EXHIBIT 10(a)(iv)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or
supplemented from time to time, this "Agreement") made this 24th day of June,
1999 by and between LASALLE BANK NATIONAL ASSOCIATION, a national banking
association ("Bank"), 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000-0000,
and Colonial Commercial Sub Corp., 0000 Xxxxxxxxx Xxxxxxxx, Xxxxx 000-X,
Xxxxxxxxx, Xxx Xxxx 00000-0000 ("Borrower") [Insert entity designation(s) and
address(es) of principal place of business].
WITNESSETH:
WHEREAS, Borrower may, from time to time, request Loans from
Bank, and the parties wish to provide for the terms and conditions upon which
such Loans, if made by Bank, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any
Loan by renewal or extension) hereafter made to Borrower by Bank, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrower, the parties agree as follows:
1. DEFINITIONS.
(a) "Account", "Account Debtor", "Chattel Paper", "Documents", "Equipment",
"General Intangibles", "Goods", "Instruments", "Inventory", and "Investment
Property" shall have the respective meanings assigned to such terms, as of the
date of this Agreement, in the Illinois
Uniform Commercial Code.
(b) "Affiliate" shall mean any Person (i) which directly or indirectly through
one or more intermediaries controls, is controlled by, or is under common
control with, Borrower, (ii) which beneficially owns or holds five percent (5%)
or more of the voting control or equity interests of Borrower, or (iii) five
percent (5%) or more of the voting control or equity interests of which is
beneficially owned or held by Borrower.
(c) "Collateral" shall mean all of the property of Borrower described
in paragraph 4 hereof, together with all other real or personal
property of any Obligor or any other Person now or hereafter pledged to
Bank to secure, either directly or indirectly, repayment of any of the
Liabilities.
(d) "Eligible Account" shall mean an Account owing to Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without
limiting Bank's discretion, Bank shall, in general, consider an Account
to be an Eligible Account if it meets, and so long as it continues to
meet, the following requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by Borrower, Borrower has the right to subject
it to a security interest in favor of Bank or assign it to Bank
and it subject to a first priority perfected security interest in
favor of Bank and to no other claim, lien, security interest or
encumbrance whatsoever, other than Permitted Liens;
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(iii) it arises from (A) the performance of services by Borrower
in the ordinary course of Borrower's business, and such services
have been fully performed and acknowledged and accepted by the
Account Debtor thereunder; or (B) the sale or lease of Goods by
Borrower in the ordinary course of Borrower's business, and such
Goods have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to the Account Debtor, such
Account Debtor has not refused to accept, returned or offered to
return, any of the Goods which are the subject of such Account,
and Borrower has possession of, or Borrower has delivered to Bank
(at Bank's request) shipping and delivery receipts evidencing
delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable within one hundred twenty (120)
days after the date of the invoice and does not remain unpaid one
hundred twenty (120) days past the invoice date thereof;
provided, however, that if more than twenty-five percent (25%) of
the aggregate dollar amount of invoices owing by a particular
Account Debtor remain unpaid one hundred twenty (120) days after
the respective invoice dates thereof, then all Accounts owing by
that Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not subject
to setoff, counterclaim, credit, allowance or adjustment by such
Account Debtor, or to any claim by such Account Debtor denying
liability thereunder in whole or in part;
(vi) it does not arise out of a contract or order which fails in
any material respect to comply with the requirements of
applicable law;
(vii) the Account Debtor thereunder is not a director, officer,
employee or agent of Borrower, or a Subsidiary, Parent or
Affiliate;
(viii) it is not an Account with respect to which the Account
Debtor is the United States of America or any state or local
government, or any department, agency or instrumentality thereof,
unless Borrower assigns its right to payment of such Account to
Bank pursuant to, and in full compliance with, the Assignment of
Claims Act of 1940, as amended, or any comparable state or local
law, as applicable;
(ix) it is not an Account with respect to which the Account
Debtor is located in a state which requires Borrower, as a
precondition to commencing or maintaining an action in the courts
of that state, either to (A) receive a certificate of authority
to do business and be in good standing in such state; or (B) file
a notice of business activities report or similar report with
such state's taxing authority, unless
(x) Borrower has taken one of the actions described in clauses
(A) or (B); (y) the failure to take one of the actions described
in either clause (A) or (B) may be cured retroactively by
Borrower at its election; or (z) Borrower has proven, to Bank's
satisfaction, that it is exempt from any such requirements under
any such state's laws; (x) the Account Debtor is located within
the United States of America;
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(xi) it is not an Account with respect to which the Account
Debtor's obligation to pay is subject to any repurchase
obligation or return right, as with sales made on a
xxxx-and-hold, guaranteed sale, sale on approval, sale or return
or consignment basis;
(xii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue;
or (B) which violates any of the covenants of Borrower contained
in this Agreement;
(xiii) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to Borrower, exceeds a credit
limit determined by Bank in its sole discretion for that Account
Debtor (except that Accounts excluded from Eligible Accounts
solely by reason of this subparagraph 1(d)(xiii) shall be
Eligible Accounts to the extent of such credit limit); and
(xiv) it is not an Account with respect to which the prospect of
payment or performance by the Account Debtor is or will be
impaired, as determined by Bank in its sole discretion.
(e) "Eligible Inventory" shall mean Inventory of Borrower which is acceptable to
Bank in its sole discretion for lending purposes. Without limiting Bank's
discretion, Bank shall, in general, consider Inventory to be Eligible Inventory
if it meets, and so long as it continues to meet, the following requirements:
(i) it is owned by Borrower, Borrower has the right to subject it
to a security interest in favor of Bank and it is subject to a
first priority perfected security interest in favor of Bank and
to no other claim, lien, security interest or encumbrance
whatsoever, other than Permitted Liens;
(ii) it is located on one of the premises listed on Exhibit B (or
other locations of which Bank has been advised in writing
pursuant to subparagraph 10(c) hereof) and is not in transit;
(iii) if held for sale or lease or furnishing under contracts of
service, it is (except as Bank may otherwise consent in writing)
new and unused and free from defects which would, in Bank's sole
determination, affect its market value;
(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Bank has given its prior
written approval and Borrower has caused any such bailee,
consignee, warehouseman, processor or similar party to issue and
deliver to Bank, in form and substance acceptable to Bank, such
Uniform Commercial Code financing statements, warehouse receipts,
waivers and other documents as Bank shall require;
(v) Bank has determined, in accordance with Bank's customary
business practices, that it is not unacceptable due to age, type,
category or quantity; and
(vi) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are
untrue; or (B) which violates any of the covenants of Borrower
contained in this Agreement.
(f) "Environmental Laws" shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrower's business or
facilities owned or operated by Borrower, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
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(g) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, modified or restated from time to time.
(h) "Event of Default" shall have the meaning specified in paragraph 12 hereof.
(i) "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
(j) "Indemnified Party" shall have the meaning specified in paragraph 14 hereof.
(k) "Letter of Credit" shall mean any letter of credit issued by Bank on behalf
of Borrower.
(l) "Liabilities" shall mean any and all obligations, liabilities and
indebtedness of Borrower to Bank or to any parent, affiliate or subsidiary of
Bank of any and every kind and nature, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct, indirect,
absolute, contingent or otherwise (including, without limitation, obligations of
performance), whether several, joint or joint and several, and whether arising
or existing under written or oral agreement or by operation of law.
(m) "Loans" shall mean all loans and advances made by Bank to or on behalf of
Borrower hereunder.
(n) "Loan Limit" shall have the meaning specified in paragraph 1 of Exhibit A.
(o) "Lock Box" and "Lock Box Account" shall have the meanings specified in
paragraph 7 hereof.
(p) "Maximum Loan Limit" shall have the meaning specified in paragraph 1 of
Exhibit A.
(q) "Obligor" shall mean Borrower and each other Person who is or shall become
primarily or secondarily liable for any of the Liabilities.
(r) "Original Term" shall have the meaning specified in paragraph 9 hereof.
(s) "Other Agreements" shall mean all agreements, instruments and documents,
other than this Agreement, including, without limitation, guaranties, mortgages,
trust deeds, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, leases, financing statements and all other
writings heretofore, now or from time to time hereafter executed by or on behalf
of Borrower or any other Person and delivered to Bank or to any parent,
affiliate or subsidiary of Bank in connection with the Liabilities or the
transactions contemplated hereby, as each of the same may be amended, modified
or supplemented from time to time.
(t) "Parent" shall mean any Person now or at any time or times hereafter owning
or controlling (alone or with any other Person) at least a majority of the
issued and outstanding equity of Borrower and, if Borrower is a partnership, the
general partner of Borrower.
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(u) "Permitted Liens" shall mean (i) statutory liens of landlords, carriers,
warehousemen, processors, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder or amounts which are being contested in good
faith and by appropriate proceedings and for which Borrower has maintained
adequate reserves; (ii) liens or security interests in favor of Bank; (iii)
zoning restrictions and easements, licenses, covenants and other restrictions
affecting the use of real property that do not individually or in the aggregate
have a material adverse effect on Borrower's ability to use such real property
for its intended purpose in connection with Borrower's business; (iv) liens in
connection with purchase money indebtedness and capitalized leases otherwise
permitted pursuant to the Agreement, provided, that such liens attach only to
the assets the purchase of which was financed by such purchase money
indebtedness or which is the subject of such capitalized leases; and (v) liens
specifically permitted by Bank in writing. (v) "Person" shall mean any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof. (w) "Renewal Term" shall have the meaning specified in paragraph 9
hereof. (x) "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower, or any partnership, joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by Borrower or any partnership of which Borrower is a general partner. (y)
"Tangible Net Worth" shall have the meaning specified in subparagraph 11(o)
hereof.
(z) "Business Day" shall mean any day other than a Saturday, a Sunday
or (i) with respect to all matters, determinations, fundings and payments in
connection with LIBOR Rate Loans, any day on which banks in London, England or
Chicago, Illinois are required or permitted to close, and (ii) with respect to
all other matters, any day that banks in Chicago, Illinois are permitted or
required to close.
(aa) "Interest Period" shall have the meaning specified in Paragraph
(3)(b) of Exhibit A of the Agreement hereto.
(bb) "LIBOR Rate" shall mean with respect to any LIBOR Rate Loan for
any Interest Period, a rate per annum equal to the offered rate for deposits in
United States dollars for a period equal to such Interest Period as it appears
on Telerate page 3750 as of 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period. "Telerate page 3750" means the display
designated as "Page 3750" on the Telerate Service (or such other page as may
replace page 3750 of that service or such other service as may be nominated by
the British Bankers' Association as the vendor for the purpose of displaying
British Bankers' Association interest settlement rates for United States dollar
deposits).
(cc) "LIBOR Rate Loans" shall mean the Loans bearing interest at the
rate set forth in Paragraph (3)(b) of Exhibit A of the Agreement.
(dd) "Prime Rate Loans" shall mean the Loans bearing interest at the
rates set forth in Paragraph (3)(a) of Exhibit A of the Agreement.
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(ee) "Tax" shall mean in relation to any LIBOR Rate Loans and the
applicable LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or
charges of whatever nature required (i) to be paid by Bank and/or (ii) to be
withheld or deducted from any payment otherwise required hereby to be made by
Borrower to Bank; provided, that the term "Tax" shall not include any taxes
imposed upon the net income of Bank.
2. LOANS. Subject to the terms and conditions of this Agreement (including
Exhibit A) and the Other Agreements, during the Original Term and any Renewal
Term, Bank may, in its sole discretion, make such Loans to Borrower as Borrower
shall from time to time request. The aggregate unpaid principal balance of all
Liabilities outstanding at any one time shall not exceed the lesser of the Loan
Limit and the Maximum Loan Limit and shall bear interest at the rates set forth
in Exhibit A. ALL LIABILITIES SHALL BE REPAID BY BORROWER UPON DEMAND BY BANK.
Prior to Bank making such demand, Liabilities shall be repaid as provided
elsewhere in this Agreement. If at any time the outstanding Liabilities exceeds
the Maximum Loan Limit or the Loan Limit, or any portion of the Liabilities
exceed any applicable sublimit set forth in Exhibit A, Borrower shall
immediately, and without the necessity of a demand by Bank, pay to Bank such
amount as may be necessary to eliminate such excess and Bank shall apply such
payment to the Liabilities in such order as Bank shall determine in its sole
discretion. Borrower hereby authorizes Bank, in its sole discretion, to charge
any of Borrower's accounts or advance Loans to make any payments of principal,
interest, fees, costs or expenses required to be made under this Agreement. All
Loans shall, in Bank's sole discretion, be evidenced by one or more promissory
notes in form and substance satisfactory to Bank. However, if such Loans are not
so evidenced, such Loans may be evidenced solely by entries upon the books and
records maintained by Bank.
3. FEES AND CHARGES. Borrower shall pay to Bank, in addition to all other
amounts payable hereunder, the fees and charges set forth in Exhibit A. It is
the intent of the parties that the rate of interest and the other charges to
Borrower under this Agreement shall be lawful; therefore, if for any reason the
interest or other charges payable under this Agreement are found by a court of
competent jurisdiction, in a final determination, to exceed the limit which Bank
may lawfully charge Borrower, then the obligation to pay interest and other
charges shall automatically be reduced to such limit and, if any amount in
excess of such limit shall have been paid, then such amount shall be refunded to
Borrower.
4. GRANT OF SECURITY INTEREST TO BANK. As security for the payment of all Loans
now or in the future made by Bank to Borrower hereunder and for the payment or
other satisfaction of all other Liabilities, Borrower hereby assigns to Bank and
grants to Bank a continuing security interest in the following property of
Borrower, whether now or hereafter owned, existing, acquired or arising and
wherever now or hereafter located: (a) all Accounts (whether or not Eligible
Accounts) and all Goods whose sale, lease or other disposition by Borrower has
given rise to Accounts and have been returned to, or repossessed or stopped in
transit by, Borrower; (b) all Chattel Paper, Instruments, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, tradenames, trade secrets, goodwill,
copyrights, copyright applications, registrations, licenses, franchises,
customer lists, tax refund claims, claims against carriers and shippers,
guarantee claims, contracts rights, security interests, security deposits and
rights to indemnification); (c) all Inventory (whether or not Eligible
Inventory); (d) all Goods (other than Inventory), including, without limitation,
Equipment, vehicles and fixtures; (e) all Investment Property; (f) all deposits
and cash; (g) any other property of Borrower now or hereafter in the possession,
custody or control of Bank or any agent or any parent, affiliate or subsidiary
of Bank or any participant with Bank in the Loans, for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or otherwise)
and (h) all additions and accessions to, substitutions for, and replacements,
products and proceeds of the foregoing property, including, without limitation,
proceeds of all insurance policies insuring the foregoing property, and all of
Borrower's books and records relating to any of the foregoing and to Borrower's
business.
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5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Borrower shall, at Bank's request, at any time and from time to time, execute
and deliver to Bank such financing statements, documents and other agreements
and instruments (and pay the cost of filing or recording the same in all public
offices deemed necessary or desirable by Bank) and do such other acts and things
as Bank may deem necessary or desirable in its sole discretion in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Bank (free and clear of all other liens, claims,
encumbrances and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
Liabilities, and in order to facilitate the collection of the Collateral.
Borrower irrevocably hereby makes, constitutes and appoints Bank (and all
Persons designated by Bank for that purpose) as Borrower's true and lawful
attorney and agent-in-fact to execute such financing statements, documents and
other agreements and instruments and do such other acts and things as may be
necessary to preserve and perfect Bank's security interest in the Collateral.
Borrower further agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until otherwise notified by
Bank following the occurrence of an Event of Default,, Borrower shall have the
right, except as otherwise provided in this Agreement, in the ordinary course of
Borrower's business, to (a) sell, lease or furnish under contracts of service
any of Borrower's Inventory normally held by Borrower for any such purpose; and
(b) use and consume any raw materials, work in process or other materials
normally held by Borrower for such purpose; provided, however, that a sale in
the ordinary course of business shall not include any transfer or sale in
satisfaction, partial or complete, of a debt owed by Borrower, provided further,
that a sale of Inventory to a creditor of Borrower resulting in a valid Account
owing to Borrower by such creditor shall not constitute a transfer or sale in
satisfaction, partial, or complete, of a debt owed by Borrower.
7. COLLECTIONS.
(a) Borrower shall direct all of its Account Debtors to make all payments on
the Accounts directly to a post office box (the "Lock Box") designated by,
and under the exclusive control of, Bank, at Bank or at another financial
institution acceptable to Bank. Borrower shall establish an account (the
"Lock Box Account") in Bank's name with Bank or such other financial
institution acceptable to Bank, into which all payments received in the Lock
Box shall be deposited, and into which Borrower will immediately deposit all
payments received by Borrower for Inventory or services in the identical form
in which such payments were received, whether by cash or check. If Borrower,
any Affiliate or Subsidiary, any shareholder, officer, director, employee or
agent of Borrower or any Affiliate or Subsidiary, or any other Person acting
for or in concert with Borrower shall receive any monies, checks, notes,
drafts or other payments relating to or as proceeds of Accounts or other
Collateral, Borrower and each such Person shall receive all such items in
trust for, and as the sole and exclusive property of, Bank and, immediately
upon receipt thereof, shall remit the same (or cause the same to be remitted)
in kind to the Lock Box Account. If the Lock Box Account is not established
with Bank, the financial institution with which the Lock Box Account is
established shall acknowledge and agree, in a manner satisfactory to Bank,
that the amounts on deposit in such Lock Box Account are the sole and
exclusive property of Bank, that such financial institution has no right to
setoff against the Lock Box Account or against any other account maintained
by such financial institution into which the contents of the Lock Box Account
are transferred, and that such financial institution shall wire, or otherwise
transfer in immediately available funds to Bank in a manner satisfactory to
Bank, funds deposited in the Lock Box Account on a daily basis as such funds
are collected. Borrower agrees that all payments made to such Lock Box
Account or otherwise received by Bank, whether in respect of the Accounts or
as proceeds of other Collateral or otherwise, will be applied on account of
the Liabilities in accordance with the terms of this Agreement provided, that
so long as no Event of Default has occurred, payments received by Bank shall
not be applied to the unmatured portion of the LIBOR Rate Loans, but shall be
held in a cash collateral account maintained by Bank until the earlier of (i)
the last day of the Interest Period applicable to such LIBOR Rate Loan and
(ii) the occurrence of an Event of Default; provided further, that so long as
no Event of Default has occurred, the immediately available funds held in
such cash collateral account may be disbursed, at Borrower's discretion, to
Borrower so long as after giving effect to such disbursement, Borrower's
availability under Paragraph 1 of Exhibit A of the Agreement at such time
equals or exceeds the outstanding Liabilities at such time. If the Lock Box
Account is established with Bank, Borrower agrees to pay all fees, costs and
expenses in connection with opening and maintaining the Lock Box Account and
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depositing for collection by Bank any check or other item of payment received
by Bank on account of the Liabilities. All of such fees, costs and expenses
shall constitute Liabilities hereunder, shall be payable to Bank by Borrower
upon demand, and, until paid, shall bear interest at the highest rate then
applicable to Loans hereunder. All checks, drafts, instruments and other
items of payment or proceeds of Collateral shall be endorsed by Borrower to
Bank, and, if that endorsement of any such item shall not be made for any
reason, Bank is hereby irrevocably authorized to endorse the same on
Borrower's behalf. For the purpose of this paragraph, Borrower irrevocably
hereby makes, constitutes and appoints Bank (and all Persons designated by
Bank for that purpose) as Borrower's true and lawful attorney and
agent-in-fact (i) to endorse Borrower's name upon said items of payment
and/or proceeds of Collateral and upon any Chattel Paper, Document,
Instrument, invoice or similar document or agreement relating to any Account
of Borrower or Goods pertaining thereto; (ii) to take control in any manner
of any item of payment or proceeds thereof and (iii) to have access to any
lock box or postal box into which any of Borrower's mail is deposited, and
open and process all mail addressed to Borrower and deposited therein.
(b) Bank may, at any time and from time to time after the occurrence of an
Event of Default, whether before or after notification to any Account Debtor
and whether before or after the maturity of any of the Liabilities, (i)
enforce collection of any of Borrower's Accounts or other amounts owed to
Borrower by suit or otherwise; (ii) exercise all of Borrower's rights and
remedies with respect to proceedings brought to collect any Accounts or other
amounts owed to Borrower; (iii) surrender, release or exchange all or any
part of any Accounts or other amounts owed to Borrower, or compromise or
extend or renew for any period (whether or not longer than the original
period) any indebtedness thereunder; (iv) sell or assign any Account of
Borrower or other amount owed to Borrower upon such terms, for such amount
and at such time or times as Bank deems advisable; (v) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or other similar document
against any Account Debtor or other Person obligated to Borrower; and (vi) do
all other acts and things which are necessary, in Bank's sole discretion, to
fulfill Borrower's obligations under this Agreement and to allow Bank to
collect the Accounts or other amounts owed to Borrower. In addition to any
other provision hereof, Bank may at any time, after the occurrence of an
Event of Default, at Borrower's expense, notify any parties obligated on any
of the Accounts to make payment directly to Bank of any amounts due or to
become due thereunder.
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(c) For purposes of calculating interest, Bank shall, within two (2) business
days after receipt by Bank at its office in Chicago, Illinois of (i) checks
and (ii) cash or other immediately available funds from collections of items
of payment and proceeds of any Collateral, apply the whole or any part of
such collections or proceeds against the Liabilities in such order as Bank
shall determine in its sole discretion. For purposes of determining the
amount of Loans available for borrowing purposes, checks and cash or other
immediately available funds from collections of items of payment and proceeds
of any Collateral shall be applied in whole or in part against the
Liabilities, in such order as Bank shall determine in its sole discretion, on
the day of receipt, subject to actual collection.
(d) Bank, in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person in, upon
or against the Collateral. All sums paid by Bank in respect thereof and all
costs, fees and expenses including, without limitation, reasonable attorney
fees, all court costs and all other charges relating thereto incurred by Bank
shall constitute Liabilities, payable by Borrower to Bank on demand and,
until paid, shall bear interest at the highest rate then applicable to Loans
hereunder.
(e) Promptly upon Borrower's receipt of any portion of the Collateral
evidenced by an agreement, Instrument or Document, including, without
limitation, any Chattel Paper, Borrower shall deliver the original thereof to
Bank together with an appropriate endorsement or other specific evidence of
assignment thereof to Bank (in form and substance acceptable to Bank). If an
endorsement or assignment of any such items shall not be made for any reason,
Bank is hereby irrevocably authorized, as Borrower's attorney and
agent-in-fact, to endorse or assign the same on Borrower's behalf.
8. SCHEDULES AND REPORTS.
(a) Within ten (10) days after the close of each calendar month, and at such
other times as may be requested by Bank from time to time hereafter, Borrower
shall deliver to Bank (i) a schedule identifying each Account and which
Accounts constitute Eligible Accounts together with copies of the invoices
when requested by Bank (with evidence of shipment attached) pertaining to
each such Account, for the month (or other applicable period) immediately
preceding; and (ii) such additional schedules, certificates, reports and
information with respect to the Collateral as Bank may from time to time
require. Bank, through its officers, employees or agents, shall have the
right, at any time and from time to time in Bank's name, in the name of a
nominee of Bank or in Borrower's name, to verify the validity, amount or any
other matter relating to any of Borrower's Accounts, by mail, telephone,
telegraph or otherwise, provided that prior to the occurrence of an Event of
Default, Bank shall conduct such verification in the name of a nominee of
Bank or in Borrower's name. All costs, fees and expenses incurred by Bank in
this regard shall constitute Liabilities, payable on demand and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder.
(b) Without limiting the generality of the foregoing, Borrower shall deliver
to Bank, at least once a month (or more frequently when requested by Bank), a
report with respect to Borrower's Inventory. Borrower shall immediately
notify Bank of any event causing loss or depreciation in value of Borrower's
Inventory (other than normal depreciation occurring in the ordinary course of
business) and which exceeds $125,000.00.
9
(c) All schedules, certificates, reports and other items delivered by
Borrower to Bank hereunder shall be executed by an authorized representative
of Borrower and shall be in such form and contain such information as Bank
shall specify.
9. TERMINATION. This Agreement shall be in effect from the date hereof until
June 24, 2002 (the "Original Term") and shall automatically renew itself from
year to year thereafter (each such one-year renewal being referred to herein as
a "Renewal Term") unless (a) Bank makes demand for repayment prior to the end of
the Original Term or the then current Renewal Term; (b) the due date of the
Liabilities is accelerated pursuant to paragraph 13 hereof; or (c) Borrower
elects to terminate this Agreement at the end of the Original Term or at the end
of any Renewal Term by giving Bank written notice of such election at least
ninety (90) days prior to the end of the Original Term or the then current
Renewal Term and by paying all of the Liabilities in full on the last day of
such term. If one or more of the events specified in clauses (a), (b) and (c)
occurs, then (i) Bank shall not make any additional Loans on or after the date
identified as the date on which the Liabilities are to be repaid; and (ii) this
Agreement shall terminate on the date thereafter that the Liabilities are paid
in full. At such time as Borrower has repaid all of the Liabilities and this
Agreement has terminated, Borrower shall deliver to Bank a release, in form and
substance satisfactory to Bank, of all obligations and liabilities of Bank and
its officers, directors, employees, agents, parents, subsidiaries and affiliates
to Borrower, and if Borrower is obtaining new financing from another lender,
Borrower shall deliver such lender's indemnification of Bank, in form and
substance satisfactory to Bank, for checks which Bank has credited to Borrower's
account, but which subsequently are dishonored for any reason or for automatic
clearinghouse or wire transfers not yet posted to Borrower's account. If, during
the term of this Agreement, Borrower prepays all of the Liabilities from any
source other than income from the ordinary course operations of Borrower's
business and this Agreement is terminated, Borrower agrees to pay to Bank as a
prepayment fee, in addition to the payment of all other Liabilities, an amount
equal to (i) three percent (3%) of the Maximum Loan Limit if such prepayment
occurs two (2) years or more prior to the end of the Original Term, (ii) two
percent (2%) of the Maximum Loan Limit if such prepayment occurs less than two
(2) years, but at least one (1) year prior to the end of the Original Term, or
(iii) one percent (1%) of the Maximum Loan Limit if such prepayment occurs less
than one (1) year prior to the end of the Original Term or any then current
Renewal Term; provided, that Borrower shall not be required to pay such
prepayment fee if the Liabilities are prepaid by Borrower in response to the
Bank's demand for repayment of the Loans before the occurrence of an Event of
Default.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower hereby
represents, warrants and covenants that:
(a) the financial statements delivered or to be delivered by Borrower to
Bank at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect in all material respects the financial condition
of Borrower, and there has been no material adverse change in the financial
condition, the operations or any other status of Borrower since the date of
the financial statements delivered to Bank most recently prior to the date
of this Agreement;
(b) (i) the office where Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of
Collateral and post office boxes and locations of bank accounts (other than
those bank accounts at Bank) are as set forth in Exhibit B; and (ii)
Borrower shall promptly (but in no event less than ten (10) days prior
thereto) advise Bank in writing of the proposed opening of any new place of
business or new location of Collateral, the closing of any existing place of
business or location of Collateral, any change in the location of Borrower's
books, records and accounts (or copies thereof), the opening or closing of
any post office box of Borrower or the opening or closing of any bank
account;
10
(c) the Collateral, including, without limitation, the Equipment (except any
part thereof which Borrower shall have advised Bank in writing consists of
Collateral normally used in more than one state) is and shall be kept, or,
in the case of vehicles, based, only at the addresses set forth on Exhibit
B, and at other locations within the continental United States of which Bank
has been advised by Borrower in writing;
(d) if any of the Collateral consists of Goods of a type normally used in
more than one state, whether or not actually so used, (i) Borrower shall
immediately give written notice to Bank of any use of any such Goods in any
state other than a state in which Borrower has previously advised Bank such
Goods shall be used and (ii) such Goods shall not, unless Bank shall
otherwise consent in writing, be used outside of the continental United
States;
(e) Borrower has not made, and shall not make, any loans or advances to any
Affiliate or other Person except for advances to employees, officers and
directors of Borrower for travel and other expenses arising in the ordinary
course of Borrower's business;
(f) each Account or item of Inventory which Borrower shall, expressly or by
implication, request Bank to classify as an Eligible Account or as Eligible
Inventory, respectively, shall, as of the time when such request is made,
conform in all respects to the requirements of such classification as set
forth in the respective definitions of "Eligible Account" and "Eligible
Inventory" as set forth herein and as otherwise established by Bank from
time to time, and Borrower shall promptly notify Bank in writing if any such
Eligible Account or Eligible Inventory shall subsequently become ineligible;
(g) Borrower is, and shall at all times during the Original Term and any
Renewal Term be, the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) Borrower has the right and power and is duly authorized and empowered to
enter into, execute and deliver this Agreement and the Other Agreements and
perform its obligations hereunder and thereunder. Borrower's execution,
delivery and performance of this Agreement and the Other Agreements does not
and shall not conflict with the provisions of the organizational documents
of Borrower, any statute, regulation, ordinance or rule of law, or any
agreement, contract or other document which may now or hereafter be binding
on Borrower except for conflicts with agreements, contracts or other
documents which would not have a material adverse effect on its business,
property, assets, operations or condition, financial or otherwise, and
Borrower's execution, delivery and performance of this Agreement and the
Other Agreements shall not result in the imposition of any lien or other
encumbrance upon any of Borrower's property (other than Permitted Liens)
under any existing indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument by which Borrower or any of its
property may be bound or affected;
(i) there are no actions or proceedings which are pending or, to the best of
Borrower's knowledge, threatened against Borrower which might result in any
material adverse change in its business, property, assets, operations or
condition, financial or otherwise, and Borrower shall, promptly upon
becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to Bank;
(j) (i) Borrower has obtained and shall maintain all governmental consents,
franchises, certificates, licenses, authorizations, approvals and permits,
the lack of which would have a material adverse effect on its business
11
property, assets, operations or condition financial or otherwise; and (ii)
Borrower is and shall remain in compliance in all material respects with all
applicable federal, state, local and foreign statutes, orders, regulations,
rules and ordinances (including, without limitation, Environmental Laws and
statutes, orders, regulations, rules and ordinances relating to taxes,
employer and employee contributions and similar items, securities, ERISA or
employee health and safety) the failure to comply with which would have a
material adverse effect on its business, property, assets, operations or
condition, financial or otherwise;
(k) all written information now, heretofore or hereafter furnished by
Borrower to Bank is and shall be true and correct in all material respects
as of the date with respect to which such information was or is furnished;
(l) Borrower is not conducting, permitting or suffering to be conducted, nor
shall it conduct, permit or suffer to be conducted, any activities pursuant
to or in connection with which any of the Collateral is now, or will (while
any Liabilities remain outstanding) be owned by any Affiliate; provided,
however, that Borrower may enter into transactions with Affiliates for the
purchase or sale of Inventory or services in the ordinary course of business
pursuant to terms that are no less favorable to Borrower than the terms upon
which such transfers or transactions would have been made had they been made
to or with a Person that is not an Affiliate and, in connection therewith,
may transfer cash or property to Affiliates for fair value;
(m) Borrower's name has always been as set forth on the first page of this
Agreement and Borrower uses no tradenames, assumed names, fictitious names
or division names in the operation of its business, except as otherwise
disclosed in writing to Bank; Borrower shall notify Bank in writing within
ten (10) days of the change of its name or the use of any tradenames,
assumed names, fictitious names or division names not previously disclosed
to Bank in writing;
(n) with respect to Borrower's Equipment: (i) Borrower has good and
indefeasible and merchantable title to and ownership of all Equipment; (ii)
Borrower shall keep and maintain the Equipment in good operating condition
and repair and shall make all necessary replacements thereof and repairs
thereto so that the value and operating efficiency thereof shall at all
times be preserved and maintained; (iii) Borrower shall not permit any such
items to become a fixture to real estate unless such real estate is owned by
Borrower and is subject to a mortgage in favor of Bank or to become an
accession to other personal property; and (iv) Borrower, immediately on
demand by Bank, shall deliver to Bank any and all evidence of ownership of,
including, without limitation, certificates of title and applications of
title to, any of the Equipment;
(o) this Agreement and the Other Agreements to which Borrower is a party are
the legal, valid and binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms;
(p) Borrower is and shall remain solvent, is and shall be able to pay its
debts as they become due, has and shall continue to have capital sufficient
to carry on its business, now owns and shall continue to own property having
a value both at fair valuation and at present fair saleable value greater
than the amount required to pay its debts, and will not be rendered
insolvent by the execution and delivery of this Agreement or any of the
Other Agreements or by completion of the transactions contemplated hereunder
or thereunder;
(q) Borrower is not now obligated, nor shall it create, incur, assume or
become obligated (directly or indirectly), for any loans or other
indebtedness for borrowed money other than the Loans, except that Borrower
may (i) borrow money from a Person other than Bank on an unsecured and
subordinated basis if a subordination agreement in favor of Bank and in form
and substance satisfactory to Bank is executed and delivered to Bank
12
relative thereto; (ii) maintain any present indebtedness to any Person which
has been disclosed to Bank in writing and consented to in writing by Bank;
(iii) incur unsecured indebtedness to trade creditors in the ordinary course
of Borrower's business; (iv) incur purchase money indebtedness or
capitalized lease obligations in connection with capital expenditures
permitted pursuant to subparagraph 11(q) of this Agreement; and (v) incur
operating lease obligations requiring payments not to exceed $75,000.00 in
the aggregate during any fiscal year of Borrower;
(r) Borrower does not own any margin securities, and none of the proceeds of
the Loans hereunder shall be used for the purpose of purchasing or carrying
any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities
or for any other purpose not permitted by Regulation U of the Board of
Governors of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed in writing to Bank, Borrower has no
Parents, Subsidiaries or other Affiliates or divisions, nor is Borrower
engaged in any joint venture or partnership with any other Person;
(t) if Borrower is a corporation, limited liability company or partnership,
Borrower is duly organized, validly existing and in good standing in its
state of organization and Borrower is duly qualified and in good standing in
all states where the nature and extent of the business transacted by it or
the ownership of its assets makes such qualification necessary or, if
Borrower is not so qualified, Borrower may cure any such failure without
losing any of its rights, incurring any liens or material penalties, or
otherwise affecting Bank's rights;
(u) Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Borrower
know of any dispute regarding any contract, lease or commitment which would
have a material adverse effect on its business, property, assets, operations
of condition, financial or otherwise;
(v) there are no controversies pending or, to the best of Borrower's
knowledge, threatened between Borrower and any of its employees, other than
employee grievances arising in the ordinary course of business which would
not, in the aggregate, have a material adverse effect on its business,
property, assets, operations or condition, financial or otherwise, and
Borrower is in compliance with all federal and state laws respecting
employment and employment terms, conditions and practices except for such
non-compliance which would not have a material adverse effect on its
business, property, assets, operations or condition, financial or otherwise;
(w) Borrower possesses, and shall continue to possess, adequate licenses,
patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct
its business as heretofore conducted by it;
(x) (i) Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on
or off its premises (whether or not owned by it) in any manner which at any
time violates any Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of the
Borrower comply in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations
thereunder; (ii) there has been no investigation, proceeding, complaint,
order, directive, claim, citation or notice by any governmental authority or
any other Person, nor is any pending or to the best of the Borrower's
knowledge threatened, and Borrower shall immediately notify Bank upon
becoming aware of any such investigation, proceeding, complaint, order,
13
directive, claim, citation or notice and take prompt and appropriate actions
to respond thereto, with respect to any non-compliance with or violation of
the requirements of any Environmental Law by the Borrower or the release,
spill or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects the Borrower or its
business, operations or assets or any properties at which the Borrower has
transported, stored or disposed of any Hazardous Materials; (iii) Borrower
has no material liability (contingent or otherwise) in connection with a
release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials;
and (iv) without limiting the generality of the foregoing, Borrower shall,
following the determination by Bank that there is non-compliance, or any
condition which requires any action by or on behalf of Borrower in order to
avoid any non-compliance, with any Environmental Law, at Borrower's expense,
cause an independent environmental engineer acceptable to Bank to conduct
such tests of the relevant site(s) as are appropriate and prepare and
deliver a report setting forth the result of such tests, a proposed plan for
remediation and an estimate of the costs thereof; and
(y) Borrower has paid and discharged, and shall at all times hereafter
promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which, if unpaid or unperformed, might result in the
imposition of a lien against any of its properties or assets and will
promptly notify the Bank of (i) the occurrence of any "reportable event" (as
defined in ERISA) which might result in the termination by the Pension
Benefit Guaranty Corporation (the "PBGC") of any employee benefit plan
("Plan") covering any officers or employees of the Borrower, any benefits of
which are, or are required to be, guaranteed by the PBGC; (ii) receipt of
any notice from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor and (iii) its intention to terminate or
withdraw from any Plan; provided, that Borrower shall not terminate any Plan
or withdraw therefrom if such withdrawal or termination shall result in any
liability to Borrower.
Borrower represents, warrants and covenants to Bank that all representations and
warranties of Borrower contained in this Agreement (whether appearing in
paragraphs 10 or 11 hereof or elsewhere) shall be true at the time of Borrower's
execution of this Agreement, shall survive the execution, delivery and
acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full and satisfaction of all of the Liabilities and termination of this
Agreement, and shall be remade by Borrower at the time each Loan is made
pursuant to this Agreement, provided, that representations and warranties made
as of a particular date shall be true and correct as of such date.
14
11. ADDITIONAL COVENANTS OF BORROWER. Until payment and satisfaction in full of
all Liabilities and termination of this Agreement, unless Borrower obtains
Bank's prior written consent waiving or modifying any of Borrower's covenants
hereunder in any specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books, records
and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit B;
(b) Borrower agrees to deliver to Bank the following financial information,
all of which shall be prepared in accordance with generally accepted
accounting principles consistently applied, and shall be accompanied by a
compliance certificate in the form of Exhibit C hereto, which compliance
certificate shall include a calculation of all financial covenants contained
in this Agreement: (i) no later than thirty (30) days after each calendar
month, copies of internally prepared financial statements, including,
without limitation, balance sheets and statements of income, retained
earnings and cash flow of Borrower, certified by the Chief Financial Officer
of Borrower; (ii) no later than forty-five (45) days after the end of each
of the first three quarters of Borrower's fiscal year a balance sheet,
operating statement and reconciliation of surplus of Borrower, which
quarterly financial statements may be unaudited but shall be certified by
the Chief Financial Officer of Borrower and (iii) no later than ninety (90)
days after the end of each of Borrower's fiscal years, audited annual
financial statements with an unqualified opinion by independent certified
public accountants selected by Borrower and reasonably satisfactory to Bank,
which financial statements shall be accompanied by (A) a letter from such
accountants acknowledging that they are aware that a primary intent of
Borrower in obtaining such financial statements is to influence Bank and
that Bank is relying upon such financial statements in connection with the
exercise of its rights hereunder and (B) copies of any management letters
sent to the Borrower by such accountants;
(c) Borrower shall promptly advise Bank in writing, after obtaining
knowledge thereof, of any material adverse change in the business, property,
assets, operations or condition, financial or otherwise, of Borrower, the
occurrence of any Event of Default hereunder or the occurrence of any event
which, if uncured, will become an Event of Default hereunder after notice or
lapse of time (or both);
(d) Bank, or any Persons designated by it, shall have the right to call at
Borrower's places of business at any reasonable times, and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check
and make extracts from Borrower's books, records, journals, orders, receipts
and any correspondence and other data relating to Borrower's business, the
Collateral or any transactions between the parties hereto, and shall have
the right to make such verification concerning Borrower's business as Bank
may consider reasonable under the circumstances. Borrower shall furnish to
Bank such information relevant to Bank's rights under this Agreement as Bank
shall at any time and from time to time request. Borrower authorizes Bank to
discuss the affairs, finances and business of Borrower with any officers,
employees or directors of Borrower or with Parent or any Affiliate or the
officers, employees or directors of Parent or any Affiliate, and to discuss
the financial condition of Borrower with Borrower's independent public
accountants. Any such discussions shall be without liability to Bank or to
Borrower's independent public accountants. Borrower shall pay to Bank all
customary fees and out-of-pocket expenses incurred by Bank in the exercise
of its rights hereunder, and all of such fees and expenses shall constitute
Liabilities hereunder, shall be payable on demand and, until paid, shall
bear interest at the highest rate then applicable to Loans hereunder;
15
(e) Borrower shall:
(i) keep the Collateral properly housed and insured for the full
insurable value thereof against loss or damage by fire, theft,
explosion, sprinklers, collision (in the case of motor vehicles) and
such other risks as are customarily insured against by Persons
engaged in businesses similar to that of Borrower, with such
companies, in such amounts, with such deductibles, and under
policies in such form, as shall be satisfactory to Bank. Original
(or certified) copies of such policies of insurance have been or
shall be, within ninety (90) days of the date hereof, delivered to
Bank, together with evidence of payment of all premiums therefor,
and shall contain an endorsement, in form and substance acceptable
to Bank, showing loss under such insurance policies payable to Bank.
Such endorsement, or an independent instrument furnished to Bank,
shall provide that the insurance company shall give Bank at least
thirty (30) days written notice before any such policy of insurance
is altered or canceled and that no act, whether willful or
negligent, or default of Borrower or any other Person shall affect
the right of Bank to recover under such policy of insurance in case
of loss or damage. In addition, Borrower shall cause to be executed
and delivered to Bank an assignment of proceeds of its business
interruption insurance policies. Borrower hereby directs all
insurers under all policies of insurance to pay all proceeds payable
thereunder directly to Bank. Borrower irrevocably makes, constitutes
and appoints Bank (and all officers, employees or agents designated
by Bank) as Borrower's true and lawful attorney (and agent-in-fact)
for the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of Borrower on any check,
draft, instrument or other item of payment for the proceeds of such
policies of insurance and making all determinations and decisions
with respect to such policies of insurance provided, however, that
if no Event of Default shall have occurred, Borrower may make,
settle and adjust claims involving less than $100,000.00 in the
aggregate without Bank's consent; and
(ii) maintain, at its expense, such public liability and third party
property damage insurance as is customary for Persons engaged in
businesses similar to that of Borrower with such companies and in
such amounts, with such deductibles and under policies in such form
as shall be satisfactory to Bank and original (or certified) copies
of such policies have been or shall be, within ninety (90) days
after the date hereof, delivered to Bank, together with evidence of
payment of all premiums therefor; each such policy shall contain an
endorsement showing Bank as additional insured thereunder and
providing that the insurance company shall give Bank at least thirty
(30) days written notice before any such policy shall be altered or
canceled.
If Borrower at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required above or to pay any premium relating
thereto, then Bank, without waiving or releasing any obligation or default by
Borrower hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Bank deems advisable. Such insurance, if
obtained by Bank, may, but need not, protect Borrower's interests or pay any
claim made by or against Borrower with respect to the Collateral. Such insurance
may be more expensive than the cost of insurance Borrower may be able to obtain
on its own and may be cancelled only upon Borrower providing evidence that it
has obtained the insurance as required above. All sums disbursed by Bank in
16
connection with any such actions, including, without limitation, court costs,
expenses, other charges relating thereto and reasonable attorneys' fees, shall
constitute Loans hereunder, shall be payable on demand by Borrower to Bank and,
until paid, shall bear interest at the highest rate then applicable to Loans
hereunder;
(f) Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable Environmental Laws; shall keep
the Collateral in good condition, repair and order; shall permit Bank to
examine any of the Collateral at any time and wherever the Collateral may be
located; shall not permit the Collateral, or any part thereof, to be levied
upon under execution, attachment, distraint or other legal process; shall
not sell, lease, grant a security interest in or otherwise dispose of any of
the Collateral except as expressly permitted by this Agreement; shall not
settle or adjust any Account identified by Borrower as an Eligible Account
or with respect to which the Account Debtor is an Affiliate without the
consent of Bank, provided, that following the occurrence of an Event of
Default, Borrower shall not settle or adjust any Account without the consent
of Bank; and shall not secrete or abandon any of the Collateral, or remove
or permit removal of any of the Collateral from any of the locations listed
on Exhibit B (or such other locations as Borrower shall have notified Bank
in writing pursuant to subparagraph 10(c) hereof), except for the removal of
Inventory sold in the ordinary course of Borrower's business as permitted
herein;
(g) all monies and other property obtained by Borrower from Bank pursuant to
this Agreement shall be used solely for business purposes of Borrower;
(h) Borrower shall, at the request of Bank, indicate on its records
concerning the Collateral a notation, in form satisfactory to Bank, of the
security interest of Bank hereunder;
(i) Borrower shall file all required tax returns and pay all of its taxes
when due, subject to any extensions granted by the applicable taxing
authority, including, without limitation, taxes imposed by federal, state or
municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the
payment of such taxes in good faith by appropriate proceedings so long as
(i) the amount so contested is shown on Borrower's financial statements;
(ii) the contesting of any such payment does not give rise to a lien for
taxes; (iii) Borrower keeps on deposit with Bank (such deposit to be held
without interest) or a reserve is maintained against Borrower's availability
to borrow money under paragraph 1 of Exhibit A, in either case, in an amount
of money which, in the sole judgment of Bank, is sufficient to pay such
taxes and any interest or penalties that may accrue thereon; and (iv) if
Borrower fails to prosecute such contest with reasonable diligence, Bank may
apply the money so deposited or reserved in payment of such taxes. If
Borrower fails to pay any such taxes and in the absence of any such contest
by Borrower, Bank may (but shall be under no obligation to) advance and pay
any sums required to pay any such taxes and/or to secure the release of any
lien therefor, and any sums so advanced by Bank shall constitute Loans
hereunder, shall be payable by Borrower to Bank on demand, and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder;
(j) Borrower shall not assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by
endorsement of instruments for deposit or collection or similar transactions
in the ordinary course of business;
(k) Borrower shall not (i) enter into any merger or consolidation; (ii)
sell, lease or otherwise dispose of any of its assets other than in the
ordinary course of business; (iii) purchase the stock or all or
17
substantially all of the assets of any Person or division of such Person; or
(iv) enter into any other transaction outside the ordinary course of
Borrower's business, including, without limitation, any purchase, redemption
or retirement of any shares of any class of its stock or any other equity
interest, and any issuance of any shares of, or warrants or other rights to
receive or purchase any shares of, any class of its stock or any other
equity interest;
(l) Borrower shall not declare or pay any dividend or other distribution
(whether in cash or in kind) on any class of its stock (if Borrower is a
corporation) or on account of any equity interest in Borrower (if Borrower
is a partnership, limited liability company or other type of entity);
(m) Borrower shall not purchase or otherwise acquire, or contract to
purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States;
(n) Borrower shall not amend its organizational documents or change its
fiscal year or enter into a new line of business materially different from
Borrower's current business;
(o) Borrower's Tangible Net Worth shall not at any time be less than the
Tangible Net Worth as reflected on the opening balance sheet; and "Tangible
Net Worth" being defined for purposes of this subparagraph as Borrower's
shareholders' equity (including retained earnings) less the book value of
all intangible assets as determined solely by Bank on a consistent basis
plus the amount of any LIFO reserve plus the amount of any debt subordinated
to Bank, all as determined under generally accepted accounting principles
applied on a basis consistent with the opening balance sheet except as set
forth herein;
(p) Borrower shall reimburse Bank for all costs and expenses, including,
without limitation, legal expenses and reasonable attorneys' fees, incurred
by Bank in connection with the (i) documentation and consummation of this
transaction and any other transactions between Borrower and Bank, including,
without limitation, Uniform Commercial Code and other public record searches
and filings, overnight courier or other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs; (ii) collection, protection or enforcement of any rights in or to the
Collateral; (iii) collection of any Liabilities; and (iv) administration and
enforcement of any of Bank's rights under this Agreement. Borrower shall
also pay all normal service charges with respect to all accounts maintained
by Borrower with Bank and any additional services requested by Borrower from
Bank. All such costs, expenses and charges shall constitute Liabilities
hereunder, shall be payable by Borrower to Bank on demand, and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder;
(q) Borrower shall not purchase or otherwise acquire (including, without
limitation, acquisition by way of capitalized lease), or commit to purchase
or acquire, any fixed asset if, after giving effect to such purchase or
other acquisition, the aggregate cost of all such fixed assets purchased or
otherwise acquired would exceed $200,000.00 during any fiscal year of
Borrower; and
(r) Neither Borrower nor any Affiliate shall use any portion of the proceeds
of the Loans, either directly or indirectly, for the purpose of (i)
purchasing any securities underwritten or privately placed by ABN AMRO
Securities (USA) Inc. ("AASI"), an affiliate of Bank, (ii) purchasing from
AASI any securities in which AASI makes a market, or (iii) refinancing or
making payments of principal, interest or dividends on any securities issued
by Borrower or any Affiliate, and underwritten, privately placed or dealt in
by AASI.
12. DEFAULT. The occurrence of any one or more of the following events shall
constitute an "Event of Default" by Borrower hereunder:
18
(a) the failure of any Obligor to pay when due, declared due, or demanded by
Bank, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor
under this Agreement or any of the Other Agreements provided that any such
failure by Borrower under subparagraphs 10(b)(ii), 10(g) (but only with
respect to involuntarily created liens, claims, security interests and
encumbrances), and 10(j)(i) of this Agreement shall not constitute an Event
of Default hereunder until the fifteenth (15th) day following the occurrence
thereof;
(c) the failure of any Obligor to perform, keep or observe (after any
applicable notice and cure period) any of the covenants, conditions,
promises, agreements or obligations of such Obligor under any other
agreement with any Person if such failure might have a material adverse
effect on such Obligor's business, property, assets, operations or
condition, financial or otherwise;
(d) the making or furnishing by any Obligor to Bank of any representation,
warranty, certificate, schedule, report or other communication within or in
connection with this Agreement or the Other Agreements or in connection with
any other agreement between such Obligor and Bank, which is untrue or
misleading in any material respect as of the date made;
(e) the loss, theft, damage or destruction of any of the Collateral in an
amount in excess of $100,000.00 in the aggregate for all such events during
any year of the Original Term or any Renewal Term as determined by Bank in
its sole discretion, or (except as permitted hereby) sale, lease or
furnishing under a contract of service of, any of the Collateral;
(f) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien except involuntary liens securing amounts less than
$100,000.00 and which are released or for which a bond acceptable to Bank in
its sole discretion has been posted within ten (10) days of its creation, or
other encumbrance upon any of the Collateral, other than the Permitted
Liens, or the making or any attempt to make any levy, seizure or attachment
thereof provided that with respect to states in which creditors may obtain a
prejudgment attachment without notice, such attachment shall be an Event of
Default only if the attachment involves Collateral having a value in excess
of $100,000.00 and remains in effect for more than ten (10) days;
(g) the commencement of any proceedings in bankruptcy by or against any
Obligor or for the liquidation or reorganization of any Obligor, or alleging
that such Obligor is insolvent or unable to pay its debts as they mature, or
for the readjustment or arrangement of any Obligor's debts, whether under
the United States Bankruptcy Code or under any other law, whether state or
federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings
involving any Obligor; provided, however, that if such commencement of
proceedings against such Obligor is involuntary, such action shall not
constitute an Event of Default unless such proceedings are not dismissed
within forty-five (45) days after the commencement of such proceedings;
(h) the appointment of a receiver or trustee for any Obligor, for any of the
Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however,
that if such appointment or commencement of proceedings against such Obligor
is involuntary, such action shall not constitute an Event of Default unless
such appointment is not revoked or such proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings;
19
(i) the entry of any judgment or order aggregating in excess of $100,000.00
against any Obligor which remains unsatisfied or undischarged and in effect
for thirty (30) days after such entry without a stay of enforcement or
execution;
(j) the death of any Obligor who is a natural Person, or of any general
partner who is a natural Person of any Obligor which is a partnership, or
any member who is a natural Person of any Obligor which is a limited
liability company or the dissolution of any Obligor which is a partnership,
limited liability company or corporation;
(k) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered
by any Person to Bank pursuant to which such Person has guaranteed to Bank
the payment of all or any of the Liabilities or has granted Bank a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities;
(l) the institution in any court of a criminal proceeding against any
Obligor which would have a material adverse effect on such Obligor's
business, property, assets, operation or condition, financial or otherwise,
or the indictment of any Obligor for any crime other than traffic and
boating tickets and misdemeanors not punishable by jail terms; and
(m) any material adverse change in the business, property, assets,
operations or condition, financial or otherwise of any Obligor, as
determined by Bank in its sole judgment.
13. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in subparagraph
12(g) hereof, all of the Liabilities shall immediately and automatically
become due and payable, without notice of any kind. Upon the occurrence of
any other Event of Default, all Liabilities may, at the option of Bank, and
without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, Bank may exercise from time
to time any rights and remedies available to it under the Uniform Commercial
Code and any other applicable law in addition to, and not in lieu of, any
rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of Bank's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by
way of limitation of the foregoing, Bank may, without notice, demand or
legal process of any kind, take possession of any or all of the Collateral
(in addition to Collateral of which it already has possession), wherever it
may be found, and for that purpose may pursue the same wherever it may be
found, and may enter onto any of Borrower's premises where any of the
Collateral may be, and search for, take possession of, remove, keep and
store any of the Collateral until the same shall be sold or otherwise
disposed of, and Bank shall have the right to store the same at any of
Borrower's premises without cost to Bank. At Bank's request, Borrower shall,
at Borrower's expense, assemble the Collateral and make it available to Bank
at one or more places to be designated by Bank and reasonably convenient to
Bank and Borrower. Borrower recognizes that if Borrower fails to perform,
observe or discharge any of its Liabilities under this Agreement or the
Other Agreements, no remedy at law will provide adequate relief to Bank, and
agrees that Bank shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages. Any
notification of intended disposition of any of the Collateral required by
law will be deemed reasonably and properly given if given at least five (5)
calendar days before such disposition. Any proceeds of any disposition by
Bank of any of the Collateral may be applied by Bank to the payment of
expenses in connection with the Collateral, including, without limitation,
legal expenses and reasonable attorneys' fees, and any balance of such
proceeds may be applied by Bank toward the payment of such of the
Liabilities, and in such order of application, as Bank may from time to time
elect.
20
14. INDEMNIFICATION. Borrower agrees to defend (with counsel satisfactory to
Bank), protect, indemnify and hold harmless Bank, each affiliate or subsidiary
of Bank, and each of their respective officers, directors, employees, attorneys
and agents (each an "Indemnified Party") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature (including,
without limitation, the disbursements and the reasonable fees of counsel for
each Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities laws and regulations, Environmental Laws and commercial
laws and regulations, under common law or in equity, or based on contract or
otherwise) in any manner relating to or arising out of this Agreement or any
Other Agreement, or any act, event or transaction related or attendant thereto,
the making or issuance and the management of the Loans or any Letters of Credit
or the use or intended use of the proceeds of the Loans or any Letters of
Credit; provided, however, that Borrower shall not have any obligation hereunder
to any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense covered
by this indemnity shall be paid to each Indemnified Party on demand, and,
failing prompt payment, shall, together with interest thereon at the highest
rate then applicable to Loans hereunder from the date incurred by each
Indemnified Party until paid by Borrower, be added to the Liabilities of
Borrower and be secured by the Collateral. The provisions of this paragraph 14
shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.
15. NOTICE. All written notices and other written communications with respect to
this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Bank shall be sent to it at
000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000-0000, Attention: Asset Based
Lending Division, and in the case of Borrower shall be sent to it at its
principal place of business set forth on the first page of this Agreement or as
otherwise directed by Borrower in writing. All notices shall be deemed received
upon actual receipt thereof or refusal of delivery.
16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This
Agreement and the Other Agreements are submitted by Borrower to Bank for Bank's
acceptance or rejection at Bank's principal place of business as an offer by
Borrower to borrow monies from Bank now and from time to time hereafter, and
shall not be binding upon Bank or become effective until accepted by Bank, in
writing, at said place of business. If so accepted by Bank, this Agreement and
the Other Agreements shall be deemed to have been made at said place of
business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS,
INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER
CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL
LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED
BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If
any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
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To induce Bank to accept this Agreement, Borrower irrevocably
agrees that, subject to Bank's sole and absolute election, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO
THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN
COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER
HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL
COURTS LOCATED WITHIN SAID CITY AND STATE. Borrower hereby irrevocably appoints
and designates the Secretary of State of Illinois, whose address is Springfield,
Illinois (or any other person having and maintaining a place of business in such
state whom Borrower may from time to time hereafter designate upon ten (10) days
written notice to Bank and whom Bank has agreed in its sole discretion in
writing is satisfactory and who has executed an agreement in form and substance
satisfactory to Bank agreeing to act as such attorney and agent), as Borrower's
true and lawful attorney and duly authorized agent for acceptance of service of
legal process. Borrower agrees that service of such process upon such person
shall constitute personal service of such process upon Borrower. Bank agrees to
endeavor to provide a copy of such process to the law firm of Xxxxx X. Xxxxxx,
Esq. by mail at the address of 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or by
facsimile transmission at facsimile number (000) 000-0000. Failure of Bank to
provide a copy of such process shall not impair Bank's rights hereunder.
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS
PARAGRAPH.
17. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Borrower or such other person who is a party to such Other
Agreement and Bank. Borrower may not sell, assign or transfer this Agreement, or
the Other Agreements or any portion thereof, including, without limitation,
Borrower's rights, titles, interest, remedies, powers or duties hereunder and
thereunder. Borrower hereby consents to Bank's sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement, or the Other Agreements, or of any portion thereof, or participations
therein, including, without limitation, Bank's rights, titles, interest,
remedies, powers and/or duties and agrees that it shall execute and deliver such
documents as Bank may request in connection with any such sale, assignment,
transfer or other disposition.
18. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this Agreement are
for convenience of reference only, and shall not govern the interpretation of
any of the provisions of this Agreement.
19. POWER OF ATTORNEY. Borrower acknowledges and agrees that its appointment of
Bank as its attorney and agent-in-fact for the purposes specified in this
Agreement is an appointment coupled with an interest and shall be irrevocable
until all of the Liabilities are satisfied and paid in full and this Agreement
is terminated.
20. CONFIDENTIALITY. Borrower and Bank hereby agree and acknowledge that any and
all information relating to Borrower which is (i) furnished by Borrower to Bank
(or to any affiliate of Bank); and (ii) non-public, confidential or proprietary
in nature, shall be kept confidential by Bank or such affiliate in accordance
with applicable law; provided, however, that such information and other credit
information relating to Borrower may be distributed by Bank or such affiliate to
Bank's or such affiliate's directors, officers, employees, attorneys,
affiliates, assignees, participants, auditors and regulators, and upon the order
of a court or other governmental agency having jurisdiction over Bank or such
affiliate, to any other party. Borrower and Bank further agree that this
provision shall survive the termination of this Agreement.
22
21. COUNTERPARTS. This Agreement and any amendments, waivers, consents or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all of which counterparts together
shall constitute but one agreement.
22. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) BORROWER AND BANK EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT BY BORROWER OR BANK OR WHICH, IN ANY WAY, DIRECTLY
OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER
AND BANK. IN NO EVENT SHALL BANK BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL
OR CONSEQUENTIAL DAMAGES.
(b) Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(c) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY BANK OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL, provided that in the event that Bank seeks to enforce its rights
hereunder by judicial process, Bank shall provide Borrower with such notices
as are required by law.
(d) Bank's failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Bank of an Event of Default under this Agreement or
any default under any of the Other Agreements shall not suspend, waive or
affect any other Event of Default under this Agreement or any other default
under any of the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different kind or character. No
delay on the part of Bank in the exercise of any right or remedy under this
Agreement or any Other Agreement shall preclude other or further exercise
thereof or the exercise of any right or remedy. None of the undertakings,
agreements, warranties, covenants and representations of Borrower contained
in this Agreement or any of the Other Agreements and no Event of Default
under this Agreement or default under any of the Other Agreements shall be
deemed to have been suspended or waived by Bank unless such suspension or
waiver is in writing, signed by a duly authorized officer of Bank and
directed to Borrower specifying such suspension or waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
COLONIAL COMMERCIAL SUB CORP. LASALLE BANK NATIONAL ASSOCIATION
By_______________________________
By______________________________________ Its______________________________
Its_____________________________________
23
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
CREDIT TERMS
(1) LOANS: Bank may, in its sole discretion, advance an amount up to the sum of
the following sublimits (the "Loan Limit"):
(a) Up to eighty-five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
Account Debtors in connection therewith in the ordinary course of Borrower's
business) of Borrower's Eligible Accounts minus the outstanding amount of
all Loans (as such term is defined in that certain Loan and Security
Agreement entered into by and between Atlantic Hardware & Supply Corporation
("Atlantic Hardware") and Bank dated June 24, 1999 (the "Atlantic Hardware
Agreement")) under Paragraph (1)(a) of Exhibit A of the Atlantic Hardware
Agreement; plus
(b) Up to sixty percent (60%) of the lower of the cost or market value of
Borrower's Eligible Inventory minus the outstanding amount of all Loans
under Paragraph (1)(b) of Exhibit A of the Atlantic Hardware Agreement; plus
(c) Subject to Paragraph (2)(a) of this Exhibit A, up to Three Million and
No/100 Dollars ($3,000,000.00) against the assets of Borrower; minus
(d) Such reserves as Bank elects, in its sole discretion, to establish from
time to time provided, that the Loan Limit shall in no event exceed
Sixteen Million and No/100 Dollars ($16,000,000.00) (the "Maximum Loan
Limit") minus Atlantic Hardware's Loans (as such term is defined in the
Atlantic Hardware Agreement), except as such amount may be increased or
decreased by Bank, in its sole discretion, from time to time.
(2) AVAILABILITY REDUCTIONS:
(a) The availability described in Paragraph (1)(c) of this Exhibit A shall
be curtailed monthly by an amount sufficient (assuming a like
curtailment each month) to reduce said availability to zero at the end
of sixty (60) months. Each such curtailment shall automatically occur on
the thirtieth (30th) day following the date of disbursement under
Paragraph (1)(c) of this Exhibit A and on the corresponding day of each
month thereafter (or if there is no corresponding day, on the last day
of such month) until the earliest to occur of (i) the date on which said
availability shall be reduced in full; (ii) the date upon which demand
for repayment is made by Bank, on which date said availability shall be
reduced in full; and (iii) the date upon which the Agreement terminates
pursuant to the provisions of paragraph 9 of the Agreement, on which
date said availability shall be reduced in full.
(3) INTEREST RATE: Subject to the terms and conditions set forth below, the
Loans shall bear interest at the per annum rate of interest set forth
in subsection (a) or (b) below:
(a) Bank's publicly announced prime rate (which is not intended to be Bank's
lowest or most favorable rate in effect at any time) (the "Prime Rate")
in effect from time to time, payable on the last Business Day of each
month in arrears. Said rate of interest shall increase or
24
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
decrease by an amount equal to each increase or decrease in the Prime
Rate effective on the effective date of each such change in the Prime
Rate.
(b) Two hundred fifty (250) basis points in excess of the LIBOR Rate for the
applicable Interest Period, such rate to remain fixed for such Interest
Period. "Interest Period" shall mean any continuous period of thirty
(30), sixty (60), ninety (90) or one hundred eighty (180) days, as
selected from time to time by Borrower by irrevocable notice (in
writing, by telex, telegram or cable) given to Bank not less than three
(3) Business Days prior to the first day of each respective Interest
Period; provided that: (i) each such period occurring after such initial
period shall commence on the day on which the immediately preceding
period expires; (ii) the final Interest Period shall be such that its
expiration occurs on or before the end of the Original Term or any
Renewal Term; and (iii) if for any reason Borrower shall fail to timely
select a period, then such Loans shall continue as, or revert to, Prime
Rate Loans. Interest shall be payable on the last Business Day of each
month and on the date of any payment hereon by Borrower.
Upon the occurrence of an Event of Default, the Loans shall bear
interest at the rate of two percent (2.0%) per annum in excess of the
interest rate otherwise payable thereon, which interest shall be payable
on demand. All interest shall be calculated on the basis of a 360-day
year.
(3).(1) OTHER LIBOR PROVISIONS:
(a) Subject to the provisions of this Agreement, Borrower shall have the
option (i) as of any date, to convert all or any part of the Prime Rate
Loans to, or request that new Loans be made as, LIBOR Rate Loans of
various Interest Periods, (ii) as of the last day of any Interest
Period, to continue all or any portion of the relevant LIBOR Rate Loans
as LIBOR Rate Loans; (iii) as of the last day of any Interest Period, to
convert all or any portion of the LIBOR Rate Loans to Prime Rate Loans;
and (iv) at any time, to request new Loans as Prime Rate Loans;
provided, that Loans may not be continued as or converted to LIBOR Rate
Loans, if the continuation or conversion thereof would violate the
provisions of Paragraphs (3).(1)(b) and (3).(1)(c) of this Exhibit A or
if an Event of Default has occurred.
(b) Bank's determination of LIBOR as provided above shall be conclusive,
absent manifest error. Furthermore, if Bank determines, in good faith
(which determination shall be conclusive, absent manifest error), prior
to the commencement of any Interest Period that (i) U.S. Dollar deposits
of sufficient amount and maturity for funding the Loans are not
available to Bank in the London Interbank Eurodollar market in the
ordinary course of business, or (ii) by reason of circumstances
affecting the London Interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the rate of interest to be
applicable to the Loans requested by Borrower to be LIBOR Rate Loans or
the Loans bearing interest at the rates set forth in Paragraph (3)(b) of
this Exhibit A shall not represent the effective pricing to Bank for
U.S. Dollar deposits of a comparable amount for
25
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
the relevant period (such as for example, but not limited to, official
reserve requirements required by Regulation D to the extent not given
effect in determining the rate), Bank shall promptly notify Borrower and
(x) all existing LIBOR Rate Loans shall convert to Prime Rate Loans upon
the end of the applicable Interest Period, and (y) no additional LIBOR
Rate Loans shall be made until such circumstances are cured.
(c) If, after the date hereof, the introduction of, or any change in any
applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority
or any central bank or other fiscal, monetary or other authority having
jurisdiction over Bank or its lending offices (a "Regulatory Change"),
shall, in the opinion of counsel to Bank, make it unlawful for Bank to
make or maintain LIBOR Rate Loans, then Bank shall promptly notify
Borrower and (i) the LIBOR Rate Loans shall immediately convert to Prime
Rate Loans on the last Business Day of the then existing Interest Period
or on such earlier date as required by law and (ii) no additional LIBOR
Rate Loans shall be made until such circumstance is cured.
(d) If, for any reason, a LIBOR Rate Loan is paid prior to the last Business
Day of any Interest Period or if a LIBOR Rate Loan does not occur on a
date specified by Borrower in its request (other than as a result of a
default by Bank), Borrower agrees to indemnify Bank against any loss
(including any loss on redeployment of the deposits or other funds
acquired by Bank to fund or maintain such LIBOR Rate Loan) cost or
expense incurred by Bank as a result of such prepayment.
(e) If any Regulatory Change (whether or not having the force of law) shall
(i) impose, modify or deem applicable any assessment, reserve, special
deposit or similar requirement against assets held by, or deposits in or
for the account of or loans by, or any other acquisition of funds or
disbursements by, Bank; (ii) subject Bank or the LIBOR Rate Loans to any
Tax or change the basis of taxation of payments to Bank of principal or
interest due from Borrower to Bank hereunder (other than a change in the
taxation of the overall net income of Bank); or (c) impose on Bank any
other condition regarding the LIBOR Rate Loans or Bank's funding
thereof, and Bank shall determine (which determination shall be
conclusive, absent any manifest error) that the result of the foregoing
is to increase the cost to Bank of making or maintaining the LIBOR Rate
Loans or to reduce the amount of principal or interest received by Bank
hereunder, then Borrower shall pay to Bank, on demand, such additional
amounts as Bank shall, from time to time, determine are sufficient to
compensate and indemnify Bank from such increased cost or reduced
amount.
(f) Bank shall receive payments of amounts of principal of and interest with
respect to the LIBOR Rate Loans free and clear of, and without deduction
for, any Taxes. If (1) Bank shall be subject to any Tax in respect of
any LIBOR Rate Loans or any part thereof or, (2) Borrower shall be
required to withhold or deduct any Tax from any such amount, the LIBOR
Rate applicable to such LIBOR Rate Loans shall be adjusted by Bank to
reflect all additional costs incurred by Bank in connection with the
payment by Bank or the
26
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
withholding by Borrower of such Tax and Borrower shall provide Bank with
a statement detailing the amount of any such Tax actually paid by
Borrower. Determination by Bank of the amount of such costs shall be
conclusive, absent manifest error. If after any such adjustment any part
of any Tax paid by Bank is subsequently recovered by Bank, Bank shall
reimburse Borrower to the extent of the amount so recovered. A
certificate of an officer of Bank setting forth the amount of such
recovery and the basis therefor shall be conclusive, absent manifest
error.
(g) Each request for LIBOR Rate Loans shall be in an amount not less than
One Million and No/100 Dollars ($1,000,000.00), and in integral
multiples of, One Million and No/100 Dollars ($1,000,000.00).
(h) Unless otherwise specified by Borrower, all Loans shall be Prime Rate
Loans.
(i) No more than five (5) Interest Periods may be in effect with respect to
outstanding LIBOR Rate Loans at any one time.
(4) FEES AND CHARGES:
(a) Facilities Fees: Borrower, jointly and severally with Atlantic Hardware,
agrees to pay to Bank an annual facilities fee of one-fourth of one
percent (1/4th of 1%) of the Maximum Loan Limit, which fee shall be
fully earned by Bank and payable on the date that Bank makes its initial
disbursement under the Agreement and on each anniversary date of the
Agreement during the Original Term and any Renewal Term.
(b) Minimum Usage Fee: Borrower, jointly and severally with Atlantic
Hardware, agrees to pay to Bank an unused line fee of one-fourth of one
percent (1/4th of 1%) of the difference between the Maximum Loan Limit
and the average monthly loan balance which fee shall be fully earned by
Bank and payable monthly in arrears on each day that interest is payable
hereunder. Said fee shall be calculated on the basis of a 360 day year.
(5) WAIVER OF LOCKBOX REQUIREMENT: Notwithstanding the provisions of Paragraph
7(a) of the Agreement and until such time as Bank shall, in its sole
discretion, notify Borrower that Bank will require Borrower to establish and
maintain a Lock Box and Lock Box Account as required by Paragraph 7(a) of
the Agreement, Borrower shall collect and enforce all of its Accounts. All
costs of enforcement and collection of Borrower's Accounts shall be borne
solely by Borrower, whether the same are incurred by Bank or by Borrower.
Borrower agrees that, with respect to all of Borrower's Accounts, the
collection and enforcement of such Accounts by Borrower shall be as Bank's
agent, and that all collections and proceeds thereof (and of all other
Collateral, including, without limitation, Inventory) received by Borrower,
Affiliate or any Subsidiary or any shareholder, officer, director, employee
or agent of Borrower or any Affiliate or Subsidiary, or any other person
acting for or in connection with Borrower shall be received in trust for
Bank and shall be promptly turned over to Bank in the precise form in which
received, either by mailing the same or delivering the same to Bank not
later than the business day following the receipt thereof. Borrower agrees
that it will not intermingle or permit the intermingling of such collections
or proceeds with any of Borrower's other funds or property but will hold
such collections and proceeds separate and apart from such other funds and
property and upon an express trust for Bank. Such collections and proceeds
so turned over to Bank may be handled and administered by Bank in and
through a remittance or similar
27
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
account, but Borrower acknowledges that the maintenance of such an
account is solely for the convenience of Bank in facilitating its own
operations and that Borrower has not and shall not have any right, title
or interest in any such account or in the amounts at any time appearing
to the credit thereof. Borrower agrees that all payments made to Bank,
whether in respect of the Accounts or as proceeds of other Collateral or
otherwise, will be applied on account of the Liabilities in accordance
with the terms of this Agreement; provided, that so long as no Event of
Default has occurred, payments received by Bank shall not be applied to
the unmatured portion of the LIBOR Rate Loans, but shall be held in a
cash collateral account maintained by Bank until the earlier of (i) the
last day of the Interest Period applicable to such LIBOR Rate Loan and
(ii) the occurrence of an Event of Default; provided further, that so
long as no Event of Default has occurred, the immediately available
funds held in such cash collateral account may be disbursed, at
Borrower's discretion, to Borrower so long as after giving effect to
such disbursement, Borrower's availability under Paragraph 1 hereto, at
such time equals or exceeds the outstanding Liabilities at such time.
All checks, drafts, instruments and other items of payment or proceeds
of the Collateral shall be endorsed by Borrower to Bank and, if
endorsement of any such item shall not be made for any reason, Bank is
hereby irrevocably authorized to endorse the same on Borrower's behalf.
For purposes of this paragraph, Borrower irrevocably hereby makes,
constitutes and appoints Bank (and all Persons designated by Bank for
that purpose) as Borrower's true and lawful attorney and agent-in-fact
(i) to endorse Borrower's name upon said items of payment and/or
proceeds of Collateral and upon any Chattel Paper, document, instrument,
invoice or similar document or agreement relating to any Account of
Borrower or goods pertaining thereto; (ii) to take control in any manner
of any item of payment or proceeds thereof; and (iii) to have access to
any lock box or postal box into which any of Borrower's mail is
deposited, and open and process all mail addressed to Borrower and
deposited therein.
ADDITIONS AND CHANGES TO COVENANTS
(6) CHECKING ACCOUNT PROVISIONS: Borrower shall maintain its controlled
disbursement account with Bank. Normal charges shall be assessed thereon.
(7) YEAR 2000: Borrower and its Subsidiaries have reviewed the areas within
their business and operations which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer applications used by Borrower and
its Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date on or after December 31,
1999), and have made related appropriate inquiry of material suppliers and
vendors. Based on such review and program, Borrower believes that the "Year 2000
Problem" will not have a material adverse effect on its business, assets or
condition, financial or otherwise. From time to time, at the request of Bank,
Borrower and its Subsidiaries shall provide to Bank such updated information or
documentation as is requested regarding the status of their efforts to address
the "Year 2000 Problem".
(8) PERMITTED DISTRIBUTIONS: Notwithstanding the provisions of subparagraph
11(l) of the Agreement and provided that (i) each such distribution is
permitted under all applicable laws; and (ii) no Event of Default shall have
occurred prior to, or would occur as a result of, any such distribution,
Borrower may distribute to Parent monies in an amount sufficient to permit
Parent to pay Borrower's taxes.
(9) RESTRICTION ON MANAGEMENT FEES: In addition to the restrictions contained in
subparagraph 10(e) of the Agreement, Borrower shall not pay any management
fees to any Persons, provided that Borrower
28
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
may pay a management fee to Parent in an amount not exceeding Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00) per calendar
year.
ADDITIONS AND CHANGES TO DEFAULT PROVISIONS
(10) ADDITIONAL CROSS DEFAULT: In addition to the Events of Default specified in
Paragraph 12 of the Agreement, it shall be an Event of Default hereunder if
Atlantic Hardware shall fail to perform, keep or observe any of the
covenants, conditions, promises, agreements or other obligations of Atlantic
Hardware to Bank under any agreements now or hereafter existing between
Atlantic Hardware and Bank, including, without limitation, the Atlantic
Hardware Agreement or in the event of the termination of said Atlantic
Hardware Agreement.
(11) CHANGE OF CONTROL DEFAULT: In addition to the Events of Default specified
in paragraph 12 of the Agreement, it shall be an Event of Default hereunder
if Parent shall cease to own and have voting control over one hundred
percent (100%) of the issued and outstanding stock of Borrower.
(12) CHANGE OF MANAGEMENT DEFAULT: In addition to the Events of Default
specified in Paragraph 12 of the Agreement, it shall be an Event of Default
hereunder if neither Xxxxx Xxxxxxx or Xxxxxxx Xxxx are the Executive Vice
President/Assistant Secretary or Chairman, respectively, of Borrower.
CONDITIONS TO CLOSING
(13) ADDITIONAL CONDITIONS TO CLOSING: Bank shall be under no obligation to
consummate the transactions contemplated by the Agreement until each of the
conditions listed in this Paragraph (13) has been satisfied. Whenever a
condition contained herein requires delivery of an agreement or other document
to Bank, each such agreement or other document shall be in form and substance
satisfactory to Bank in its sole discretion.
(a) Landlord's Agreements: Borrower shall cause to be executed in favor of
Bank and delivered to Bank a Landlord's Agreements from each lessor of
property(ies) set forth on Exhibit B (other than 0000 Xxxxxxxxx Xxxxxxxx,
Xxxxx 000-X, Xxxxxxxxx, Xxx Xxxx 00000-0000), which Landlord's Agreements
shall include a copy of the relevant lease.
(b) Guaranties:
(i) Borrower shall cause to be executed in favor of Bank and delivered
to Bank the Continuing Unconditional Guaranty of Atlantic Hardware of
any and all indebtedness of Borrower to Bank.
(ii) Borrower shall cause to be executed in favor of Bank and delivered
to Bank the Continuing Unconditional Guaranty of Colonial Commercial
Corp. of any and all indebtedness of Borrower to Bank.
29
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
(c) Related Transactions: Borrower shall have consummated the transactions
set forth in that certain Agreement of Purchase and Sale of Assets dated
March 25, 1999 by and between Borrower and Universal Supply Group, Inc.
(the Purchase Agreement"). Borrower shall provide Bank with copies of
the Purchase Agreement and all related documentation, and evidence
satisfactory to Bank that any and all approvals of the transaction
contemplated therein have been obtained.
(d) Equity Investment: Borrower shall cause Colonial Commercial Corp. to
invest Four Million and No/100 Dollars ($4,000,000.00) in Borrower in
the form of an infusion of equity and shall provide Bank with evidence
of such infusion.
(e) Assignment of Undertakings Under Purchase Agreement: Borrower shall
execute and deliver to Bank a Assignment of Undertakings Under Purchase
Agreement and shall cause Universal Supply Group, Inc. to consent to
such Assignment.
(f) Solvency Certificate: Borrower shall execute and deliver to Bank a
Solvency Certificate.
(g) Notice of Business Activities Report: Borrower shall deliver to Bank a
copy of the Notice of Business Activities Report filed with the New
Jersey Taxing Authority.
(h) Attorney's Opinion Letter: Borrower shall cause to be executed and
delivered to Bank an Attorney's Opinion Letter.
30
Attached to and made a part of that a certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith by and between
Colonial Commercial Sub Corp. ("Borrower") and LaSalle Bank National Association
("Bank").
OTHER PROVISIONS
(14) PERMITTED LIENS: Bank acknowledges that the liens evidenced by the
following filed financing statements and any amendments thereto, as said
financing statements exist as of ____________, 1999, shall constitute Permitted
Liens:
============================================================
IN WITNESS WHEREOF, this Exhibit A has been executed as of the
____ day of ___________, 1999.
LASALLE BANK NATIONAL ASSOCIATION COLONIAL COMMERCIAL SUB CORP.
By______________________________________
Title__________________________________ By____________________________
Title_________________________
31
EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security
Agreement of even date herewith between Colonial Commercial Sub Corp.
("Borrower") and LASALLE BANK NATIONAL ASSOCIATION ("Bank").
A. Borrower's Business Locations (please indicate which location is the
principal place of business and at which locations originals and all copies of
Borrower's books, records and accounts are kept).
1. 0000 Xxxxxxxxx Xxxxxxxx
Xxxxx 000-X
Xxxxxxxxx, Xxx Xxxx 00000-0000
[leased property/principal place of business]
2.
3.
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of Borrower. Please indicate the relationship of such location to Borrower
(i.e. public warehouse, processor, etc.).
1. 000 Xxxx Xxxxx Xxxxxx 6. 00 Xxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000 Xxx Xxxxxxx, Xxx Xxxx 00000
[leased property] [leased property]
2. Xxx 000, Xxxx Xxxx 0. 000 Xxxxx 00
Xxxxx Xxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxx Xxxxxx 00000
[leased property] [leased property]
3. 000 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxxxxx, Xxx Xxxxxx 00000
[leased property]
4. 000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
[leased property]
5. Xxxxx 000, Xxxxxxxx #00
Xxxxxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
[leased property]
32
C. Bank Accounts of Borrower (other than those at Bank):
Bank (with address) Account Number Type of Account
1.
2.
3.
33
