EXHIBIT 10.1
LOAN AGREEMENT
BETWEEN
CENTIV, INC., A DELAWARE CORPORATION
AND
XXXX XXXXXX BANK
AS LENDER
This Loan Agreement ("Agreement") is dated as of June 12, 2002, by and between
CENTIV, INC., a Delaware corporation ("Borrower") and XXXX XXXXXX BANK
("Lender").
RECITALS
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1.1 Borrower has requested that Lender provide a line of credit to
Borrower in the maximum principal amount of $2,000,000.00 to provide funds for
working capital purposes and Lender has agreed to make said loans subject to the
terms and conditions set forth herein.
1.2 In consideration of the mutual agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Lender agree as follows:
2.0 DEFINITIONS. As used in this Agreement, the following terms shall
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have the following meanings:
2.1 "Applicable Laws" shall mean all laws, statutes, ordinances, rules,
regulations, judgments, decrees or orders of any state, federal or local
government or agency which are applicable to the Borrower and/or the Collateral.
2.2 "Business Day" shall mean each day excluding Saturdays, Sundays and
any other day on which Lender is closed for business to the public.
2.3 "Closing Date" shall mean June 12, 2002.
2.4 "Collateral" shall mean all collateral and assets granted as
security for the Loan, whether granted directly or indirectly, whether granted
now or in the future, including, but in no way limited to the accounts
receivable, inventory, equipment, furniture and fixtures of Borrower, wherever
located.
2.5 "Debt" shall mean all current and long term loans, accounts
payable, loans from shareholders and all other indebtedness of Borrower.
2.6 "Debt Service Coverage Ratio" shall be defined as the book net
income (less distributions) plus taxes, depreciation, amortization and interest
expenses divided by total debt service requirements for the year to date period
then ending of the principal and interest payments on all Debt of Borrower
including, but not limited to the interest payments on the Note.
2.7 "Debt to Tangible Net Worth Ratio" shall be defined as the ratio of
all short and long term debt of Borrower to Tangible Net Worth of Borrower, all
as reasonably determined by Lender in accordance with its custom and practice.
2.8 "Default Rate" shall mean the Loan Rate plus Four percent
(4%) per annum.
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2.9 "Eligible Accounts Receivable" shall mean those accounts receivable
that are less than ninety (90) days old as measured from the date of the
original invoice giving rise to such account receivable and subject to a 25%
cross-aging analysis.
2.10 "Event of Default" shall have the meaning ascribed to it in
Article 10 of this Agreement.
2.11 "Inventory" shall have the meaning as set forth in the Uniform
Commercial Code as in effect from time to time in the State of Illinois.
2.12 "Initial Advance" shall mean the first draw or disbursement made
from the proceeds of the Loan.
2.13 "Initial Loan Amount" shall have the meaning ascribed to it in
Article 3 of this Agreement.
2.14 "Loan" shall mean the loan from Lender to Borrower in an amount
not to exceed $2,000,000.00 in the aggregate which is to be disbursed pursuant
to this Agreement and which loan shall otherwise be governed by the provisions
hereof.
2.15 "Loan Advance" shall mean a disbursement of all or any portion
of the Loan.
2.16 "Loan Documents" shall mean this Agreement, the Note, the Security
Agreement, Uniform Commercial Code financing statements, Opinion of Borrower's
Counsel, Borrower's Certificate and every other document now or hereafter
evidencing, securing or otherwise executed in conjunction with the Loan,
together with all amendments and modifications thereof.
2.17 "Loan Expenses" shall mean the reasonable expenses, charges, costs
(including both hard costs and soft costs) and fees relating to the making,
administration, negotiation, documentation or any other aspect of the Loan,
including, without limitation, Lender's reasonable attorneys' fees and costs in
connection with the negotiation, documentation and enforcement of the Loan, all
recording fees and charges, fees of insurance consultants, and all other
reasonable costs, expenses, charges and fees referred to in or necessitated by
the terms of this Agreement or any of the other Loan Documents.
2.18 "Loan Rate" shall mean an annual rate of interest equal to "Prime"
plus one percent (1%). Notwithstanding the foregoing, the Loan Rate shall be
reduced to "Prime" plus one-half percent (1/2%) if the Borrower satisfies all of
the following conditions:
(a) Borrower shall maintain a Tangible Net Worth Ratio, as reasonably
determined by Lender in accordance with its custom and practice, of not
less than Three Million and 00/100 Dollars ($3,000,000.00).
(b) Borrower's Debt to Tangible Net Worth does not exceed 3.00:1.
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(c) Borrower shall maintain minimum monthly earnings before interest, taxes,
depreciation and amortization ("EBITDA") of One Hundred Thousand and 00/100
Dollars ($100,000.00) for six (6) consecutive months.
"Prime" or "P" shall mean the "Prime Rate," which at any time, and from time to
time, shall be the rate of interest then most recently announced by Lender as
its Prime Rate, which is not necessarily Lender's lowest or most favorable rate
of interest at any one time. Each change in the interest rate hereon shall take
effect on the effective date of the change in the Prime Rate. Lender shall not
be obligated to give notice of any change in the Prime Rate.
2.19 "Maturity Date" shall mean June 30, 2004.
2.20 "Maximum Loan Amount" shall have the meaning ascribed to it in
Article 3 of this Agreement.
2.21 "Note" shall mean the Revolving Credit Note evidencing the Loan to
be made by Centiv, Inc. payable to the order of Lender in the maximum principal
amount of Two Million and 00/100 Dollars ($2,000,000.00); all as the same may be
hereafter amended or otherwise modified from time to time.
2.22 "Obligors" shall mean each individual or entity comprising
Borrower.
2.23 "Person" shall mean any individual, firm, corporation, business
enterprise, trust, association, joint venture, partnership, governmental body or
other entity, whether acting in an individual, fiduciary or other capacity.
2.24 "Principal Balance" shall mean the unpaid principal balance of
the Loan outstanding from time to time.
2.25 "Security Agreement" shall mean the security agreement encumbering
the Collateral to be made by Borrower to Lender to secure the Loan, as the same
may be hereafter amended or otherwise modified from time to time.
2.26 "Tangible Net Worth" shall mean the book value of common
stock of Borrower plus retained earnings and subordinated debt and less
intangible assets, e.g. goodwill and loans to shareholders, all as calculated in
accordance with generally accepted accounting principles. In addition, any loans
to shareholders or employees of Borrower shall be considered intangible for the
purposes hereof and shall not be included as an asset of Borrower.
2.27 "Unmatured Default" shall mean an event or circumstance that with
the giving of notice, the passage of time, or both, would constitute an Event of
Default.
3. COMMITMENT TO LEND.
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3.1 Loan Amount.
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A. Initial Loan Amount. Lender agrees to lend to Borrower, and Borrower
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agrees to borrow from Lender, an amount, with respect to the Note, not to exceed
(i) Eighty per cent (80%) of the Eligible Accounts Receivable in the aggregate
plus (ii) Fifty percent (50%) of the Loan Advance against Inventory (but in no
event shall the Loan Advance against Inventory (i) include Advances against
"open stock" or ink on consignment; or (ii) exceed Two Hundred Fifty Thousand
and 00/100 ($250,000.00)). The aggregate Loan Advances prior to satisfaction of
the Credit Threshold (as defined below) under the Note shall not exceed Seven
Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) for the purposes, upon
the terms and subject to the conditions contained in this Agreement.
B. Maximum Loan Amount. Notwithstanding the foregoing and provided Borrower
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is achieves earnings before interest, taxes, depreciation and amortization
("EBITDA") of at least Fifty Thousand and 00/100 Dollars ($50,000.00) for three
(3) consecutive months ("Credit Threshold"), Lender agrees to lend to Borrower,
and Borrower agrees to borrow from Lender, an mount, with respect to the Note,
not to exceed (i) Eighty per cent (80%) of the Eligible Accounts Receivable in
the aggregate plus (ii) Fifty percent (50%) of the Loan Advance against
Inventory (but in no event shall the Loan Advance against Inventory (i) include
Advances against "open stock" or ink on consignment; or (ii) exceed Seven
Hundred Thousand and 00/100 ($700,000.00)). The aggregate Loan Advances at any
given time under the Note once the Credit Threshold is satisfied shall not
exceed Two Million and 00/100 Dollars ($2,000,000.00) for the purposes, upon the
terms and subject to the conditions contained in this Agreement.
Notwithstanding anything contained in this Article to the contrary, Loan
Advances shall be limited to such amounts as Borrower is eligible to receive
pursuant to, and upon compliance with, the conditions of Article 5 hereof.
Borrower may prepay all or any part of the Note at any time and from time to
time without cost or penalty. Borrower shall be entitled to reborrow portions of
the Note that are repaid or prepaid pursuant to, and upon compliance with, the
conditions of Article 5 hereof.
3.2 Loan Advances Evidenced by Note. All Loan Advances hereunder
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shall be evidenced by the Note, which shall be executed and delivered by
Borrower simultaneously with the execution of this Agreement.
3.3 Payment of Interest and Principal. Interest shall accrue on the
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Principal Balance remaining from time to time unpaid under the Note during each
calendar month (whether full or partial) prior to the Maturity Date at an annual
rate equal to Loan Rate.
Payments due under the Note, if not sooner declared to be due in accordance with
the provisions of the Note, shall be made as follows:
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(i) Commencing on July 1, 2002, and on the first day of each month
thereafter through and including the month in which the Maturity Date occurs,
installments of accrued and unpaid interest only shall be due and payable.
(ii) The unpaid Principal Balance of the Note, if not sooner declared
to be due in accordance with the terms hereof, together with all accrued and
unpaid interest, shall be due and payable in full onthe Maturity Date.
3.4 Default Rate. At any time after the Maturity Date or otherwise when
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an Event of Default exists under this Agreement or any of the other Loan
Documents, the Principal Balance and any other amounts then owing by Borrower to
Lender shall bear interest at the Default Rate.
3.5 Late Charge. If any payment of interest or principal due under the
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Note is not made within five (5) days after such payment is due, then, in
addition to the payment of the amount so due, Borrower shall pay to Lender a
"late charge" in the amount of five percent (5%) of the amount due to defray
part of the cost of collecting and handling such late payment.
4. LOAN DOCUMENTS. Prior to the Initial Advance, Borrower shall
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execute and/or deliver to Lender those of the following documents and other
items required to be executed and/or delivered by Borrower, and shall cause to
be executed and/or delivered to Lender those of the following documents and
other items required to be executed and/or delivered by others, all of which
documents and other items shall contain such provisions as shall be required to
conform to this Agreement and otherwise shall be reasonably satisfactory in form
and substance to Lender:
4.1 The Loan Documents.
4.2 UCC financing statements perfecting the security interests
created by the Security Agreement.
4.3 Such insurance policies and certificates (with premiums prepaid)
evidencing all-risk, fire and extended coverage, hazard and comprehensive
liability insurance, including contractual liability, workmen's compensation
insurance, and such other insurance as Lender reasonably requires covering the
Collateral, in such form, with such endorsements, in such amounts, with
deductibles and with such carriers as shall be acceptable to Lender, and naming
Lender as an additional insured party on all liability policies and as
mortgagee/additional loss payee on the fire and extended coverage and other
Collateral damage policies and containing a prohibition against cancellation for
nonpayment of premiums or any other reason or modification without thirty days
prior written notice to Lender. Any provision of this Article to the contrary
notwithstanding, all insurance policies required to be carried under this
Agreement shall provide expressly that they shall not be rendered invalid by a
waiver of the right of subrogation by any insured and that the insurer shall
have no right to be subrogated to Lender. Borrower shall deliver (or cause to be
delivered) to Lender either (i) an original of each such insurance policy, or
(ii) a copy of each such policy certified by the issuing agent as being a true,
correct and complete copy of the original.
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4.4 Current Uniform Commercial Code, federal and state tax lien and
judgment searches, pending suit and litigation searches and bankruptcy court
filings searches covering Borrower and disclosing no matters objectionable to
Lender.
4.5 Opinion letter from legal counsel for Borrower (which counsel must
be approved by Lender with respect to the issuance of such opinion) opining to
the authority of said parties to execute, deliver and perform their respective
obligations under the Loan Documents, to the validity and binding effect of the
Loan Documents and to such other matters as Lender and its counsel shall
reasonably require.
4.6 Certified copies of the Bylaws and Articles of Incorporation
of Centiv, Inc. together with all amendments thereto, and such resolutions and
other documents as Lender deems appropriate evidencing the authority of Borrower
to execute and deliver the Loan Documents to which Borrower is a party and to
perform the obligations contemplated hereby and thereby.
4.7 Such other assignments, certificates, opinions and other
documents, instruments and information affecting or relating to Lender's
interest in the Collateral or the use, operation or development of the
Collateral as Lender may reasonably require.
5. DISBURSEMENT OF THE LOAN.
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5.1 Conditions Precedent. In addition to the other conditions set forth
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herein, the obligation of Lender to make the initial and each subsequent
disbursement of the Loan under this Agreement shall be conditioned upon and
subject to the payment to Lender of all loan fees then owing from Borrower to
Lender and to satisfaction of all of the following conditions:
(a) All representations and warranties contained in this Agreement and in
the other Loan Documents shall be true in all material respects on and
as of the date of such disbursement.
(b) Borrower shall have performed all of its obligations under all Loan
Documents which are required to be performed on or prior to the date
of such disbursement.
(c) No Event of Default shall have occurred that has not been waived in
writing by Lender, and no Unmatured Default shall then exist.
(d) Delivery by Borrower to Lender of (i) quarterly company prepared
financial statements within forty-five (45) days after the end of the
quarter; (ii) annually audited financial statements from an accounting
firm reasonably acceptable to Lender within one hundred twenty (120)
days after the end of the year; (iii) monthly accounts receivable
aging reports, inventory reports and Borrowing Base Certificate in
form and content reasonably acceptable to Lender within twenty (20)
days after the end of the month; (iv) annual field audits by employees
of Lender and outside auditors, if requested by Lender.
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5.2 Certifications. Representations and Warranties. Each request for
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disbursement by Centiv, Inc. under the Note shall constitute (a) certification
that the representations and warranties contained in Article 6 below are true
and correct in all material respects as of the date of such request, and (b)
certification thatBorrower is in compliance with the conditions contained in
this Article 5 to the extent applicable toBorrower.
6. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to execute
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this Agreement and to make the Loan, Borrower represents and warrants to Lender
as follows:
6.1 Borrower. Borrower is a duly formed corporation, validly existing
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and in good standing in the State of Delaware and duly authorized to transact
business in the State of Illinois and has full power and authority to execute
and deliver the Loan Documents and to perform its obligations hereunder and
thereunder. The Bylaws of Borrower, dated as of April 11, 2002 creating
Borrower and the Articles of Incorporation of said corporation, copies of which
have been furnished to Lender, are in effect, unamended since delivery to Lender
and are the true, correct and complete documents relating to said corporation's
creation and governance. Borrower has fully complied with all applicable
securities and other laws and regulations in connection with the formation
ofBorrower and the sale and offer for sale of interests therein.
6.2 Validity and Enforceability of Documents. Upon the execution and
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delivery of the Loan Documents, the Loan Documents shall be valid and binding
upon the parties that have executed the same in accordance with the respective
provisions thereof, and enforceable in accordance with the respective provisions
thereof, subject only to applicable bankruptcy, reorganization, insolvency,
moratorium and other similar laws affecting the enforcement of creditor's
rights. Execution, delivery and performance of the Loan Documents do not and
will not contravene, conflict with or violate the articles of incorporation
creating Borrower, the Bylaws of Borrower, or any Applicable Law or constitute a
default under any material agreement, indenture or instrument to which the
Borrower is a party or is bound or which is binding upon or applicable to the
Collateral or any portion thereof.
6.3 Litigation. There is not any condition, event or circumstance
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existing, or any litigation, arbitration, governmental or administrative
proceeding, action, examination, claims or demand pending or, to the best of
Borrower's knowledge after due inquiry, threatened affecting Borrower or the
Collateral, or involving the validity or enforceability of the Loan Documents or
involving any risk of a judgment or liability which, if satisfied, would have an
adverse effect on the financial condition, business or properties of Borrower or
the priority of the lien of the Security Agreement, or which would prevent
Borrower from complying with or performing its obligations under this Agreement,
the Note or any of the other Loan Documents within the time limits set forth
therein for such compliance or performance and no basis for any such matter
exists.
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6.4 Solvency. Borrower is solvent and able to pay Borrower's debts as
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such debts become due, and has capital sufficient to carry on such Borrower's
present business transactions. The value of Borrower's Collateral, at a fair
valuation, is greater than the sum of Borrower's debts. Borrower is not bankrupt
or insolvent, nor has Borrower made an assignment for the benefit of Borrower's
creditors, nor has there been a trustee or receiver appointed for the benefit of
Borrower's creditors, nor has there been any bankruptcy, reorganization or
insolvency proceedings instituted by or against Borrower, nor will Borrower be
rendered insolvent by Borrower's execution, delivery or performance of the Loan
Documents or by the transactions contemplated thereunder.
6.5 Financial Statements. All financial statements submitted to Lender
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relating to Borrower and the Collateral are true, complete and correct, and have
been prepared in accordance with sound accounting principles consistently
applied and fairly present the financial condition of the Person to which they
pertain and the other information therein described and do not contain any
untrue statement of a material fact or omit to state a fact material to the
financial statement submitted or this Agreement. No material adverse change has
occurred in the financial condition of Borrower or the Collateral since the
dates of each such financial statements.
6.6 Compliance with Laws. The use, occupancy and operation of the
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Collateral for its intended purposes is not in violation any Applicable Laws,
any contractual arrangements with third parties or any material covenants,
conditions, easements, rights of way or restrictions of record the violation of
which would have a material adverse impact on the financial condition of
Borrower. Neither Borrower nor any agent thereof has received any notice,
written or otherwise, alleging any such violation, which violation has not
previously been cured.
6.7 Financing Statements. Except as set forth on Schedule 6.7 attached
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hereto, there are no UCC financing statements in effect other than those to be
filed and/or recorded by Lender which name Borrower as debtor and pertaining to
any rights in any of the Collateral.
6.8 Event of Default. No Event of Default has occurred, and no
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Unmatured Default which Borrower has failed to commence curing, shall then
exist.
All representations and warranties which have been made by Borrower in this
Agreement or the other Loan Documents shall be true in all material respects at
the time of each disbursement of the Loan, and in the event of any material
breach, misrepresentation or omission and the failure of Borrower to cure such
breach, misrepresentation, or omission within any applicable grace period,
Lender shall have the absolute right to terminate its obligations under this
Agreement (without any obligation to refund any loan or other fees previously
paid), and upon demand by Lender, Borrower shall reimburse Lender for the Loan
Expenses, and Lender shall be entitled to recover from Borrower all losses and
damages resulting therefrom.
7. BORROWER'S COVENANTS.
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7.1 Compliance with Laws. Borrower shall comply or cause compliance
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with all Applicable Laws governing the development, use and operation of the
Collateral. Evidence of such compliance shall be submitted to Lender on request.
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7.2 Inspection. Upon reasonable prior written or oral notice (which
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shall not be required in the event of an emergency), Borrower shall permit
inspection of the Collateral by Lender and any other agent or designee of
Lender. In addition, upon reasonable prior written or oral notice (which shall
not be required in the event of an emergency), Borrower shall permit Lender
and/or its agents and designees access to and the right to inspect, audit and
copy all books, records, contracts and other documents and information relating
to Borrower or the Collateral during normal business hours. Lender shall keep
confidential all information and documentation obtained by Lender in connection
with such audits and inspections, except to the extent that Lender determines,
in its reasonable discretion, a need to disclose same. All such books, records
and accounts of operations relating to the Collateral shall be kept in
accordance with sound accounting practices consistently applied. Borrower shall
promptly respond to any inquiry from Lender for information with respect to the
Collateral, which information may be verified by Lender at Borrower's expense in
the case of the existence of an Event of Default hereunder, otherwise at
Lender's expense; provided, however, that Lender shall at all times be entitled
to rely upon any statements or representations made by Borrower or any agent
thereof.
7.3 Liens. Except as set forth in sections 7.3(a) -(e) below,
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Borrower shall not permit any lien claims to be filed or otherwise asserted
against the Collateral and Borrower shall promptly (and in any event within
fifteen days after Borrower has received written notice of such filing)
discharge or cause to be discharged the same in case of the filing of any claims
for lien or proceedings for the enforcement thereof; provided that in connection
with any such lien or claim which Borrower may in good faith desire to contest,
Borrower may contest the same by appropriate legal proceedings diligently
prosecuted, but only if Borrower shall furnish to Lender reasonably adequate
security for the payment of such lien.
Notwithstanding the foregoing, the following liens shall be permitted:
(a) liens for current taxes not delinquent or taxes being diligently
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by generally
accepted accounting principles or as otherwise required by Lender are being
maintained on its books, but only if Lender has been notified of Borrower's
intention to contest such taxes and such contest has the effect of
preventing the sale or forfeiture of any property subject to such lien;
(b) liens of carrier's, warehousemen, mechanics, materialmen,
repairmen and other like statutory liens arising in the ordinary course of
business securing obligations which are not overdue or which are being
diligently contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by
generally accepted accounting principles or as otherwise required by Lender
are being maintained on its books, but only if Lender has been notified of
Borrower's intention to contest such obligations and such contest has the
effect of preventing the sale or forfeiture of any property subject to such
lien;
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(c) liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of
Borrower or which customarily exist on properties or Persons engaged in
similar activities and similarly situated, and which do not in any event
materially impair their use by the Borrower in the conduct of its business;
and
(e) judgment liens (i) with respect to which execution has been stayed
or (ii) the payment of which is covered in full (subject to a customary
deductible) by insurance maintained with responsible insurance companies.
7.4 Release by Lender. With respect to the matters set forth in Article
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7.3 above, if Borrower shall (a) fail promptly to discharge any asserted liens
or claims, or (b) fail promptly to contest asserted liens or claims or to give
security in the manner provided in Article 7.3 above, or (c) having commenced to
contest the same, and having given such security, fail to prosecute such contest
with diligence, or to maintain such security so required by Lender for its full
amount, or (d) upon adverse conclusion of any such contest, fail promptly to
cause any judgment or decree to be satisfied and lien to be released, then
Lender may, but shall not be required to, procure the release and discharge of
any such claim and any judgment or decree thereon and, further, may, in its sole
discretion, effect any settlement or compromise of the same, or may furnish such
security, and any reasonable amounts so expended by Lender, including premiums
paid or security furnished in connection with the issuance of any surety company
bonds, shall be deemed to constitute disbursements of the proceeds of the Loan
hereunder and shall bear interest from the date so disbursed until paid at the
Default Rate. In settling, compromising or discharging any claims for lien,
Lender shall not be required to inquire into the validity or amount of any such
claim.
7.5 Financial Statements: Reports. Borrower will from time to time
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furnish to Lender such information and reports, financial and otherwise,
concerning Borrower and the operation of the Collateral as Lender reasonably
requires, including, without limitation, the following:
(a) Within one hundred twenty (120) days after the end of each fiscal
year, audited financial statements of the Borrower prepared by an
independent accounting firm, such financial statements to be on Lender's
standard form or another form acceptable to Lender, setting forth the
information therein required as of the end of Borrower's fiscal year, and
certified by such Borrower as fairly and accurately presenting the
information contained therein.
(b) Within forty-five (45) days after the end of each fiscal quarter,
company prepared financial statements for the preceding fiscal quarter for
Centiv, Inc., on a form acceptable to Lender, certified by the chief
financial officer of Centiv, Inc., as applicable, as fairly and accurately
presenting the information contained therein.
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(c) Within twenty (20) days after the end of each month, Borrower
shall deliver to Lender an aged accounts receivable report and a signed
Borrowing Base Certificate (as provided by Lender) indicating Loan Advances
not to exceed the limits set forth herein.
7.6 Affirmation of Representations and Warranties. Borrower agrees that
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all representations and warranties of Borrower contained in Article 6 hereof
shall remain true in all material respects at all times until the Loan is repaid
in full.
7.7 Title. Except for the Security Agreement, any perfected purchase
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money security interests disclosed in writing to Lender prior to the date hereof
and other security for the Loan, Borrower shall keep its title in the Collateral
free and clear of all liens, claims and encumbrances, whether senior or junior
to or at parity with the Loan Documents other than the Permitted Liens set forth
in Sections 7(a)-(e).
7.8 Proceedings Affecting Collateral. If any proceedings are filed
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seeking to enjoin or otherwise prevent or declare invalid or unlawful the
possession, use, maintenance or operation of the Collateral, or any portion
thereof, Borrower shall cause such proceedings to be vigorously contested in
good faith, and in the event of an adverse ruling or decision, prosecute all
commercially reasonable appeals therefrom, and shall, without limiting the
generality of the foregoing, resist the entry or seek the stay of any temporary
or permanent injunction that may be entered, and use commercially reasonable
efforts to bring about a favorable and speedy disposition of all such
proceedings. All such proceedings. including without limitation, all of Lender's
reasonable costs, and fees and disbursements of Lender's counsel in connection
with any such proceedings, whether or not Lender is a party thereto, shall be at
Borrower's expense. To the extent that Lender incurs any such expenses,
including attorneys' fees and fees and charges for court costs, bonds and the
like, Borrower shall reimburse Lender for such expenses and the amount due
Lender shall bear interest from the date so incurred by Lender until repaid to
Lender at the Default Rate and shall be payable to Lender on demand. The
foregoing provisions of this Article shall not limit or affect the provisions of
Articles 10 or 11 below.
7.9 Disposal and Encumbrance of Collateral. Except as expressly
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permitted herein, Borrower shall not, without Lender's prior written consent,
suffer, permit or enter into any agreement for any sale, lease, transfer, or in
any way encumber or dispose of or grant or suffer any security or other
assignment (collateral or otherwise) of or in all or any portion of the
Collateral other than in the ordinary course of business. Any consent given by
Lender or any waiver of default under this Article, shall not constitute a
consent to, or waiver of any right, remedy or power of Lender under any
subsequent default hereunder.
7.10 Insurance. Borrower shall pay all premiums on all insurance
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policies required from time to time under this Agreement, and thirty days prior
to expiration of any such policies, Borrower shall furnish to Lender, with
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premiums prepaid, additional and renewal policies in form, and with companies,
coverage, deductibles and amounts reasonably satisfactory to Lender. In the
event of failure by Borrower to provide such insurance, Lender may, but shall
not be required to, place insurance and treat the amounts expended therefor as
disbursements of Loan proceeds and such amounts from the date so expended by
Lender until repaid to Lender shall bear interest at the Default Rate.
7.11 Performance of Obligations: Notice of Default. Borrower shall
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promptly and fully perform and comply in all respects with the obligations,
terms, agreements, provisions and requirements of this Agreement and the other
Loan Documents and all other documents and instruments relating thereto and will
not permit to occur any default or breach hereunder or thereunder. Borrower
shall promptly give to Lender notice of the occurrence of any Unmatured Default
or of any event that could have a material adverse effect on any security for
the Loan or on Borrower's ability to perform its obligations under this
Agreement or any of the other Loan Documents.
7.12 Restrictions Affecting Borrower. Borrower covenants and agrees
---------------------------------
that, without the prior written consent of Lender, there shall not occur: (i)
any amendment or modification of the bylaws or articles of incorporation of
Borrower, or (ii) the sale or transfer of any shares of Borrower except as set
forth in Schedule 7.12. At all times prior to the repayment of the Loan, (A)
Borrower shall not make or permit any distributions of cash flow or cash
proceeds to any partner, subpartner, member, shareholder, officer, director or
affiliate in excess of net income of the Borrower; (B) Borrower shall not enter
into any contract or agreement for the provision of services or otherwise with
any affiliate of Borrower or any partner, subpartner, member, shareholder,
officer, director or affiliate of any shareholder of Borrower unless in the
ordinary course of business and unless such contract or agreement is an
arms-length, market rate agreement and is cancelable upon thirty days written
notice from any owner of the Collateral; and (C) Borrower shall be dissolved or
its existence terminated.
7.13 Additional Documents. Borrower shall not execute or record any
---------------------
document pertaining to, affecting or pledging all or any portion of the
Collateral without the prior written approval of Lender of the form and
substance of such documents, which approval shall not be unreasonably withheld.
7.14 Borrower's Accounts. Borrower shall maintain all operating
--------------------
accounts with Lender such that Lender is the main receipt and disbursement bank
for Borrower and pledge the same to Lender as security for the Loan. Should the
Lender's operating costs related to the accounts exceed the earnings credit rate
associated with the account balances, the deficiency will be charged to the
Borrower's account on a monthly basis.
7.15 Subordination of Shareholder Debt. All shareholder debt is hereby
---------------------------------
subjected and subordinated and shall remain in all respects and for all purposes
subject, subordinate and junior to the lien of the Lender and to all the terms,
conditions and provisions hereof; all advances made or to be made hereunder; and
any amendments, renewals, extensions, modifications, restatements and
replacements hereof made at any time or from time to time, including (without
limitation) any increases therein or in the amounts secured hereby or extensions
of the maturity hereof.
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7.16 Shareholder Withdrawal. Borrower shall not make or permit any
-----------------------
withdrawals or distributions of cash flow or cash proceeds to any partner,
subpartner, member, shareholder, officer, director or affiliate that exceed the
current or accumulated net income of the Borrower.
7.17 Borrower shall maintain a Debt Service Coverage Ratio of (i) not
less than 1.05:1 by December 31, 2002; and (ii) not less than 1.25:1 by March
31, 2003, and thereafter, as determined by quarterly company prepared financial
statements of Borrower.
7.18 Borrower's Debt to Tangible Net Worth Ratio shall not exceed (i)
3.50:1 through June 29, 2003; and (ii) 3.00:1 beginning June 30, 2003, and
thereafter, determined by quarterly company prepared financial statements of
Borrower.
7.19 Borrower shall maintain a Tangible Net Worth, of not less
than Two Million One Hundred Thousand and 00/100 Dollars ($2,100,000.00) through
June 29, 2003; not less than Three Million and 00/100 Dollars ($3,000,000.00)
beginning June 30, 2003, and thereafter, as determined by quarterly company
prepared financial statements of Borrower.
8. LOAN EXPENSES. Borrower agrees to pay all of the Loan Expenses. Any
--------------
Loan Expenses paid by Lender shall bear interest commencing on the date demand
for repayment thereof is made by Lender until repaid to Lender at the Default
Rate and shall be paid by Borrower upon demand, or may be paid by Lender at any
time by disbursement of proceeds of the Loan. Any Loan Expenses paid by Lender
shall be reimbursed to Lender by Borrower regardless of whether there shall be
any disbursements of the Loan.
9. LENDER'S REPRESENTATIVES. Lender, at Borrower's expense, shall have
-------------------------
the right to engage personnel in connection with negotiation, documentation,
administration and servicing of the Loan at the Borrower's expense to the extent
consistent with the terms hereof.
10. EVENTS OF DEFAULT. The occurrence of any one or more of the
-------------------
following shall constitute an "Event of Default":
(a) Failure by Borrower or any other obligor to pay any installment of
principal or interest or any other amount payable pursuant to the Note,
this Agreement or any of the other Loan Documents when such amount is due
and such failure continues for five (5) days after written notice from
Lender.
(b) Failure by Borrower to promptly perform or cause to be performed
any non-monetary obligation or observe any non-monetary condition,
covenant, term, agreement or provision required to be performed or observed
by Borrower or any other obligor under this Agreement, the Note, or any of
the other Loan Documents; provided, however, that if such failure by its
nature can be cured, then so long as the continued operation, value and
safety of the Collateral, and the priority, validity and enforceability of
the lien created by the Loan Documents and the value of the Collateral are
not imminently impaired, threatened or jeopardized, then Borrower shall
have a period (the "Cure Period") of thirty (30) days after written notice
from Lender (or a reasonable period of time not to exceed ninety (90) days
14
provided that Borrower commences curing such failure within thirty (30)
days after notice from Lender and diligently pursues the curing thereof in
good faith and without interruption) of any such failure of performance or
observance to cure or cause the cure of the same, and an Event of Default
shall not be deemed to exist during the Cure Period. The foregoing Cure
Period is intended only to apply in circumstances not referred to in any of
the other paragraphs of this Article; Borrower's right to a grace or cure
period, if any, with respect to such other circumstances are to be governed
by the provisions of such other paragraphs.
(c) The existence of any material inaccuracy or untruth in any
representation, or warranty contained in this Agreement or any other Loan
Documents, or of any statement or certification as to facts delivered to
Lender by or on behalf of Borrower.
(d) At any time any Borrower files a voluntary petition in bankruptcy,
or is adjudicated a bankrupt or insolvent, or institutes (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, composition, readjustment, dissolution,
liquidation or similar proceedings under any present or future federal,
state or other statute or law, or admits in writing its inability to pay
its debts as they mature, or makes an assignment for the benefit of its
creditors, or seeks or consents to the appointment of any receiver, trustee
or similar officer for all or any substantial part of its Collateral.
(e) The commencement of any involuntary petition in bankruptcy against
the Borrower or the institution against Borrower of any reorganization,
arrangement, composition, readjustment, dissolution, liquidation or similar
proceedings under any present or future federal, state or other statute or
law, or the appointment of a receiver, trustee or other officer for all or
any substantial part of the Collateral of Borrower which remains
undismissed or undischarged for a period of ninety (90) days.
(f) Any sale, transfer, lease, assignment, conveyance, financing,
lien, encumbrance or other transaction made in violation of this Agreement.
(g) Failure of Borrower for a period of thirty days (or a reasonable
period of time not to exceed ninety (90) days provided that Borrower
commences curing such failure within thirty (30) days after written notice
from Lender and diligently pursues the curing thereof in good faith and
without interruption) after Lender's written notice of its demand to
procure the reversal, dismissal or disposition to Lender's reasonable
satisfaction of any order enjoining or otherwise preventing or declaring
invalid or unlawful the occupancy, maintenance, operation or use of the
Collateral, or any portion thereof, in the manner required by the terms of
this Agreement, or of any proceedings which could or might affect the
validity or priority of the lien of the Security Agreement or any of the
other security for the Loan, or which could materially affect Borrower's
ability to perform its obligations under this Agreement or the other Loan
Documents.
(h) The attachment, seizure, levy upon or taking of possession by any
receiver, custodian or assignee for the benefit of creditors of all or a
15
substantial part of the Collateral of Borrower which is not stayed or
dismissed within thirty (30) days (or a reasonable period of time not to
exceed ninety (90) days provided that Borrower commences curing such
failure within thirty (30) days after written notice from Lender and
diligently pursues the curing thereof in good faith and without
interruption) after the occurrence thereof.
(i) The assignment or attempted assignment of this Agreement by
Borrower without Lender's prior written consent.
(j) The filing of formal charges under any federal, state or local
law, statute or ordinance for which Borrower's forfeiture of all or any
portion of the Collateral is a potential penalty.
(k) Failure of Borrower to maintain Debt Service Coverage Ratio, Debt
to Tangible Net Worth Ratio and Tangible Net Worth Ratios as set forth in
Articles 7.17-7.19 and such failure continues for thirty (30) days after
notice from Lender.
(l) The delisting of the Borrower on the Nasdaq Stock Market for
failure to comply with the Nasdaq Stock Market listing requirements and
such failure (i) has a material adverse effect on the Collateral and (ii)
continues for a period of fifteen (15) days after notice from Lender to
Borrower and failure of Borrower to restore its listing on Nasdaq or
otherwise provide additional collateral or assurances to Lender in its sole
discretion within such fifteen (15) day period.
11. REMEDIES. Upon the occurrence of any Event of Default, Lender, in
--------
addition to availing itself of any remedies conferred upon it at law or in
equity and by the terms of the Note, the Security Agreement and the other Loan
Documents, may pursue any one or more of the following remedies first,
concurrently or successively with each other and with any other available
remedies, it being the intent hereof that none of such remedies shall be to the
exclusion of any others:
(a) Take possession of the Collateral and do anything necessary or
desirable in Lender's sole judgment to fulfill the obligations of Borrower
hereunder. All sums expended by Lender pursuant to this Article 11 shall be
deemed to have been paid to Borrower and secured by the Security Agreement and
the other Loan Documents, and shall bear interest at the Default Rate until
repaid to Lender.
(b) Withhold further disbursements of proceeds of the Loan.
(c) Declare the unpaid indebtedness evidenced by the Note to be
immediately due and payable.
(d) Apply the balance of any deposits made with Lender toward the
repayment of the Loan.
16
12. MISCELLANEOUS.
-------------
12.1 Additional Indebtedness. If any advances or payments made by
------------------------
Lender pursuant to this Agreement or any other Loan Document, together with
disbursements of the Loan, shall exceed the aggregate face amount of the Note
(other than accrued interest not yet payable), all such advances and payments
shall constitute additional indebtedness secured by the Loan Documents and all
other security for the Loan, and shall bear interest at the Default Rate from
the date advanced until paid.
12.2 Additional Acts. Borrower shall, upon request, execute and deliver
---------------
such further instruments and documents and do such further acts and things as
may be reasonably required to provide to Lender the evidence of and security for
the Loan contemplated by this Agreement.
12.3 Loan Agreement Governs. In the event of any inconsistency between
-----------------------
any provision of this Agreement and any provision of any other Loan Document,
the provision of this Agreement shall govern; provided, however, that the
provisions of all of the Loan Documents shall be construed as an integrated set
of provisions governing the Loan and, accordingly, shall be interpreted and
construed liberally to give the maximum validity, enforceability and effect to
all of such provisions.
12.4 Additional Advances. If an Event of Default shall occur, Lender
--------------------
may, but shall not be obligated to, take any and all actions to cure such
default, and all amounts expended in so doing, all Loan Expenses and all other
amounts paid or advanced by Lender pursuant to the Loan Documents, and all other
amounts advanced by Lender in connection with preserving any security for the
Loan, shall constitute additional advances of the Loan, shall be secured by the
Security Agreement and all other security for the Loan, and shall bear interest
at the Default Rate from the date advanced until paid.
12.5 Amendment: Waiver: Approval. This Agreement shall not be amended,
----------------------------
modified or supplemented without the written agreement of Borrower and Lender at
the time of such amendment, modification or supplement. No waiver of any
provision of this Agreement or any of the other Loan Documents shall be
effective unless set forth in writing signed by the party making such waiver,
and any such waiver shall be effective only to the extent therein set forth.
Failure by Lender to insist upon full and prompt performance of any provisions
of this Agreement or any of the other Loan Documents, or to take action in the
event of any breach of any such provision or upon the occurrence of any Event of
Default, shall not constitute a waiver of any rights of Lender, and Lender may
at any time thereafter exercise all available rights and remedies with respect
to such breach or Event of Default. Receipt by Lender of any instrument or
document shall not constitute or be deemed to be an approval thereof. Any
approvals required under any of the other Loan Documents must be in writing,
signed by Lender and directed to Borrower.
12.6 Notice. All notices, waivers, demands, requests or other
------
communications required or permitted hereunder shall, unless otherwise expressly
provided, be in writing and be deemed to have been properly given, served and
received (i) if delivered by messenger, when delivered; (ii) if mailed, on the
third (3rd) business day after deposit in the United States mail, certified or
17
registered, postage prepaid, return receipt requested; (iii) if telexed, faxed,
telegraphed or telecopied, six (6) hours after being dispatched by telex, fax,
telegram or telecopy, if such sixth (6th) hour falls on a business day within
the hours of 8:00 a.m. through 6:00 p.m. of the time in effect at the place of
receipt, or at 8:00 a.m. on the next business day thereafter if such sixth (6th)
hour is later than 6:00 p.m.; or (iv) if delivered by reputable overnight
express courier, freight prepaid, the next business day after delivery to such
courier; in every case addressed to the party to be notified as follows:
To Lender: Xxxx Xxxxxx Bank
000 Xxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxxx
With copy to: Xxxxx & Xxxxxxx, Ltd
000 Xxxx Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. X'Xxxxxx, Esq.
To Borrower: Centiv, Inc.
000 Xxxxxx Xxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx
Attention: Xxxxxxx X. Xxxxxx
With copy to: Xxxxxxx, Carton & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Either party hereto may change the names and addresses of the designee to whom
notice shall be sent by giving written notice of such change to the other party
hereto in the same manner as all other notices are required to be delivered
hereunder.
12.7 Benefit: Assignment. The rights, powers and remedies of Lender
--------------------
under this Agreement shall inure to the benefit of Lender and its successors and
assigns. The rights and obligations of Borrower under this Agreement may not be
assigned and any purported assignment by Borrower shall be null and void.
12.8 Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Illinois.
12.9 Indemnity. Borrower agrees to indemnify, defend and hold Lender
---------
harmless from and against any and all liabilities, obligations, losses, damages,
claims, costs and expenses (including reasonable attorneys' fees and court
costs) of whatever kind or nature which may be imposed on, incurred by or
asserted against Lender at any time which relate to or arise from the offer for
18
sale or sale of any interest in Borrower, the acquisition or sale or offer for
sale of all or any portion of the Collateral and/or the ownership, use,
operation or maintenance of the Collateral, including, without limitation, any
brokerage commissions or finder's fees asserted against Lender with respect to
the making of the Loan or the acquisition of the Collateral; provided, however,
that the foregoing indemnity shall not extend to any liabilities, obligations,
claims, losses, costs, damages or expenses resulting from the gross negligence
or willful misconduct of Lender.
12.10 Headings. The titles and headings of the articles, sections and
--------
paragraphs of this Agreement have been inserted as a matter of convenience of
reference only and shall not control or affect the meaning or construction of
any of the terms or provisions of this Agreement.
12.11 No Partnership or Joint Venture. Lender, by executing and
-----------------------------------
performing this Agreement shall not become a partner or joint venturer with
Borrower or any shareholder of Borrower or any of their respective associates or
affiliates and all inspections of the Collateral herein provided for are for the
sole benefit of Lender.
12.12 Time is of the Essence. Time is of the essence of the payment of
-----------------------
all amounts due Lender under the Loan Documents and performance and observance
by Borrower of each covenant, agreement, provision and term of this Agreement
and the other Loan Documents.
12.13 Invalid Provisions. In the event that any provision of this
-------------------
Agreement is deemed to be invalid by reason of the operation of law, or by
reason of the interpretation placed thereon by any administrative agency or any
court, Borrower and Lender shall negotiate an equitable adjustment in the
provisions of the same in order to effect, to the maximum extent permitted by
law, the purpose of this Agreement and the validity and enforceability of the
remaining provisions, or portions or applications thereof, shall not be affected
thereby and shall remain in full force and effect.
12.14 Offset. Without limitation of any other right or remedy of Lender
------
hereunder or provided by law, any indebtedness relating to the Collateral or its
operation and now or hereafter owing to Borrower by Lender (including, without
limitation, any amounts on deposit in any demand, time, savings, passbook or
like account maintained by Borrower with Lender) may be offset and applied by
Lender hereunder, or under the Note, the Security Agreement or any of the other
Loan Documents.
12.15 Acts byParties. Notwithstanding anything herein contained to the
---------------
contrary, neither party will be required to make or to receive any disbursement
or perform any other act under this Agreement if, as a result thereof, such
party will violate any law, statute, ordinance, rule, regulation or judicial
decision applicable thereto.
12.16 Binding Provisions. The covenants, warranties, agreements,
-------------------
obligations, liabilities and responsibilities of Borrower under this Agreement
shall be binding upon and enforceable against Borrower and its legal
representatives, administrators, successors and permitted assigns.
19
12.17 Counterparts. This Agreement may be executed in counterparts, and
------------
all said counterparts when taken together shall constitute one and the same
Agreement.
12.18 No Third Party Beneficiary. This Agreement is only for the
-----------------------------
benefit of the parties hereto and their permitted successors and assigns. No
other person or entity shall be entitled to rely on any matter set forth herein
without the prior written consent of such parties.
12.19 Publicity. Subject to compliance with Applicable Laws and the
---------
consent of Borrower which shall not be unreasonably withheld, conditioned or
delayed, Lender reserves the right to publicize the making of the Loan in any
manner it deems appropriate, including, without limitation, advertisements in
trade journals and newspapers.
12.20 Jurisdiction and Venue. Borrower hereby agrees that all
-------------------------
actions or proceedings initiated by Borrower and arising directly or indirectly
out of this Loan Agreement or any other loan document shall be litigated in the
circuit court of Xxxx County, Illinois, or the United States District Court for
the Northern District of Illinois. Borrower hereby expressly submits and
consents in advance to such jurisdiction in any action or proceeding commenced
by lender in any of such courts. Borrower waives any claim that Chicago,
Illinois or the northern district of Illinois is an inconvenient forum or an
improper forum based on lack of venue. Should Borrower, after being so served,
fail to appear or answer to any summons, complaint, process or papers so served
within the number of days prescribed by law after the mailing thereof, Borrower
shall be deemed in default and an order and/or judgment may be entered by Lender
against Borrower as demanded or prayed for in such summons, complaint, process
or papers. The exclusive choice of forum for Borrower set forth in this Article
shall not be deemed to preclude the enforcement by Lender of any judgment
obtained in any other forum or the taking by Lender of any action to enforce the
same in any other appropriate jurisdiction, and Borrower hereby waives the
right, if any, to collaterally attack any such judgment or action.
12.21 Waiver Of Right To Jury Trial. Lender and Borrower
----------------------------------
acknowledge and agree that any controversy which may arise under this Loan
Agreement or any other Loan Document or with respect to the transactions
contemplated herein and therein would be based upon difficult and complex issues
and, therefore, the parties agree that any court proceeding arising out of any
such controversy will be tried in a court of competent jurisdiction by a judge
sitting without a jury.
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CENTIV, INC., an Delaware corporation
BY:/S/ XXXXXX X. XXXXX
-----------------------------
XXXXXX X. XXXXX
ITS: VICE PRESIDENT & CHIEF FINANCIAL OFFICER
XXXX XXXXXX BANK
BY:/S/ XXXXXXXX XXXXXX
---------------------------
XXXXXXXX XXXXXX
ITS: VICE PRESIDENT
21
