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Exhibit 10.7
FINANCING AGREEMENT
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THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER)
AND
CERION TECHNOLOGIES INC.
(AS BORROWER)
DATED: MARCH 7, 1997
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TABLE OF CONTENTS
PAGE
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SECTION 1. Definitions . . . . . . . . . . . . . . . . . . 2
SECTION 2. Conditions Precedent . . . . . . . . . . . . . 8
SECTION 3. Revolving Loans . . . . . . . . . . . . . . . . 12
SECTION 4. [Reserved] . . . . . . . . . . . . . . . . . . . 15
SECTION 5. Letters of Credit . . . . . . . . . . . . . . . 15
SECTION 6. Collateral . . . . . . . . . . . . . . . . . . . 18
SECTION 7. Representations, Warranties and Covenants . . . 21
SECTION 8. Interest, Fees and Expenses . .. . . . . . . . . 28
SECTION 9. Powers. . . .. .. .. . . . . . . . . . . . . . . 29
SECTION 10. Events of Default and Remedies. . . . . . . . . 30
SECTION 11. Termination . . . . . . . . . . . . . . . . . 32
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . 35
EXHIBITS
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NONE
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter, "CITBC") with offices located at 00 Xxxxx XxXxxxx Xxxxxx, 00xx
Xxxxx, Xxxxxxx, Xxxxxxxx 00000, is pleased to confirm the terms and conditions
under which CITBC shall make revolving loans, advances and other financial
accommodations to CERION TECHNOLOGIES INC. (hereinafter, the "Company"), a
Delaware corporation with a principal place of business at 0000 Xxxxxxxxxx
Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
SECTION 1. DEFINITIONS
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ACCOUNTS shall mean all of the Company's now existing and future: (A) accounts
receivable, (whether or not specifically listed on schedules furnished to
CITBC), and any and all instruments, documents, contract rights, chattel paper,
general intangibles, including, without limitation, all accounts created by or
arising from all of the Company's sales of goods or rendition of services to its
customers, and all accounts arising from sales or rendition of services made
under any of the Company's trade names or styles, or through any of the
Company's divisions; (B) unpaid seller's rights (including rescission, replevin,
reclamation and stoppage in transit) relating to the foregoing or arising
therefrom; (C) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (D) reserves and credit
balances arising hereunder; (E) guarantees or collateral for any of the
foregoing; (F) insurance policies or rights relating to any of the foregoing;
and (G) cash and non-cash proceeds of any and all the foregoing.
ANNIVERSARY DATE shall mean the date occurring one year from the date hereof and
the same date in every year thereafter.
AVAILABILITY shall mean at any time of determination, the excess of (A) the
Borrowing Base at such time, over (B) the sum at such time of I) the outstanding
aggregate amount of all Obligations, II) the Availability Reserve and III) after
the occurrence of an Event of Default, all payments of the Company to CITBC
coming due within sixty (60) days from the date of computation.
AVAILABILITY RESERVE shall mean, at any time of determination, the sum of (A)
the then outstanding amount of all Letters of Credit, (B) unless and until the
Company provides CITBC with evidence of credit insurance covering the Trace
Receivable in form and substance satisfactory to CITBC and the Company assigns
to CITBC the Company's right to receive the proceeds of such credit insurance,
an amount equal to $500,000.00, (C) the sum of three (3) months rental payments
on all of the Company's leased premises for which the Company has not delivered
to CITBC a landlord's waiver in form and substance satisfactory to CITBC, and
(D) such other reserves as CITBC, in its sole discretion, deems necessary from
time to time.
BORROWING BASE shall mean the lesser of (A) the Line of Credit or
(B) the sum of I) Eligible Accounts Receivable multiplied by
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eighty-five percent (85%), and II) the lesser of x) Eligible Inventory
multiplied by fifty percent (50%) or y) $500,000.
BUSINESS DAY shall mean any day on which both CITBC and Chase Manhattan Bank are
open for business.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Company during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the consolidated balance sheet of the Company.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Company.
CHASE MANHATTAN RATE shall mean the rate of interest per annum announced by
Chase Manhattan Bank from time to time as its prime rate in effect at its
principal office in the City of New York. (The prime rate is not intended to be
the lowest rate of interest charged by Chase Manhattan Bank to its borrowers).
COLLATERAL shall mean all real and personal property in which the Company has or
obtains rights, wherever located, including, without limitation, present and
future Accounts, Equipment, Inventory, Documents of Title, General Intangibles,
Investment Property, Other Collateral and Real Estate of the Company.
COLLATERAL MANAGEMENT FEE shall mean the sum of $10,000.00 per annum which shall
be paid to CITBC in accordance with paragraph 8 of Section 8 hereof to offset
the expenses and costs of CITBC in connection with record keeping, periodic
examinations and analyzing and evaluating the Collateral.
COMMITMENT LETTER shall have the meaning provided for in paragraph (l) of
Section 2 of this Financing Agreement.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for the
Company and the consolidated subsidiaries of the Company, if any, eliminating
all inter-company transactions and prepared in accordance with GAAP.
CUSTOMARILY PERMITTED LIENS shall mean: (A) liens of local or state authorities
for franchise or other like taxes provided the aggregate amount of such liens
shall not exceed $100,000.00 at any one time; (B) statutory liens of landlords
and liens of carriers, warehousemen, mechanics, materialmen and other like liens
imposed by law, created in the ordinary course of business and for amounts not
yet due (or which are being contested in good faith by appropriate proceedings
or other appropriate actions which are sufficient to prevent imminent
foreclosure of such liens) and with
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respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP; (C) deposits made (and the liens thereon) in
the ordinary course of business (including, without limitation, security
deposits for leases, surety bonds and appeal bonds) in connection with workers'
compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations arising as a result of
progress payments under government contracts; and (D) easements (including,
without limitation, reciprocal easement agreements and utility agreements),
encroachments, minor defects or irregularities in title, variation and other
restrictions, charges or encumbrances (whether or not recorded) affecting the
Real Estate and which are listed in Schedule B of the title insurance policy
delivered to CITBC herewith; and
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: (A) two and one-quarter percent (2.25%) and (B) the Chase Manhattan
Rate, which CITBC shall be entitled to charge the Company on all Obligations due
CITBC by the Company to the extent provided in paragraph 2 of Section 10 of this
Financing Agreement.
DEPOSITORY ACCOUNT shall mean those accounts owned by CITBC and designated for
the deposit of proceeds of Collateral.
DOCUMENTATION FEE shall mean CITBC's standard fees relating to any and all
modifications, waivers, releases, amendments or additional collateral with
respect to this Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future warehouse receipts, bills
of lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company terminates this
Financing Agreement or the Line of Credit which date is prior to the third (3rd)
Anniversary Date.
EARLY TERMINATION FEE shall: (A) mean the fee CITBC is entitled to charge the
Company in the event the Company terminates the Line of Credit or this Financing
Agreement on a date prior to the third Anniversary Date; and (B) be the product
obtained by multiplying I)
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the lesser of x) $7,500,000 or y) the Borrowing Base as of the Early
Termination Date, times II) either x) two percent (2%), if the Early
Termination Date occurs on or prior to the first Anniversary Date, or y)
one percent (1%), if the Early Termination Date occurs after the first
Anniversary Date but prior to the third Anniversary Date.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's
accounts receivable that conform to the warranties contained herein and at all
times continue to be acceptable to CITBC in its sole discretion, LESS, without
duplication, the sum of (A) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted or outstanding) and (B)
reserves for: I) sales to the United States of America or to any agency,
department or division thereof; II) foreign sales, other than that portion of
foreign sales not exceeding $2,500,000 in the aggregate at any one time x)
secured by stand-by letters of credit (in form and substance satisfactory to
CITBC) issued or confirmed by, and payable at, banks having a place of business
in the United States of America and payable in United States currency, and which
sales otherwise comply with all other criteria for eligibility hereunder or y)
for which the Company has procured credit insurance in form and substance
satisfactory to CITBC and has assigned to CITBC the Company's right to receive
the proceeds of such credit insurance; III) accounts that remain unpaid more
than ninety (90) days from invoice date; IV) contras; V) sales to any subsidiary
of the Company, or to any other company affiliated with the Company in any way;
VI) xxxx and hold (deferred shipment) or consignment sales; VII) sales to any
customer which is w) insolvent, x) the debtor in any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law, y) negotiating, or has called a meeting of its creditors
for purposes of negotiating, a compromise of its debts or z) financially
unacceptable to CITBC or has a credit rating unacceptable to CITBC; VIII) all
sales to any customer if fifty percent (50%) or more of either x) all
outstanding invoices or y) the aggregate dollar amount of all outstanding
invoices, are unpaid more than ninety (90) days from invoice date; IX) any other
reason deemed necessary by CITBC in its sole discretion.
ELIGIBLE INVENTORY shall mean the gross amount of the Company's inventory of raw
materials, valued at the lower of cost or market on a first-in, first-out
("FIFO") basis in accordance with GAAP, which (A) conform to the warranties
contained herein and (B) at all times continue to be acceptable to CITBC in its
sole discretion, LESS the value of goods not present in the United States of
America, goods to be returned to the Company's suppliers and goods in transit to
third parties (other than the Company's agents or warehouses), and LESS the
value of any reserves with respect to the Inventory deemed necessary by CITBC in
its sole discretion.
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EQUIPMENT shall mean all present and hereafter acquired machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds
of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply.
GENERAL INTANGIBLES shall have the meaning set forth in the Uniform Commercial
Code as in effect in the State of Illinois and shall include, without
limitation, all present and future right, title and interest in and to all
tradenames, trademarks (together with the goodwill associated therewith),
patents, licenses, customer lists, distribution agreements, supply agreements
and tax refunds, together with all monies and claims for monies now or hereafter
due and payable in connection with any of the foregoing or otherwise, and all
cash and non-cash proceeds thereof.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (A) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets (other than Inventory), or (B) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INVENTORY shall mean all of the Company's present and hereafter acquired
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production - from raw materials through work-in-process to finished
goods and all proceeds thereof of whatever sort.
INVESTMENT PROPERTY shall mean all of the Company's present and hereafter
acquired securities, securities entitlements, securities accounts and other
investment property, as such terms are defined in the Uniform Commercial Code as
in effect in the State of Illinois.
ISSUING BANK shall mean the bank issuing Letters of Credit for the Company.
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LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
CITBC by the Issuing Bank for or on behalf of the Company.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by CITBC to the
Issuing Bank of the Company's reimbursement obligation under the Issuing Bank's
Reimbursement Agreement, Application for Letter of Credit or other like
document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee CITBC may charge the Company
under paragraph 3 of Section 8 of this Financing Agreement for (A) issuing the
Letter of Credit Guaranty or (B) otherwise aiding the Company in obtaining
Letters of Credit.
LINE OF CREDIT shall mean the commitment of CITBC to make loans and advances
pursuant to Section 3 of this Financing Agreement and to assist the Company in
obtaining Letters of Credit under Section 5 of this Financing Agreement in the
aggregate amount equal to $7,500,000.
LINE OF CREDIT FEE shall: (A) mean the fee due CITBC at the end of each month
for the Line of Credit, and (B) be determined by multiplying the difference
between I) the Line of Credit and II) the average daily amount of Revolving
Loans and Letters of Credit outstanding for said month, by three-eighths of one
percent (0.375%) per annum for the number of days in said month.
LOAN FACILITY FEE shall mean the fee payable to CITBC in accordance with, and
pursuant to, the provisions of paragraph 7 of Section 8 of this Financing
Agreement.
OBLIGATIONS shall mean all loans and advances made or to be made by CITBC to the
Company or to others for the Company's account; any and all indebtedness and
obligations which may at any time be owing by the Company to CITBC howsoever
arising, whether now in existence or incurred by the Company from time to time
hereafter; whether secured by pledge, lien upon or security interest in any of
the Company's assets or property or the assets or property of any other person,
firm, entity or corporation; whether such indebtedness is absolute or
contingent, joint or several, matured or unmatured, direct or indirect and
whether the Company is liable to CITBC for such indebtedness as principal,
surety, endorser, guarantor or otherwise. Obligations shall also include
indebtedness owing to CITBC by the Company under this Financing Agreement or
under any other agreement or arrangement now or hereafter entered into between
the Company and CITBC; indebtedness or obligations incurred by, or imposed on,
CITBC as a result of environmental claims arising out of the Company's
operation, premises or waste disposal practices or sites; the Company's
liability to CITBC as maker or endorser on any promissory note or other
instrument for the payment of money; the Company's liability to CITBC under any
instrument of guaranty or indemnity, or arising under any guaranty, endorsement
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or undertaking which CITBC may make or issue to others for the Company's
account, including any accommodation extended with respect to applications for
Letters of Credit, CITBC's acceptance of drafts or CITBC's endorsement of notes
or other instruments for the Company's account and benefit.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
OTHER COLLATERAL shall mean: (A) all now owned and hereafter acquired deposit
accounts maintained by or on behalf of the Company with any bank or financial
institution; (B) all of the Company's cash and other monies and property in the
possession or control of CITBC; (C) all of the Company's book's, ledger cards,
disks and related data processing software at any time evidencing or containing
information relating to any of the Collateral described herein or otherwise
necessary or helpful in the collection thereof or realization thereon, and all
cash and non-cash proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of CITBC's present and future expenses
incurred relative to this Financing Agreement, whether incurred heretofore or
hereafter, which expenses shall include, without being limited to, the cost of
record searches, all costs and expenses incurred by CITBC in opening bank
accounts, depositing checks, receiving and transferring funds, and any charges
imposed on CITBC due to "insufficient funds" of deposited checks and CITBC's
standard fees relating thereto, any amounts paid by, incurred by or charged to,
CITBC by the Issuing Bank under the Letter of Credit Guaranty or the Company's
Reimbursement Agreement, Application for Letter of Credit or other like document
which pertain either directly or indirectly to such Letters of Credit, and
CITBC's standard fees relating to the Letters of Credit and any drafts
thereunder, local counsel fees, title insurance premiums, real estate survey
costs, the Georgia General Intangible Tax, fees and taxes relative to the filing
of financing statements, costs of preparing and recording mortgages/deeds of
trust against the Real Estate and all expenses, costs and fees set forth in
paragraph 3 of Section 10 of this Financing Agreement.
PERMITTED ENCUMBRANCES shall mean: (A) liens expressly permitted, or consented
to, by CITBC; (B) Purchase Money Liens; (C) Customarily Permitted Liens; (D)
liens granted CITBC by the Company; (E) liens of judgment creditors provided
such liens do not exceed, in the aggregate, at any time, $50,000.00 (other than
liens bonded or insured to the reasonable satisfaction of CITBC); and (F) liens
for taxes not yet due and payable or which are being diligently contested in
good faith by the Company by appropriate proceedings and which liens are not I)
other than with respect to Real Estate, senior to the liens of CITBC or II) for
taxes due the United States of America.
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PERMITTED INDEBTEDNESS shall mean: (A) current indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, taxes or labor; (B) the indebtedness secured by
the Purchase Money Liens; (C) indebtedness arising under the Letters of Credit
and this Financing Agreement; (D) deferred taxes and other expenses incurred in
the ordinary course of business; and (E) other indebtedness existing on the date
of execution of this Financing Agreement and listed in the most recent financial
statement delivered to CITBC or otherwise disclosed to CITBC in writing.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (A) each such lien shall
attach only to the property to be acquired, (B) a description of the property so
acquired is furnished to CITBC, and (C) the debt incurred in connection with
such acquisitions shall not exceed in the aggregate $10,000 in any fiscal year.
REAL ESTATE shall mean the Company's fee and/or leasehold interests in the real
property which has been, or will be, encumbered, mortgaged, pledged or assigned
to CITBC or its designee.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by CITBC pursuant to Section 3 of this Financing
Agreement.
TANGIBLE NET WORTH shall mean the the excess of (A) total assets less intangible
assets, over (B) total liabilities net of subordinated debt, all determined in
accordance with GAAP on a basis consistent with the latest audited statements.
TRACE RECEIVABLE shall mean any and all existing and future Accounts from Trace
Storage Technologies Inc. or any affiliate thereof.
SECTION 2. CONDITIONS PRECEDENT
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The obligation of CITBC to execute this Financing Agreement and to make
loans hereunder is subject to the satisfaction of, or waiver of, immediately
prior to or concurrently with the making of such loans, the following conditions
precedent:
(A) LIEN SEARCHES - CITBC shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CITBC for all locations presently
occupied or used by the Company.
(B) CASUALTY INSURANCE - The Company shall have delivered to CITBC evidence
satisfactory to CITBC that casualty insurance policies listing CITBC as loss
payee or mortgagee, as the case may be, are in full force and effect, all as set
forth in Section 7, paragraph 5 of this Financing Agreement.
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(C) MORTGAGES/DEEDS OF TRUST - The Company shall have executed and delivered to
either CITBC or an agent of CITBC or of a title insurance company acceptable to
CITBC such mortgages and deeds of trust as CITBC may reasonably require to
obtain first liens on the Real Estate.
(D) UCC FILINGS - Any documents (including without limitation, financing
statements) required to be filed in order to create, in favor of CITBC, a first
and exclusive perfected security interest in the Collateral with respect to
which a security interest may be perfected by a filing under the Uniform
Commercial Code shall have been properly filed in each office in each
jurisdiction required in order to create in favor of CITBC a perfected lien on
the Collateral. CITBC shall have received acknowledgement copies of all such
filings (or, in lieu thereof, CITBC shall have received other evidence
satisfactory to CITBC that all such filings have been made); and CITBC shall
have received evidence that all necessary filing fees and all taxes or other
expenses related to such filings have been paid in full.
(E) TITLE INSURANCE POLICIES - CITBC shall have received, in respect of each
mortgage or deed of trust, a mortgagee's title policy or marked-up unconditional
binder for such insurance. Each such policy shall (I) be in an amount
satisfactory to CITBC; (II) insure that the mortgage or deed of trust insured
thereby creates a valid first lien on the property covered by such mortgage or
deed of trust, free and clear of all defects and encumbrances except those
acceptable to CITBC; (III) name CITBC as the insured thereunder; and (IV)
contain such endorsements and effective coverage as CITBC may reasonably
request, including without limitation the revolving line of credit endorsement.
CITBC shall also have received evidence that all premiums in respect of such
policies have been paid and that all charges for mortgage recording taxes, if
any, shall have been paid.
(F) SURVEYS - CITBC and the title insurance company issuing each policy referred
to in the immediately preceding paragraph (each, a "TITLE INSURANCE COMPANY")
shall have received maps or plats of a perimeter or boundary of the site of each
of the properties covered by the mortgages or deeds of trust, dated a date
satisfactory to CITBC and the relevant Title Insurance Company prepared by an
independent professional licensed land surveyor satisfactory to CITBC and the
relevant Title Insurance Company, which maps or plats and the surveys on which
they are based shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by the
American Land Title Association and the American Congress on Surveying and
Mapping; and, without limiting the generality of the foregoing, there shall be
surveyed and shown on the maps or plats or surveys the following: I) the
locations on such sites of all the buildings, structures and other improvements
and the established building setback lines insofar as the foregoing affect the
perimeter or
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boundary of such property; II) the lines of streets abutting the sites and width
thereof; III) all access and other easements appurtenant to the sites or
necessary or desirable to use the sites; IV) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar encumbrances
affecting the sites, whether recorded, apparent from a physical inspection of
the sites or otherwise known to the surveyor; V) any encroachments on any
adjoining property by the building structures and improvements on the sites; and
VI) if the site is designated as being on a filed map, a legend relating the
survey to said map. Further, the survey shall be certified to CITBC and the
Title Insurance Company and contain a legend reciting as to whether or not the
site is located in a flood zone.
(G) EXAMINATION & VERIFICATION- CITBC shall have completed to the satisfaction
of CITBC an examination and verification of the Accounts, Inventory, books and
records of the Company.
(H) OPINIONS - Counsel for the Company shall have delivered to CITBC opinions
satisfactory to CITBC opining, inter alia, that, subject to I) the filing,
priority and remedies provisions of the Uniform Commercial Code, II) the
provisions of the Bankruptcy Code, insolvency statutes or other like laws, III)
the equity powers of a court of law and IV) such other matters as may be agreed
upon with CITBC, all documents of the Company are x) valid, binding and
enforceable according to their terms, y) are duly authorized and z) do not
violate any terms, provisions, representations or covenants in the charter or
by-laws of the Company or, to the best knowledge of such counsel, of any loan
agreement, mortgage, deed of trust, note, security or pledge agreement or
indenture to which the Company is a signatory or by which the Company or its
assets are bound.
(I) ADDITIONAL DOCUMENTS - The Company shall have executed and delivered to
CITBC all loan documents necessary to consummate the lending arrangement
contemplated between the Company and CITBC.
(J) MINIMUM AVAILABILITY AND CASH BALANCE - The Company shall provide CITBC with
documentation evidencing that, as of the date hereof, I) the Company has not
less than $5,000,000 in cash (or cash equivalents) on its consolidated balance
sheet, and II) the Availability is not less than the greater of x) $3,000,000.00
less 85% of the face amount of the Trace Receivable then outstanding or y)
$2,100,000.
(K) CONTROL AGREEMENT WITH BROKER - The Company, CITBC and the Company's
stockbroker shall have entered into an agreement, in form and substance
satisfactory to CITBC, regarding the control of the Company's investment
account(s).
(L) CITBC COMMITMENT LETTER - The Company has fully complied, to the
satisfaction of CITBC, with all of the terms and conditions of
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the commitment letter, dated February 5, 1997 (the "Commitment Letter"), issued
by CITBC to, and accepted by, the Company.
(M) ENVIRONMENTAL REPORT - CITBC shall have received environmental audit reports
on I) all of the Company's fee interests, and II) the Company's waste disposal
practices. The reports must be satisfactory to CITBC and not disclose or
indicate any liability (real or potential) stemming from the Company's premises,
its operations, its waste disposal practices or waste disposal sites used by
Company.
(N) BOARD RESOLUTION - CITBC shall have received a copy of the resolutions of
the Board of Directors of the Company authorizing the execution, delivery and
performance of I) this Financing Agreement, and II) any related agreements, in
each case certified by the Secretary or Assistant Secretary of the Company as of
the date hereof, together with a certificate of the Secretary or Assistant
Secretary of the Company as to the incumbency and signature of the officers of
the Company executing this Financing Agreement and any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(O) CORPORATE ORGANIZATION - CITBC shall have received I) a copy of the
Certificate of Incorporation of the Company certified by the Secretary of State
of its incorporation, II) a copy of the By-Laws (as amended through the date
hereof) of the Company and certified by the Secretary or Assistant Secretary of
the Company, and III) an original good standing certificate (or equivalent
document) issued by the Secretary of State of Illinois.
(P) OFFICER'S CERTIFICATE - CITBC shall have received an executed Officer's
Certificate of the Company, satisfactory in form and substance to CITBC,
certifying that I) the representations and warranties contained herein are true
and correct in all material respects on and as of the date hereof, II) the
Company is in compliance with all of the terms and provisions set forth herein,
and (III) no Event of Default or Default has occurred.
(Q) ABSENCE OF DEFAULT - No Default, Event of Default or material adverse change
in the financial condition, business, prospects, profits, operations or assets
of the Company shall have occurred.
(R) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this Financing
Agreement, there shall be no I) litigation, investigation or proceeding
(judicial or administrative) pending or threatened against the Company or its
assets, by any agency, division or department of any county, city, state or
federal government, II) injunction, writ or restraining order restraining or
prohibiting the consummation of the financing arrangements contemplated under
this Financing Agreement, or III) suit, action, investigation or proceeding
(judicial or administrative) pending or threatened
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against the Company or its assets, which, in the opinion of CITBC, if adversely
determined could have a material adverse effect on the business, operation,
assets, or financial condition of the Company or any of the Collateral.
(S) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to CITBC all
information necessary for CITBC to issue wire transfer instructions on behalf of
the Company for the initial and subsequent loans and/or advances to be made
under this Agreement including, but not limited to, disbursement authorizations
in form acceptable to CITBC.
(T) COLLECTION ACCOUNTS; PAYMENT DIRECTION - CITBC shall have established a
lockbox and opened a bank account in its name for the collection of the
Company's Accounts and the deposit of the proceeds of the Collateral, and CITBC,
the Company and the depository bank shall have entered into an agreement in form
and substance satisfactory to CITBC regarding the administration and control of
such lockbox and bank account. In addition, the Company shall have provided
CITBC with satisfactory evidence that the Company has directed its account
debtors to send payments on all Accounts directly to such lockbox.
(U) CREDIT INSURANCE FOR TRACE RECEIVABLE - As a condition precedent to the
making of any Revolving Loan or the issuance of any Letter of Credit Guaranty by
CITBC under this Financing Agreement (but not the execution of this Financing
Agreement by CITBC), the Company shall obtain credit insurance covering the
Trace Receivable in form and substance satisfactory to CITBC, and all proceeds
thereof shall be assigned to CITBC.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Company and CITBC shall otherwise agree herein or in a
separate writing.
SECTION 3. REVOLVING LOANS
---------------
1. Subject to the terms and conditions of this Financing Agreement, and subject
to CITBC's right to make "overadvances", CIT agrees to make loans and advances
to the Company on a revolving basis from time to time (i.e. subject to the
limitations set forth herein, the Company may borrow, repay and re-borrow
Revolving Loans) in the aggregate principal amount not exceeding at any one time
the Borrowing Base. All requests for loans and advances must be received by an
officer of CITBC no later than 1:00 p.m., New York time, of the Business Day on
which such loans and advances are required. In no event shall CITBC have an
obligation to make any loans or advances to the Company which would exceed the
Availability as of the date such request is made. Should CITBC for any reason
honor requests for advances in excess of the limitations set forth herein, such
advances shall be considered "overadvances" and shall
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be made in CITBC's sole discretion, subject to any additional terms CITBC deems
necessary.
2. In furtherance of the continuing assignment and security interest in the
Company's Accounts, the Company will, upon the creation of Accounts, execute and
deliver to CITBC in such form and manner as CITBC may reasonably require, solely
for CITBC's convenience in maintaining records of collateral, such confirmatory
schedules of Accounts as CITBC may reasonably request, and such other
appropriate reports designating, identifying and describing the Accounts as
CITBC may reasonably require. In addition, upon CITBC's request the Company
shall provide CITBC with copies of agreements with, or purchase orders from, the
Company's customers, and copies of invoices to customers, proof of shipment or
delivery and such other documentation and information relating to said Accounts
and other collateral as CITBC may reasonably require. Failure to provide CITBC
with any of the foregoing shall in no way affect, diminish, modify or otherwise
limit the security interests granted herein. The Company hereby authorizes CITBC
to regard the Company's printed name or rubber stamp signature on assignment
schedules or invoices as the equivalent of a manual signature by one of the
Company's authorized officers or agents.
3. The Company hereby represents and warrants that: (A) each Account is based on
an actual and bona fide sale and delivery of goods or rendition of services to
customers, made by the Company in the ordinary course of its business; (B) the
Inventory being sold and the Accounts created are the exclusive property of the
Company and are not and shall not be subject to any lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever,
other than the Permitted Encumbrances; (C) the invoices evidencing such Accounts
are in the name of the Company; and (D) the customers of the Company have
accepted the goods or services, owe and are obligated to pay the full amounts
stated in the invoices according to their terms, without dispute, offset,
defense, counterclaim or contra, except for disputes and other matters arising
in the ordinary course of business of which the Company has advised CITBC
pursuant to paragraph 5 of this Section 3. The Company confirms to CITBC that
any and all taxes or fees relating to its business, its sales, the Accounts or
goods relating thereto, are its sole responsibility and that same will be paid
by the Company when due and that none of said taxes or fees represent a lien on
or claim against the Accounts. The Company also warrants and represents that it
is a duly and validly existing corporation and is qualified in all states where
the failure to so qualify would have an adverse effect on the business of the
Company or the ability of the Company to enforce collection of Accounts due from
customers residing in that state. The Company agrees to maintain such books and
records regarding Accounts as CITBC may reasonably require and agrees that the
books and records of the Company will reflect CITBC's interest in the Accounts.
All of the books and records of the Company will be available to CITBC at normal
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business hours, including any records handled or maintained for the Company by
any other company or entity.
4. The Company may and will enforce, collect and receive all amounts owing on
the Accounts for CITBC's benefit and on CITBC's behalf, but at the Company's
expense, however, such privilege shall (A) terminate automatically upon the
institution by or against the Company of any proceeding under any bankruptcy or
insolvency law or, (B) at the election of CITBC, terminate upon written notice
from CITBC to the Company. Any checks, cash, notes or other instruments or
property received by the Company with respect to any Accounts shall be held by
the Company in trust for CITBC, separate from the Company's own property and
funds, and immediately turned over to CITBC with proper assignments or
endorsements by deposit to the Depository Accounts. All amounts received by
CITBC in payment of Accounts will be credited to the Company's accounts upon
CITBC's receipt of "collected funds" at CITBC's bank account in New York, New
York on the Business Day of receipt if received no later than 1:00 pm or on the
next succeeding Business Day if received after 1:00 pm. No checks, drafts or
other instrument received by CITBC shall constitute final payment to CITBC
unless and until such instruments have actually been collected.
5. The Company agrees to notify CITBC promptly of any matters materially
affecting the value, enforceability or collectibility of any Account and of all
material customer disputes, offsets, defenses, counterclaims, returns,
rejections and all reclaimed or repossessed merchandise or goods. The Company
agrees to issue credit memoranda promptly (with duplicates to CITBC upon request
after the occurrence of an Event of Default) upon accepting returns or granting
allowances, and may continue to do so until CITBC has notified the Company that
(A) an Event of Default has occurred, (B) CITBC has declared all outstanding
Obligations immediately due and payable and (C) all future credits or allowances
are to be made only after CITBC's prior written approval. Upon the occurrence of
an Event of Default and until such time as such Event of Default is waived and
on notice from CITBC, the Company agrees that all returned, reclaimed or
repossessed merchandise or goods shall be set aside by the Company, marked with
CITBC's name and held by the Company for CITBC's account as owner and assignee.
6. CITBC shall maintain a separate account on its books in the Company's name in
which the Company will be charged with loans and advances made by CITBC to it or
for its account, and with any other Obligations, including any and all costs,
expenses and reasonable attorney's fees which CITBC may incur in connection with
the exercise by or for CITBC of any of the rights or powers herein conferred
upon CITBC, or in the prosecution or defense of any action or proceeding to
enforce or protect any rights of CITBC in connection with this Financing
Agreement or the Collateral assigned hereunder, or any Obligations owing to
CITBC by the Company. The Company will be credited with all amounts received by
CITBC from
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the Company or from others for the Company's account, including, as above set
forth, all amounts received by CITBC in payment of assigned Accounts and such
amounts will be applied to payment of the Obligations. In no event shall prior
recourse to any Accounts or other security granted to or by the Company be a
prerequisite to CITBC's right to demand payment of any Obligation. Further, it
is understood that CITBC shall have no obligation whatsoever to perform in any
respect any of the Company's contracts or obligations relating to the Accounts.
7. After the end of each month, CITBC shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between CITBC and the Company during that month. The
monthly statements shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and CITBC unless CITBC
receives a written statement of the exceptions within thirty (30) days of the
date of the monthly statement.
8. In the event that either (A) the aggregate amount of all Obligations and
Letters of Credit outstanding at any time exceeds the Borrowing Base, or (B) the
Availability is ever less than zero, the Company shall immediately prepay the
Revolving Loans by an amount equal to such excess, in the case of (A), or by an
amount sufficient to cause the Availability to exceed zero, in the case of (B).
SECTION 4. [RESERVED]
SECTION 5. LETTERS OF CREDIT
-----------------
In order to assist the Company in establishing or opening Letters of
Credit with an Issuing Bank to cover the purchase of imported Inventory,
Equipment or for any other reason acceptable to CITBC, the Company has requested
CITBC to join in the applications for such Letters of Credit, and/or guarantee
payment or performance of such Letters of Credit and any drafts or acceptances
thereunder through the issuance of the Letters of Credit Guaranty, thereby
lending CITBC's credit to the Company and CITBC has agreed to do so. These
arrangements shall be handled by CITBC subject to the terms and conditions set
forth below.
1. The amount, purpose and extent of the Letters of Credit and changes or
modifications thereof by the Company and/or the Issuing Bank of the terms and
conditions thereof shall in all respects be subject to the prior approval of
CITBC, PROVIDED, HOWEVER, that (A) in no event may the aggregate amount of all
such outstanding Letters of Credit exceed, in the aggregate, at any one time
$1,000,000, (B) the amount of any Letter of Credit to be issued shall not exceed
the Availability as of the date of the issuance thereof, (C) the Letter of
Credit and all documentation in connection therewith shall be in form and
substance satisfactory to
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the Company, CITBC and the Issuing Bank, and (D) the initial expiration date of
any Letter of Credit shall not be more than one year from the date of the
issuance thereof.
2. CITBC shall have the right, without notice to the Company, to charge the
Company's account on CITBC's books with the amount of any and all indebtedness,
liability or obligation of any kind incurred by CITBC under the Letters of
Credit Guaranty at the earlier of (A) payment by CITBC under the Letters of
Credit Guaranty, or (B) the declaration by CITBC, after the occurrence of an
Event of Default, that all outstanding Obligations are immediately due and
payable. Any amount charged to Company's loan account shall be deemed a
Revolving Loan hereunder and shall incur interest at the rate provided in
Section 8, paragraph 1 of this Financing Agreement.
3. The Company unconditionally indemnifies CITBC and holds CITBC harmless from
any and all loss, claim or liability incurred by CITBC arising from any
transactions or occurrences relating to Letters of Credit established or opened
for the Company's account, the collateral relating thereto and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any action taken by any Issuing Bank, other than for any such
loss, claim or liability arising out of the gross negligence or willful
misconduct by CITBC under the Letters of Credit Guaranty. The Company further
agrees to hold CITBC harmless from any errors or omission, negligence or
misconduct by the Issuing Bank. The Company's unconditional obligation to CITBC
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever, other than as a result of CITBC's gross negligence or willful
misconduct. The Company agrees that any charges incurred by CITBC for the
Company's account by the Issuing Bank shall be conclusive on CITBC and may be
charged to the Company's account.
4. CITBC shall not be responsible for: (A) the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; (B) any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; (C) the validity, sufficiency or genuineness of any
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
(D) the time, place, manner or order in which shipment is made; (E) partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; (F) any deviation from
instructions; (G) delay, default, or fraud by the shipper and/or anyone else in
connection with the Collateral or the shipping thereof; or (H) any breach of
contract between the shipper or vendors and the Company. Furthermore, without
being limited by the foregoing, CITBC shall not be responsible for any
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act or omission with respect to or in connection with any Collateral.
5. The Company agrees that any action taken by CITBC, if taken in good faith, or
any action taken by any Issuing Bank, under or in connection with the Letters of
Credit, the guarantees, the drafts or acceptances, or the Collateral, shall be
binding on the Company and shall not put CITBC in any resulting liability to the
Company. In furtherance thereof but subject to paragraph 6 below, CITBC shall
have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or airways
guaranties (and applications therefore), indemnities or delivery orders; to
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, drafts
or acceptances; all in CITBC's sole name, and the Issuing Bank shall be entitled
to comply with and honor any and all such documents or instruments executed by
or received solely from CITBC, all without any notice to or any consent from the
Company.
6. Without CITBC's express consent and endorsement in writing, the Company
agrees: (A) not to execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders; to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and (B) after the
occurrence of an Event of Default which is not waived by CITBC, not to I) clear
and resolve any questions of non-compliance of documents, or II) give any
instructions as to acceptances or rejection of any documents or goods.
7. The Company agrees that any necessary import, export or other licenses or
certificates for the import or handling of the Collateral will have been
promptly procured; all foreign and domestic governmental laws and regulations in
regard to the shipment and importation of the Collateral, or the financing
thereof will have been promptly and full complied with; and any certificates in
that regard that CITBC may at any time request will be promptly furnished. In
this connection, the Company warrants and represents that all shipments made
under any such Letters of Credit are in accordance with the laws and regulations
of the countries in which the shipments originate and terminate, and are not
prohibited by any such laws and regulations. The Company assumes all risk,
liability and responsibility for, and agrees to pay and discharge, all present
and future local, state, federal or foreign taxes, duties, or levies. Any
embargo, restriction, laws,
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customs or regulations of any country, state, city, or other political
subdivision, where the Collateral is or may be located, or wherein payments are
to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall
be solely the Company's risk, liability and responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, CITBC shall acquire by subrogation, any rights, remedies, duties or
obligations granted or undertaken by the Company to the Issuing Bank in any
application for Letters of Credit, any standing agreement relating to Letters of
Credit or otherwise, all of which shall be deemed to have been granted to CITBC
and apply in all respects to CITBC and shall be in addition to any rights,
remedies, duties or obligations contained herein.
SECTION 6. COLLATERAL
----------
1. As security for the prompt payment in full of all loans and advances made and
to be made to the Company from time to time by CITBC pursuant hereto, as well as
to secure the payment in full of the other Obligations, the Company hereby
pledges and grants to CITBC a continuing general lien upon and security interest
in all of the Collateral, including, without limitation, all of its:
(A) present and hereafter acquired Inventory;
(B) present and hereafter acquired Equipment;
(C) present and future Accounts;
(D) present and future Documents of Title;
(E) present and future General Intangibles;
(F) present and future Investment Property;
(G) present and future Other Collateral; and
(H) Real Estate.
2. The security interests granted hereunder shall extend and
attach to:
(A) All Collateral which is presently in existence and which is owned by the
Company or in which the Company has any interest, whether held by the Company or
others for its account, and, if any Collateral is Equipment, whether the
Company's interest in such Equipment is as owner or lessee or conditional
vendee;
(B) All Equipment whether the same constitutes personal property or fixtures,
including, but without limiting the generality of the foregoing, all dies, jigs,
tools, benches, tables, accretions,
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component parts thereof and additions thereto, as well as all accessories,
motors, engines and auxiliary parts used in connection with or attached to the
Equipment; and
(C) All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either CITBC or the Company from the Company's
customers, as well as to all supplies, goods, incidentals, packaging materials,
labels and any other items which contribute to the finished goods or products
manufactured or processed by the Company, or to the sale, promotion or shipment
thereof.
3. The Company agrees to safeguard, protect and hold all Inventory for CITBC's
account and make no disposition thereof except in the regular course of the
business of the Company as herein provided. Inventory may only be sold and
shipped by the Company to its customers in the ordinary course of the Company's
business, on open account and on terms currently being extended by the Company
to its customers, provided that all proceeds of all sales (including cash,
accounts receivable, checks, notes, instruments for the payment of money and
similar proceeds) are forthwith transferred, endorsed, and turned over and
delivered to CITBC by deposit in the Depository Accounts. Cash sales or sales of
Inventory in which a lien upon, or security interest in, Inventory is retained
by the Company shall be made by the Company only with the approval of CITBC, and
the proceeds of such sales or sales of Inventory for cash shall not be
commingled with the Company's other property, but shall be segregated, held by
the Company in trust for CITBC as CITBC's exclusive property, and shall be
delivered immediately by the Company to CITBC in the identical form received by
the Company by deposit to the Depository Accounts. Upon the sale, exchange, or
other disposition of Inventory, as herein provided, the security interest in the
Company's Inventory provided for herein shall, without break in continuity and
without further formality or act, continue in, and attach to, all proceeds,
including any instruments for the payment of money, accounts receivable,
contract rights, documents of title, shipping documents, chattel paper and all
other cash and non-cash proceeds of such sale, exchange or disposition. As to
any such sale, exchange or other disposition, CITBC shall have all of the rights
of an unpaid seller, including stoppage in transit, replevin, rescission and
reclamation.
4. The Company agrees at its own cost and expense to keep the Equipment in as
good and substantial repair and condition as the same is now or at the time the
lien and security interest granted herein shall attach thereto, reasonable wear
and tear excepted, making any and all repairs and replacements when and where
necessary. The Company also agrees to safeguard, protect and hold all Equipment
for CITBC's account and make no disposition thereof unless the Company first
obtains the prior written approval of CITBC. Any sale, exchange or other
disposition of any Equipment
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shall only be made by the Company with the prior written approval of CITBC, and
the proceeds of any such sales shall not be commingled with the Company's other
property, but shall be segregated, held by the Company in trust for CITBC as
CITBC's exclusive property, and shall be delivered immediately by the Company to
CITBC in the identical form received by the Company by deposit to the Depository
Accounts. Upon the sale, exchange, or other disposition of the Equipment, as
herein provided, the security interest provided for herein shall, without break
in continuity and without further formality or act, continue in, and attach to,
all proceeds, including any instruments for the payment of money, accounts
receivable, contract rights, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, CITBC shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding anything hereinabove
contained to the contrary, the Company may sell, exchange or otherwise dispose
of obsolete Equipment or Equipment no longer needed in the Company's operations,
PROVIDED, HOWEVER, that (A) the then book value of the Equipment so disposed of
does not exceed $250,000 in the aggregate in any fiscal year and $500,000 in the
aggregate during the term of this Financing Agreement, (B) the proceeds of such
sales or dispositions are delivered to CITBC in accordance with the foregoing
provisions of this paragraph, except that the Company may retain and use such
proceeds to purchase forthwith replacement Equipment which the Company
determines in its reasonable business judgment to have a collateral value at
least equal to the Equipment so disposed of or sold, PROVIDED, HOWEVER, that the
aforesaid right shall automatically cease upon the occurrence of an Event of
Default which is not waived.
5. The rights and security interests granted to CITBC hereunder are to continue
in full force and effect, notwithstanding the termination of this Financing
Agreement or the fact that the account maintained in the Company's name on the
books of CITBC may from time to time be temporarily in a credit position, until
the final payment in full to CITBC of all Obligations and the termination of
this Financing Agreement. Any delay, or omission by CITBC to exercise any right
hereunder, shall not be deemed a waiver thereof, or be deemed a waiver of any
other right, unless such waiver be in writing and signed by CITBC. A waiver on
any one occasion shall not be construed as a bar to or waiver of any right or
remedy on any future occasion.
6. To the extent that the Obligations are now or hereafter secured by any assets
or property other than the Collateral or by the guarantee, endorsement, assets
or property of any other person, then CITBC shall have the right in its sole
discretion to determine which rights, security, liens, security interests or
remedies CITBC shall at any time pursue, foreclose upon, relinquish,
subordinate, modify or take any other action with respect to, without in any way
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modifying or affecting any of them, or any of CITBC's rights hereunder.
7. Any reserves or balances to the credit of the Company and any other property
or assets of the Company in the possession of CITBC may be held by CITBC as
security for any Obligations and applied in whole or partial satisfaction of
such Obligations when due. The liens and security interests granted herein and
any other lien or security interest CITBC may have in any other assets of the
Company, shall secure payment and performance of all now existing and future
Obligations. CITBC may in its discretion charge any or all of the Obligations to
the account of the Company when due.
8. This Financing Agreement and the obligation of the Company to perform all of
its covenants and obligations hereunder are further secured by a mortgage, deed
of trust or assignment on the Real Estate.
9. The Company shall give to CITBC from time to time such mortgage, deed of
trust or assignment on the Real Estate or real estate acquired after the date
hereof as CITBC shall require to obtain a valid first lien thereon subject only
to those exceptions of title as set forth in future title insurance policies
that are satisfactory to CITBC.
10. The Company shall give to CITBC from time to time such pledge or security
agreements with respect to General Intangibles and capital stock of any
subsidiary of the Company as CITBC shall require to obtain valid first liens
thereon.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
1. The Company hereby warrants and represents and/or covenants that: (A) the
fair value of the Company's assets exceeds the book value of the Company's
liabilities; (B) the Company is generally able to pay its debts as they become
due and payable; and (C) the Company does not have unreasonably small capital to
carry on its business as it is currently conducted absent extraordinary and
unforeseen circumstances. The Company further warrants and represents that
except for the Permitted Encumbrances, the security interests granted herein
constitute and shall at all times constitute the first and only liens on the
Collateral; that, except for the Permitted Encumbrances, the Company is or will
be at the time additional Collateral is acquired by it, the absolute owner of
the Collateral with full right to pledge, sell, consign, transfer and create a
security interest therein, free and clear of any and all claims or liens in
favor of others; that the Company will at its expense forever warrant and, at
CITBC's request, defend the same from any and all claims and demands of any
other person other than the Permitted Encumbrances; that the Company will not
grant, create or permit to exist, any lien upon or security interest in the
Collateral, or any proceeds thereof, in favor of any other
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person other than the holders of the Permitted Encumbrances; and that the
Equipment does not comprise a part of the Inventory of the Company and that the
Equipment is and will only be used by the Company in its business and will not
be held for sale or lease, or removed from its premises, or otherwise disposed
of by the Company without the prior written approval of CITBC except as
otherwise permitted in paragraph 4 of Section 6 of this Financing Agreement.
2. The Company agrees to maintain books and records pertaining to the Collateral
in such detail, form and scope as CITBC shall reasonably require. The Company
agrees that CITBC or its agents may enter upon the Company's premises at any
time during normal business hours, and from time to time, for the purpose of
inspecting the Collateral, and any and all records pertaining thereto. The
Company agrees to afford CITBC prior written notice of any change in the
location of any Collateral, other than to locations, that as of the date hereof,
are known to CITBC and at which CITBC has filed financing statements and
otherwise fully perfected its liens thereon. The Company is also to advise CITBC
promptly, in sufficient detail, of any material adverse change relating to the
type, quantity or quality of the Collateral or on the security interests granted
to CITBC therein.
3. The Company agrees to execute and deliver to CITBC, from time to time, solely
for CITBC's convenience in maintaining a record of the Collateral, such written
statements, and schedules as CITBC may reasonably require, designating,
identifying or describing the Collateral pledged to CITBC hereunder. The
Company's failure, however, to promptly give CITBC such statements or schedules
shall not affect, diminish, modify or otherwise limit CITBC's security interests
in the Collateral.
4. The Company agrees to comply with the requirements of all state and federal
laws in order to grant to CITBC valid and perfected first security interests in
the Collateral, subject only to the Permitted Encumbrances. CITBC is hereby
authorized by the Company to file any financing statements covering the
Collateral whether or not the Company's signature appears thereon. The Company
agrees to do whatever CITBC may reasonably request, from time to time, by way
of: (A) filing notices of liens, financing statements, amendments, renewals and
continuations thereof; (B) cooperating with CITBC's agents and employees; (C)
keeping Collateral records; (D) transferring proceeds of Collateral to CITBC's
possession; and (E) performing such further acts as CITBC may reasonably require
in order to effect the purposes of this Financing Agreement.
5. (A) The Company agrees to maintain insurance on the Real Estate, Equipment
and Inventory under such policies of insurance, with such insurance companies,
in such reasonable amounts and covering such insurable risks as are at all times
reasonably satisfactory to CITBC. All policies covering the Real Estate,
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Equipment and Inventory are, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to CITBC, to be made payable to CITBC, in
case of loss, under a standard non-contributory "mortgagee", "lender" or
"secured party" clause and are to contain such other provisions as CITBC may
require to fully protect CITBC's interest in the Real Estate, Inventory and
Equipment and to any payments to be made under such policies. All original
policies or true copies thereof are to be delivered to CITBC with the loss
payable endorsement in CITBC's favor, and shall provide for not less than thirty
(30) days prior written notice to CITBC of the exercise of any right of
cancellation. At the Company's request, or if the Company fails to maintain such
insurance, CITBC may arrange for such insurance, but at the Company's expense
and without any responsibility on CITBC's part for: obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence of an Event of Default which is not
waived, CITBC shall, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to CITBC, have the sole right, in the name of
CITBC or the Company, to file claims under any insurance policies, to receive,
receipt and give acquittance for any payments that may be payable thereunder,
and to execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any claims under any such insurance policies.
(B) I) In the event of any loss or damage by fire or other casualty, insurance
proceeds relating to Inventory shall first reduce the Company's Revolving Loan
and then reduce any of the other Obligations.
II) In the event any part of the Company's Real Estate or Equipment is damaged
by fire or other casualty and the insurance proceeds for such damage or other
casualty (the "Proceeds") is less than or equal to $250,000.00, CITBC shall
promptly apply such Proceeds to reduce the Company's outstanding balances under
the Revolving Loan account.
III) As long as an Event of Default has not occurred (which is not waived), the
Company has sufficient business interruption insurance to replace the lost
profits of any of the Company's facilities, and the Proceeds are in excess of
$250,000.00, the Company may elect (by delivering written notice to CITBC) to
replace, repair or restore such Real Estate or Equipment to substantially the
equivalent condition prior to such fire or other casualty as set forth herein.
If the Company does not, or cannot, elect to use the Proceeds as set forth
above, CITBC may, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to CITBC, apply the Proceeds to the payment of the
Obligations in such manner and in such order as CITBC may reasonably elect.
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IV) If the Company elects to use the Proceeds for the repair, replacement or
restoration of any Real Estate or Equipment, and there is then no Event of
Default, x) proceeds of insurance on Equipment and Real Estate in excess of
$250,000.00 will be applied to the reduction of the Revolving Loans of the
Company and y) CITBC may set up a reserve against Availability for an amount
equal to the proceeds referred to in clause x) hereof. The reserve will be
reduced dollar-for-dollar upon receipt of non-cancelable executed purchase
orders, delivery receipts or contracts for the replacement, repair or
restoration of Equipment or the Real Estate and disbursements in connection
therewith. Prior to the commencement of any restoration, repair or replacement
of Real Estate, the Company shall provide CITBC with a restoration plan and a
total budget certified by an independent third party experienced in construction
costing. If there are insufficient Proceeds to cover the cost of restoration as
so determined, the Company shall be responsible for the amount of any such
insufficiency, prior to the commencement of restoration and shall demonstrate
evidence of such before the reserve will be reduced. Completion of restoration
shall be evidenced by a final, unqualified certification of the design architect
employed, if any; an unconditional Certificate of Occupancy, if applicable; such
other certification as may be required by law; or if none of the above is
applicable, a written good faith determination of completion by the Company
(herein collectively the "Completion"). Upon Completion, any remaining reserve
as established hereunder will be automatically released.
6. The Company agrees to pay, when due, all taxes, assessments, claims and other
charges (herein "taxes") lawfully levied or assessed upon the Company or the
Collateral and if such taxes remain unpaid after the date fixed for the payment
thereof unless such taxes are being diligently contested in good faith by the
Company by appropriate proceedings or if any lien shall be claimed thereunder
(A) for taxes due the United States of America or (B) which in CITBC's opinion
might create a valid obligation having priority over the rights granted to CITBC
herein, CITBC may, on the Company's behalf, pay such taxes, and the amount
thereof shall be an Obligation secured hereby and due to CITBC on demand.
7. The Company: (A) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the Company's
business, provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in CITBC's reasonable opinion, materially and adversely effect CITBC's
rights or priority in the Collateral; and (B) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the ownership and/or use
of its real property and operation of its business,
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which the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Company. The Company hereby indemnifies CITBC and agrees to defend and hold
CITBC harmless from and against any and all loss, damage, claim, liability,
injury or expense which CITBC may sustain or incur in connection with: any claim
or expense asserted against CITBC as a result of any environmental pollution,
hazardous material or environmental clean-up of the Company's real property; or
any claim or expense which results from the Company's operations (including, but
not limited to, the Company's off-site disposal practices) and the Company
further agrees that this indemnification shall survive termination of this
Financing Agreement as well as the payment of all Obligations or amounts payable
hereunder. The Company shall not be deemed to have breached any provision of
this paragraph 7 if I) the failure to comply with the requirements of this
paragraph 7 resulted from good faith error or innocent omission, II) the Company
promptly commences and diligently pursues a cure of such breach and III) such
failure is cured within ten (10) Business Days following the Company's receipt
of notice of such failure.
8. Until termination of the Financing Agreement and payment and satisfaction of
all Obligations due hereunder, the Company agrees that, unless CITBC shall have
otherwise consented in writing, the Company will furnish to CITBC: (A) within
ninety (90) days after the end of each fiscal year of the Company, I) a
Consolidated Balance Sheet as at the close of such year, and statements of
profit and loss, cash flow and reconciliation of surplus of the Company and all
subsidiaries of the Company (if any) for such year, audited by independent
public accountants selected by the Company and satisfactory to CITBC, and II) a
copy of the Company's Form 10- K annual report for such fiscal year which the
Company files with the Securities Exchange Commission; (B) within sixty (60)
days after the end of each fiscal quarter, I) a Consolidated Balance Sheet as at
the end of such period and statements of profit and loss, cash flow and surplus
of the Company and all subsidiaries of the Company (if any) for such period,
certified by an authorized financial or accounting officer of the Company, and
II) a copy of the Company's Form 10-Q quarterly report for such period which the
Company files with the Securities Exchange Commission; (C) within thirty (30)
days after the end of each month, a Consolidated Balance Sheet as at the end of
such period and statements of profit and loss, cash flow and surplus of the
Company and all subsidiaries of the Company (if any) for such period, certified
by an authorized financial or accounting officer of the Company; and (D) from
time to time, such further information regarding the business affairs and
financial condition of the Company as CITBC may reasonably request, including
without limitation annual cash flow projections in form satisfactory to CITBC.
Each financial statement which the Company is required to submit hereunder must
be accompanied by an officer's certificate, signed by the President, Vice
President, Controller, or Treasurer, pursuant to which any one such officer
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must certify that: (A) the financial statement(s) fairly and accurately
represent(s) the Company's financial condition at the end of the particular
accounting period, as well as the Company's operating results during such
accounting period, subject to year-end audit adjustments; (B) during the
particular accounting period I) there has been no default or condition which,
with the passage of time or notice, or both, would constitute a Default or Event
of Default under this Financing Agreement (PROVIDED, HOWEVER, that if any such
officer has knowledge that any such Default or Event of Default has occurred
during such period, the existence of and a detailed description of same shall be
set forth in such officer's certificate), and II) the Company has not received
any notice of cancellation with respect to its property insurance policies; and
(C) the exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement.
9. The Company shall maintain at all times during the periods below, determined
as of the end of each calendar month during such period, a Tangible Net Worth of
not less than:
APPLICABLE PERIOD MINIMUM NET WORTH
----------------- -----------------
From the date hereof through
March 31, 1997 $15,000,000.00
For the month of April, 1997 $14,500,000.00
For the month of May, 1997 $14,250,000.00
For the month of June, 1997 $14,000,000.00
From July 1, 1997 though
August 31, 1997 $13,500,000.00
For the month of September, 1997 $13,000,000.00
For the month of October, 1997 $12,500,000.00
For the month of November, 1997 $12,250,000.00
For the month of December, 1997
and each calendar month thereafter $12,000,000.00
10. Until termination of the Financing Agreement and payment and satisfaction of
all Obligations due hereunder, the Company agrees that, without the prior
written consent of CITBC, except as otherwise herein provided, the Company will
not:
(A) Mortgage, assign, pledge, transfer or otherwise permit any lien, charge,
security interest, encumbrance or judgment, (whether as a result of a purchase
money or title retention transaction, or other security interest, or otherwise)
to exist on any of its assets or goods, whether real, personal or mixed, whether
now owned or hereafter acquired, except for the Permitted Encumbrances;
(B) Incur or create any Indebtedness other than the Permitted Indebtedness;
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(C) Borrow any money on the security of the Company's Collateral from sources
other than CITBC;
(D) Sell, lease, assign, transfer or otherwise dispose of I) Collateral, except
in the ordinary course of the Company's business and as otherwise specifically
permitted by this Financing Agreement, or II) either all or substantially all of
the Company's assets, which do not constitute Collateral;
(E) Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, structure, status or existence, or enter into or
engage in any operation or activity materially different from that presently
being conducted by the Company;
(F) Assume, guarantee, endorse, or otherwise become liable upon the obligations
of any person, firm, entity or corporation, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business;
(G) Declare or pay any dividend of any kind on, or purchase, acquire, redeem or
retire, any of the capital stock or equity interest of the Company, of any class
whatsoever, whether now or hereafter outstanding; or
(H) Make advances or loans to, or investments in, any firm, entity, person or
corporation in excess of $20,000 in the aggregate outstanding at any time.
11. Without the prior written consent of CITBC, the Company will not: (A) enter
into any Operating Lease if after giving effect thereto the aggregate
obligations with respect to Operating Leases of the Company during any fiscal
year would exceed $80,000; or (B) contract for, purchase, make expenditures for,
lease pursuant to a Capital Lease or otherwise incur obligations with respect to
Capital Expenditures (whether subject to a security interest or otherwise)
during any fiscal year in the aggregate amount in excess of:
(A) $5,285,000.00 for the fiscal year ending December 31, 1997;
(B) $4,000,000.00 for the fiscal year ending December 31, 1998; and
(C) $3,600,000.00 for the fiscal year ending December 31, 1999 and for each
fiscal year thereafter.
12. The Company agrees to advise CITBC in writing of: (A) all expenditures
(actual or anticipated) in excess of $25,000.00 for I) environmental clean-up,
II) environmental compliance or III) environmental testing and the impact of
said expenses on the Company's Working Capital; and B) any notices the Company
receives
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from any local, state or federal authority advising the Company of any
environmental liability (real or potential) stemming from the Company's
operations, its premises, its waste disposal practices, or waste disposal sites
used by the Company and to provide CITBC with copies of all such notices if so
required.
13. Without the prior written consent of CITBC, the Company agrees that it will
not enter into any transaction, including, without limitation, any purchase,
sale, lease, loan or exchange of property with any subsidiary or affiliate of
the Company.
SECTION 8. INTEREST, FEES AND EXPENSES
---------------------------
1. Interest on the Revolving Loan shall be payable monthly as of the end of each
month and shall be an amount equal to eight and one-half percent (8.50%) per
annum on the average of the net balances owing by the Company to CITBC in the
Company's account at the close of each day during such month. This rate of
interest is based on the eight and one-quarter percent (8.25%) per annum Chase
Manhattan Rate as of March 6, 1997. In the event of any change in said Chase
Manhattan Rate, the rate hereunder shall change, as of the first of the month
following any change, so as to remain one-quarter of one percent (0.25%) above
the Chase Manhattan Rate. The rate hereunder shall be calculated based on a
360-day year. CITBC shall be entitled to charge the Company's account at the
rate provided for herein when due until all Obligations have been paid in full.
2. [RESERVED]
3. In consideration of the Letter of Credit Guaranty of CITBC, the Company shall
pay CITBC the Letter of Credit Guaranty Fee which shall be an amount equal to
one and one-half percent (1.50%) per annum, payable monthly, on the face amount
of each Letter of Credit less the amount of any and all amounts previously drawn
under the Letter of Credit. The rate hereunder shall be calculated based on a
360-day year.
4. Any charges, fees, commissions, costs and expenses charged to CITBC for the
Company's account by any Issuing Bank in connection with or arising out of
Letters of Credit issued pursuant to this Financing Agreement or out of
transactions relating thereto will be charged to the Company's account in full
when charged to or paid by CITBC and when made by any such Issuing Bank shall be
conclusive on CITBC.
5. The Company shall reimburse or pay CITBC, as the case may be, for (A) all
Out-of-Pocket Expenses of CITBC and (B) any applicable Documentation Fee.
6. Upon the last Business Day of each month, commencing with March 31, 1997, the
Company shall pay CITBC the Line of Credit Fee.
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7. To induce CITBC to enter into this Financing Agreement and to extend to the
Company the Revolving Loan, the Company shall pay to CITBC a Loan Facility Fee
in the amount of $75,000, $37,500 of which was paid to CITBC by the Company in
connection with the Company's acceptance of the Commitment Letter and the
balance of which is due and payable upon execution of this Financing Agreement.
8. Upon the execution of this Financing Agreement and on each Anniversary Date
thereafter, the Company shall pay to CITBC the Collateral Management Fee.
9. Upon the occurrence of an Event of Default, the Company shall pay CITBC's
standard charges for, and the fees and expenses of, the CITBC personnel used by
CITBC for reviewing the books and records of the Company and for verifying,
testing, protecting, safeguarding, preserving or disposing of all or any part of
the Collateral which shall be in addition to the Collateral Management Fee.
10. The Company hereby authorizes CITBC to charge the Company's accounts with
CITBC with the amount of all payments due hereunder as such payments become due.
The Company confirms that any charges which CITBC may so make to the Company's
account as herein provided will be made as an accommodation to the Company and
solely at CITBC's discretion.
SECTION 9. POWERS
------
The Company hereby constitutes CITBC or any person or agent CITBC may
designate as its attorney-in-fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all of the Company's Obligations to CITBC have been
paid in full:
(A) To receive, take, endorse, sign, assign and deliver, all in the name of
CITBC or the Company, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral;
(B) To receive, open and dispose of all mail addressed to the Company and to
notify postal authorities to change the address for delivery thereof to such
address as CITBC may designate;
(C) To request from customers indebted on Accounts at any time, in the name of
CITBC or the Company or that of CITBC's designee, information concerning the
amounts owing on the Accounts;
(D) To transmit to customers indebted on Accounts notice of CITBC's interest
therein and to notify customers indebted on Accounts to make payment directly to
CITBC for the Company's account; and
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(E) To take or bring, in the name of CITBC or the Company, all steps, actions,
suits or proceedings deemed by CITBC necessary or desirable to enforce or effect
collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers set
forth in (B), (D) and (E) above may only be exercised after the occurrence of an
Event of Default and until such time as such Event of Default is waived.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
1. Notwithstanding anything hereinabove to the contrary, CITBC may terminate
this Financing Agreement immediately upon the occurrence of any of the following
(herein "Events of Default"):
(A) cessation of the business of the Company or the calling of a meeting of the
creditors of the Company for purposes of compromising the debts and obligations
of the Company;
(B) the failure of the Company to generally meet debts as they mature;
(C) the commencement by or against the Company of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law;
(D) breach by the Company of any warranty, representation or covenant contained
herein (other than those referred to in sub-paragraph (e) below) or in any other
written agreement between the Company or CITBC, provided that such Default by
the Company of any of the warranties, representations or covenants referred in
this sub-paragraph (d) shall not be deemed to be an Event of Default unless and
until such Default shall remain unremedied to CITBC's satisfaction for a period
of ten (10) Business Days from the date of such Default;
(E) breach by the Company of any warranty, representation or covenant of Section
3, Paragraphs 3 (other than the third sentence of paragraph 3) and 4; Section 6,
Paragraphs 3 and 4 (other than the first sentence of paragraph 4); Section 7,
Paragraphs 1,5,6, 9, 10, 11 and 13;
(F) failure of the Company to pay any of the Obligations on the due date
thereof, provided that nothing contained herein shall prohibit CITBC from
charging such amounts to the Company's account on the due date thereof; or
(G) the Company shall I) engage in any "prohibited transaction" as defined in
ERISA, II) have any "accumulated funding deficiency" as defined in ERISA, III)
have any "reportable event" enumerated in subsection c(1), c(5), c(6) or c(13)
of Section 4303 of ERISA, or have any other "reportable event" and fail to give
CITBC prompt
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written notice thereof, IV) terminate any Plan, as defined in ERISA or V) be
engaged in any proceeding in which the Pension Benefit Guaranty Corporation
shall seek appointment, or is appointed, as trustee or administrator of any
Plan, as defined in ERISA; and with respect to this sub-paragraph (g) such event
or condition x) remains uncured for a period of thirty (30) Business Days from
date of occurrence and y) could, in the reasonable opinion of CITBC, subject the
Company to any tax, penalty or other liability material to the business,
operations or financial condition of the Company.
2. Upon the occurrence of a Default and/or an Event of Default, at the option of
CITBC, all loans and advances provided for in paragraph 1 of Section 3 of this
Financing Agreement shall be thereafter in CITBC's sole discretion and the
obligation of CITBC to make revolving loans and/or open Letters of Credit shall
cease unless such Default is cured to CITBC's reasonable satisfaction within the
applicable grace period or Event of Default is waived by CITBC and at the option
of CITBC upon the occurrence of an Event of Default: (A) all Obligations shall
become immediately due and payable; (B) CITBC may charge the Company the Default
Rate of Interest on all then outstanding or thereafter incurred Obligations in
lieu of the interest provided for in paragraphs one and two of Section 8 of this
Financing Agreement provided I) CITBC has given the Company written notice of
the Event of Default, provided, however, that no notice is required if the Event
of Default is the Event listed in paragraph 1(c) of this Section 10 and II) the
Company has failed to cure the Event of Default within ten (10) Business Days
after x) CITBC deposited such notice in the United States mail or y) the
occurrence of the Event of Default listed in paragraph 1(c) of this Section 10;
and (C) CITBC may immediately terminate this Financing Agreement upon notice to
the Company, PROVIDED, HOWEVER, that no notice of termination is required if the
Event of Default is the Event listed in paragraph 1(c) of this Section 10. The
exercise of any option is not exclusive of any other option which may be
exercised at any time by CITBC.
3. Immediately upon the occurrence of any Event of Default, CITBC may to the
extent permitted by law: (A) remove from any premises where same may be located
any and all documents, instruments, files and records, and any receptacles or
cabinets containing same, relating to the Accounts, or CITBC may use, at the
Company's expense, such of the Company's personnel, supplies or space at the
Company's places of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon; (B) bring suit, in the name of the Company or CITBC, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to I) accelerate or extend the time of payment, II)
settle, compromise, release in whole or in part any amounts owing on any
Accounts and III) issue credits in the name of the Company or CITBC; (C) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without
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advertisement, at public or private sale, for cash, on credit or otherwise, at
CITBC's sole option and discretion, and CITBC may bid or become a purchaser at
any such sale, free from any right of redemption, which right is hereby
expressly waived by the Company; (D) foreclose the security interests created
herein by any available judicial procedure, or to take possession of any or all
of the Inventory and Equipment without judicial process, and to enter any
premises where any Inventory and Equipment may be located for the purpose of
taking possession of or removing the same and (E) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. CITBC shall have
the right, without notice or advertisement, to sell, lease, or otherwise dispose
of all or any part of the Collateral whether in its then condition or after
further preparation or processing, in the name of the Company or CITBC, or in
the name of such other party as CITBC may designate, either at public or private
sale or at any broker's board, in lots or in bulk, for cash or for credit, with
or without warranties or representations, and upon such other terms and
conditions as CITBC in its sole discretion may deem advisable, and CITBC shall
have the right to purchase at any such sale. If any Inventory and Equipment
shall require rebuilding, repairing, maintenance or preparation, CITBC shall
have the right, at its option, to do such of the aforesaid as is necessary, for
the purpose of putting the Inventory and Equipment in such saleable form as
CITBC shall deem appropriate. The Company agrees, at the request of CITBC, to
assemble the Inventory and Equipment and to make it available to CITBC at
premises of the Company or elsewhere and to make available to CITBC the premises
and facilities of the Company for the purpose of CITBC's taking possession of,
removing or putting the Inventory and Equipment in saleable form. However, if
notice of intended disposition of any Collateral is required by law, it is
agreed that ten (10) Business Days notice shall constitute reasonable
notification and full compliance with the law. The net cash proceeds resulting
from CITBC's exercise of any of the foregoing rights, (after deducting all
charges, costs and expenses, including reasonable attorneys' fees) shall be
applied by CITBC to the payment of the Company's Obligations, whether due or to
become due, in such order as CITBC may elect, and the Company shall remain
liable to CITBC for any deficiencies, and CITBC in turn agrees to remit to the
Company or its successors or assigns, any surplus resulting therefrom. The
enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative. The mortgage, deed of trust or assignment on the
Real Estate shall govern the rights and remedies of CITBC thereto.
SECTION 11. TERMINATION
-----------
Except as otherwise permitted herein, CITBC may terminate this Financing
Agreement and the Line of Credit only as of the third or any subsequent
Anniversary Date and then only by giving the Company
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at least sixty (60) days prior written notice of termination. Notwithstanding
the foregoing CITBC may terminate the Financing Agreement immediately upon the
occurrence of an Event of Default, PROVIDED, HOWEVER, that if the Event of
Default is an event listed in paragraph 1(c) of Section 10 of this Financing
Agreement, CITBC may regard the Financing Agreement as terminated and notice to
that effect is not required. This Financing Agreement, unless terminated as
herein provided, shall automatically continue from Anniversary Date to
Anniversary Date. The Company may terminate this Financing Agreement and the
Line of Credit at any time upon at least sixty (60) days' prior written notice
to CITBC; PROVIDED, HOWEVER, that if such termination is on a date other than
the third Anniversary Date or any subsequent Anniversary Date, the Company shall
pay to CITBC, immediately on demand, the Early Termination Fee, unless such
termination occurs in connection with a sale of all or substantially all of the
capital stock or assets of the Company which results in the repayment in full of
all Obligations, in which case no Early Termination Fee shall be owed by the
Company to CITBC. All Obligations shall become due and payable as of any
termination hereunder or under Section 10 hereof and, pending a final
accounting, CITBC may withhold any balances in the Company's account (unless
supplied with an indemnity satisfactory to CITBC) to cover all of the Company's
Obligations, whether absolute or contingent, including contingent Obligations
with respect to Letters of Credit outstanding at the time of termination. All of
CITBC's rights, liens and security interests shall continue after any
termination until all Obligations have been paid and satisfied in full.
SECTION 12. MISCELLANEOUS
-------------
1. The Company hereby waives diligence, demand, presentment and protest and any
notices thereof as well as notice of nonpayment. No delay or omission of CITBC
or the Company to exercise any right or remedy hereunder, whether before or
after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by CITBC of any right or remedy precludes any
other or further exercise thereof, or precludes any other right or remedy.
2. This Financing Agreement and the documents executed and delivered in
connection therewith constitute the entire agreement between the Company and
CITBC; supersede any prior agreements; can be changed only by a writing signed
by both the Company and CITBC; and shall bind and benefit the Company and CITBC
and their respective successors and assigns.
3. In no event shall the Company, upon demand by CITBC for payment of any
indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any
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provision herein or in any agreement made in connection herewith, CITBC shall
never be entitled to receive, charge or apply, as interest on any indebtedness
relating hereto, any amount in excess of the maximum amount of interest
permissible under applicable law. If CITBC ever receives, collects or applies
any such excess, it shall be deemed a partial repayment of principal and treated
as such; and if principal is paid in full, any remaining excess shall be
refunded to the Company. This paragraph shall control every other provision
hereof and of any other agreement made in connection herewith.
4. If any provision hereof or of any other agreement made in connection herewith
is held to be illegal or unenforceable, such provision shall be fully severable,
and the remaining provisions of the applicable agreement shall remain in full
force and effect and shall not be affected by such provision's severance.
Furthermore, in lieu of any such provision, there shall be added automatically
as a part of the applicable agreement a legal and enforceable provision as
similar in terms to the severed provision as may be possible.
5. THE COMPANY AND CITBC EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT. THE COMPANY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
6. Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered when hand delivered or sent by facsimile, or three
Business Days after deposit in the United State mails, with proper first class
postage prepaid and addressed to the party to be notified as follows:
(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
00 Xxxxx XxXxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Regional Manager
Telecopier No. (000) 000-0000
(B) if to the Company at:
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Vice
President-Finance and CFO
Telecopier No. (000) 000-0000
with a copy to:
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Erwin, Martinkus, Xxxx & Xxxxx
000 X. Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxxx, Esq.
Telecopier No. (000) 000-0000
or to such other address as any party may designate for itself by
like notice.
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement to
be executed, agreed to, accepted and delivered in Chicago, Illinois by their
proper and duly authorized officers as of the date set forth above.
THE CIT GROUP/BUSINESS CREDIT, INC.
By:/s/ Xxx Xxxxxxxx
-------------------------------
Title: Vice President
CERION TECHNOLOGIES INC.
By:/s/Xxxxxxx X. Xxxxx
-------------------------------
Title: Vice President/Finance
35
