LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") made this 15 day of
September, 1998 by and between LASALLE NATIONAL BANK, a national banking
association ("Bank"), 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000-0000,
and
PSI INDUSTRIES, INC.
0000-X XXXXX XXXXXX XXXXXX
XXXX XXXXX, XXXXXXX 00000-0000 ("Borrower")
[insert entity designation(s) and address(es)of principal place of business].
WITNESSETH:
WHEREAS, Borrower may, from time to time, request Loans from Bank. and the
parties wish to provide for the terms and conditions upon which such Loans, if
made by Bank, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or
extension) hereafter made to Borrower by Bank, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Borrower, the parties agree as follows:
1. DEFINITIONS.
(a) "Account," "Account Debtor," "Chattel Paper," "Documents," "Equipment,"
"General Intangibles," "Goods," "Instruments," 'Inventory," and 'Investment
Property" shall have the respective meanings assigned to such terms, as of the
date of this Agreement in the Illinois Uniform Commercial Code.
(b) "Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under common control with Borrower.
(c) "Collateral" shall mean al of the property of Borrower described in
paragraph 4 hereof, together with all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Bank to secure, either
directly or indirectly, repayment of any of the Liabilities.
(d) "Eligible Account" shall mean an Account owing to Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without limiting
Bank's discretion, Bank shall, in general, consider an Account to be an Eligible
Account if it meets, and so long as it continues to meet, the following
requirements:
(i) it is genuine and in all respects what ft purports to be;
(ii) it is owned by Borrower, Borrower has the right to subject it to a
security interest in favor of Bank or assign it to Bank and ft is subject to a
first priority perfected security interest in favor of Bank and to no other
claim, lien, security interest or encumbrance whatsoever, other than Permitted
Liens;
(iii) it arises from (A) the performance of services by Borrower and
such services have been fully performed and acknowledged and accepted by the
Account Debtor thereunder, or (B) the sale or lease of Goods by Borrower, and
such Goods have been completed in accordance with the Account Debtor's
specification (if any) and delivered to and accepted by the Account Debtor, such
Account Debtor has not refused to accept any of the Goods, returned or offered
to return any of the Goods which are the subject of such Account and Borrower
has possession of, or Borrower has delivered to Bank (at Bank's request),
shipping and delivery receipts evidencing delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable within ninety (90) days after the date of the
invoice and does not remain unpaid ninety (90) days past the invoice date
thereof, provided, however, that if more than fifty percent (50%) of the
aggregate dollar amount of invoices owing by a particular Account Debtor remain
unpaid ninety (90) days after the respective invoice dates thereof, then all
Accounts owing by that Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor thereunder. arid is not subject to setoff, counterclaim,
credit, allowance or adjustment by such Account Debtor, or to any claim by such
Account Debtor denying liability thereunder in whole or in part;
(vi) it does not arise out of a contract or order which fails in any
material respect to comply with the requirements of applicable law,
(vii) the Account Debtor thereunder is not a director, officer,
employee or agent of Borrower, or a Subsidiary, Parent or Affiliate;
(viii) it is not an Account with respect to which the Account Debtor is
the United States of America or any department agency or instrumentality
thereof. unless Borrower assigns its right to payment of such Account to Bank
pursuant to, and in full compliance with, the Assignment of Claims Act of 1940,
as amended;
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(ix) it is not an Account with respect to which the Account Debtor is
located in a state which requires Borrower, as a precondition to commencing or
maintaining an action in the courts of that state. either to (A) receive a
certificate of authority to do business and be in good standing in such state;
or (B) file a notice of business activities report or similar report with such
state's taxing authority, unless (x) Borrower has taken one of the actions
described in clauses (A) or (B); (y) the failure to take one of the actions
described in either clause (A) or (B) may be cured retroactively by Borrower at
its election; or (z) Borrower has proven, to Bank's satisfaction, that ft is
exempt from any such requirements under any such state's laws;
(x) it is an Account which arises out of a sale made in the ordinary
course of Borrower's business;
(xi) the Account Debtor is a resident or citizen of, and is located
within, the United States of America;
(xii) it is not an Account with respect to which the Account Debtors
obligation to pay is conditional upon the Account Debtor's approval of the Goods
or services or is otherwise subject to any repurchase obligation or return right
as with sales made on a xxxx-and-hold, guaranteed sale, sale on approval, sale
or return or consignment basis;
(xiii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue; or (B) which
violates any of the covenants of Borrower contained in this Agreement;
(xiv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to Borrower, exceeds a credit limit determined by
Bank, in its sole discretion, for that Account Debtor (except that Accounts
excluded from Eligible Accounts solely by reason of this subparagraph 1 (d)(xiv)
shall be Eligible Accounts to the extent of such credit limit); and
(xv) it is not an Account with respect to which the prospect of payment
or performance by the Account Debtor is or will be impaired, as determined by
Bank in its sole discretion.
(e) "Eligible Inventory" shall mean Inventory of Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without limiting
Bank's discretion, Bank shall, in general, consider Inventory to be Eligible
Inventory if it meets, and so long as it continues to meet, the following
requirements:
(i) it is owned by Borrower, Borrower has the right to subject it to a
security interest in favor of Bank and it is subject to a first priority
perfected security interest in favor of Bank and to no other claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens;
(ii) it is located on the premises listed on Exhibit B and is not in
transit;
(iii) if held for sale or lease or furnishing under contracts of
service, it is (except as Bank may otherwise consent in writing) new and unused
and free from defects which would, in Bank's sole determination, affect its
market value;
(iv) it is not stored with a bailee, consignee, warehouseman, processor
or similar party unless Bank has given its prior written approval and Borrower
has caused any such bailee, consignee, warehouseman, processor or similar party
to issue and deliver to Bank, in form and substance acceptable to Bank, such
Uniform Commercial Code financing statements, warehouse receipts, waivers and
other documents as Bank shall require;
(v) Bank has determined in accordance with Bank's customary business
practices that it is not unacceptable due to age, type, category or quantity,
and
(vi) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue; or (B)
which violates any of the covenants of Borrower contained in this Agreement.
(f) "Environmental Law" shall mean all federal. state, district local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect applicable to the Borrower's business or
facilities owned or operated by Borrower, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal. transport or handling of Hazardous Materials.
(g) "Event of Default" shall have the meaning specified in paragraph 12
hereof.
(h) "Exhibit A" shall mean the exhibit entitled Exhibit A - Special
Provisions which is attached hereto and made a part hereof.
(i) "Exhibit B" shall mean the exhibit entitled Exhibit B - Business and
Collateral Locations which is attached hereto and made a part hereof.
(j) "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides.
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation, any that are or become classified as hazardous or toxic under any
Environmental Law).
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(k) "Indemnified Party" shall have the meaning specified in paragraph 14
hereof.
(l) "Letter of Credit" shall mean any letter of credit issued by Bank on
behalf of Borrower.
(m) "Liabilities" shall mean any and all obligations, liabilities and
indebtedness of Borrower to Bank or to any parent, affiliate or subsidiary of
Bank of any and every kind and nature, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct indirect
absolute, contingent or otherwise (including, without limitation, obligations of
performance), whether several, joint or joint and several, and whether arising
or existing under written or oral agreement or by operation of law.
(n) "Loans" shall mean all loans and advances made by Bank to or on behalf
of Borrower hereunder.
(o) "Loan Limit" shall have the meaning specified in paragraph 1 of Exhibit
A.
(p) "Lock Box" and "Lock Box Account" shall have the meanings specified in
paragraph 7 hereof.
(q) "Obligor" shall mean Borrower and each other Person who is or shall
become primarily or secondarily liable for any of the Liabilities.
(r) "Original Term" shall have the meaning specified in paragraph 9 hereof.
(s) "Other Agreements" shall mean all agreements, instruments and
documents. other than this Agreement including, without Imitation, guaranties,
mortgages, trust deeds, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and all
other writings heretofore, now or from time to time hereafter executed by or on
behalf of Borrower or any other Person and delivered to Bank or to any parent
affiliate or subsidiary of Bank in connection with the Liabilities or the
transactions contemplated hereby.
(t) "Parent" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding equity of Borrower and, if Borrower is a partnership,
the general partner of Borrower.
(u) "Permitted Liens" shall mean (i) statutory liens of landlords, carriers,
warehousemen. processors, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder or amounts which are being contested in good
faith and by appropriate proceedings and for which Borrower has maintained
adequate reserves; (ii) liens or security interests in favor of Bank; (iii)
zoning restrictions and easements, licenses, covenants and other restrictions
affecting the use of real property that do not individually or in the aggregate
have a material adverse effect on Borrower's ability to use such real property
for its intended purpose in connection with Borrower's business; (iv) liens
specifically permitted by Bank in writing; and (v) liens arising in connection
with financing or refinancing of the acquisition of the Equipment, provided that
such borrowings are permitted by this Agreement, and further provided that such
liens are limited to the Equipment being financed or refinanced;
(v) "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party or foreign or United States government (whether
federal, state, county, city, municipal, or otherwise), including, without
limitation. any instrumentality, division, agency, body or department thereof.
(w) "Renewal Term" shall have the meaning specified in paragraph 9 hereof.
(x) "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower or any partnership or joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by Borrower or of which Borrower is a general partner.
(y) "Tangible Net Worth" shall have the meaning specified in subparagraph
11 (o) hereof.
(z) "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or
(i) with respect to all matters, determinations, fundings and payments in
connection with LIBOR Rate Loans, any day on which banks in London, England or
Chicago, Illinois are required or permitted to close, and (ii) with respect to
all other matters, any day that banks in Chicago, Illinois are permitted or
required to close.
(aa) "INTEREST PERIOD" shall have the meaning specified in Paragraph
(5)(b) of Exhibit A of the Agreement hereto.
(bb) "LIBOR RATE LOANS" shall mean the Loans bearing interest at the
rate set forth in Paragraph (5)(b) of Exhibit A of the Agreement.
(cc) "PRIME RATE LOANS" shall mean the Loans bearing interest at the
rates set forth in Paragraph (5)(a) of Exhibit A of the Agreement.
2. LOANS. Subject to the terms and conditions of this Agreement (including
Exhibit A) and the Other Agreements, during the Original Term and any Renewal
Term, Bank may, in its sole discretion, make such Loans to Borrower as Borrower
shall from time to time request The aggregate unpaid principal of all Loans
outstanding at any one time shall not exceed the Loan Limit set forth in Exhibit
A and shall bear interest at the rates set forth in Exhibit A. ALL LOANS SHALL
BE REPAID BY BORROWER UPON DEMAND BY BANK. Prior to Bank making such demand,
Loans shall be repaid as provided elsewhere in this Agreement If at any time the
outstanding principal balance of the Loans exceeds the Loan Limit or any portion
of the Loans exceeds any applicable sublimit set forth in Exhibit A, Borrower
shall immediately, and without the necessity o! a demand by Bank, pay to Bank
such amount as may be necessary to eliminate such excess and Bank shag apply
such payment to the Liabilities in such order as Bank shall determine in its
sole discretion. Borrower hereby authorizes Bank, in its sole discretion, to
charge any of Borrower's accounts or advance Loans to make any payments of
principal, interest fees, costs and expenses required by this agreement All
loans shall, in Bank's sole discretion, be evidenced by one or more promissory
notes in form and substance satisfactory to Bank. However, if such Loans are not
so evidenced, such Loans may be evidenced solely by entries upon the books and
records maintained by Bank.
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3. FEES AND CHARGES. Borrower shall pay to Bank, in addition to all other
amounts payable hereunder, the fees and charges se forth in Exhibit A. R is the
intent of the parties that the rate of interest and the other charges to
Borrower under this Agreement shall be lawful; therefore, if for any reason the
interest or other charges payable under this Agreement are found by a court of
competent jurisdiction, in a final determination, to exceed the limit which Bank
may lawfully charge Borrower, then the obligation to pay interest and other
charges shall automatically be reduced to such limit and, if any amount in
excess of such limit shall have been paid, then such amount shall be refunded to
Borrower.
4. GRANT OF SECURITY INTEREST TO BANK. As security for the payment of all Loans
now or in the future made by Bank to Borrower hereunder and for the payment or
other satisfaction of all other Liabilities, Borrower hereby assigns to Bank and
grants to Bank a continuing security interest in the following property of
Borrower, whether now or hereafter owned. existing, acquired or arising and
wherever now or hereafter located: (a) all Accounts (whether or not Eligible
Accounts) and all Goods whose sale, lease or other disposition by Borrower has
given rise to Accounts and that have been returned to, or repossessed or stopped
in transit by, Borrower; (b) all Chattel Paper, Instruments, Documents and
General Intangibles (including, without limitation, all patents, patent
applications, trademarks, trademark applications, trade-names, trade secrets,
goodwill, copyrights, copyright applications, registrations, licenses,
franchises, customer lists, tax refund claims, claims against carriers and
shippers, guarantee claims, contracts rights, security interests, security
deposits and any rights to indemnification); (c) all Inventory (whether or not
Eligible Inventory); (d) all Goods (other than Inventory), including. without
limitation, Equipment, vehicles and fixtures; (e) all Investment Property; (all
deposits and cash; (g) any other property of Borrower now or hereafter in the
possession, custody or control of Bank or any agent or any parent affiliate or
subsidiary of Bank or any participant with Bank in the Loans for any purpose
(whether for safekeeping, deposit collection, custody, pledge, transmission or
otherwise), and (h) all additions and accessions to, substitutions for, and
replacements, products and proceeds of the foregoing property, including,
without limitation, proceeds of all insurance policies insuring the foregoing
property, and all of Borrower's books and records relating to any of the
foregoing and to Borrowers business.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Borrower shall, at Bank's request, at anytime and from time to time, execute and
deliver to Bank such financing statements, documents and other agreements and
instruments (and pay the cost of filing or recording the same in all pubic
offices deemed necessary or desirable by Bank) and do such other acts and things
as Bank may deem necessary or desirable in its sole discretion in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Bank (free and clear of all other lens, claims,
encumbrances and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
liabilities, and in order to facilitate the collection of the Collateral.
Borrower irrevocably hereby makes, constitutes and appoints Bank (and all
Persons designated by Bank for that purpose) as Borrower's true and lawful
attorney and agent-in-fact to execute such financing statements, documents and
other agreements and instruments and do such other acts and things as may be
necessary to preserve and perfect Bank's security interest in the Collateral.
Borrower further agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until otherwise notified by
Bank following the occurrence of an Event of Default, Borrower shall have the
right, except as otherwise provided in this Agreement, in the ordinary course of
Borrower's business, to (a) sell, lease or furnish under contracts of service
any of Borrower's Inventory normally held by Borrower for any such purpose: and
(b) use and consume any raw materials, work in process or other materials
normally held by Borrower for such purpose; provided, however, that a sale in
the ordinary course of business shall not include any transfer or sale in
satisfaction, partial or complete of a debt owed by Borrower, provided further
that a sale of Inventory to a creditor of Borrower resulting in a valid Account
owing to the Borrower by such creditor shall not constitute a transfer or sale
in satisfaction, partial, or complete, of a debt owed by Borrower.
; provided, that so long as no Event of Default has occurred, payments received
by Bank shall not be applied to the unmatured portion of the LIBOR Rate Loans,
but shall be held in an interest bearing cash collateral account maintained by
Bank until the earlier of (i) the last day of the Interest Period applicable to
such LIBOR Rate Loan and (ii) the occurrence of an Event of Default; provided
further, that so long as no Event of Default has occurred, the immediately
available funds held in such interest bearing cash collateral account may be
disbursed, at Borrower's discretion, to Borrower so long as after giving effect
to such disbursement, Borrower's availability under Paragraph 1 hereto, at such
time equals or exceeds the outstanding Liabilities at such time.
(a) Borrower shall direct all of its Account Debtors to make all payments
on the Accounts directly to a post office box (the "Lock Box") designated by.
and under the exclusive control of, Bank or another financial institution
acceptable to Bank. Borrower shall establish an account (the "Lock Box Account')
in Bank's name with Bank or such other financial institution acceptable to Bank,
into which all payments received in the Lock Box shall be deposited, and into
which Borrower will immediately deposit all payments received by Borrower for
Inventory or services in the identical form in which such payments were
received, whether by cash or check. If Borrower. any Affiliate or Subsidiary, or
any shareholder, officer. director. employee or agent of Borrower or any
Affiliate or Subsidiary, or any other Person acting for or in concert with
Borrower shall receive any monies, checks, notes, drafts or other payments
relating to or as proceeds of Accounts or other Collateral, Borrower and each
such Person shall receive all such items in trust for, and as the sole and
exclusive property of, Bank and, immediately upon receipt thereof, shall remit
the same (or cause the same to be remitted) in kind to the Lock Box Account. If
the Lock Box Account is not established with Bank, the financial institution
with which the Lock Box Account is established shall acknowledge and agree, in a
manner satisfactory to Bank, that the amounts on deposit in such Lock Box
Account are the sole and exclusive property of Bank, that such financial
institution has no right to setoff against the Lock Box Account or against any
other account maintained by such financial institution into which the contents
of the Lock Box Account are transferred, and that such financial institution
shall wire, or otherwise transfer in immediately available funds in a manner
satisfactory to Bank, funds deposited in the Lock Box Account on a daily basis
as such funds are collected. Borrower agrees that all payments made to such Lock
Box Account or otherwise received by Bank, whether in respect of the Accounts or
as proceeds of other Collateral or otherwise, will be applied on account of the
liabilities in accordance with the terms of this Agreement. /If the Lock Box
Account is established with Bank, Borrower agrees to pay all fees, costs and
expenses in connection with opening and maintaining the Lock Box Account and
depositing for collection by Bank any check or other item of payment received by
Bank on account of the Liabilities. All of such fees, costs and expenses shall
constitute Loans hereunder, shall be payable to Bank by Borrower upon demand,
and, until paid, shall bear interest at the highest rate then applicable to
Loans hereunder. AD checks, drafts, instruments and other items of payment or
proceeds of Collateral shall be endorsed by Borrower to Bank, and, if that
endorsement of any such item shall not be made for any reason, Bank is hereby
irrevocably authorized to endorse the same on Borrowers behalf. For the purpose
of this paragraph, Borrower irrevocably hereby makes, constitutes and appoints
Bank (and al Persons designated by Bank for that purpose) as Borrower's true and
lawful attorney and agent-in-fact (i) to endorse Borrowers name upon said items
of payment and/or proceeds of Collateral and upon any Chattel Paper, Document,
Instrument, invoice or similar document or agreement relating to any Account of
Borrower or Goods pertaining thereto; (ii) to take control in any manner of any
item of payment or proceeds thereof and (i) to have access to any lock box or
postal box into which any of Borrower's mail is deposited, and open and process
all mail addressed to Borrower and deposited therein.
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(b) Bank may, at any time and from time to time after the occurrence of an
Event of Default, whether before or after notification to any Account Debtor and
whether before or after the maturity of any of the Liabilities, (i) enforce
collection of any of Borrowers Accounts or other amounts owed to Borrower by
suit or otherwise: (ii) exercise all of Borrowers rights and remedies with
respect to proceedings brought to collect any Accounts or other amounts -owed to
Borrower; (iii) surrender, release or exchange all or any part of any Accounts
or other amounts owed to Borrower, or compromise or extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder; (iv) sell or assign any Account of Borrower or other amount owed to
Borrower upon such terms, for such amount and at such time or times as Bank
deems advisable; (v) prepare. file and sign Borrowers name on any proof of claim
in bankruptcy or other similar document against any Account Debtor or other
Person obligated to Borrower and (vi) do all other acts and things which are
necessary, in Bank's sole discretion, to fulfill Borrowers obligations under
this Agreement and to allow Bank to collect the Accounts or other amounts owed
to Borrower. In addition to any other provision hereof, Bank may at any time,
after the occurrence of an Event of Default. at Borrower's expense, notify any
parties obligated on any of the Accounts to make payment directly to Bank of any
amounts due or to become due thereunder.
(c) For purposes of calculating interest, Bank shall, within two ( 2 )
business days after receipt by Bank at its office in Chicago, Illinois of (i)
checks; and (ii) cash or other immediately available funds from collections of
items of payment and proceeds of any Collateral, apply the whole or any part of
such collections or proceeds against the Liabilities in such order as Bank shall
determine in its sole discretion. For purposes of determining the amount of
Loans available for borrowing purposes, (i) checks: and (ii) cash or other
immediately available funds from collections of items of payment and proceeds of
any Collateral shall be applied in whole or in part against the Liabilities, in
such order as Bank shall determine in ft sole discretion, on the day of receipt,
subject to actual collection.
(d) Bank in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Bank in respect thereof and all costs, fees and
expenses including, without limitation, reasonable attorney fees. all court
costs and all other charges relating thereto incurred by Bank shall constitute
Loans, payable by Borrower to Bank on demand and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
(e) Promptly upon Borrowers receipt of any portion of the Collateral
evidenced by an agreement, Instrument or Document including, without limitation,
any Chattel Paper, Borrower shall deliver the original thereof to Bank together
with an appropriate endorsement or other specific evidence of assignment thereof
to Bank (in form and substance acceptable to Bank). If an endorsement or
assignment of any such items shall not be made for any reason, Bank is hereby
irrevocably authorized, as Borrowers attorney and agent-in-fact, to endorse or
assign the same on Borrowers behalf.
8. SCHEDULES AND REPORTS.
(a) Within ten (10) days after the close of each calendar month, and at
such other times as may be requested by Bank from time to time hereafter,
Borrower shall deliver to Bank (i) a schedule identifying each Account and which
Accounts constitute Eligible Accounts together with copies of the invoices when
requested by Bank (with evidence of shipment attached) pertaining to each such
Account for the month (or other applicable period) immediately preceding: and
(ii) such additional schedules, certificates, reports and information with
respect to the Collateral as Bank may from time to time require. Bank, through
its officers, employees or agents, shall have the fight, at any time and from
time to time in Bank's name, in the name of a nominee of Bank or in Borrowers
name, to verify the validity, amount or any other matter relating to any of
Borrowers Accounts, by mail, telephone, telegraph or otherwise. Borrower shall
reimburse Bank, on demand, for all costs, fees and expenses incurred by Bank in
this regard.
(b) Without limiting the generality of the foregoing, Borrower shall
deliver to Bank, at least once a month (or more frequently when requested by
Bank), a report with respect to Borrower's Inventory. Borrower shall immediately
notify Bank of any event causing loss or depreciation in value of Borrowers
Inventory (other than normal depreciation occurring in the ordinary course of
business) and which exceeds $50,000.00.
(c) All schedules, certificates, reports and other items delivered by
Borrower to Bank hereunder shall be executed by an authorized representative of
Borrower and shall be in such form and contain such information as Bank shall
specify.
9. TERMINATION. This Agreement shall be in effect from the date hereof until
September 15, 2001 (the "Original Term") and shall automatically renew itself
from year to year thereafter (each such one-year renewal 8eing'ref'erred to
herein as a "Renewal Term") unless (a) Bank makes demand for repayment prior to
the end of the Original Term or the then current Renewal Term; (b) the due date
of the Liabilities is accelerated pursuant to paragraph 13 hereof or (c)
Borrower elects to terminate this Agreement at the end of the Original Term or
at the end of any Renewal Term by giving Bank written notice of such election at
least ninety (90) days prior to the end of the Original Term or the then current
Renewal Term and by paying all of the Liabilities in full on the last day of
such term. Absent an Event of Default, Bank will give at least ninety (90) days
notice of its intention to demand the Loan or terminate this Agreement prior to
the end of the Original Term or any Renewal Term. If one-or more of the events
specified in clauses (a), (b) and (c) occurs, then (i) Bank shall not make any
additional Loans on or after the date identified as the date on which the
Liabilities are to be repaid; and (i) this Agreement shall terminate on the date
thereafter that the Liabilities are paid in full. At such time as Borrower has
repaid all of the Liabilities and this Agreement has terminated, Borrower shall
deliver to Bank a release, in form and substance satisfactory to Bank of all
obligations and liabilities of Bank and its officers, directors, employees,
agents, parents, subsidiaries and affiliates to Borrower, and Borrower is
obtaining new financing from another lender, Borrower shall deliver such
lender's indemnification of Bank, in form and substance satisfactory to Bank,
for checks which Bank has credited to Borrower's account, but which subsequently
are dishonored for any reason. If, during the term of this Agreement, Borrower
prepays all or any portion of the Liabilities from any source other than income
from the ordinary course of operations of Borrower's business, Borrower agrees
to pay to Bank, as a prepayment fee, in addition to the payment of all other
Liabilities, an amount equal to the product of (i) fifty percent (50%) of the
average monthly interest earned by Bank on the Loans made hereunder preceding
the date of prepayment, multiplied by(ii)the number of full and partial months
remaining from the date of prepayment to the end of the Original Term or the
then current Renewal Term.
-5-
10. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower hereby represents,
warrants and covenants that
(a) the financial statements delivered or to be delivered by Borrower to
Bank at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect in all material respects the financial condition of
Borrower, and there has been no material adverse change in the financial
condition, the operations or any other status of Borrower since the date of the
financial statements delivered to Bank most recently prior to the date of this
Agreement;
(b) (i) the office where Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Borrowers principal place of business
and all of Borrowers other places of business, locations of Collateral and post
office boxes are as set forth in Exhibit B; and (ii) Borrower shall promptly
(but in no event less than ten (10) days prior thereto) advise Bank in writing
of the proposed opening of any new place of business or new location of
Collateral, the closing of any existing place of business or location of
Collateral, any change in the location of Borrowers books, records and accounts
(or copies thereof or the opening or closing of any post office box of Borrower;
(c) the Collateral, including, without limitation, the Equipment (except
any part thereof which Borrower shall have advised Bank in writing consists of
Collateral normally used in more than one state) is and shall be kept or, in the
case of vehicles, based. only at the addresses set forth on Exhibit B, and at
other locations within the continental United States of which Bank has been
advised by Borrower in writing;
(d) if any of the Collateral consists of Goods of a type normally used in
more than one state, whether or not actually so used, (i) Borrower shall
immediately give written notice to Bank of any use of any such Goods in any
state other than a state in which Borrower has previously advised Bank such
Goods shall be used; and (ii) such Goods shall not, unless Bank shall otherwise
consent in writing, be used outside of the continental United States;
(e) Borrower has not made, and shall not make. any loans or advances to any
Affiliate or other Person except for advances to employees, officers and
directors of Borrower for travel and other expenses arising in the ordinary
course of Borrowers business;
(f) each Account or item of Inventory which Borrower shall, expressly or by
implication, request Bank to classify as an Eligible Account or as Eligible
Inventory, respectively, shall. as of the time when such request is made,
conform in all respects to the requirements of such classification as set forth
in the respective definitions of "Eligible Account" and "Eligible Inventory" as
set forth herein and as otherwise established by Bank from time to time, and
Borrower shall promptly notify Bank in writing if any such Eligible Account or
Eligible Inventory shall subsequently become ineligible:
(g) Borrower is and shall at all times during the Original Term or any
Renewal Term be the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) Borrower has the right and power and is duly authorized and empowered
to enter into, execute and deliver this Agreement and the Other Agreements and
perform its obligations hereunder and thereunder. Borrowers execution, delivery
and performance of this Agreement and the Other Agreements does not and shall
not conflict with the provisions of any statute, regulation, ordinance or rule
of taw, or any agreement contract or other document which may now or hereafter
be binding on Borrower where such conflict would have a material adverse effect
on its business, property, assets, operations or condition, financial or
otherwise and Borrowers execution, delivery and performance of this Agreement
and the Other Agreements shall not result in the imposition of any lien or other
encumbrance upon any of Borrowers property under any existing indenture,
mortgage, deed of trust loan or credit agreement or other agreement or
instrument by which Borrower or any of its property may be bound or affected;
(i) there are no actions or proceecings which are pending or to the best
of Borrower's knowledge threatened against Borrower which might result in any
material adverse change in its financial condition or materially adversely
affect the Collateral and Borrower shall, promptly upon becoming aware of any
such pending or threatened action or proceeding, give written notice thereof to
Bank;
(j) (i) Borrower has obtained and shall maintain all licenses,
authorizations, approvals and permits, the lack of which would have a material
adverse effect on the operation of its business; and (ii) Borrower is and shall
remain in compliance in all material respects with all applicable federal,
state, local and foreign statutes, orders, regulations, rules and ordinances
(including, without limitation, Environmental Laws and statutes, orders,
regulations, rules and ordinances relating to taxes, employer and employee
contributions and similar items, securities, ERISA (as hereinafter defined) or
employee health and safety) the failure to comply with which would have a
material adverse effect on its business, property, assets, operations or
condition, financial or otherwise;
(k) all written information now, heretofore or hereafter furnished by
Borrower to Bank is and shall be true and correct in all material respects as of
the date with respect to which such information was or is furnished;
(l) Borrower is not conducting, permitting or suffering to be conducted,
nor shall ft conduct, permit or suffer to be conducted any activities pursuant
to or in connection with which any of the Collateral is now, or will (while any
Liabilities remain outstanding) be owned by any Affiliate; provided, however,
that Borrower may enter into transactions with Affiliates for the purchase or
sale of Inventory or services in the ordinary course of business pursuant to
terms that are no less favorable to Borrower than the terms upon which such
transfers or transactions would have been made had they been made to or with a
Person that is not an Affiliate and, in connection therewith, may transfer cash
or property to Affiliates for fair value;
(m) Borrower's name has always been as set forth on the first page of this
Agreement and Borrower uses no trade names or division names in the operation of
its business, except as otherwise disclosed in writing to Bank; Borrower shall
notify Bank in writing within ten (10) days of the change of its name or the use
of any trade names or division names not previously disclosed to Bank in
writing;
-6-
(n) with respect to Borrowers Equipment (i) Borrower has good and
indefeasible and merchantable tide to and ownership of all equipment (ii)
Borrower shall keep and maintain the Equipment in good operating condition and
repair and shall make all necessary replacements thereof and repairs thereto so
that the value and operating efficiency thereof shall at al times be preserved
and maintained; (iii) Borrower shall not, permit any such items to become a
fixture to real estate or an accession to other personal property; and (iv)
Borrower, immediately on demand by Bank, shall deliver to Bank any and all
evidence of ownership of, including, without limitation, certificates of tide
and applications of tide to, any of the Equipment;
(o) this Agreement and the Other Agreements to which Borrower is a party
are the legal, valid and binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms;
(p) Borrower is and shall remain solvent is and shall be able to pay its
debts as they become due, has and shall continue to have capital sufficient to
carry on its business, now owns and shag continue to own property having a value
both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(q) Borrower is not now obligated, nor shad R create, incur, assume or
become obligated (directly or indirectly), for any loans or other indebtedness
for borrowed money other than the Loans, except that Borrower may (i) borrow
money from a Person other than Bank on an unsecured and subordinated basis d a
subordination agreement in favor of Bank and in form and substance satisfactory
to Bank is executed and delivered to Bank relative thereto; (ii) maintain any
present indebtedness to any Person which has been disclosed to Bank in writing
and consented to in writing by Bank; (iii) incur unsecured indebtedness to trade
creditors in the ordinary course of Borrowers business; (iv) incur purchase
money indebtedness or capitalized lease obligations in connection with capital
expenditures pursuant to subparagraph 11 (q) of this Agreement; and (v) incur
other lease obligations requiring payments not to exceed $100,000.00 during any
fiscal year of Borrower;
(r) Borrower does not own any margin securities, and none of the proceeds
of the Loans hereunder shall be used for the purpose of purchasing or carrying
any margin securities or for the purpose of. reducing or ret6ng any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation G or Regulation U of the Board of Governors
of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed in writing to Bank, Borrower has no
Parents, Subsidiaries or other Affiliates or divisions, nor is Borrower engaged
in any joint venture or partnership with any other Person;
(t) if Borrower is a corporation, limited liability company or partnership,
Borrower is duly organized, validly existing and in good standing in its state
of organization and Borrower is duty qualified and in good standing in all
states where the nature and extent of the business transacted by ft or the
ownership of ft assets makes such qualification necessary or if Borrower is not
so qualified, Borrower may cure any such failure without losing any of its
rights or affecting Bank's rights;
(u) Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound. nor does Borrower
know of any dispute regarding any contract lease or commitment which is material
to the continued financial success and well-being of Borrower;
(v) there are no controversies pending or, to the best of Borrower's
knowledge, threatened between Borrower and any of its employees, other than
employee grievances arising in the ordinary course of business which are not, in
the aggregate, material to the continued financial success and well-being of
Borrower, and Borrower is in compliance in all material respects with all
federal and state laws respecting employment and employment terms, conditions
and practices;
(w) Borrower possesses, and shall continue to possess, adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, trade styles and trade names to continue to conduct its business
as heretofore conducted by it
(x) (i) Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by ft) in any manner which at any time
violates in any material respect any Environmental Law or any license, permit,
certificate, approval or similar authorization thereunder and the operations of
the Borrower comply in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations thereunder
(ii) there has been no investigation, proceeding, complaint order, directive,
claim. citation or notice by any governmental authority or any other Person, nor
is any pending or to the best of the Borrower's knowledge threatened, and
Borrower shall immediately notify Bank upon becoming aware of any such
investigation, proceeding, complaint, order, directive, claim, citation or
notice and take prompt and appropriate actions to respond thereto, with respect
to any non-compliance with or violation of the requirements of any Environmental
Law by the Borrower or the release, spill or discharge, threatened or actual, of
any Hazardous Material or the generation, use. storage, treatment
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects the
Borrower, or its business, operations or assets, or any properties at which the
Borrower has transported, stored or disposed of any Hazardous Materials, unless
the foregoing shall not reasonably be expected to have a material adverse effect
on Borrower (iii) Borrower has no material liability, (contingent or otherwise)
in connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment transportation,
manufacture, handling, production or disposal of any Hazardous Materials; and
(iv) without limiting the generality of the foregoing, Borrower shall, following
the determination by Bank that there is non-compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any
non-compliance, with any Environmental Law, at Borrowers expense, cause an
independent environmental engineer acceptable to Bank to conduct such tests of
the relevant site as are appropriate and prepare and deliver a report setting
forth the result of such tests, a proposed plan for remediation and an estimate
of the costs thereof; and
-7-
(y) Borrower has paid and discharged, and shall at al times hereafter
promptly pay and discharge all obligations and liabilities under the Employee
Retirement Income Security Act of 1974 (as amended, modified or restated from
time to time, "ERISA") of a character which if unpaid or unperformed might
result in the imposition of a lien against any of its properties or assets and
will promptly notify the Bank of (i) the occurrence of any "reportable event"
(as defined in ERISA) which might result in the termination by the Pension
Benefit Guaranty Corporation ("PBGC") of any employee benefit plan ("Plan")
covering any officers or employees of the Borrower, any benefits of which are,
or are required to be, guaranteed by PBGC; the receipt of any notice from PBGC
of its intention to seek termination of any Plan or appointment of a trustee
therefor and (iii) its intention to terminate or withdraw from any Plan;
provided, that Borrower shall not terminate any Plan or withdraw therefrom if
such withdrawal or termination shall result in any liability to Borrower.
Borrower represents, warrants and covenants, to Bank that all
representations and warranties of Borrower contained in this Agreement (whether
appearing in paragraphs 10 or 11 hereof or elsewhere) shall be true at the time
of Borrower's execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full and satisfaction of al of the Liabilities and termination of this
Agreement, and shall be remade by Borrower at the time each Loan is made
pursuant to this Agreement, provided, that representations and warranties made
as of a particular date shall be true and correct as of such date.
11. ADDITIONAL COVENANTS OF BORROWER. Until payment and satisfaction in full of
all Liabilities and termination of this Agreement unless Borrower obtains Bank's
prior written consent waiving or modifying any of Borrowers covenants hereunder
in any specific instance, Borrower agrees as follows:
(a) Borrower shall at al times keep accurate and complete books, records
and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit B;
(b) Borrower agrees to deliver to Bank the following financial information,
all of which shall be prepared in accordance with generally accepted accounting
principles consistently applied: (i) no later than twenty (20) days after-each
calendar month, copies of internally prepared financial statements, including,
without limitation, balance sheets and statements of income, retained earnings
and cash flow of Borrower, certified by the Chief Financial Officer of Borrower,
(ii) no later than thirty (30) days after the end of each of the first three
quarters of Borrower's fiscal year a balance sheet operating statement and
reconciliation of surplus of Borrower, which quarterly financial statements may
be unaudited but shall be certified by the Chief Financial Officer of Borrower,
and (iii) no later than seventy-five (75) days after the end of each of
Borrower's fiscal years, audited annual financial statements with an unqualified
opinion by independent certified public accountants selected by Borrower and
reasonably satisfactory to Bank, which financial statements shall be accompanied
by a letter from such accountants acknowledging that they are aware that a
primary intent of Borrower in obtaining such financial statements is to
influence Bank and that Bank is relying upon such financial statements in
connection with the exercise of its rights hereunder and copies of any
management letters sent to the Borrower by such accountants;
(c) Borrower shall promptly advise Bank in writing of any material adverse
change in the business, assets or condition, financial or otherwise, of
Borrower, the occurrence of any Event of Default hereunder or the occurrence of
any event which, d uncured, will become an Event of Default hereunder after
notice or lapse of time (or both);
(d) Bank or any Persons designated by it shall have the right at any time,
to call at Borrowers places of business at any reasonable times, and, without
hindrance or delay, to inspect the Collateral and to inspect audit check and
make extracts from Borrowers books, records, journals, orders, receipts and any
correspondence and other data relating to Borrowers business, the Collateral or
any transactions between the parties hereto. and shall have the right to make
such verification concerning Borrowers business as Bank may consider reasonable
under the circumstances. Borrower shall furnish to Bank such information
relevant to Bank's rights under this Agreement as Bank shall at any time and
from time to time request Borrower authorizes Bank to discuss the affairs,
finances and business of Borrower with any officers, employees or directors of
Borrower or with any Affiliate or the officers, employees or directors of any
Affiliate, and to discuss the financial condition of Borrower with Borrowers
independent pubic accountants. Any such discussions shall be without liability
to Bank or to Borrower's independent public accountants. Borrower shall pay to
Bank all customary fees and out-of-pocket expenses incurred by Bank in the
exercise of Its rights hereunder, and al of such fees and expenses shall
constitute Loans hereunder, shall be payable on demand and, until paid, shall
bear interest at the highest rate then applicable to Loans hereunder
(e) Borrower shall:
(i) keep the Collateral property housed and insured for the full
insurable value thereof against loss or damage by fire, theft explosion,
sprinklers, collision (in the case of motor vehicles) and such other risks as
are customarily insured against by Persons engaged in businesses similar to that
of Borrower, with such companies, in such amounts, with such deductions, and
under policies in such form as shall be satisfactory to Bank Original (or
certified) copies of such policies of insurance have been or shall be delivered
to Bank within ninety (90) days after the date hereof, together with evidence of
payment of all premiums therefor, and shall contain an endorsement in form and
substance acceptable to Bank, showing loss under such insurance policies payable
to Bank. Such endorsement, or an independent instrument furnished to Bank, shall
provide that the insurance company shall give Bank at least thirty (30) days
written notice before any such policy of insurance is altered or canceled and
that no act, whether willful or negligent, or default of Borrower or any other
Person shall affect the fight of Bank to recover under such policy of insurance
in case of loss or damage. In addition, Borrower shall cause to be executed and
delivered to Bank an assignment of proceeds of its business interruption
insurance policies. Borrower hereby directs all insurers under al policies of
insurance to pay all proceeds payable thereunder directly to Bank. Borrower
irrevocably makes, constitutes and appoints Bank (and all officers, employees or
agents designated by Bank) as Borrower's true and lawful attorney (and
agent-in-fact) for the purpose of making, setting and adjusting claims under
such policies of insurance, endorsing the name of Borrower on any check, draft
instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance, provided, however, that if no Event of Default shall have
occurred, Borrower may make, settle and adjust claims involving less than the
$50,000.00 in the aggregate without Bank's consent; and (ii) maintain, at its
-8-
expense, such public liability and third party property damage insurance as is
customary for Persons engaged in businesses similar to that of Borrower with
such companies and in such amounts, with such deductibles and under policies in
such form as shag be satisfactory to Bank and original (or certified) copies of
such policies have been or shall be delivered to Bank within ninety (90) days
after the date hereof, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing Bank as
additional insured thereunder and providing that the insurance company shall
give Bank at least thirty (30) days written notice before any such policy shall
be altered or canceled.
If Borrower at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay any premium relating
thereto, then Bank without waiving or releasing any obligation or default by
Borrower hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Bank deems advisable. Any sums disbursed by Bank
in connection with any such actions, including, without limitation. court costs,
expenses, other charges relating thereto and reasonable attorneys' fees, shall
constitute Loans hereunder, shall be payable on demand by Borrower to Bank and,
until paid, shall bear interest at the highest rate then applicable to Loans
hereunder
(f) Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; shall keep the Collateral in good condition, repair and order,
ordinary wear and tear excepted, shall permit Bank to examine any of the
Collateral at any time and wherever the Collateral may be located; shall not
permit the Collateral, or any part thereof, to be levied upon under execution,
attachment distraint or other legal process; shall not sell, lease, grant a
security interest in or otherwise dispose of any of the Collateral except as
expressly permitted by this Agreement; shall not settle or adjust any Account
identified by Borrower as an Eligible Account or with respect to which the
Account Debtor is an Affiliate without the consent of Bank, provided. that
following the occurrence of an Event of Default Borrower shall not settle or
adjust any Account without the consent of Bank: and shall not secrete or abandon
any of the Collateral, or remove or permit removal of any of the Collateral from
any of the locations listed on Exhibit 8, except for the removal of Inventory
sold in the ordinary course of Borrower's business as permitted herein;
(g) all monies and other property obtained by Borrower from Bank pursuant
to this Agreement shall be used solely for business purposes of Borrower;
(h) Borrower shall, at the request of Bank, indicate on its records
concerning the Collateral a notation, in form satisfactory to Bank, of the
security interest of Bank hereunder; subject to an extensions granted by the
applicable taxing authority.
(i) Borrower shall file all required tax returns and pay all of its taxes
when due including, without limitation, taxes imposed by federal, state or
municipal agencies, and shall cause any liens for taxes to be promptly released;
provided, that Borrower shall have the right to contest the payment of such
taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrowers financial statements; (ii) the contesting of any
such payment does not give rise to a lien for taxes; (iii) Borrower keeps on
deposit with Bank (such deposit to be held without interest) an amount of money
which, in the sole judgment of Bank, is sufficient to pay such taxes and any
interest or penalties that may accrue thereon, or, the Borrower maintains
adequate reserves on its balance sheet in accordance with generally accepted
accounting principals and (iv) if Borrower fails to prosecute such contest with
reasonable diligence, Bank may apply the money so deposited t of such taxes. if
Borrower fails to pay any such taxes and in the absence of any such contest by
Borrower. Bank may (but shall be under no obligation to) advance and pay any
sums required to pay any such taxes and/or to secure the release of any lien
therefor, and any sums so advanced by Bank shall constitute Loans hereunder,
shall be payable by Borrower to Bank on demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder;
(j) Borrower shall not assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business;
(k) Borrower shall not (i) enter into any merger or consolidation: (ii)
sell, lease or otherwise dispose of any of its assets other than in the ordinary
course of business; (ii) purchase all or substantially all of the assets of any
Person or division of such Person; or (iv) enter into any other transaction
outside the ordinary course of Borrower's business, including, without
limitation, any purchase, redemption or retirement of any shares of any class of
its stock or any other equity interest and any issuance of any shares of, or
warrants or other fights to receive or purchase any shares of, any class of its
stock or any other equity interest;
(l) Borrower shall not declare or pay any dividend or other distribution
(whether in cash or in kind) on any class of its stock (K Borrower is a
corporation) or on account of any equity interest in Borrower (if Borrower is a
partnership, limited liability company or other type of entity);
(m) Borrower shag not purchase or otherwise acquire, or contract to
purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States;
(n) Borrower shall not amend its organizational documents or change its
fiscal year/or enter into a new line of business materially different from
Borrowers current business;
(o) See Exhibit A unless such actions would not have an adverse effect on
Borrower's business, property, assets, operations or condition, financial or
otherwise, as determined by Bank in its sole discretion, and Bank has received
ten (10) days prior written notice of such amendment of change, and "TANGIBLE
NET WORTH" being defined for purposes of this subparagraph as Borrowers
shareholders' equity (including retained earnings) LESS the book value of all
intangible assets as determined solely by Bank on a consistent basis plus the
amount of any LIFO reserve plus the amount of any debt subordinated to Bank, all
as determined under generally accepted accounting principles applied on a basis
consistent with the financial statement dated July 31, 1998 except as set forth
herein;
-9-
(p) Borrower shag reimburse Bank for all costs and expenses, including,
without limitation, legal expenses and reasonable attorney's fees, incurred by
Bank in connection with the (i) documentation and consummation of this
transaction and any other transactions between Borrower and Bank, including,
without limitation, Uniform Commercial Code and other public record searches and
flings, overnight courier or other express or messenger delivery, appraisal
costs, surveys, title insurance and environmental audit or review costs; (ii)
collection, protection or enforcement of any rights in or to the Collateral;
(iii) collection of any Liabilities; and (iv) administration and enforcement of
any of Bank's rights under this Agreement Borrower shall also pay all normal
service charges with respect to all accounts maintained by Borrower with Bank
and any additional services requested by Borrower from Bank. All such costs,
expenses and charges shall constitute Loans hereunder, shall be payable by
Borrower to Bank on demand, and, until paid, shall bear interest at the highest
rate then applicable to Loans hereunder,
(q) Borrower shall not purchase or otherwise acquire (including, without
limitation, acquisition by way of capitalized lease), or commit to purchase or
acquire, any fixed asset if, after giving effect to such purchase or other
acquisition, the aggregate cost of all such fixed assets purchased or otherwise
acquired would exceed $100,000.00 during any fiscal year of Borrower; and
(r) Neither Borrower nor any Affiliate shall use any portion of the
proceeds of the Loans, either directly or indirectly, for the purpose of (i)
purchasing any securities underwritten or privately placed by ABN AMRO
Securities (USA) Inc. ("AASI"), an affiliate of Bank; or (ii) purchasing from
AASI any securities in which AASI makes a market or (iii) refinancing or making
payments of principal, interest or dividends on any securities issued by
Borrower or any Affiliate, and underwritten, privately placed or dealt in by
AASI.
12. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "EVENT OF DEFAULT' by Borrower hereunder:
(a) the failure of any Obligor to pay when due, declared due, or demanded
by Bank, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements; provided that any such failure by
Borrower under subparagraphs 10(b) (ii), 10(g) (but only with respect to
involuntarily created liens, claims, security interests and encumbrances) and
10( ) (i) and 10 (j) (ii) of this Agreement shall constitute an Event of Default
hereunder until the fifteenth (15th) day following the occurrence thereof; any
of the Collateral in an amount in excess of $50,000.00 in the aggregate for all
such events during any year of the Original term or and any Renewal term as
determined by Bank in its sole discretion.
(c) the failure of any Obligor to perform, keep or observe (after any
applicable notice and cure period, if any) any of the covenants, conditions,
promises, agreements or obligations of such Obligor under any other agreement
with any Person if such failure may have a material adverse effect on such
Obligor's business, property, assets, operations or condition, financial or
otherwise;
(d) the making or furnishing by any Obligor to Bank of any representation,
warranty, certificate, schedule, report or other communication within or in
connection with this Agreement or the Other Agreements or in connection with any
other agreement between such Obligor and Bank, which is untrue or misleading in
any material respect as of the date made;
(e) the loss, theft, damage or destruction of any of the Collateral in an
amount in excess of $50,000 in the aggregate for all such events during any year
of the Original Term or any Renewal Term as determined by Bank in its sole
discretion (except as permitted hereby) sale, lease or furnishing under a
contract of service of, any of the collateral;
(f) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral, other than the
Permitted Liens and involuntary liens securing amounts less than Fifty Thousand
Dollars ($50,000.00) and which a bond acceptable to Bank in its sole discretion
has been posted within ten (10) days of its creation, or the making or any
attempt to make any levy, seizure or attachment thereof; provided that with
respect to states in which creditors obtain a prejudgment attachment without
notice, such attachment shall be an Event of Default only if the attachment
remains in effect for ten (10) days;
(g) the commencement of any proceedings in bankruptcy by or against any
Obligor or for the liquidation or reorganization of any Obligor, or alleging
that such Obligor is insolvent or unable to pay its debts as they mature, or for
the readjustment or arrangement of any Obligors debts, whether under the United
States Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing for the relief of debtor, or the commencement of any
analogous statutory or non-statutory proceedings involving any Obligor;
provided, however, that if such commencement of proceedings against such Obligor
is involuntary, such action shag not constitute an Event of Default unless such
proceedings are not dismissed within thirty (30) days after the commencement of
such proceedings;
(h) the appointment of a receiver or trustee for any Obligor, for any of
the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however, that
if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within thirty
(30) days after the commencement of such proceedings;
(i) the entry of any judgment or order against any Obligor which remains
unsatisfied or undischarged and in effect for thirty (30) days after such entry
without a stay of enforcement or execution to the extent such judgments exceed
$50,000.00;
(j) the death of any Obligor who is a natural Person, or of any general
partner of any Obligor which is a partnership, or any member of a limited
liability company or the dissolution of any Obligor which is a partnership,
limited liability company or corporation;
(k) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Bank pursuant to which such Person has guaranteed to Bank the
payment of all or any of the Liabilities or has granted Bank a security interest
in or lien upon some or all of such Person's real and/or personal property to
secure the payment of all or any of the Liabilities;
(l) the institution in any court of a criminal proceeding against any
Obligor which would have a material adverse effect on such Obligor's business,
property, assets operation or condition, financial or otherwise, or the
indictment of any Obligor for any crime other than traffic and boating tickets
and misdemeanors not punishable by jail terms; and
(m) Bank shall reasonably feel insecure for any material reason whatsoever,
including, without limitation, fear of removal or waste of the Collateral, or
any part thereof.
-10-
13. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in subparagraph
12(g) hereof, all of Borrower's Liabilities shall immediately and automatically
become due and payable, without notice of any kind. Upon the occurrence of any
other Event of Default, all Liabilities may, at the option of Bank, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.
(b) Upon the occurrence of an Event of Default Bank may exercise from time
to time any rights and remedies available to it under the Uniform Commercial
Code and any other applicable law in addition to, and not in lieu of, any rights
and remedies expressly granted in this Agreement or in any of the Other
Agreements and all of Bank's rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law. In particular, but not by way of
limitation of the foregoing, Bank may, without notice, demand or legal process
of any kind, take possession of any or all of the Collateral (in addition to
Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found, and may enter
onto any of Borrowers premises where any of the Collateral may be, and search
for, take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Bank shall have the right to
store the same at any of Borrower's premises without cost to Bank. At Bank's
request, Borrower shall, at Borrower's expense. assemble the Collateral and make
it available to Bank at one or more places to be designated by Bank and
reasonably convenient to Bank and Borrower. Borrower recognizes that if Borrower
fails to perform, observe or discharge any of its Liabilities under this
Agreement or the Other Agreements, no remedy at law will provide adequate relief
to Bank, and agrees that Bank shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages. Any notification of intended disposition of any of the Collateral
required by law will be deemed reasonably and property given if given at least
five (5) calendar days before such disposition. Any proceeds of any disposition
by Bank of any of the Collateral may be applied by Bank to the payment of
expenses in connection with the Collateral, including, without limitation, legal
expenses and reasonable aftorneys' fees, and any balance of such proceeds may be
applied by Bank toward the payment of such of the Liabilities, and in such order
of application, as Bank may from time to time elect
14. INDEMNIFICATION. Borrower agrees to defend (with counsel satisfactory to
Bank), protect, indemnify and hold harmless Bank each affiliate or subsidiary of
Bank, and each of their respective officers, directors, employees, attorneys and
agents (each an "Indemnified Party") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature (including, without
limitation. the disbursements and the reasonable fees of counsel for each
Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct indirect or consequential and whether based on
any federal, state or local laws or regulations, including, without limitation,
securities, Environmental Laws and commercial laws and regulations, under common
law or in equity, or based on contract or otherwise) in any manner relating to
or arising out of this Agreement or any Other Agreement or any act event or
transaction related or attendant thereto, the making or issuance and the
management of the Loans or any Letter of Credit or the use or intended use of
the proceeds of the Loans or any Letter of Credit; provided, however, that
Borrower shall not have any obligation hereunder to any Indemnified Party with
respect to matters caused by or resulting from the willful misconduct or gross
negligence of such Indemnified Party. To the extent that the undertaking to
indemnify set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower shall satisfy such undertaking
to the maximum extent permitted by applicable law. Any liability, obligation,
loss, damage, penalty, cost or expense covered by this indemnity shall be paid
to each Indemnified Party on demand, and, failing prompt payment shall, together
with interest thereon at the highest rate then applicable to Loans hereunder
from the date incurred by each Indemnified Party until paid by Borrower, be
added to the Liabilities of Borrower and be secured by the Collateral. The
provisions of this paragraph 14 shall survive the satisfaction and payment of
the other Liabilities and the termination of this Agreement.
15. NOTICE. All written notices and other written communications with respect to
this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Bank shall be sent to it at
000 Xxxxx XxXxxxx Xxxxxx Xxxxxxx, Xxxxxxxx 00000-0000, Attention: Asset Based
Lending Division, and in the case of Borrower shall be sent to ft at its
principal place of business set forth on the first page of this Agreement or as
otherwise directed by Borrower in writing.
16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This Agreement and
the Other Agreements are submitted by Borrower to Bank for Bank's acceptance or
rejection at Bank's principal place of business as an offer by Borrower to
borrow monies from Bank now and from time to time hereafter, and shall not be
binding upon Bank or become effective until accepted by Bank in writing, at said
place of business. If so accepted by Bank, this Agreement and the Other
Agreements shall be deemed to have been made at said place of business. THIS
AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT
LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OF THE STATE
OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT
JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity. without invalidating the remainder of such provision or remaining
provisions of this Agreement
To induce Bank to accept this Agreement, Borrower irrevocably agrees that,
subject to Bank's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE
OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. Borrower hereby irrevocably appoints and designates the
Secretary of State of Illinois, whose address is Springfield, Illinois (or any
other person having and maintaining a place of business in such state whom
Borrower may from time to time hereafter designate upon ten (10) days written
notice to Bank and whom Bank has agreed, in its sole discretion, in writing is
-11-
satisfactory and who has executed an agreement in form and substance
satisfactory to Bank agreeing to act as such attorney and agent), as Borrower's
true and lawful attorney and duty authorized agent for acceptance of service of
legal process. Borrower agrees that service of such process upon such person
shall constitute personal service of such process upon Borrower. Bank agrees to
endeavor to provide a copy of such process to the law firm of Nason, Yeager,
Gerson, White & Xxxxx, P.A., Attn: Xxxx X. Xxxxxxx, Esq. by mail at the address
of 0000 Xxxx Xxxxx Xxxxx Xxxxxxxxx, Xxxx Xxxx Xxxxx, Xxxxxxx 00000 or by
facsimile transmission at facsimile number (000) 000-0000. Failure of Bank to
provide a copy of such process shall not impair Bank's rights hereunder.
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS
PARAGRAPH.
17. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Borrower or such other person who is a party to such Other
Agreement and Bank. Borrower may not sell, assign or transfer this Agreement or
the Other Agreements or any portion thereof, including, without limitation,
Borrower's rights, titles, interest remedies, powers or duties hereunder and
thereunder. Borrower hereby consents to Bank's sale, assignment transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or the Other Agreements, or of any portion thereof, or participations
therein, including, without limitation, Bank's rights, titles, interest
remedies, powers and/or duties and agrees that it shall execute and deliver such
documents as Bank may request in connection with any such sale, assignment,
transfer or other disposition.
18. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this Agreement are
for convenience of reference only. and shall not govern the interpretation of
any of the provisions of this Agreement.
19. POWER OF ATTORNEY. Borrower acknowledges and agrees that its appointment of
Bank as its attorney and agent-in-fact for the purposes specified in this
Agreement is an appointment coupled with an interest and shall be irrevocable
until all of the Liabilities are satisfied and paid in full and this Agreement
is terminated.
20. CONFIDENTIALITY. Borrower and Bank hereby agree and acknowledge that any and
all information relating to Borrower which is (i) furnished by Borrower to Bank
(or to any affiliate of Bank); and (ii) non-public, confidential or Proprietary
in nature, shall be kept confidential by Bank or such affiliate in accordance
with applicable law; provided, however, that such information and other credit
information relating to Borrower may be distributed by Bank or such affiliate to
Bank's or such affiliate's directors, officers, employees, attorneys,
affiliates, assignees, participants, auditors and regulators, and upon the order
of a court or other governmental agency having jurisdiction over Bank or such
affiliate, to any other party. Borrower and Bank further agree that this
provision shall survive the termination of this Agreement.
21. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) BORROWER AND BANK EACH HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED
TORTIOUS CONDUCT BY BORROWER OR BANK OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND
BANK IN NO EVENT SHALL BANK BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR
CONSEQUENTIAL DAMAGES.
(b) Borrower hereby waives demand, presentment protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(c) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY BANK OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL; provided that in the event that Bank seeks to enforce its rights
hereunder by judicial process, Bank shall provide Borrower with such notices as
are required by law.
(d) Bank's failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement or any of the Other
Agreements shall not waive, affect or diminish any right of Bank thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Bank of an Event of Default under this Agreement or any default under any of the
Other Agreements shall not suspend, waive or affect any other Event of Default
under this Agreement or any other default under any of the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different kind or character. No delay on the part of Bank in the exercise of any
right or remedy under this Agreement or any Other Agreement shall preclude other
or further exercise thereof or the exercise of any right or remedy. None of the
undertakings, agreements, warranties, covenants. and representations of Borrower
contained in this Agreement or any of the Other Agreements and no Event of
Default under this Agreement or default under any of the Other Agreements shall
be deemed to have been suspended or waived by Bank unless such suspension or
waiver is in writing, signed by a duly authorized officer of Bank and directed
to Borrower specifying such suspension or waiver.
-12-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the 15 day of SEPTEMBER, 1998.
PSI Industries, Inc. LASALLE NATIONAL BANK
By: /S/ XXXXXXXX XXXXXXXX By:/S/
------------------------- ---------------------------------
Title: CEO Title: VICE PRESIDENT
and W.M.M.
By:
-----------------------------
Title:
-13-
EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS
Attached to and made apart of that certain Loan and Security Agreement of even
date herewith between PSI INDUSTRIES, INC. ("Borrower") and LASALLE NATIONAL
BANK ("Bank").
A. Borrowers Business Locations (please indicate which location is the principal
place of business and at which locations originals and all copies of Borrower's
books, records and accounts are kept).
1. 0000-X Xxxxx Xxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000-0000
[principal place of business/ owned property]
2.
3.
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of Borrower. Please indicate the relationship of such location to Borrower
(i.e. public warehouse, processor, etc.).
1. Achiever Service Corp.
0000-X X.X. Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
(processor location]
2. Industrias Achiever
Boulevard Circuito Siglo XXI #1928 CyD
Parque Industrial EX-XXI
Mexicali, BC Mexico
(processor location]
3. Vastfame Investment Ltd.
20B Max Share Center
000 Xxxxx Xxxx Xxxxx Xxxxx
Xxxx Xxxx
[processor location]
4. Mass Chance Electronics (Shenzhen) Co. Ltd.
Xxxx Xxxx 0/X 000 Xxxxxxxx
Xxxxxxxxxxx Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxx
[processor location]
-14-
