Exhibit 10.15
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT is made as of May 1, 1998, by and between CTI
Industries Corporation, a Delaware corporation (the "Borrower"), and First
American Bank, an Illinois banking corporation (the "Bank").
Whereas, the Borrower and the Bank are parties to a Loan and
Security Agreement dated as of August 22, 1996, as it has been amended from time
to time and the parties wish to restate the terms and conditions under which the
Bank will make loans to the Borrower; and
In consideration of the mutual covenants, conditions, and
agreements herein contained, the parties hereto agree as follows:
Section 1. THE BANK'S AGREEMENT TO LEND.
1.1. Loan Amount. Subject to and upon the terms and conditions
set forth in this Agreement, the Bank agrees to lend to the Borrower, from time
to time, such sums as may be requested by the Borrower and which the Bank in its
discretion agrees to lend from time to time, the total of which shall not
exceed, in the aggregate, $10,224,651.16, subject to the further limits
hereinafter set forth (the "Loan") pursuant to the First Term Loan, the Second
Term Loan, Third Term Loan, Fourth Term Loan and the Revolving Loan hereinafter
provided.
1.1.1. First Term Loan (Loan No. 600804665-63). The Bank
agrees to lend to the Borrower, subject to and upon the terms and conditions
herein set forth, the sum of One Million Seven Hundred Eighty Eight Thousand
Three Hundred Twenty Eight and 39/100 Dollars ($1,788,328.39) (herein referred
to as the "First Term Loan"). The First Term Loan shall be evidenced by and be
repayable with interest in accordance with the terms of this Agreement and a
promissory note payable to the order of the Bank in the original principal
amount of $1,788,328.39, which shall be dated on or before the initial
disbursement of the First Term Loan and shall be duly executed and delivered by
the Borrower (the "First Term Note").
1.1.2. Second Term Loan (Loan No. 600804665-56). The Bank
agrees to lend to the Borrower, subject to and upon the terms and conditions
herein set forth, the sum of Two Million One Hundred Twenty Eight Thousand Three
Hundred Twenty Two and 80/100 Dollars ($2,128,322.80)(herein referred to as the
"Second Term Loan"). The Second Term Loan shall be evidenced by and be repayable
with interest in accordance with the terms of this Agreement and a promissory
note payable to the order of the Bank in the original principal amount of
$2,200,000.00, dated August 22, 1996 and having been duly executed and delivered
by the Borrower (the "Second Term Note").
1.1.3. Third Term Loan (Loan No. 600804665-64). The Bank
agrees to lend to the Borrower, subject to and upon the terms and conditions
herein set forth, the sum of Two Million Two Hundred Fifty Eight Thousand and
No/100 Dollars ($2,258,000.00) (herein referred to as the "Third Term Loan").
The Third Term Loan shall be evidenced by and be repayable with interest in
accordance with the terms of this Agreement and a promissory note payable to the
order of the Bank in the original principal amount of $2,258,000.00, which shall
be dated on or before the initial disbursement of the Third Term Loan and shall
be duly executed and delivered by the Borrower (the "Third Term Note").
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1.1.4. Fourth Term Loan (Loan No. 600804665-60). The Bank
agrees to lend to the Borrower, subject to and upon the terms and conditions
herein set forth, the sum of Forty Nine Thousand Nine Hundred Ninety Nine and
97/100 Dollars ($49,999.67)(herein referred to as the "Fourth Term Loan"). The
Fourth Term Loan shall be evidenced by and be repayable with interest in
accordance with the terms of this Agreement and a promissory note payable to the
order of the Bank in the original principal amount of $200,000.00, dated July 1,
1997 and having been duly executed and delivered by the Borrower (the "Fourth
Term Note").
1.1.5. Revolving Loan (Loan No. 600804665-65) The Bank agrees
to lend to the Borrower, subject to and upon the terms and conditions set forth
herein, at any time or from time to time on or after the date hereof and on or
before May 1, 1999, such amounts (each such loan and all such loans,
collectively, as the context requires being herein referred to as the "Revolving
Loan") as may be requested by the Borrower and which the Bank in its discretion
agrees to lend from time to time, subject to the limitations hereinafter set
forth. Within the limits and subject to and upon the terms and conditions herein
set forth, amounts under the Revolving Loan may be borrowed and repaid and
reborrowed from time to time. Except as otherwise permitted by the Bank, the
aggregate unpaid principal amount of the Revolving Loan outstanding at any time
shall not exceed the lesser of Four Million and No/100 Dollars ($4,000,000.00)
or the Advance Limit (as hereinafter defined). The Revolving Loan shall be
evidenced by and be repayable with interest in accordance with the terms of this
Agreement and a promissory note payable to the order of the Bank in the original
principal amount of $4,000,000.00 which shall be dated on or before the initial
disbursement of the Revolving Loan and shall be duly executed and delivered by
the Borrower (the "Revolving Note"). For purposes of this Agreement, the Advance
Limit shall be equal to the sum of: (i) 80% of the Eligible Accounts (as
hereinafter defined) or $4,000,000.00, whichever is less; and (ii) 25% of
Eligible Inventory (as hereinafter defined) or $1,300,000.00, whichever is less.
For purposes of this Agreement the Eligible Accounts shall
mean all Accounts Receivable (as defined in Section 4.1(a) hereof) created by
the Borrower in the ordinary course of business arising out of the sale or lease
of goods or the rendition of services by the Borrower and which are and at all
times shall continue to be (to the effect that any Eligible Account that at any
subsequent time fails to meet the requirements to be an Eligible Account shall
cease to be an Eligible Account) acceptable to the Bank in all respects as the
Bank shall from time to time determine in its discretion, but excluding in all
events:
(a) any Accounts Receivable unpaid for more than
90 days fromthe date of invoice;
(b) any Accounts Receivable against the payment of
which the account debtor claims to have, may have, or has a defense,
set-off, or counterclaim;
(c) any Accounts Receivable as to which the account
debtor is located outside the United States, unless supported by a
letter of credit or other security deemed to be acceptable by the Bank;
(d) any Accounts Receivable as to which the account
debtor is a parent, subsidiary, or affiliate of the Borrower;
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(e) any Accounts Receivable with respect to which
goods are placed on consignment, guaranteed sale, or other terms which
are conditions precedent to payment by the account debtor;
(f) any Accounts Receivable as to which an account
debtor is the United States of America or any department, agency, or
instrumentality of the United States of America, unless appropriate
assignment of claims forms are executed in advance;
(g) any Accounts Receivable not arising out of the
Borrower's ordinary course of trade or business;
(h) any Accounts Receivable not evidenced by an
invoice;
(i) any Accounts Receivable arising out of a contract
or order that, by its terms, forbids or makes void or unenforceable the
assignment by the Borrower to the Bank of the Accounts Receivable
arising with respect thereto; and
(j) any Accounts Receivable that the Bank elects to
exclude from eligibility due to any actual or potential liens, claims,
or risks, including unsatisfactory financial responsibility, payment
record, or reputation of the account debtor.
For purposes of this Agreement, the Eligible Inventory shall
mean the lower of cost or market value (as determined in accordance with
generally accepted accounting principles consistently applied) of the Inventory
(as defined in Section 4.1(b) hereof) of the Borrower and which is and at all
times shall continue to be (to the effect that any Inventory that at any
subsequent time fails to meet the requirements to be Eligible Inventory shall
cease to be Eligible Inventory) acceptable to the Bank in all respects as the
Bank shall from time to time determine in its discretion, but excluding in all
events:
(a) any Inventory that is subject to any prior
assignment, claim, lien, security interest, or encumbrance, other than
the security interest in favor of the Bank;
(b) any Inventory that is not new and unused, except
as the Bank may otherwise consent in writing;
(c) any Inventory that is stored with a bailee,
warehouseman, or similar party, unless such bailee, warehouseman, or
similar party shall issue and deliver to the Bank, in form and
substance acceptable to the Bank, an agreement or other instrument
acknowledging the Bank's prior security interest therein; and
(d) any Inventory that the Bank elects to exclude
from eligibility due to any actual or potential liens, claims, or
risks, including age, type, category, and/or quantity of the Inventory.
1.2. Loan Disbursements.
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1.2.1. First Term Loan Disbursements. The First Term Loan
shall be disbursed, as the Borrower shall direct, upon the satisfaction of the
conditions set forth in Sections 2 and 3 hereof.
1.2.2. Second Term Loan Disbursements. The Second Term Loan
has already been disbursed as Borrower requested.
1.2.3. Third Term Loan Disbursements. The Third Term Loan
shall be disbursed, as the Borrower shall direct, upon the satisfaction of the
conditions set forth in Sections 2 and 3 hereof.
1.2.4. Fourth Term Loan Disbursements. The Fourth Term Loan
has already been disbursed as Borrower requested.
1.2.5. Revolving Loan Disbursements. The Revolving Loan shall
be disbursed, as the Borrower shall direct, upon the submission of such evidence
as the Bank shall request to verify the Advance Limit and the satisfaction of
the conditions set forth in Sections 2 and 3 hereof. Whenever the Borrower
desires to make a borrowing of the Revolving Loan, the Borrower shall give the
Bank written or telephonic notice thereof not later than 1:00 p.m. Chicago time
on the borrowing date. Each notice of borrowing required under this section
shall specify the amount of the proposed borrowing and the proposed borrowing
date.
1.3. Interest and Penalties.
1.3.1. First Term Loan Interest and Penalties The First Term
Loan shall bear interest on its principal amount outstanding from time to time
at a rate per annum equal to eight and one-quarter percent (8.25%) per annum.
Upon and after the occurrence of an Event of Default, the First Term Loan shall
bear interest on its principal amount outstanding from time to time at a rate
per annum (the "First Term Loan Default Rate") equal to eleven and one-quarter
percent (11.25%) per annum. Interest accruing prior to maturity of the First
Term Loan (whether by lapse of time, acceleration, or otherwise) shall be due
and payable on the first day of each calendar month, commencing with the month
following the date on which the first disbursement of the First Term Loan is
made. After maturity of the First Term Loan (whether by lapse of time,
acceleration, or otherwise) accrued interest shall be due and payable upon
demand. The Borrower shall pay a late charge of five percent (5%) of the amount
of any sum payable to the Bank under this Agreement or any of the Notes that is
received by the Bank more than 10 days after the date on which it is due. Such
late charges shall be due and payable on the due date of the next installment of
principal or interest, together with the regular installment then due.
1.3.2. Second Term Loan Interest and Penalties The Second Term
Loan shall bear interest on its principal amount outstanding from time to time
at a rate per annum equal to eight and one-quarter percent (8.25%) per annum.
Upon and after the occurrence of an Event of Default, the Second Term Loan shall
bear interest on its principal amount outstanding from time to time at a rate
per annum (the "Second Term Loan Default Rate") equal to eleven and one-quarter
percent (11.25%) per annum. Interest accruing prior to maturity of the Second
Term Loan (whether by lapse of time, acceleration, or otherwise) shall be due
and payable on the first day of each calendar month, commencing with the month
following the date on which the first disbursement of the Second Term Loan is
made. After maturity of the Second Term Loan (whether by lapse of time,
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acceleration, or otherwise) accrued interest shall be due and payable upon
demand.
1.3.3. Third Term Loan Interest and Penalties The Third Term
Loan shall bear interest on its principal amount outstanding from time to time
at a rate per annum equal to eight and one-quarter percent (8.25%) per annum.
Upon and after the occurrence of an Event of Default, the Third Term Loan shall
bear interest on its principal amount outstanding from time to time at a rate
per annum (the "Third Term Loan Default Rate") equal to eleven and one-quarter
percent (11.25%) per annum. Interest accruing prior to maturity of the Third
Term Loan (whether by lapse of time, acceleration, or otherwise) shall be due
and payable on the first day of each calendar month, commencing with the month
following the date on which the first disbursement of the Third Term Loan is
made. After maturity of the Third Term Loan (whether by lapse of time,
acceleration, or otherwise) accrued interest shall be due and payable upon
demand.
1.3.4. Fourth Term Loan Interest and Penalties The Fourth Term
Loan shall bear interest on its principal amount outstanding from time to time
at a rate per annum equal to one percent (1%) per annum over the Prime Rate
announced from time to time by the Bank (the "Bank's Prime Rate," which may not
be the Bank's lowest rate of interest) which shall be adjusted daily when and as
the Bank's Prime Rate changes. Upon and after the occurrence of an Event of
Default, the Fourth Term Loan shall bear interest on its principal amount
outstanding from time to time at a rate per annum (the "Fourth Term Loan Default
Rate") equal to five percent (5%) per annum over the Bank's Prime Rate, which
shall be adjusted daily when and as the Bank's Prime Rate changes. Interest
accruing prior to maturity of the Fourth Term Loan (whether by lapse of time,
acceleration, or otherwise) shall be due and payable on the first day of each
calendar month, commencing with the month following the date on which the first
disbursement of the Fourth Term Loan is made. After maturity of the Fourth Term
Loan (whether by lapse of time, acceleration, or otherwise) accrued interest
shall be due and payable upon demand.
1.3.5. Revolving Loan Interest and Penalties The Revolving
Loan shall bear interest on its principal amount outstanding from time to time
at a rate per annum equal to one-half of one percent (.5%) per annum over the
Prime Rate announced from time to time by the Bank (the "Bank's Prime Rate,"
which may not be the Bank's lowest rate of interest) which shall be adjusted
daily when and as the Bank's Prime Rate changes. Upon and after the occurrence
of an Event of Default, the Revolving Loan shall bear interest on its principal
amount outstanding from time to time at a rate per annum (the "Revolving Loan
Default Rate") equal to three and one-half percent (3.5%) per annum over the
Bank's Prime Rate, which shall be adjusted daily when and as the Bank's Prime
Rate changes. Interest accruing prior to maturity of the Revolving Loan (whether
by lapse of time, acceleration, or otherwise) shall be due and payable on the
first day of each calendar month, commencing with the month following the date
on which the first disbursement of the Revolving Loan is made. After maturity of
the Revolving Loan (whether by lapse of time, acceleration, or otherwise)
accrued interest shall be due and payable upon demand.
1.4. Maturity of the Loan.
1.4.1. First Term Loan Maturity. The First Term Loan shall be
due and payable in equal monthly installments of $43,978.98 of principal and
interest,
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commencing on June 1, 1998, and a like sum on the first day of each calendar
month thereafter until the principal of and accrued and unpaid interest on the
First Term Loan is paid in full, provided that the outstanding principal of and
accrued and unpaid interest on the First Term Loan, if not sooner paid in full,
shall be due and payable in full on May 1, 2002 (or earlier as provided in this
Agreement or the First Term Note).
1.4.2. Second Term Loan Maturity. The Second Term Loan shall
be due and payable in equal monthly installments of $19,617.26 of principal and
interest, commencing on May 1, 1998, and a like sum on the first day of each
calendar month thereafter until the principal of and accrued and unpaid interest
on the Second Term Loan is paid in full, provided that the outstanding principal
of and accrued and unpaid interest on the Second Term Loan, if not sooner paid
in full, shall be due and payable in full on September 1, 2001 (or earlier as
provided in this Agreement or the Second Term Note).
1.4.3. Third Term Loan Maturity. The Third Term Loan shall be
due and payable in equal monthly installments of $46,194.61 of principal and
interest, commencing on September 1, 1998, and a like sum on the first day of
each calendar month thereafter until the principal of and accrued and unpaid
interest on the Third Term Loan is paid in full, provided that the outstanding
principal of and accrued and unpaid interest on the Third Term Loan, if not
sooner paid in full, shall be due and payable in full on August 1, 2003 (or
earlier as provided in this Agreement or the Third Term Note).
1.4.4. Fourth Term Loan Maturity. The Fourth Term Loan shall
be due and payable in monthly installments of $16,666.67 of principal,
commencing on May 1, 1998, and a like sum on the first day of each calendar
month thereafter until the principal of and accrued and unpaid interest on the
Fourth Term Loan is paid in full, provided that the outstanding principal of and
accrued and unpaid interest on the Fourth Term Loan, if not sooner paid in full,
shall be due and payable in full on July 1, 1998 (or earlier as provided in this
Agreement or the Fourth Term Note).
1.4.5. Revolving Loan Maturity. The Revolving Loan shall be
prepayable as provided in this Agreement and, if not sooner paid in full, shall
be due and payable on May 1, 1999 (or earlier as provided in this Agreement or
the Revolving Note).
1.5. Mandatory and Optional Prepayments. The Borrower shall
prepay the Revolving Loan if and to the extent that the outstanding principal
amount of the Revolving Loan shall from time to time exceed the limits therefor.
In addition, the Revolving Loan may be prepaid at any time at the option of the
Borrower without premium or penalty. All prepayments required or permitted
hereunder shall be applied first to prepayment of accrued and unpaid interest on
the Revolving Loan and then to the prepayment of the outstanding principal of
the Revolving Loan in the inverse order of maturity thereof.
1.6 Second Term Loan Prepayment Fee. The Second Term Note may
be prepaid at any time and from time to time prior to maturity, without premium,
penalty, or discount, but only to the extent that the source of such prepayment
is not derived, directly or indirectly, from money borrowed by the Borrower, any
Guarantor, or any Affiliate (as hereinafter defined) of the Borrower or any
Guarantor. The Borrower agrees to pay the Bank, on demand, in addition to the
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payment of all other obligations of the Borrower to the Bank that are then due
and payable, a fee (the "Second Term Loan Prepayment Fee") determined as
hereinafter provided if the Second Term Note is prepaid in whole or in part at
any time or from time to time prior to maturity, but only to the extent that the
source of such prepayment is derived, directly or indirectly, from money
borrowed by the Borrower, any Guarantor, or any Affiliate of the Borrower or any
Guarantor. The Second Term Loan Prepayment Fee shall be equal to the applicable
Loan Prepayment Percentage provided below, multiplied by the outstanding
principal amount of the Second Term Note so prepaid. For any year in which a
prepayment of the Second Term Note occurs, the applicable Second Term Loan
Prepayment Percentage shall be the percentage set forth opposite such year in
the following schedule:
Second Term Loan
Year Prepayment Percentage
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May 1, 1998 to September 1, 1999 3%
May 2, 1999 to September 1, 2000 2%
May 2, 2000 to September 1, 2001 1%
All payments shall be applied first to accrued and unpaid interest on the Second
Term Note then, at the Bank's election, to any Second Term Loan Prepayment Fee
due by reason of any prepayment, and then to the outstanding principal of the
Second Term Note in the inverse order of maturity thereof. For purposes of this
Section the term "Affiliate" shall mean: any director, officer, or stockholder
of the Borrower, or any partnership or corporate entity controlled by the
Guarantors.
Section 2. CONDITIONS PRECEDENT TO THE BANK'S OBLIGATION TO
MAKE THE INITIAL LOAN DISBURSEMENT. Prior to the initial disbursement by the
Bank of any monies pursuant to this Agreement the following conditions must be
satisfied:
2.1. Delivery of Loan Documents. The Borrower shall execute
and deliver or cause to be executed and delivered to the Bank, as evidence of
and as security for all obligations under this Agreement, the following
documents (the "Loan Documents"), all to be in form and content as specified by
the Bank:
(a) the First Term Note, the Second Term Note, the
Third Term Note, the Fourth Term Note and the Revolving Note
(collectively, the "Notes");
(b) a first mortgage (the "Mortgage") on the real
estate commonly known as 00000 X. Xxxxxx Xx., Xxxxxxxxxx, XX 00000 (the
"Premises") owned by American National Bank and Trust Company of
Chicago, not personally, but solely as Trustee under Trust Agreement
dated September 19, 1984 and known as Trust No. 61978 (the "Trust") to
secure the obligations of the Borrower under this Agreement and the
Second Term Note;
(c) a collateral assignment of beneficial interest in
the Trust;
(d) the filing with the Secretary of State of the
State of Illinois and the recording with the Recorder's Office of Lake
County, Illinois duly executed U.C.C. Financing Statements showing the
Bank as secured party;
(e) guaranties of the obligations of the Borrower
under this Agreement and the Notes, executed and delivered by Xxxxxxx
X. Xxxxxxx, Xxxxxx
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X. Xxxxxx and Xxxx X. Xxxxxx (together with any other persons obligated
at any time with respect to all or any part of the Borrower's
obligations to the Bank, the "Guarantors"); and
(f) subordination agreements in the amount of
$315,000.00 executed by Xxxxxx X. Xxxxxxx; $350,000.00 executed by Xxxx
X. Xxxxxx; and $50,000.00 executed Xxxxxx X. Xxxxxx.
2.2. Liens on Property. The Bank shall have received evidence
satisfactory to the Bank that all real and personal property, fixtures and
equipment in which the Bank is taking a security interest will be free and clear
of all liens and encumbrances of every nature and description other than: the
security interest in favor of the Bank; the Permitted Exceptions (as defined in
Section 2.3); security interests disclosed in the search, conducted on behalf of
the Bank in July, 1996, for financing statements on file with the Illinois
Secretary of State naming the Borrower as debtor for XL/Datacomp, Inc., Suburban
National Bank of Palatine, Fathom Technologies, AT & T Credit Corporation, and
Xerox Corporation; and security interests and liens permitted under this
Agreement or to which the Bank shall have otherwise consented in writing
(collectively, the "Permitted Liens").
2.3. Title Insurance. The Borrower shall have furnished the
Bank with an ALTA Mortgage Loan Policy issued by Real Estate Index Inc. (the
"Title Company") (such policy being referred to herein as the "Title Policy"),
in the aggregate amount of $2,200,000.00. The Title Policy shall insure the
Mortgage (for its full amount) as a first lien on the Premises. The Title Policy
shall be subject only to the exceptions approved by the Bank (the "Permitted
Exceptions") and shall contain no exceptions for mechanic's or materialmen's
liens.
2.4. Insurance. The Borrower shall have delivered to the Bank
insurance policies with premiums prepaid, with issuing companies, coverages and
amounts satisfactory to the Bank, insuring the Premises and other properties of
the Borrower against loss or damage by fire and such other hazards as may be
required by the Bank, including, but not limited to, extended coverage,
vandalism, malicious mischief, and comprehensive public liability insurance as
required by the Bank. Each policy shall contain standard mortgage clauses
satisfactory to the Bank and loss payable clauses satisfactory to the Bank with
respect to such other insurance and shall provide that the policy may not be
canceled by any party for any reason whatsoever without first giving the Bank at
least thirty (30) days' prior written notice of any proposed cancellation. The
Borrower shall provide the Bank with fully paid valid policies each year as long
as any sums are owed the Bank. All policies shall name the Bank as mortgagee,
additional insured and loss payee with endorsements acceptable to the Bank.
2.5. Authority. The Borrower shall have furnished to the Bank
such documents, in form and content satisfactory to the Bank, as the Bank may
request as evidence of the due organization and good standing of the Borrower
and the due authorization and execution of the Loan Documents by the Borrower.
Section 3. ADDITIONAL CONDITIONS PRECEDENT TO THE BANK'S
OBLIGATIONS TO MAKE DISBURSEMENTS OF THE LOAN. Prior to and as a condition to
each disbursement of the Loan by the Bank:
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3.1. Accuracy of Representations and Warranties. The
representations and warranties of the Borrower made herein shall be true and
correct as though made on and as of the date of such disbursement.
3.2. No Material Adverse Change. There shall have been no
material adverse change in the financial condition of the Borrower from the
financial condition reflected on the financial statements of the Borrower last
furnished to the Bank.
3.3. No Default. There shall exist no Event of Default and no
event or condition which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default.
Section 4. SECURITY INTEREST.
4.1. Grant of Security Interest. In order to secure the timely
and full performance of the obligations of the Borrower to the Bank under this
Agreement and the Notes and any and all interest accruing thereon, and any and
all extensions, renewals, or refinancings thereof, and all other present and
future obligations of the Borrower to the Bank, the Borrower hereby grants to
the Bank a security interest in the following property (collectively, the
"Collateral"):
(a) all present and future accounts, accounts
receivable, other receivables and claims for money due, instruments,
documents, chattel paper, contract rights, and general intangibles (the
"Accounts Receivable");
(b) all raw materials, supplies, work-in-process,
finished goods, and all other inventory of whatsoever kind or nature,
wherever located, whether now owned or hereafter acquired (the
"Inventory");
(c) all machinery, equipment, vehicles, furniture,
tools, and trade fixtures and all substitutions and replacements
thereof wherever located, and all attachments, accessions, parts, and
additions thereto, whether now owned or hereafter acquired;
(d) all of the Borrower's deposit accounts (whether
checking, savings, or otherwise) with the Bank or any other depositary
institution, whether now or hereafter existing and including accounts
held jointly with others;
(e) all monies, securities, drafts, notes, and other
property of the Borrower and the proceeds thereof, now or hereafter
held or received by or on behalf of the Bank from or for the Borrower,
whether for custody, pledge, transmission or otherwise;
(f) all books, records, and general intangibles
evidencing or relating to any of the foregoing; and
(g) any and all proceeds and products of the
foregoing.
4.2. Filing and Recording; Perfection. The Borrower shall
execute and deliver to the Bank financing statements and take whatever other
actions are requested by the Bank to perfect and continue the Bank's security
interest in the Collateral. Upon the request of the Bank, the Borrower will
deliver to the Bank
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any and all of the documents and instruments evidencing or constituting the
Collateral or any part thereof, together with an appropriate endorsement or
assignment thereof satisfactory to the Bank, and the Borrower will note the
Bank's security interest upon any and all chattel paper included in the
Collateral. The Borrower irrevocably appoints the Bank as the agent and
attorney-in-fact of the Borrower to execute such documents and take such actions
as the Bank deems necessary to preserve and perfect the Bank's security interest
in the Collateral.
4.3. Collections of Accounts. The Borrower hereby authorizes
the Bank, now and at any time or times hereafter, to (a) notify any or all
account debtors that the Accounts Receivable have been assigned to the Bank and
that the Bank has a security interest therein and (b) direct such account
debtors to make all payments due from them to the Borrower upon the Accounts
Receivable directly to the Bank or to a lockbox designated by the Bank. Until
such time as the Bank shall exercise such rights, the Borrower shall collect and
enforce all of its Accounts Receivable. The costs of collection and enforcement
of the Accounts Receivable shall be borne by the Borrower, whether such costs
are incurred by the Borrower or the Bank. All collections and proceeds of the
Accounts Receivable and other Collateral shall be held in trust for the Bank,
separate and apart from other funds and properties of the Borrower, and shall be
promptly delivered by the Borrower to the Bank in the form in which they are
received by the Borrower (except for any necessary endorsement in favor of the
Bank) by mailing or delivering the same to the Bank not later than the business
day following receipt thereof by the Borrower. The Bank will, within two (2)
business days after receipt of checks and one business day after receipt of cash
and cash equivalents, apply the whole or any part of such collections against
the Borrower's liabilities to the Bank. All checks, drafts, instruments, and
other items of payment or proceeds of Collateral shall be endorsed by the
Borrower to the order of the Bank. The Borrower irrevocably constitutes and
appoints the Bank and all persons designated by the Bank as the true and lawful
agent and attorney-in-fact to endorse the Borrower's name to any payment or
proceeds of Collateral.
Section 5. GENERAL COVENANTS. The Borrower agrees that so long
as any of the Notes shall be outstanding, unless waived in writing by the Bank:
5.1. Financial Information, Reports. The Borrower will
maintain a standard and modern system of accounting in accordance with generally
accepted practice and will furnish to the Bank and its duly authorized
representatives such information with respect to the business, affairs,
operations, and financial condition of the Borrower as may be reasonably
requested from time to time. The Borrower shall furnish to the Bank:
(a) as soon as available, and in any event not more
than 45 days after the close of each quarterly fiscal period of the
Borrower, a copy of the balance sheet and profit and loss statement of
the Borrower for the period from the beginning of the current fiscal
year to the end of such quarterly period, prepared by an independent
public accounting firm of recognized standing selected by the Borrower;
(b) as soon as available, and in any event within 30
days after the close of each monthly fiscal period of the Borrower, a
copy of the balance sheet and profit and loss statement for the
Borrower (of its domestic
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operations only) prepared by the Borrower and signed by a principal
officer of the Borrower for such monthly period and the period from the
beginning of the current fiscal year to the end of such monthly period;
(c) as soon as practicable and in any event within
120 days after the end of each fiscal year of the Borrower, a profit
and loss statement and a reconciliation of surplus accounts of the
Borrower for such year, and a balance sheet of the Borrower as of the
end of such year, setting forth in each case in comparative form
corresponding figures from the preceding fiscal year, all in reasonable
detail and satisfactory to the Bank and certified by an independent
certified public accounting firm of recognized standing selected by the
Borrower;
(d) within 15 days after the close of each monthly
fiscal period of the Borrower, and otherwise from time to time as the
Bank may request, a schedule of the Eligible Accounts and Eligible
Inventory and an aging of the Accounts Receivable and accounts payable,
and a report of Inventory in form acceptable to the Bank, signed by a
principal officer of the Borrower, together with copies of invoices, if
requested by the Bank pertaining to the Eligible Accounts arising since
the previous such report to the Bank;
(a) promptly upon receipt thereof, copies of any
detailed reports submitted to the Borrower by independent accountants
in connection with each annual audit or any annual or interim review of
the books and records of the Borrower made by such accountants; and
(b) with reasonable promptness, such other financial
information, including annual financial statements of the Guarantors,
as the Bank may reasonably request.
All financial statements of the Borrower specified in the preceding clauses (a)
and (c) shall be furnished in consolidated and consolidating form for the
Borrower and all subsidiaries that the Borrower may at any time have. Together
with each delivery of financial statements required by the preceding clauses
(a), (b) and (c), the Borrower will deliver to the Bank a certificate of a
principal officer of the Borrower stating that there exists no Event of Default
or any event or condition that, with notice or lapse of time, or both, would
constitute an Event of Default, or, if any such Event of Default or event or
condition exists, specifying the nature thereof, the period of existence
thereof, and what action the Borrower proposes to take with respect thereto. The
Borrower will permit any person designated by the Bank to visit and inspect any
of the properties, corporate books, and financial records of the Borrower, and
to discuss the affairs, finances, and accounts of the Borrower, all at such
reasonable times and as often as the Bank may reasonably request.
5.2. Taxes. The Borrower shall cause to be paid on a timely
basis all taxes and assessments, special or otherwise, and any other such
charges which are due and payable. In the event the Borrower fails to pay taxes
as required herein, the Bank reserves the right to require the Borrower to make
monthly deposits into an escrow account established for the payment of taxes in
an amount satisfactory to the Bank. The Borrower may contest in good faith and
through appropriate proceedings any tax or assessment or other charge due and
payable provided that the Borrower shall have deposited with the Bank a cash sum
sufficient to discharge such tax assessment or charge.
-11-
5.3. Insurance. The Borrower will maintain insurance coverage
by reputable insurance companies in such forms and amounts, and against such
hazards, as are ordinarily carried by other companies similarly situated in
operating like businesses and properties. Without limiting the generality of the
foregoing, property and casualty insurance shall be in amounts and forms
insuring the full replacement cost of fixed assets of the Borrower.
5.4. Liens and Encumbrances. The Borrower shall not create,
assume, or suffer to exist any mortgage, deed of trust, pledge, encumbrance,
lien, or charge of any kind (including the charge upon the property purchased
under conditional sales or other title retention agreements) upon any of the
property or assets of the Borrower, whether now owned or hereafter acquired,
except: (a) liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings; (b) other liens, charges, and encumbrances
incidental to the conduct of the Borrower's business or the ownership of its
property and assets which are not incurred in connection with the borrowing of
money or the obtaining of advances of credit and which do not in the aggregate
materially impair the use of such property or assets in the operation of the
Borrower's business; (c) Permitted Liens; and (d) purchase money mortgages and
other purchase money liens or security interests (including finance leases) upon
any fixed or capital assets hereafter acquired by the Borrower, provided that no
such mortgage, lien, or security interest shall extend to or cover any other
property of the Borrower, and further provided that the principal amount of the
aggregate of all such indebtedness secured by all such mortgages, liens, and
security interests shall not exceed $50,000.00.
5.5. Maintenance of Properties. The Borrower will maintain,
keep, and preserve all of its properties (tangible and intangible) necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted. The Borrower shall from time to time
make or cause to be made all necessary and proper repairs, renewals,
replacements, additions, and improvements to its properties so that the business
carried on by the Borrower may be properly and advantageously conducted at all
times in accordance with prudent business management.
5.6. Compliance With Laws. The Borrower shall comply in all
material respects with all laws, ordinances, regulations, and orders of all
governmental authorities applicable to its business or the use of its
properties. The Borrower may contest, in good faith, any such law, ordinance,
regulation, or order and withhold compliance during any proceeding, including
appropriate appeals, so long as the Bank's security interest in the Collateral
or lien in the Premises, in the opinion of the Bank, is not jeopardized.
5.7. Location of Collateral. All Collateral now owned by the
Borrower is and will be, and all Collateral hereafter acquired by the Borrower
will be, and to the extent the Collateral consists of intangible property such
as accounts, the records concerning the Collateral will be, kept at the
Borrower's facilities at either 00000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxxx, XX 00000 or
000 Xxxxxxxxxx Xxxxx, Xxxx, Xxxxxxxx. Except in the ordinary course of its
business, the Borrower shall not remove the Collateral from its existing
locations. To the extent the Collateral consists of vehicles or other property,
the ownership of which is evidenced by a certificate of title, the Borrower
shall not take or
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permit any action that would require registration of such Collateral outside the
State of Illinois.
5.8. Mergers, Sales of Assets. The Borrower shall not merge or
consolidate with any other corporation or sell, lease, transfer, or otherwise
dispose of all or any substantial part of the assets of the Borrower or enter
into any sale and leaseback transaction or arrangement with respect to any
properties of the Borrower, change the name of the Borrower, or wind up,
liquidate, or dissolve, or agree to do any of the foregoing, except that the
Borrower may sell in the ordinary course of business assets or properties no
longer necessary for the proper conduct of the business of the Borrower having a
value amounting, in any single transaction, to not more than $50,000.00.
5.9. Bank Account. The Borrower shall maintain its principal
deposit relationship, including its corporate operating checking account and
money market deposit account, with the Bank.
5.10. Tangible Net Worth. The Borrower shall at all times
maintain a Tangible Net Worth in an amount greater than $6,000,000.00. For
purposes of this Agreement, Tangible Net Worth shall mean the total of all
assets appearing on a balance sheet of the Borrower prepared in accordance with
generally accepted accounting principles consistently applied, less the total
liabilities of the Borrower, as determined in accordance with generally accepted
accounting principles consistently applied, less the amount of any intangible
assets as determined by the Bank in its discretion.
5.11 Debt to Worth Ratio. At the end of each fiscal quarter of
the Borrower, the Borrower shall achieve a ratio of total debt to tangible net
worth of no more than 3 to 1. For purposes of this Agreement total debt shall
mean all items that, in accordance with generally accepted accounting
principles, would be included in determining total liabilities as shown on the
liabilities side of a balance sheet as of the date the amount of total
liabilities is to be determined and, in any event, shall include (without
duplication) capitalized lease obligations, letters of credit, and all
obligations relating thereto, any liabilities secured by any mortgage, pledge,
lien, or security interest on property owned or acquired, whether or not such
liabilities shall have been assumed and guaranties and endorsements (other than
for collection in the ordinary course of business) and other contingent
obligations. Tangible net worth shall mean the total of all assets appearing on
a balance sheet prepared in accordance with generally accepted accounting
principles consistently applied, less total liabilities, as determined in
accordance with generally accepted accounting principles consistently applied,
less the amount of any intangible assets as determined by the Bank in its
discretion.
5.12 Permitted Debt. The Borrower shall not create, incur,
assume, or suffer to exist any funded or current debt, or guarantee, endorse or
otherwise be or become contingently liable in connection with the obligations,
stock, or dividends of any person, except: (a) debt represented by the Notes;
(b) funded or current debt secured by mortgages and other liens and retentions
permitted under Section 5.4 hereof; (c) contingent liabilities arising out of
the endorsement in the ordinary course of business of negotiable instruments in
the course of collection thereof; (d) current liabilities arising in the
ordinary course of business of the Borrower and which are not incurred for money
borrowed; and (e) debt subordinated to the Bank.
-13-
5.13 Leases and Purchases. The Borrower shall not incur or
have outstanding any obligations for the payment for purchases of property or
for rentals on account of the use or possession of real or personal property
(whether or not any express or implied arrangement is made for the acquisition
by the Borrower of title thereto at any time) if after giving effect thereto the
maximum aggregate amount of rentals for which the Borrower is obligated in any
fiscal year on all leases having a term in excess of three years would exceed
$50,000.00.
5.14 Investments. Except for investments in PTF and CTF (which
will not exceed $500,000.00 in the aggregate), the Borrower shall not make or
permit to remain outstanding any loan or advance to, or own, purchase, or
acquire any stock or securities of, any person, excepting loans to employees not
exceeding, at any time, in the aggregate, $50,000.00 outstanding.
5.15 Restricted Payments. The Borrower shall not pay or
declare any dividend on any shares of any class of its capital stock or make any
other distribution on account of any shares of any class of its stock, or
redeem, pur chase, or otherwise acquire, directly or indirectly, any shares of
any class of its capital stock in excess of $250,000.00 in any year.
5.16 Transactions with Affiliates. The Borrower shall not,
directly or indirectly, purchase, acquire, or lease any material property or
service from, or sell, transfer, or lease any material property or service to,
any Affiliate (as hereinafter defined) except in the usual, regular, and
ordinary course of business of the Borrower and upon fair and reasonable terms
no less favorable to the Borrower than would result from arm's-length bargaining
with an unaffiliated person. For purposes of this Agreement, "Affiliate" shall
mean: any person or entity, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with the
Borrower; or any director, officer, trustee, or shareholder of the Borrower or
any entity, directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with the Borrower.
Section 6. DEFAULT AND REMEDIES.
6.1. Events of Default. Each of the following shall constitute
an "Event of Default" under this Agreement:
(a) The Borrower fails to pay, within ten (10) days
after the date on which payment thereof is due, any installment of
principal or interest on any of the Notes or any other sum due and
payable under this Agreement, any of the Notes, or the Mortgage; or
(b) the Borrower fails to keep or perform any
agreement, undertaking, obligation, covenant or condition set forth in
Section 5.2, 5.3 or 5.4 of this Agreement; or
(c) the Borrower fails to keep or perform any other
agreement, undertaking, obligation, covenant, or condition set forth in
this Agreement or any of the Loan Documents or any other agreement
between the Borrower and the Bank within thirty (30) days after notice
that such performance is due and such performance remains uncured
within that period; or
-14-
(d) if default shall occur in the payment of any
principal, interest, or premium with respect to any indebtedness of the
Borrower or any Guarantor for borrowed money and such default shall
continue for more than the period of grace, if any, therein specified
and shall not have been effectively waived, or if any such indebtedness
shall be declared due and payable prior to the stated maturity thereof;
or
(e) (i) any representation, warranty or
certification, made or given in or pursuant to this Agreement by the
Borrower or otherwise made by the Borrower in writing in connection
with this Agreement, proves to be untrue in any respect when such
representation, warranty or certification is made or given hereunder;
or (ii) any representation, warranty or certification, made or given in
or pursuant to this Agreement by the Borrower or otherwise made by the
Borrower in writing in connection with this Agreement, although true in
all respects when such representation, warranty or certification was
made or given, proves to be untrue in any material respect at any
subsequent time when such representation, warranty or certification is
operative or applicable and such representation, warranty or
certification continues to be untrue ten (10) days after written notice
from the Bank to the Borrower; or
(f) the Collateral or the Premises, or any material
part thereof, is damaged or destroyed by fire or other casualty and the
cost to rebuild or reconstruct exceeds the face amount of insurance
actually collected or in the process of collection through diligent
efforts of the Borrower, and if the Borrower fails to deposit or to
cause to be deposited with the Bank the deficiency within ten (10) days
after the Bank's written request therefor, unless such deficiency is
less than $50,000.00; or
(g) an order of condemnation by eminent domain
proceedings is entered with respect to the Premises or any part thereof
and is not dismissed or stayed; or
(h) any petition is filed or proceeding is commenced
for any attachment, levy, or seizure of any property of the Borrower
subject to a lien in favor of the Bank; or any judgment or judgments,
writ or writs, warrant or warrants of attachment, or any similar
process or processes in an aggregate amount in excess of $50,000.00
shall be entered or filed against the Borrower or against any property
or assets of the Borrower and remains unvacated, unbonded or unstayed
for a period of sixty (60) days; or
(i) if the Borrower or any Guarantor: shall be unable
to pay its debts as they become due; files a petition to take advantage
of any insolvency act; makes an assignment for the benefit of its
creditors; commences a proceeding for or consents to the appointment of
a receiver, trustee, liquidator, or conservator of itself or of the
whole or any substantial part of its property; files a petition to a
petition under any chapter of the Bankruptcy Reform Act of 1994, as
amended, or files a petition or seeks relief under or takes advantage
of any other reorganization, arrangement or readjustment of debt,
insolvency, or receivership law or statute of the United States of
America or any state thereof; or if there is commenced against the
Borrower or any Guarantor any proceeding for any of the foregoing
relief which is not dismissed or withdrawn within 90 days after the
filing thereof; or if
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the Borrower or any Guarantor by any act indicates its consent to, or
approval or authorization of, any such proceeding or petition; or
(j) if Xxxxxxx X. Xxxxxxx shall cease to own of
record and beneficially at least 406,401 shares of common stock
representing 14.34% of 2,833,188 shares of common stock, if Xxxxxxx X.
Xxxxxxx, Xxxx X. Xxxxxx and Xxxxxx X. Xxxxxx shall cease to have
beneficial interest in shares of preferred stock as follows: 571,429,
857,143 and 428,571. There are a total of 5,690,331 shares of common
and preferred outstanding of which Xxxxxxx X. Xxxxxxx owns 17.18%, Xxxx
X. Xxxxxx 15.06% and Xxxxxx X. Xxxxxx 7.53%; or
(k) if either Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxxx or
Xxxxxx X. Xxxxxx ceases to be actively employed in their respective
offices and positions held as of the date hereof; or
(l) if any Guarantor shall die or be declared
incompetent; or
(m) if, in the reasonable opinion of the Bank, there
shall be any material adverse change in the financial condition of the
Borrower or any Guarantor.
6.2. Remedies. After the occurrence of any Event of Default,
the Bank shall have the right in addition to all the remedies conferred upon the
Bank by law or equity or the terms of any of the Loan Documents, to do any or
all of the following, concurrently or successively, without notice to the
Borrower:
(a) Declare the Notes to be, and the Notes shall
thereupon become, immediately due and payable, provided that if an
Event of Default described in Section 6.1(i) shall occur or exist, the
Notes shall automatically become immediately due and payable, in each
case without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the
Loan Documents to the contrary notwithstanding;
(b) terminate the Bank's obligations under this
Agreement to extend credit of any kind or to make any disbursement,
whereupon the commitment and obligations of the Bank to extend credit
or to make disbursements hereunder shall terminate; and
(c) exercise all rights and remedies of a secured
party under the Uniform Commercial Code and otherwise, including,
without limitation, the right to foreclose the security interest
granted herein by any available judicial or other procedure and/or to
take possession of any or all of the Collateral and the books and
records relating thereto with or without judicial process, for which
purpose the Bank may enter on any or all of the premises where any of
the Collateral or books or records may be situated and take possession
and remove the same therefrom; proceed to protect and enforce its
rights or remedies either by suit in equity or by action at law, or
both; require the Borrower to assemble any or all of the Collateral and
any or all certificates of title and other documents relating to the
Collateral at a place designated by the Bank; charge or set off all
sums owing to the Bank by the Borrower against any and all of the
Borrower's accounts (including accounts held jointly with others) and
credit balances at the Bank, regardless of the stated maturity thereof;
and exercise in the Borrower's name all rights with
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respect to the Collateral, including the right to collect any and all
money due or to become due, endorse checks, notes, drafts, instruments,
or other evidences of payment, receive and open mail addressed to the
Borrower, and settle, adjust, or compromise any dispute with respect to
any item of Collateral.
6.3. Rights and Remedies Cumulative. All of the Bank's rights
and remedies, whether evidenced by this Agreement or by any other writing, shall
be cumulative and may be exercised singularly or concurrently. Election by the
Bank to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of the
Borrower under this Agreement, after the failure of the Borrower to perform,
shall not affect the Bank's right to declare a default and to exercise its
remedies.
Section 7. REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants to the Bank as follows:
7.1. Power and Authority. The Borrower is a corporation duly
organized and validly existing and in good standing under the laws of its state
of incorporation. The Borrower has the requisite authority to execute, deliver
and carry out the terms and provisions of this Agreement, and the Loan Documents
and other documents to be executed and delivered by it in connection with this
Agreement. This Agreement constitutes, and the Loan Documents and other
documents to be executed and delivered in connection with this Agreement, when
executed and delivered pursuant hereto will constitute, the duly authorized
obligations of the party or parties (other than the Bank) executing the same and
will be enforceable in accordance with their respective terms.
7.2. No Violation of Agreements, Etc. The Borrower is not in
default under any agreement to which it is a party, the effect of which will
materially adversely affect performance by the Borrower of its obligations
pursuant to and as contemplated by the terms and provisions of this Agreement or
any of the Loan Documents. Neither the execution and delivery of this Agreement,
the Loan Documents or other documents to be executed and delivered by the
Borrower, or the performance of its obligations under this Agreement (a) violate
any presently existing provisions of law or any presently existing applicable
order, writ, injunction or decree of any court or government department,
commission, board, bureau, agency or instrumentality, or (b) conflict or are
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, instrument, document, agreement or contract of any kind
which creates, represents, evidences or provides for any lien, charge or
encumbrance upon any of the assets of the Borrower, or any other indenture,
mortgage, deed of trust, instrument, document, agreement or contract of any kind
to which the Borrower is a party or by which the Borrower may be bound.
7.3. Financial Statements, Financial Condition. The Borrower
has furnished the Bank with financial statements of the Borrower as of and for
the fiscal year ended October 31 in each of the years 1995, 1996, and 1997 and a
balance sheet as of January 31, 1998 and statement of operations for the seven
month period then ended. Such financial statements are true and correct,
subject, as to the interim statements, to changes resulting from year-end
reviews and adjustments, and have been prepared in accordance with generally
accepted
-17-
accounting principles consistently followed throughout the periods involved. The
balance sheets included therein fairly present the condition of the Borrower as
at the dates thereof, and the profit and loss and surplus statements included
therein fairly present the results of operations of the Borrower for the periods
indicated. There has been no material adverse change in the condition, financial
or otherwise, of the Borrower since January 31, 1998.
7.4. No Litigation. Except for an action filed by NRS for
services performed by NRS in the aggregate of approximately $105,000.00, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower before any court or any
governmental, administrative, regulatory, adjudicatory or arbitrational body or
agency of any kind which will materially adversely affect performance by any of
such parties of its obligations pursuant to and as contemplated by the terms and
provisions of this Agreement or the Loan Documents.
7.5. Taxes. The Borrower has filed all state and federal
income tax returns that are required to be filed, and has paid all taxes shown
to be due on such returns and such assessments received by the Borrower to the
extent that the same had become due.
7.6. Title to Property. The Borrower holds and will hold all
right, title, and interest in and to its properties, including the Collateral,
free and clear of all liens, claims and encumbrances, except as permitted under
this Agreement. The Trust holds and will hold all right, title, and interest in
and to its properties, including the Premises, free and clear of all liens,
claims and encumbrances, except as permitted under this Agreement. The Borrower
has no subsidiaries.
7.7. Accounts Receivable. With respect to the Accounts
Receivable, the Borrower represents and warrants that, unless otherwise
indicated in writing by the Borrower:
(a) all Accounts Receivable are genuine, are in all
respects what they purport to be, are not evidenced by a judgment and
are evidenced by only one, if any, executed original instrument,
agreement, contract, or document;
(b) all Accounts Receivable represent undisputed bona
fide transactions completed in accordance with the terms and provisions
contained in any documents or agreements related thereto;
(c) the face amount shown on any schedule of Accounts
Receivable heretofore or hereafter provided to the Bank and all
invoices and statements delivered to the Bank with respect to any
Accounts Receivable are or will be actually and absolutely owing to the
Borrower and are not contingent for any reason;
(d) to the best of the Borrower's knowledge, there
are no set-offs, counterclaims, or disputes existing or asserted with
respect to the Accounts Receivable, and the Borrower has not made any
agreement with any account debtor for any deduction therefrom, except
for discounts and allowances allowed by the Borrower in the ordinary
course of its business for prompt payment, all of which discounts or
allowances are reflected in the calculation
-18-
of the face amount of the invoices to which such discounts or
allowances relate;
(e) to the best of the Borrower's knowledge, there
are no facts, events, or conditions which in any way impair the
validity or enforcement of the Accounts Receivable or tend to reduce
the amount payable thereunder from the invoice face amount shown on any
schedule of Accounts Receivable delivered to the Bank;
(f) the Borrower has no knowledge of any fact or
circumstance that would impair the validity or collectibility of the
Accounts Receivable; and
(g) the Accounts Receivable that the Borrower shall,
expressly or by implication, request the Bank to treat as Eligible
Accounts will, as of the time such request is made, conform in all
requests to the conditions to be treated as Eligible Accounts.
7.8. Inventory. With respect to the Inventory, the Borrower
represents and warrants that, unless otherwise indicated in writing by the
Borrower:
(a) all inventory is located at the location set
forth in Section 5.7 hereof or is Inventory that is in transit;
(b) no Inventory is, or shall at any time or times
hereafter be, stored with a bailee, warehouseman, or similar party
without the prior written consent of the Bank;
(c) no Inventory is under consignment to or from any
person;
(d) all Inventory is currently usable and salable in
the normal course of the Borrower's business; and
(e) the Inventory that the Borrower shall, expressly
or by implication, request the Bank to treat as Eligible Inventory
will, as of the time such request is made, conform in all respects to
the conditions to be treated as Eligible Inventory.
7.9. Compliance with Environmental Laws. Except as disclosed
in writing to the Bank on or before the date hereof, the Premises and its
present use complies, and at all times shall comply, with all applicable laws
and govern mental regulations including, without limitation, all applicable
federal, state and local laws pertaining to air and water quality, hazardous
waste, waste disposal, air emissions and other environmental matters, all zoning
and other land use matters, and utility availability. Except as disclosed in
writing to the Bank on or before the date hereof, neither the Borrower nor, to
the best of the Borrower's knowledge, any previous owner or occupier of the
Premises, used, generated, stored or disposed of, on, under or about the
Premises any Hazardous Materials. For purposes of this Agreement, Hazardous
Materials shall mean and include any hazardous substance or any pollutant or
contaminant defined as such in (or for purposes of) the Comprehensive
Environmental Response, Compensation, and Liability Act, any so-called
applicable "Superfund" or "Superlien" or "Non- priority Lien" law, the Toxic
Substances Control Act, or the Resource Conservation and Recovery Act, all as
amended from time to time. Further, to the
-19-
best of the Borrower's knowledge, except as disclosed in writing to the Bank on
or before the date hereof, the Premises does not contain any underground tanks
and does not contain and has not in the past contained any asbestos-containing
material in friable form.
7.10. Material Facts. Neither this Agreement nor any document,
financial statement, credit information, certificate or statement furnished to
the Bank by the Borrower contains, or will contain, any untrue statement of a
material fact or omits, or will omit, to state a material fact necessary to make
the statements made not misleading.
7.11. Representations and Warranties to be Continuing. All of
the foregoing representations and warranties will be true at the date of the
initial disbursement and at the dates of all subsequent disbursements of the
Loan. All representations, warranties, covenants, and agreements made herein or
in any certificate or other document delivered to the Bank by or on behalf of
the Borrower shall be deemed to have been relied upon by the Bank
notwithstanding any investigation heretofore or hereafter made by the Bank or on
its behalf, and shall survive the making of any or all of the disbursements
contemplated hereby and shall continue in full force and effect as long as there
remains unperformed any obligation to the Bank hereunder or under any of the
Loan Documents.
Section 8. MISCELLANEOUS PROVISIONS.
8.1. Notices. Any communications, requests or notices required
or appropriate to be given under this Agreement shall be in writing and deemed
given when delivered in person or when mailed by certified mail, return receipt
requested, deposited in the United States mail postage pre-paid, addressed to
the party for whom the notice is intended as follows:
BORROWER: CTI Industries Corporation
00000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
hief Executive Officer
BANK: First American Bank
0000 Xxxxx Xxxxxx
Xxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Exec. Vice President
These addresses may be changed by notice as provided herein.
8.2. No Waiver. No failure by the Bank to exercise, or delay
by the Bank in exercising, any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof, or
the exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement are cumulative and not exclusive of any right or
remedy provided by law. No notice to or demand on the Borrower in any case
shall, in itself, entitle the Borrower to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
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Bank to any other or further action in any circumstances without notice or
demand.
8.3. Binding Effect. This Agreement and the Loan Documents
shall be binding upon and inure to the benefit of the respective parties hereto
and their respective successors and assigns. This Agreement is made for the sole
benefit of the Borrower and the Bank and no other person or persons shall have
any bene fits, rights or remedies under or by reason of this Agreement.
8.4. Further Assurances. The Borrower agrees that, at any time
or from time to time, upon the written request of the Bank, it will execute and
deliver all such further documents and do all such other acts and things as the
Bank may reasonably request to give effect to this Agreement and the Loan
Documents.
8.5. Time of the Essence. Time is of the essence of this
Agreement and of every part hereof.
8.6. Fees and Expenses. The Borrower shall promptly pay or
reimburse the Bank for all reasonable expenses, regardless of whether the Loan
is disbursed in whole or in part, incurred in connection with the issuance of
the Bank's commitment letter and the making of the Loan, including, but not
limited to, examination and insurance of title by the Title Company, preparation
and review of all Loan Documents by the Bank's outside counsel, taxes of any
kind, appraisal, surveys, recording costs, escrow disbursement costs, inspection
costs and attorney's fees. The Borrower shall also pay promptly to the Bank on
demand the customary fees and out-of-pocket expenses of the Bank in connection
with the Bank's periodic examinations of the Collateral and inspections of books
and records of the Borrower. The Borrower shall pay promptly to the Bank on
demand reasonable attorneys' fees and all costs and other expenses paid or
incurred by the Bank in duly enforcing or exercising its rights or remedies
created by, connected with or provided in this Agreement, the Notes, the
Mortgage or the other Loan Documents or as a result of any litigation or
threatened litigation or the preparation therefor in which the Bank is a party
or threatened to be made a party and which in any way whatsoever relates to this
Agreement.
8.7. Indemnity Agreement. The Borrower agrees to indemnify,
defend, and hold the Bank harmless from and against any and all losses, damages,
liabilities, and expenses (including reasonable attorneys' fees) the Bank may
sustain as a consequence of the occurrence of any Event of Default or the breach
or inaccuracy of any representation and warranty made by the Borrower in this
Agreement or any document, financial statement, credit information, certificate,
or statement furnished to the Bank. The Borrower agrees to indemnify, defend,
and hold the Bank harmless from and against any and all losses, damages,
liabilities, and expenses (including reasonable attorneys' fees) that at any
time or from time to time may be paid, incurred, or suffered by, or asserted
against, the Bank for, with respect to, or as a direct or indirect result of the
presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission, or release from, the Premises or any part thereof, into or upon any
land, the atmosphere, or any water course, body of water, or wet lands, of any
Hazardous Material occurring during or prior to the period of ownership of the
Premises or any part thereof by the Borrower or as a result of conditions
existing during such period (including, without limitation, any losses,
liabilities, damages, or expenses asserted or arising under any applicable law
or regulation). The provisions of and undertakings and indemnifications set
forth in this Section shall survive the payment of the Notes and the other
obligations of the Borrower
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to the Bank and shall not be affected by the Bank's acquisition of any interest
in the Premises, whether by foreclosure or otherwise.
8.8. Security for Disbursements and Payments. Any and all
disbursements, payments and amounts expended by the Bank pursuant to this
Agreement, and all other expenses reimbursable by the Borrower, shall, as and
when advanced or incurred, be and become evidenced and secured by this Agreement
and the Loan Documents and shall bear interest from the date of advance or
expenditure at the rate provided in this Agreement or, if no such rate is
provided, then at the highest applicable interest rate provided in the Notes.
Any Event of Default which may occur under this Agreement shall constitute a
default under the Loan Documents.
8.9. Entire Agreement. This Agreement and the Loan Documents
constitute the entire agreement between the parties hereto and may not be
modified or amended in any manner other than by supplemental written agreement
executed by the parties hereto. This Agreement supersedes any other agreement
made by the Bank with or for the benefit of the Borrower.
8.10. Governing Law. This Agreement shall be a contract
governed by and construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto caused this Agreement
to be executed as of the day and year first written above.
BORROWER: CTI Industries Corporation
BY:______________________
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
BANK: First American Bank
BY:_______________________
Xxxxxx X. Xxxxxxx
Exec. Vice President
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