hereto. 6.2. Third-Party Rights. No rights are intended to be created hereunder for the benefit of any third- party donee, creditor, or incidental beneficiary. 6.3. Modifications. No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought. 3 6.4. Indemnity. Borrower hereby agrees to indemnify Lender from and against all losses, costs, expense, demands and damages whatsoever which Lender may suffer or incur in respect of any claims which have or may be brought by any third party relating to this Agreement, the Existing Loan Documents or the transactions contemplated hereby or thereby. This indemnity shall continue in full force and effect after the Termination Date and notwithstanding the completion of the other matters referred to in this Agreement. This indemnification is in addition to and shall not limit any other indemnification agreement between Borrower and Lender, and shall be included within the Obligations. 6.5. Integrated Agreement. This Agreement shall be deemed incorporated into and made a part of the Existing Loan Documents. Except as expressly set forth herein, all of the terms, conditions and agreements of the Existing Loan Documents are ratified and confirmed. The Existing Loan Documents and this Agreement shall be construed as integrated and complementary of each other, and as augmenting and not restricting Lender's rights, remedies and security. If after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall control. 6.6. Non-Waiver. No omission or delay by Lender in exercising any right or power under this Agreement, or the Existing Loan Documents or any related agreement will impair such right or power or be construed to be a waiver of any default or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and no waiver will be valid unless in writing and then only to the extent specified. Lender's rights and remedies are cumulative and concurrent and may be pursued singly, successively or together. 6.7. Headings. The headings of any paragraph of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement. 6.8. Survival. All warranties, representations and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by them or on their behalf under this Agreement, shall be considered to have been relied upon by Lender. All statements in any such certificate or other instrument shall constitute warranties and representations by Borrower hereunder. All warranties, representations, indemnities and covenants made by Borrower hereunder or under any other agreement or instrument shall be deemed continuing until the Obligations are indefeasibly paid and satisfied in full. 6.9. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. No delegation by Borrower of any duty or obligation of performance may be made or is intended to be made to Lender. No rights are intended to be created hereunder or under any related instruments, documents or agreements for the benefit of any third party donee, creditor, incidental beneficiary or affiliate of Borrower. 4 6.10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The provisions of this Agreement are to be deemed severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect. IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the day and year first above written. LENDER CONGRESS FINANCIAL CORPORATION By: /S/ Cindy B. Denbaum, V.P. ------------------------------ BORROWER BONTEX, INC. By: /S/ Charles Kostelni ------------------------------ Charles Kostelni, Senior Vice President 5 CONSENT OF GUARANTOR The undersigned guarantor hereby consents to the provisions of the foregoing Agreement and agrees that the undersigned's obligations under the Limited Guaranty shall be unimpaired by the said Agreement and that the undersigned has no defenses or set offs against Lender, its officers, directors, employees, agents or attorneys, with respect to the Limited Guaranty, and that all of the terms, conditions and covenants in the Limited Guaranty remain unaltered and in full force and effect and are hereby ratified and confirmed. The undersigned hereby certifies that the representations and warranties made in the Limited Guaranty are true and correct. THE UNDERSIGNED HEREBY RATIFIES AND CONFIRMS THE WAIVER OF JURY TRIAL PROVISION CONTAINED IN THE LIMITED GUARANTY. WITNESS the due execution hereof as a document under seal, as of April 10, 2002, intending to be legally bound hereby. /s/ James C. Kostelni (Seal) ------------------------- James C. Kostelni 6 CORPORATE ACKNOWLEDGMENT STATE OF New York : : ss COUNTY OF New York : On this, the 10 day of April , 2002, before me, the undersigned Notary Public, personally appeared Charles Kostelni , known to me (or satisfactorily proven) and says that he is the Sr. V.P. of Bontex, Inc., whose name is subscribed to the within instrument and who acknowledged that he executed the same for the purposes therein contained. WITNESS my hand and seal the day and year aforesaid. /S/ Amy Hotaling - ------------------------- --------------------------------- Notary Public My Commission Expires: 7 -----END PRIVACY-ENHANCED MESSAGE-----