EXHIBIT 10.2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), made as of the 15th
day of July, 1998, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO ("Bank"), a national banking association with its principal place of
business at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, and TOTAL
CONTROL PRODUCTS, INC. ("Borrower"), an Illinois corporation with its
principal place of business at 0000 X. Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxx 00000
has reference to the following facts and circumstances:
A. Pursuant to Borrower's request, Bank heretofore, now and from time to
time hereafter, has and/or may loan or advance monies, extend credit, and/or
extend other financial accommodations to or for the benefit of Borrower.
B. To secure repayment of the same and all of "Borrower's Liabilities" (as
hereinafter defined), Borrower wishes to provide Bank with a security
interest in and/or collateral assignment of Borrower's assets.
NOW, THEREFORE, in consideration of terms and conditions set forth
herein and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of Borrower by Bank, the parties hereto agree as
follows:
1. DEFINITIONS AND TERMS
1.1. When used herein, the words, terms and/or phrases set forth below
shall have the following meanings:
A. "ACCOUNTS": all present and future rights of Borrower to payment for
goods sold or leased or for services rendered, which are not evidenced
by instruments or chattel paper, and whether or not they have been
earned by performance.
B. "BORROWER'S LIABILITIES": all obligations and liabilities of Borrower
to Bank (including without limitation all debts, claims, indebtedness
and attorneys' fees and expenses as provided for in Paragraph 8.13)
whether primary, secondary, direct, contingent, fixed or otherwise,
including Rate Hedging Obligations (as defined in subparagraph L
herein), heretofore, now and/or from time to time hereafter owing, due
or payable, however evidenced, created, incurred, acquired or owing
and however arising, whether under this Agreement or the "Other
Agreements" (hereinafter defined) or by operation of law or otherwise.
C. "CHARGES": all national, federal, state, county, city, municipal
and/or other governmental (or any instrumentality, division, agency,
body or department thereof, including without limitation the Pension
Benefit Guaranty Corporation) taxes, levies, assessments, charges,
liens, claims or encumbrances upon and/or
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relating to the "Collateral" (as hereinafter defined), Borrower's
Liabilities, Borrower's business, Borrower's ownership and/or use
of any of its assets, and/or Borrower's income and/or gross
receipts.
D. "COLLATERAL": shall have the meaning set forth in Paragraph 3.2.
E. "INDEBTEDNESS": (i) indebtedness for borrowed money or for the
deferred purchase price of property or services; (ii) obligations as
lessee under leases which shall have been or should be, in accordance
with generally accepted accounting principles, recorded as capital
leases; (iii) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) or (ii) above; and (iv) liabilities with
respect to unfunded vested benefits under plans covered by Title IV of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and in effect from time to time.
F. "LETTER OF CREDIT OBLIGATIONS": shall mean any and all existing and
future indebtedness, obligations and liabilities of every kind, nature
and character, direct or indirect, absolute or contingent, of the
Borrower to Bank, arising under, pursuant to or in connection with any
letter of credit issued under the Maximum Revolving Facility.
G. "LOANS": shall mean collectively any Revolving Loans as defined in
Paragraph 2.5 and Term Loans as defined in Paragraph 2.6.
H. "MAXIMUM REVOLVING FACILITY": shall mean the maximum amount of the
Revolving Loans as evidenced by a revolving note(s) which amount Bank
has agreed to consider as a ceiling on the outstanding principal
balance of Revolving Loans (other than Term Loans) to be made by Bank
pursuant to this Agreement.
I. "OBLIGOR": any Person who is and/or may become obligated to Borrower
under or on account of "Accounts."
J. "OTHER AGREEMENTS": all agreements, instruments and documents,
including without limitation, guaranties, mortgages, deeds of trust,
notes, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, leases, subordination agreements,
financing statements and all other written matter heretofore, now
and/or from time to time hereafter executed by and/or on behalf of
Borrower and delivered to Bank.
K. "PERSONS": any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government
(whether national, federal, state, county, city, municipal or
otherwise, including without limitation, any instrumentality,
division, agency, body or department thereof).
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L. "RATE HEDGING OBLIGATIONS": shall mean any and all obligations of the
Borrower, whether absolute or contingent and howsoever and whenever
created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor),
under (i) any and all agreements designed to protect the Borrower from
the fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to: interest rate swap
agreements, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest
rate cap, floor or collar agreements, forward rate currency agreements
or agreements relating to interest rate options, puts and warrants,
and (ii) any and all agreements relating to cancellations, buy backs,
reversals, laminations or assignments of any of the foregoing.
1.2 Except as otherwise defined in this Agreement or the Other
Agreements, all words, terms and/or phrases used herein and therein shall be
defined by the applicable definition therefor (if any) in the Illinois
Uniform Commercial Code.
2. LOANS
2.1 Loans made by Bank to Borrower pursuant to this Agreement shall be
evidenced by notes or other instruments issued or made by Borrower to Bank.
Except as otherwise provided in this Agreement or in any notes executed and
delivered by Borrower to Bank in connection herewith, the principal portion
of Borrower's Liabilities shall be payable by Borrower to Bank on the
maturity date(s) described in any such note(s) or other instruments
evidencing Borrowers Liabilities (as the same may be amended, renewed or
replaced) and all costs, fees and expenses payable hereunder or under the
Other Agreements, shall be payable by Borrower to the Bank on demand, in
either case at Bank's principal place of business or such other place as Bank
shall specify in writing to Borrower.
2.2 All of Borrower's Liabilities shall constitute one obligation
secured by Bank's security interest in the Collateral and by all other
security interests, liens, claims and encumbrances heretofore, now and/or
from time to time hereafter granted by Borrower to Bank.
2.3 Each loan made by Bank to Borrower pursuant to this Agreement or
the Other Agreements shall constitute an automatic warranty and
representation by Borrower to Bank that there does not then exist an "Event
of Default" (as hereinafter defined) or any event or condition, which with
notice, lapse of time and/or the making of such loan would constitute an
Event of Default.
2.4 This Agreement shall be in effect until all of Borrower's
Liabilities have been paid in full and any and all commitments of Bank to
make loans have terminated.
2.5 Provided that an Event of Default does not then exist or would not
then be created or any event which with notice or lapse of time or both would
constitute an Event of Default does not then exist, Bank shall advance to
Borrower on a revolving credit basis (the "Revolving Loans") up to the lesser
of:: (i) the Maximum Revolving Facility minus any Letter of Credit
Obligations, or (ii) the "Borrowing Base" minus any Letter of Credit
Obligations. As used
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herein, "Borrowing Base" shall mean up to 85% ("Advance Rate") of the face
amount (less maximum discounts, credits or allowances which may be taken by
or granted to Obligors in connection therewith) of all then existing
"Eligible Accounts" (as hereinafter defined) that are scheduled on the most
recent schedule of accounts delivered to Bank. If applicable, any amount
calculated pursuant to Paragraph 2.9, shall be included in the Borrowing
Base. Notwithstanding any contrary provision contained herein, Bank may elect
at its option to at any time and upon thirty five (35) days and an event of
default prior written notice to Borrower change the foregoing method of
calculating the Borrowing Base by reducing the advances against Eligible
Accounts, or to deduct reserves from the Borrowing Base.
2.6 Bank may from time to time advance to Borrower term loans ("Term
Loans") in such amounts and on such terms and conditions as the Bank and
Borrower from time to time may agree in writing.
2.7 Notwithstanding anything contained in this Agreement or the Other
Agreements to the contrary, the principal portion of Borrower's outstanding
liabilities due at any one time under the Revolving Loans shall not exceed
the lesser of: (i) the Maximum Revolving Facility minus the amount of all
Letter of Credit Obligations, or (ii) the Borrowing Base minus the amount of
all Letter of Credit Obligations.
2.8 Bank's commitment to loan shall expire on the earlier of: (i) the
date on which Borrower's Liabilities mature under the terms of any note given
by Borrower to Bank, or (ii) the occurrence of an Event of Default pursuant
to Section 7 hereof
2.9 The Borrowing Base shall also include up to the lesser of (i)
S9,000,000.00; or (ii) 50% of the "Value" of "Eligible Inventory" (each term
as hereinafter defined) set forth in the Designation of Inventory then most
recently delivered by Borrower to Bank, which amount shall be reduced by 100%
of the Value of any reductions in such Eligible Inventory made since the date
of such Designation of Inventory. "Value" shall mean the lesser of Borrower's
cost thereof calculated on a first-in, first-out basis or the wholesale
market value thereof. "Eligible Inventory" shall mean any "Inventory" (as
hereinafter defined) which meets each of the following requirements: (a) it
is in condition to be sold in the ordinary course of Borrower's business; (b)
in case of goods held for sale or lease, it is (except as Bank may otherwise
consent in writing) new and unused; (c) it is subject to a first priority,
fully perfected security interest in favor of Bank; (d) it is owned by
Borrower and is not subject to any other lien or security interest whatsoever
except for: (i) the security interest in favor of Bank, (ii) tax liens for
taxes not past due, and (iii) warehouse liens for warehouse charges not past
due; and (e) Bank has reasonably determined, it is not unacceptable for any
reason, including, but without limitation, due to age, type, category and/or
quantity. Any Inventory which is at any time Eligible Inventory, but which
subsequently fails to meet any of the foregoing requirements shall forthwith
cease to be Eligible Inventory. "Inventory" shall mean all goods held by
Borrower for sale or lease, or furnished by Borrower under contract of
service, or held by Borrower as raw materials, work in progress or materials
used or consumed in a business.
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3. COLLATERAL: GENERAL TERMS
3.1 To secure the prompt payment to Bank of Borrower's Liabilities and
the prompt, full and faithful performance by Borrower of all of the
provisions to be kept, observed or performed by Borrower under this Agreement
and/or the Other Agreements, Borrower grants to Bank a security interest in
and to, and collaterally assigns to Bank, all of Borrower's property,
wherever located, whether now or hereafter existing, owned, licensed, leased
(to the extent of Borrower's leasehold interest therein), consigned (to the
extent of Borrower's ownership therein), arising and/or acquired, including
without limitation all of Borrower's: (a) Accounts, chattel paper, tax
refunds, contract rights, leases, leasehold interests, letters of credit,
instruments, documents, documents of title, patents, copyrights, trademarks,
tradenames, licenses, goodwill, beneficial interests and general intangibles;
(b) all goods whose sale, lease or other disposition by Borrower have given
rise to Accounts and have been returned to or repossessed or stopped in
transit by Borrower; (c) all investment property, including but not limited
to certificated and uncertificated securities; (d) goods, including without
limitation all its consumer goods, machinery, equipment, farm products,
fixtures and inventory; (e) liens, guaranties and other rights and privileges
pertaining to any of the Collateral; (f) monies, reserves, deposits, deposit
accounts and interest or dividends thereon, cash or cash equivalents; (g) all
property now or at any time or times hereafter in the possession, or under
the control of Bank or its bailee; (h) all accessions to the foregoing, all
litigation proceeds pertaining to the foregoing and all substitutions,
renewals, improvements and replacements of and additions to the foregoing;
and (i) all books, records and computer records in any way relating to the
Collateral herein described.
3.2 All of the aforesaid property and products and proceeds of the
foregoing in Paragraph 3.1 above, including without limitation, proceeds of
insurance policies insuring the foregoing are herein individually and
collectively called the "Collateral". The terms used herein to identify the
Collateral shall have the same meaning as are assigned to such terms as of
the date hereof in the Illinois Uniform Commercial Code.
3.3 Borrower shall make appropriate entries upon its financial
statements and its books and records disclosing Bank's security interest in
the Collateral.
3.4 Borrower shall execute and deliver to Bank, at the request of Bank,
all agreements, instruments and documents ("Supplemental Documentation") that
Bank reasonably may request, in form and substance acceptable to Bank, to
perfect and maintain perfected Bank's security interest in the Collateral and
to consummate the transactions contemplated in or by this Agreement and the
Other Agreements. Borrower agrees that a carbon, photographic or photostatic
copy, or other reproduction of this Agreement or of any financing statement,
shall be sufficient to evidence Bank's security interest.
3.5 Bank shall have the right, at any time during Borrower's usual
business hours, to inspect the Collateral and all related records (and the
premises upon which it is located) and to verify the amount and condition of
or any other matter relating to the Collateral.
3.6 Borrower warrants and represents to and covenants with Bank that:
(a) Bank's security interest in the Collateral is now and at all times
hereafter shall be perfected and have a first priority except as expressly
agreed to in writing by the Bank; (b) the offices and/or locations
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where Borrower keeps the Collateral are specified at the end of this
Paragraph and Borrower shall not remove such Collateral therefrom except as
may occur in the ordinary course of business, and shall not keep any of such
Collateral at any other offices or locations unless Borrower gives Bank
written notice thereof at least thirty (30) days prior thereto and the same
is within the United States of America; and (c) the addresses specified at
the end of this Paragraph include and designate Borrower's principal
executive office, principal place of business and other offices and places of
business and are Borrower's sole offices and places of business. Borrower, by
written notice delivered to Bank at least thirty (30) days prior thereto,
shall advise Bank of Borrower's opening of any new office or place of
business or its closing of any existing office or place of business and any
new office or place of business shall be within the United States of America.
Borrower has places of business at the address shown at the beginning of this
Agreement and at the locations listed below:
1) 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
2) 00000 Xxxxxxx Xxxx, Xxxxxxx Xxxxxxxxxx 0000-000
3) 0000 00000-000 Xxxxxx, Xxxxxxxx Xxxxxx X0X0X0.
All of the Collateral currently owned by Borrower and all of the
Collateral hereafter acquired is, or will be held or stored at the locations
listed below:
1) The address of the Borrower shown at the beginning of this
Agreement;
2) 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
3) 00000 Xxxxxxx Xxxx, Xxxxxxx Xxxxxxxxxx 0000-000
4) 0000 00000-000 Xxxxxx, Xxxxxxxx Xxxxxx X0X0X0
3.7 At the request of Bank, Borrower shall receive, as the sole and
exclusive property of Bank and as trustee for Bank, all monies, checks,
notes, drafts and all other payments for and/or proceeds of Collateral which
come into the possession or under the control of Borrower and immediately
upon receipt thereof, Borrower shall remit the same (or cause the same to be
remitted), in kind, to Bank or at Bank's direction.
3.8 Upon demand or upon an Event of Default, Bank may take control of,
in any manner, and may endorse Borrower's name to any of the items of payment
or proceeds described in Paragraph 3.7 above and, pursuant to the provisions
of this Agreement, Bank shall apply the same to and on account of Borrower's
Liabilities.
3.9 Bank may, at its option, at any time or times hereafter, but shall
be under no obligation to pay, acquire and/or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person against
the Collateral.
3.10 Immediately upon Borrower's receipt of that portion of the
Collateral evidenced by an agreement, instrument and/or document ("Special
Collateral"), Borrower shall xxxx the same to show that such Special
Collateral is subject to a security interest in favor of Bank and shall
deliver the original thereof to Bank, together with appropriate endorsement
and/or specific evidence of assignment (in form and substance acceptable to
Bank) thereof to Bank.
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3.11 Regardless of the adequacy of any Collateral securing Borrower's
Liabilities hereunder, any deposits or other sums at any time credited by or
payable or due from Bank to Borrower, or any monies, cash, cash equivalents,
securities, instruments, documents or other assets of Borrower in possession
or control of Bank or its bailee for any purpose may, upon demand or an Event
of Default or event or condition which with notice or lapse of time would
constitute an Event of Default, be reduced to cash and applied by Bank to or
setoff by Bank against Borrower's Liabilities hereunder.
3.12 At the request of Bank, Borrower shall instruct the Obligors of its
Accounts to make payments directly to a lockbox or cash collateral account
maintained by Bank in Borrower's name. All such collections shall be Bank's
property to be applied against Borrower's Liabilities, and not Borrower's
property. Bank may endorse Borrower's name to any of the items of payment or
proceeds described herein.
4. COLLATERAL: ACCOUNTS
4.1 An "Eligible Account" is an Account of Borrower which meets each of
the following requirements: (a) it arises from the sale or lease of goods,
such goods having been shipped or delivered to the Obligor thereof, or from
services rendered to the Obligor; (b) it is a valid, legally enforceable
obligation of the Obligor thereunder, and is not subject to any offset,
counterclaim or other defense on the part of such Obligor denying liability
thereunder in whole or in part; (c) it is subject to a perfected security
interest in favor of Bank and is not subject to any other lien or security
interest whatsoever, except those of Bank; (d) it is evidenced by an invoice
(dated not later than the date of shipment to the Obligor or performance and
having a due date not more than thirty (30) days after the date of invoice)
rendered to such Obligor, and is not evidenced by any instrument or chattel
paper; (e) it is payable in United States dollars; (f) it is not owing by any
Obligor residing, located or having its principal activities or place of
business outside the United States of America or who is not subject to
service of process in the United States of America greater than $25,000; (g)
it is not owing by any Obligor involved in any bankruptcy or insolvency
proceeding; (h) it is not owing by any affiliate of Borrower; (i) it is not
unpaid more than ninety (90) days after the date of such invoice; (j) it is
not owing by an Obligor which shall have failed to pay in full any invoice
evidencing any account within ninety (90) days after the date of such
invoice, unless the total invoice amounts of such Obligor which have not been
paid within ninety (90) days of the date represents less than 25% of the
total invoice amounts then outstanding of such Obligor; and (k) it is not an
Account as to which Bank, at any time or times hereafter, determines, in good
faith, that the prospect of payment or performance by the Obligor thereof is
or will be impaired. Notwithstanding the foregoing, Accounts with respect to
which the Account Debtor is the United States of America or any department,
agency or instrumentality thereof, shall not be included as an Eligible
Account unless, with respect to any such Account, Borrower has complied to
Bank's satisfaction with the provisions of the Federal Assignment of Claims
Act of 1940, including, without limitation, executing and delivering to Bank
all statements of assignment and/or notification which are in form and
substance acceptable to Bank and which are deemed necessary by Bank to
effectuate the assignment to Bank of such Accounts. An Account which is at
any time an Eligible Account, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be an Eligible Account. Bank
may in its sole discretion at any time upon an Event of Default reduce the
percentage set forth in clause (j) above upon seven (7) days prior notice to
Borrower.
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Borrower, immediately upon demand from Bank, shall pay to Bank an amount of
money equal to the monies advanced by Bank to Borrower upon an Account that
is no longer an Eligible Account. Borrower warrants and represents to and
covenants with Bank that the principal portion of Borrower's Liabilities
represented by Revolving Loans made by Bank to Borrower, pursuant to
Paragraph 2.5 above, shall not exceed the total of the then outstanding
amounts (less maximum discounts, credits and allowances which may be taken by
or granted to Obligors in connection therewith) of all then existing Eligible
Accounts multiplied by the Advance Rate.
4.2 With respect to Accounts, except as otherwise disclosed by Borrower
to Bank in writing, Borrower warrants and represents to Bank that: (a) they
are genuine, are in all respects what they purport to be and are not
evidenced by a judgment; (b) they represent undisputed, bona fide
transactions completed in accordance with the terms and provisions contained
in the invoices and other documents delivered to Bank with respect thereto;
(c) the amounts shown on any Schedule of Accounts and/or all invoices and
statements delivered to Bank with respect thereto are actually and absolutely
owing to Borrower and are not in any way contingent; (d) no payments have
been made or shall be made thereon except payments immediately delivered to
Bank pursuant to this Agreement; (e) there are no setoffs, counterclaims or
disputes existing or asserted with respect thereto and Borrower has not made
any agreement with any Obligor thereof for any deduction therefrom except a
regular discount allowed by Borrower in the ordinary course of its business
for prompt payment; (f) there are no facts, events or occurrences which in
any way impair the validity or enforcement thereof or tend to reduce the
amount payable thereunder, which may be shown on any schedule of accounts and
on all invoices, and statements delivered to Bank with respect thereto; (g)
to the best of Borrowers knowledge, all Obligors have the capacity to
contract and are solvent; (h) the services furnished and/or goods sold or
leased giving rise thereto are not subject to any lien, claim, encumbrance or
security interest except that of Bank; (i) Borrower has no knowledge of any
fact or circumstance which would impair the validity or collectability
thereof; (j) to the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Obligor which might
result in any material adverse change in its financial condition; and (k)
Borrower has filed a Notice of Business Activities Report or a Certificate of
Authority or similar report with the appropriate office or department in
states where Account Obligors are located and where such reports are required
as a condition to commencing or maintaining an action in the courts of such
states, or Borrower has demonstrated to Bank's satisfaction that it is exempt
from any such requirements under such state's law.
4.3 Any of Bank's officers, employees or agents shall have the right,
at any time or times hereafter, in Bank's name or in the name of a nominee of
Bank, to verify the validity, amount or any other matter relating to any
Accounts by mail, telephone, facsimile or otherwise and to sign Borrower's
name on any verification of Accounts and notices thereof to Obligors. All
reasonable costs, fees and expenses relating thereto incurred by Bank (or for
which Bank becomes obligated) shall be part of Borrower's Liabilities,
payable by Borrower to Bank on demand.
4.4 Unless Bank notifies Borrower in writing that Bank suspends any one
or more of the following requirements, Borrower shall: (a) promptly upon
Borrower's learning thereof, inform Bank, in writing, of any material delay
in Borrower's performance of any of its obligations to any Obligor and of any
assertion of any claims, offsets or counterclaims by any
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Obligor and of any allowances, credits and/or other monies granted by
Borrower to any Obligor; (b) not permit or agree to any extension, compromise
or settlement with respect to Accounts which constitute, in the aggregate,
more than 5% of all Accounts then owing to Borrower; and (c) keep all goods
returned by any Obligor and all goods repossessed or stopped in transit by
Borrower from any Obligor segregated from other property of Borrower,
immediately notify Bank of Borrower's possession of such goods, and hold the
same as trustee for Bank until otherwise directed in writing by Bank.
4.5 Bank shall have the right upon an Event of Default, now and at any
time or times hereafter, at its option, without notice thereof to Borrower:
(a) to notify any or all Obligors that the Accounts and Special Collateral
have been assigned to Bank and the Bank has a security interest therein; (b)
to direct such Obligors to make all payments due from them to Borrower upon
the Accounts and Special Collateral directly to Bank; and (c) to enforce
payment of and collect, by legal proceedings or otherwise, the Accounts and
Special Collateral in the name of Bank and Borrower.
4.6 Borrower, irrevocably, hereby designates, makes, constitutes and
appoints Bank (and all Persons designated by Bank) as Borrower's true and
lawful attorney (and agent-in-fact), with power, upon an Event of Default, or
an event or condition which with notice or lapse of time would constitute an
Event of Default, without notice to Borrower and in Borrower's or Bank's
name: (a) to demand payment of Accounts; (b) to enforce payment of the
Accounts by legal proceedings or otherwise; (c) to exercise all of Borrower's
rights and remedies with respect to the collection of the Accounts; (d) to
reasonably settle, adjust, compromise, discharge, release, extend or renew
the Accounts; (e) to settle, adjust or compromise any legal proceedings
brought to collect the Accounts; (f) to sell or assign the Accounts upon such
terms, for such amounts and at such time or times as Bank deems advisable;
(g) to prepare, file and sign Borrower's name on any Notice of Lien,
Assignment or Satisfaction of Lien or similar document in connection with the
Accounts and Special Collateral; or (h) to prepare, file and sign Borrower's
name on any Proof of Claim in Bankruptcy or similar document against any
Obligor.
5. WARRANTIES, REPRESENTATIONS
AND COVENANTS: INSURANCE AND TAXES
5.1 Borrower, at its sole cost and expense, shall keep and maintain:
(a) the Collateral insured for the full insurable value against all hazards
and risks ordinarily insured against by other owners or users of such
properties in similar businesses; and (b) business interruption insurance and
public liability and property damage insurance relating to Borrower's
ownership and use of its assets. All such policies of insurance shall be in a
form with insurers and in such amounts as may be satisfactory to Bank.
Borrower shall deliver to Bank the original (or certified) copy of each
policy of insurance, or a certificate of insurance, and evidence of payment
of all premiums for each such policy. Such policies of insurance (except
those of public liability) shall contain a standard form lender's loss
payable clause, in form and substance acceptable to Bank, showing loss
payable to Bank, and shall provide that: (i) the insurance companies will
give Bank at least thirty (30) days written notice before any such policy or
policies of insurance shall be altered or canceled; and (ii) no act or
default of Borrower or any other Person shall effect the right of Bank to
recover under such policy or policies of insurance in case of loss or damage.
Borrower hereby directs all insurers under such policies of insurance
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(except those of public liability) to pay all proceeds payable thereunder
directly to Bank and hereby authorizes Bank to make, settle, and adjust
claims under such policies of insurance and endorse the name of Borrower on
any check, draft, instrument or other item of payment for the proceeds of
such policies of insurance.
Unless Borrower provides Bank with evidence of the insurance
coverage required by this Agreement, Bank may purchase insurance at
Borrower's expense to protect Bank's interests in the Collateral. This
insurance may, but need not, protect Borrower's interests. The coverage Bank
purchases may not pay any claim that Borrower makes or any claim that is made
against Borrower in connection with the Collateral. Borrower may later
cancel any insurance purchased by Bank, but only after providing Bank with
evidence that Borrower has obtained insurance as required by this Agreement.
If Bank purchases insurance for the Collateral, Borrower will be responsible
for the costs of that insurance, including interest and other charges Bank
may impose in connection with the placement of the insurance, until the
effective date of the cancellation or expiration of the insurance. The costs
of the insurance may be added to Borrower's total outstanding balance or
obligation. The costs of the insurance may be more than the cost of the
insurance Borrower is able to obtain on its own.
5.2 Borrower shall pay promptly, when due, all Charges, and shall not
permit any Charges to arise, or to remain and will promptly discharge the
same.
6. WARRANTIES, REPRESENTATIONS AND COVENANTS: GENERAL
6.1 Borrower warrants and represents to and covenants with Bank that:
(a) Borrower has the right, power and capacity and is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and
Other Agreements; (b) the execution, delivery and/or performance by Borrower
of this Agreement and Other Agreements shall not, by the lapse of time, the
giving of notice or otherwise, constitute a violation of any applicable law
or a breach of any provision contained in Borrower's Articles of
Incorporation, By-Laws, Articles of Partnership, Articles of Organization,
Operating Agreement or similar document, or contained in any agreement,
instrument or document to which Borrower is now or hereafter a party or by
which it is or may be bound; (c) Borrower has and at all times hereafter
shall have good, indefeasible and merchantable title to and ownership of the
Collateral, free and clear of all liens, claims, security interests and
encumbrances except those of Bank; (d) Borrower is now and at all times
hereafter, shall be solvent and generally paying its debts as they mature and
Borrower now owns and shall at all times hereafter own property which, at a
fair valuation, is greater than the sum of its debts; (e) Borrower is not and
will not be during the term hereof in violation of any applicable federal,
state or local statute, regulation or ordinance that, in any respect
materially and adversely affects its business, property, assets, operations
or condition, financial or otherwise; and (f) Borrower is not in default with
respect to any indenture, loan agreement, mortgage, deed or other similar
agreement relating to the borrowing of monies to which it is a party or by
which it is bound.
6.2 Borrower warrants and represents to and covenants with Bank that
Borrower shall not, without Bank's prior written consent thereto: (a) grant a
security interest in or assign any of the Collateral to any Person or permit,
grant, or suffer a lien, claim or encumbrance upon any of the Collateral; (b)
sell or transfer any of the Collateral not in the ordinary course of
business; (c)
10
enter into any transaction not in the ordinary course of business which
materially and adversely affects the Collateral or Borrower's ability to
repay Borrower's Liabilities or Indebtedness; (d) other than as specifically
permitted in or contemplated by this Agreement, encumber, pledge, mortgage,
sell, lease or otherwise dispose of or transfer, whether by sale, merger,
consolidation or otherwise, any of Borrower's assets; and (e) incur
Indebtedness except: (i) unsecured trade debt in the ordinary course of
business; (ii) renewals or extensions of existing Indebtedness and interest
thereon; and (iii) Indebtedness that is unsecured and is to Persons who
execute and deliver to Bank in form and substance acceptable to Bank and its
counsel subordination agreements subordinating their claims against Borrower
therefor to the payment of Borrower's Liabilities.
6.3 Borrower warrants and represents to and covenants with Bank that
Borrower shall furnish to Bank: (a) as soon as available but not later than
ninety (90) days after the close of each fiscal year of Borrower, financial
statements, which shall include, but not be limited to, balance sheets,
income statements and statements of cash flow of Borrower prepared in
accordance with generally accepted accounting principles, consistently
applied, audited by a firm of independent certified public accountants
selected by Borrower and acceptable to Bank; (b) as soon as available but not
later than forty-five (45) days after the end of each month hereafter,
financial statements of Borrower certified by Borrower to be prepared in
accordance with generally accepted accounting principles which fairly present
the financial position and results of operations of Borrower for such period;
(c) schedule of accounts payable and accounts receivable by the I 5th of
every month or otherwise as Bank may direct; and (d) such other data and
information (financial and otherwise) as Bank, from time to time, may request.
6.4 Borrower will maintain its primary depository relationship with
Bank and will establish such accounts and maintain balances therein with Bank
sufficient to cover the cost of all Bank services provided; provided however,
that nothing herein shall require Borrower to keep and maintain a specific
minimum balance in such account.
6.5 Borrower warrants and represents to and covenants with Bank that
Borrower shall not permit its Tangible Net Worth (as hereinafter defined) to
be at any time less than $7,000,000.00. "Tangible Net Worth" shall mean the
value of the total assets of Borrower plus debt subordinated to Bank, as
determined in accordance with the generally accepted accounting principles
("GAAP") after subtracting therefrom the aggregate amount of any intangible
assets of Borrower as determined in accordance with GAAP, including prepaid
expenses, other officer accounts receivable, goodwill, franchises, licenses,
patents, capitalized research and development, trademarks, tradenames,
copyrights and brand names, minus the aggregate of all contingent and
non-contingent liabilities of Borrower. Tangible balance sheet items include
investment in joint ventures, deferred inocme taxes no greater than fiscal
year end 1998 levels, and nonrefundable life insuracne and any other liquid
deposit within current assets.
6.6 Borrower warrants and represents to and covenants with Bank that
Borrower shall maintain a ratio of Liabilities to Tangible Net Worth (as
hereinafter defined) of not more than 4.75 to 1.0 at all times.
"Liabilities" shall mean at all times all liabilities of Borrower that would
be shown on a balance sheet of Borrower prepared in accordance with GAAP,
except for minority interest.
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7. DEFAULT
7.1 The occurrence of any one of the following events shall constitute
a default by the Borrower ("Event of Default") unda this Agreement: (a) if
Borrower fails to pay any of Borrower's Liabilities when due and payable or
declared due and payable (whether by scheduled maturity, required payment,
acceleration, demand or otherwise); (b) if Borrower fails or neglects to
perform, keep or observe any term, provision, condition, covenant, warranty
or representation contained in this Agreement or any of the Other Agreements
after a 30 day cure period; (c) occurrence of a default or Event of Default
under any of the Other Agreements heretofore, now or at any time hereby
delivered by or on behalf of Borrower to Bank; (d) occurrence of a default or
an Event of Default under any agreement, instrument or document heretofore,
now or at any time hereafter delivered to Bank by any guarantor of Borrower's
Liabilities or by any Person which has granted to Bank a security interest or
lien in such Person's real or personal property to secure the payment of
Borrower's Liabilities; (e) if the Collateral or any other of Borrower's
assets are attached, seized, subjected to a writ, or are levied upon or
become subject to any lien or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors; (f) if a notice
of lien greater than $50,000, levy or assessment is filed of record or given
to Borrower with respect to all or any of Borrower's assets by any federal,
state, local department or agency; (g) if Borrower or any guarantor of
Borrower's Liabilities becomes insolvent or generally fails to pay or admits
in writing its inability to pay debts as they become due, if a petition under
Title 11 of the United States Code or any similar law or regulation is filed
by or against Borrower or any such guarantor, if Borrower or any such
guarantor shall make an assignment for the benefit of creditors, if any case
or proceeding is filed by or against Borrower or any such guarantor for its
dissolution or liquidation, if Borrower or any such guarantor is enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of its business affairs; (h) the appointment of a conservator
for all or any prtion of Borrower's assets or the Collateral; (i) the
revocation, termination, or cancellation of any guaranty of Borrower's
Liabilities without written consent of Bank; (j) if a contribution failure
occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or controlled group of trades or businesses
(as described in Sections 414(b) and (c) of the Intemal Revenue Code of 1986
or Section 4001 of ERISA) sufficient to give rise to a lien under Section
302(f) of ERISA; (k) if Borrower or any guarantor of Borrower's Liabilities
is in default in the payment of any obligations, indebtedness or other
liabilities to any third party and such default is declared and is not cured
within the time, if any, specified therefor in any agreement governing the
same; (1) if any material statement, report or certificate made or delivered
by Borrower, any of Borrower's partners, officers, employees or agents or any
guarantor of Borrower's Liabilities is not true and correct.
7.2 All of Bank's rights and remedies under this Agreement and the
Other Agreements are cumulative and non-exclusive.
7.3 Upon an Event of Default or the occurrence of any one of the events
described in Paragraph 7.1, without notice by Bank to or demand by Bank of
Borrower, Bank shall have no further obligation to and may then forthwith
cease advancing monies or extending credit to or for the benefit of Borrower
under this Agreement and the Other Agreements. Upon an Event of
12
Default, without notice by Bank to or demand by Bank of Borrower, Borrower's
Liabilities shall be immediately due and payable.
7.4 Upon an Event of Default, Bank, in its sole and absolute
discretion, may exercise any one or more of the rights and remedies accruing
to a secured party under the Uniform Commercial Code of the relevant state
and any other applicable law upon default by a debtor.
7.5 Upon an Event of Default, Borrower, immediately upon demand by
Bank, shall assemble the Collateral and make it available to Bank at a place
or places to be designated by Bank which is reasonably convenient to Bank and
Borrower. Borrower recognizes that in the event Borrower fails to perform,
observe or discharge any of its obligations or liabilities under this
Agreement or the Other Agreements, no remedy of law will provide adequate
relief to Bank, and agrees that Bank shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
7.6 Upon an Event of Default, without notice, demand or legal process
of any kind, Bank may take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may
be found, and for that purpose may pursue the same wherever it may be found,
and may enter into any of Borrower's premises where any of the Collateral may
be or is supposed to be, and search for, take possession of, remove, keep and
store any of the Collateral until the same shall be sold or otherwise
disposed of, and Bank shall have the right to store the same in any of
Borrower's premises without cost to Bank.
7.7 Any notice required to be given by Bank of a sale, lease, or other
disposition of the Collateral or any other intended action by Bank, (i)
deposited in the United States mail, postage prepaid and duly addressed to
Borrower at the address specified at the beginning of this Agreement, or (ii)
sent via certified mail, return receipt requested, or (iii) sent via
facsimile, or (iv) delivered personally, not less than ten (10) days prior to
such proposed action, shall constitute commercially reasonable and fair
notice to Borrower.
7.8 Upon an Event of Default Borrower agrees that Bank may, if Bank
deems it reasonable, postpone or adjourn any such sale of the Collateral from
time to time by an announcement at the time and place of sale or by
announcement at the time and place of such postponed or adjourned sale,
without being required to give a new notice of sale. Borrower agrees that
Bank has no obligation to preserve rights against prior parties to the
Collateral. Further, to the extent permitted by law, Borrower waives and
releases any cause of action and claim against Bank as a result of Bank's
possession, collection or sale of the Collateral, any liability or penalty
for failure of Bank to comply with any requirement imposed on Bank relating
to notice of sale, holding of sale or reporting of sale of the Collateral,
and any right of redemption from such sale.
8. GENERAL
8.1 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on account of
Borrower's Liabilities and Borrower agrees that Bank shall have the
continuing exclusive right to apply and re-apply any and all such
13
payments in such manner as Bank may deem advisable, notwithstanding any entry
by Bank upon any of its books and records.
8.2 Borrower covenants, warrants and represents to Bank that all
representations and warranties of Borrower contained in this Agreement and
the Other Agreements shall be true from the time of Borrower's execution of
this Agreement to the end of the original term and each renewal term hereof.
All of Borrower's warranties, representations, undertakings, and covenants
contained in this Agreement or the Other Agreements shall survive the
termination or cancellation of the same.
8.3 The terms and provisions of this Agreement and the Other Agreements
shall supersede any prior agreement or understanding of the parties hereto,
and contain the entire agreement of the parties hereto with respect to the
matters covered herein. This Agreement and the Other Agreements may not be
modified, altered or amended except by an agreement in writing signed by
Borrower and Bank. Except for the provisions of Section 2 hereof which shall
terminate as provided in paragraph 2.8, this Agreement shall continue in full
force and effect so long as any portion or component of Borrower's
Liabilities shall be outstanding. Should a claim ("Recovery Claim") be made
upon the Bank at any time for recovery of any amount received by the Bank in
payment of Borrower's Liabilities (whether received from Borrower or
otherwise) and should the Bank repay all or part of said amount by reason of
(1) any judgment, decree or order of any court or administrative body having
jurisdiction over Bank or any of its property; or (2) any settlement or
compromise of any such Recovery Claim effected by the Bank with the claimant
(including Borrower), this Agreement and the security interests granted Bank
hereunder shall continue in effect with respect to the amount so repaid to
the same extent as if such amount had never originally been received by the
Bank, notwithstanding any prior termination of this Agreement, the return of
this Agreement to Borrower, or the cancellation of any note or other
instrument evidencing Borrower's Liabilities. Borrower may not sell, assign
or transfer this Agreement, or the Other Agreements or any portion thereof.
8.4 Bank's failure to require strict performance by Borrower of any
provision of this Agreement shall not waive, affect or diminish any right of
Bank thereafter demand strict compliance and performance therewith. Any
suspension or waiver by Bank of an Event of Default by Borrower under this
Agreement or the Other Agreements shall not suspend, waive or affect any
other Event of Default by Borrower under this Agreement or the Other
Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or the Other Agreements and no Event of Default by Borrower unda
this Agreement or the Other Agreements shall be deemed to have been suspended
or waived by Bank unless such suspension or waiver is by an instrument in
writing signed by an officer of Bank and directed to Borrower specifying such
suspension or waiver.
8.5 If any provision of this Agreement or the Other Agreements or the
application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Agreements and
the application of such provision to other Persons or circumstances will not
be affected thereby and the provisions of this Agreement and the Other
Agreements shall be severable in any such instance.
14
8.6 This Agreement and the Other Agreements shall be binding upon and
inure to the benefit of the successors and assigns of Borrower and Bank.
This provision, however, shall not be deemed to modify Paragraph 8.3 hereof
8.7 Borrower hereby appoints Bank as Borrower's agent and
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any agreement, instrument or
document which Bank may reasonably deem necessary or advisable to accomplish
the purposes hereof which appointment is irrevocable and coupled with an
interest. All monies paid for the purposes herein, and all costs, fees and
expenses paid or incurred in connection therewith, shall be part of
Borrower's Liabilities, payable by Borrower to Bank on demand.
8.8 This Agreement, or a carbon, photographic or other reproduction of
this Agreement or of any Uniform Commercial Code financing statement covering
the Collateral or any portion thereof, shall be sufficient as a Uniform
Commercial Code financing statement and may be filed as such.
8.9 Except as otherwise provided in the Other Agreements, if any
provision contained in this Agreement is in conflict with, or inconsistent
with, any provision in the Other Agreements, the provision contained in this
Agreement shall govern and control.
8.10 Except as otherwise specifically provided in this Agreement,
Borrower waives any and all notice or demand which Borrower might be entitled
to receive by virtue of any applicable statute or law, and waives
presentment, demand and protest and notice of presentment, protest, default,
dishonor, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any and all agreements, instruments or documents at any time held
by Bank on which Borrower may in any way be liable.
8.11 Until Bank is notified by Borrower to the contrary in writing by
registered or certified mail directed to Bank's principal place of business,
the signature upon this Agreement or upon any of the Other Agreements of any
partner, manager, employee or agent of the Borrower, or of any other Person
designated in writing to Bank by any of the foregoing, shall bind Borrower
and be deemed to be the duly authorized act of Borrower.
8.12 This Agreement and the Other Agreements shall be governed and
controlled by the internal laws of the State of Illinois; and not the law of
conflicts.
8.13 If at anytime or times hereafter, whether or not Borrower's
Liabilities are outstanding at such time, Bank: (a) employs counsel for
advice or other representation, (i) with respect to the Collateral, this
Agreement, the Other Agreements or the administration of Borrower's
Liabilities, (ii) to represent Bank in any litigation, arbitration, contest,
dispute, suit or proceeding or to commence, defend or intervene or to take
any other action in or with respect to any litigation, arbitration, contest,
dispute, suit or proceeding (whether instituted by Bank, Borrower or any
other Person) in any way or respect relating to the Collateral, this
Agreement, the Other Agreements, or Borrower's affairs, or (iii) to enforce
any rights of Bank against Borrower or any other Person which may be
obligated to Bank by virtue of this Agreement or the Other Agreements,
including, without limitation, any Obligor; (b) takes any action with respect
15
to administration of Borrower's Liabilities or to protect, collect, sell,
liquidate or otherwise dispose of the Collateral; and/or (c) attempts to or
enforces any of Bank's rights or remedies under this Agreement or the Other
Agreements, including, without limitation, Bank's rights or remedies with
respect to the Collateral, the reasonable costs and expenses incurred by Bank
in any manner or way with respect to the foregoing, shall be part of
Borrower's Liabilities, payable by Borrower to Bank on demand.
8.14 BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND
ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR
THE COLLATERAL SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY
OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY
AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR
CHANGE TO VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN
ACCORDANCE WITH THIS PARAGRAPH.
8.15 BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER AGREEMENTS, OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (II) ARISING
FROM ANY DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS, OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
TOTAL CONTROL PRODUCTS, INC.
AN ILLINOIS CORPORATION
By: /s/ Xxxxxxxx X. Xxxx
---------------------------
Xxxxxxxx X. Xxxx, President
Accepted this 15th. day of July, 1998, at Bank's principal place of
business in the City of Chicago, State of Illinois.
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ X.X. Xxxxxxx
Its: VP
16
