Exhibit 10.150
LOAN AND SECURITY AGREEMENT
BY AND AMONG
AD ART ELECTRONIC SIGN CORPORATION AND
XXXXXXXX DIGITAL DESIGNS, LTD., AS BORROWER,
AND
SOUTHTRUST BANK, AS LENDER
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT made this 17th day of January, 2001, between AD ART
ELECTRONIC SIGN CORPORATION, a Florida corporation ("Ad Art"), XXXXXXXX DIGITAL
DESIGNS, LTD., an Ontario corporation ("Xxxxxxxx," and together with Ad Art, the
"Borrower"), and SOUTHTRUST BANK, an Alabama banking corporation formerly doing
business as SouthTrust Bank, National Association, with its principal office in
Birmingham, Alabama ("Bank" or "Lender").
R E C I T A L S:
As more particularly described in the Restructuring Agreement, the
Borrower has requested Bank to restructure certain outstanding obligations of
the Borrower to the Bank and, as part of such restructure, to lend to the
Borrower the sum of $8,122,489.56 and an additional sum of up to $1,000,000.00
on a term loan basis, and to maintain the issuance of a letter of credit in the
amount of $2,500,000.00, and the Bank is willing to do so, but only upon the
terms and subject to the conditions hereinafter set forth and set forth in the
Restructuring Agreement.
NOW, THEREFORE, Bank and Borrower agree as follows:
1. DEFINED TERMS. As used in this Loan and Security Agreement,
the following terms shall have the following meanings:
1.1 ACCOUNT DEBTOR -- any Person who is or may become
obligated under or on account of an Account, Chattel Paper, General Intangible,
or Instrument (as defined in the Code).
1.2 ACCOUNTS -- all accounts, accounts receivable, chattel
paper, leases, instruments, documents, promissory notes, contracts for receipt
of money, conditional sales contracts, and evidences of Debt of or owing to or
acquired by Borrower whether now existing or hereafter arising, whether or not
it has been earned by performance, and whether or not it has been billed,
including (i) all accounts and other rights to payment of money which arise or
result from Borrower's selling, leasing, or other disposition of Borrower's
goods or the providing of services by Borrower, (ii) the proceeds of any
insurance covering the Collateral, and (iii) the return of unearned insurance
premiums.
1.3 AD ART -- Ad Art Electronic Sign Corporation, a
Florida corporation.
1.4 AD ART COLLATERAL -- Ad Art's Accounts, Documents,
Instruments, Equipment, Real Estate, Chattel Paper, General Intangibles, and
Inventory, the other property and interests of Ad Art described in Section 8.1
("Security Interest") and elsewhere in the Loan Documents, wherever located and
whether now owned by Ad Art, or hereafter acquired, and the parts, proceeds,
products, profits, replacements, and substitutions of each, as the case may be.
1.5 AD ART OBLIGATIONS -- the Obligations.
1.6 AD ART LOAN -- means the Restructured Loan.
1.7 AD ART NOTE -- means the Restructured Note.
1.8 AD ART WINDDOWN LOAN -- means the Winddown Loan.
1.9 AD ART WINDDOWN NOTE -- means the Winddown Note.
1.10 AFFILIATE -- any director or officer of Borrower or any
Person who directly, indirectly or beneficially, owns 5% or more of the capital
stock of Borrower, or 5% of the voting stock or rights of Borrower, or any
member of the immediate family of any such officer, director, or stockholder, or
any corporation or other entity which is controlled by, controls, or is under
common control with, Borrower; provided, however, that any Affiliates of Xxxxxxx
Xxxxx Capital Partners, L.P., that are not Affiliates of the Borrower shall not
be an Affiliate hereunder.
1.11 AGREEMENT -- this Loan and Security Agreement.
1.12 BANK -- SouthTrust Bank, an Alabama banking corporation
formerly known as SouthTrust Bank, National Association, and its successors and
assigns.
1.13 BASE RATE -- the rate of interest designated by Bank
periodically as its Base Rate. The Base Rate is not necessarily the lowest
interest rate charged by Bank.
1.14 BORROWER -- Ad Art and Xxxxxxxx, jointly and severally.
1.15 CALIFORNIA MORTGAGE -- that certain Deed of Trust,
Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated June 22, 1999 executed by Ad Art, as Trustor, to Commonwealth Land Title
Insurance Company, as Trustee, for benefit of the Bank, as beneficiary, and
recorded on June 21, 1999 at 99080018 in Office of County Clerk of San Joacquin
County, California.
1.16 CALIFORNIA REAL ESTATE -- the real property and
improvements described in the California Mortgage.
1.17 CASH CAPITAL EXPENDITURES -- expenditures made from
cash or from proceeds of the Restructured Loan (but not from the proceeds of a
term loan or purchase money financing) for the acquisition of any fixed assets
or improvements, replacements, substitutions, or additions thereto which have a
useful life of more than one year, including the direct or indirect acquisition
of such assets by way of increased product or service charges, offset items, or
otherwise.
1.18 CAPITALIZED LEASE OBLIGATIONS -- any Debt represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Debt shall be
the capitalized amount of such obligations determined in accordance with GAAP.
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1.19 CHATTEL PAPER -- all writing or writings which
evidence both a monetary obligation and a security interest in or the lease of
specific goods, together with any guarantees, letters of credit, and other
security therefor.
1.20 CODE -- the Uniform Commercial Code, as in effect in
Alabama from time to time.
1.21 COLLATERAL -- collectively, the Ad Art Collateral,
the Xxxxxxxx Collateral, and any and all of Borrower's Accounts, Documents,
Instruments, Equipment, Real Estate, Chattel Paper, General Intangibles, and
Inventory, the other property and interests described in Section 8.1 ("Security
Interest") and elsewhere in the Loan Documents, wherever located and whether now
owned by Borrower or hereafter acquired, and the parts, proceeds, products,
profits, replacements, and substitutions of each, as the case may be.
1.22 CONTINGENT OBLIGATIONS -- means any obligation,
contingent or otherwise of any Person directly or indirectly guaranteeing any
Debt of any Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Debt of such Person (whether arising by virtue
of agreements to keep well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee of
such Debt of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part). Excludes any contingent obligation to
issue stock under an acquisition agreement.
1.23 CONTRACTUAL OBLIGATION -- any provision of any
security issued by a Person or of any agreement, instrument, or undertaking to
which such Person is a party or by which it or any of its property is bound.
1.24 DEBT -- the sum of (i) indebtedness for borrowed
money or for the deferred purchase price of property or services, (ii)
Capitalized Lease Obligations, and (iii) all other items which in accordance
with GAAP would be included in determining total liabilities as shown on a
balance sheet of a Person as at the date as of which Debt is to be determined.
1.25 DEFAULT RATE -- the highest lawful rate of interest
per annum specified in any Note to apply after a default under such Note or, if
no such rate is specified, a rate equal to the lesser of (a) one percent over
the interest rate specified to be the applicable contract interest rate in this
Agreement or (b) the highest rate of interest allowed by law.
1.26 DOCUMENT -- means any paper that is treated in the
regular course of business as adequate evidence that the person in possession of
the paper is entitled to receive, hold, and dispose of the goods the paper
covers, and includes warehouse receipts, bills of lading, certificates of title,
and applications for certificates of title.
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1.27 ENVIRONMENTAL REGULATIONS -- all federal, state, and
local laws, rules, regulations, ordinances, programs, permits, guidances,
orders, and consent decrees relating to the environment or to public health,
safety, and environmental matters, including the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Toxic Substances Control Act, the Clean Water Act,
the Clean Air Act, the River and Harbor Act, the Water Pollution Control Act,
the Marine Protection Research and Sanctuaries Act, the Deep Water Port Act, the
Safe Drinking Water Act, the Superfund Amendments and Reauthorization Act of
1986, the Federal Insecticide, Fungicide and Rodenticide Act, the Mineral Lands
and Leasing Act, the Surface Mining Control and Reclamation Act, the Oil
Pollution Act of 1990, state and federal super lien and environmental cleanup
programs and laws, U.S. Department of Transportation regulations and laws
regulating hazardous, radioactive and toxic materials and underground petroleum
products storage tanks, and all similar state, federal, and local laws and
regulations.
1.28 EQUIPMENT -- all machinery, equipment, fixtures, and
other property used in or purchased for Borrower's business, together with all
increases, parts, fittings, accessories, repairs, equipment, and special tools
now or later affixed to or used in connection with the foregoing property, all
transferable rights of Borrower to the licenses and warrantees (express or
implied) received from the sellers and manufacturers of the foregoing property,
all related claims, credits, setoffs, and other rights of recovery.
1.29 ERISA -- the Employee Retirement Income Security Act
of 1974 and all rules and regulations promulgated thereunder.
1.30 EVENT OF DEFAULT -- any one of the events enumerated
in Article 10 ("Events of Default").
1.31 EXISTING LOAN AGREEMENT -- Loan and Security
Agreement dated June 2, 1999 between Borrower and Bank, as amended by the
Amendment No. 1 to Loan and Security Agreement dated as of March 3, 2000 between
Borrower and Bank, as amended by the Joinder and Forbearance Agreement dated
September 26, 2000 between Borrower and Bank, as amended by the Amendment to
Joinder and Forbearance Agreement dated as of October 31, 2000.
1.32 EXISTING REVOLVING LOAN -- the revolving loan in the
maximum principal amount of $23,000,000.00 made by Lender to Borrower, among
others, pursuant to the Loan and Security Agreement dated June 2, 1999 by and
among Lender and Borrower, among others, as amended by Amendment No. 1 to Loan
and Security Agreement dated March 3, 2000.
1.33 FOCUS MANAGEMENT -- means Focus Management Group,
U.S.A., Inc., a Florida corporation engaged by Borrower to provide financial,
management, and turnaround advice to the Borrower.
1.34 GAAP -- generally accepted accounting principles in
the United States of America as defined by the Financial Accounting Standards
Board or its successor, as in effect from time to time consistently applied.
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1.35 GENERAL INTANGIBLES -- all general intangibles of
Borrower of any kind, whether now owned or hereafter acquired, including all
intangible personal property other than Accounts, Documents, Instruments, and
Chattel Paper, and includes money, contract rights, choses in action, causes of
action, corporate or other business records, deposit accounts, inventions,
designs, formulas, patents, patent applications and/or continuation applications
now pending before the United States Patent Office, trademarks and associated
goodwill, trademarks for which statements-of-use have been filed with the
Trademark Office, but specifically excluding "intent-to-use" trademark
applications, trade names, trade secrets, engineering drawings, goodwill, rights
to prepaid expenses, copyrights, registrations, licenses, franchises, customer
lists, tax refund claims, computer programs and other software, royalty,
licensing, and product rights, all claims under guaranties, security interests
or other security held by or granted to Borrower to secure payment of any of the
Accounts by an Account Debtor, all rights to indemnification, and rights to
retrieval from third parties of electronically processed and recorded data
pertaining to any Collateral, things in action, items, checks, drafts, and
orders in transit to or from Borrower, credits or deposits of Borrower (whether
general or special) that are held by Bank, and all other intangible property of
every kind and nature.
1.36 GOVERNMENTAL AUTHORITY -- means any nation or
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions pertaining to government.
1.37 XXXXXXXX -- means Xxxxxxxx Digital Designs, Ltd., an
ntario corporation.
1.38 XXXXXXXX COLLATERAL -- (a) Xxxxxxxx'x Accounts,
Documents, Instruments, Equipment, Real Estate, Chattel Paper, General
Intangibles, and Inventory, the other property and interests of Xxxxxxxx
described in Section 8.1 ("Security Interest") and elsewhere in the Loan
Documents, wherever located and whether now owned by Ad Art, or hereafter
acquired, and the parts, proceeds, products, profits, replacements, and
substitutions of each, as the case may be, and (b) the Xxxxxxxx Stock.
1.39 XXXXXXXX STOCK -- any and all common and special or
preferred stock issued by Xxxxxxxx and owned by DTEK Signs, U.L.C., a Nova
Scotia unlimited liability company and an Affiliate of the Borrower, and pledged
by DTEK Signs, U.L.C. pursuant to that certain Stock Pledge Agreement dated as
of September 26, 2000.
1.40 INSTRUMENT -- means every instrument of any kind, as
that term is used in the UCC, and includes every promissory note, negotiable
instrument, certificated security, or other writing that evidences a right to
payment of money, that is not a lease or security agreement, and that is
transferred in the ordinary course of business by delivery with any necessary
assignment or indorsement.
1.41 INTERIM OPERATION -- means the operation of Ad Art's
business in the ordinary course during the Interim Period.
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1.42 INTERIM PERIOD -- means the period of Interim
Operation commencing on the date of this Agreement and ending on January 29,
2001, unless earlier terminated by Ad Art or the Bank, in their sole and
absolute discretion.
1.43 INTELLECTUAL PROPERTY -- has the meaning set forth in
Section 5.18.
1.44 INVENTORY -- all inventory of whatever kind or nature
of Borrower, now owned or hereafter acquired by Borrower, and wherever located,
including all goods held for sale or lease or furnished or to be furnished under
a contract for services, and supplies, packaging, raw materials, goods in
transit, work in process, materials used or consumed or to be used or consumed
in Borrower's business or in the processing, packaging, or shipping of same, all
finished goods, and all property, the sale or lease of which has given rise to
Accounts, Chattel Paper, or Instruments, and that has been returned to Borrower
or repossessed by Borrower or stopped in transit, and all warranties and related
claims, credits, setoffs, and other rights of recovery with respect to any of
the foregoing.
1.45 LETTER OF CREDIT -- the 1999 Letter of Credit.
1.46 LETTER OF INTENT -- has the meaning set forth in
Section 6.21 of the Agreement.
1.47 LIEN -- any interest in property (real, personal, or
mixed, and tangible or intangible) securing an obligation owed to, or a claim
by, a Person other than the owner of the property, whether such interest is
based on the common law, statute or contract, and including a security interest,
security title or Lien arising from a security agreement, mortgage, deed of
trust, deed to secure debt, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term
"Lien" shall include covenants, conditions, restrictions, leases, and other
encumbrances affecting any property, except real property covenants running with
the land. For the purpose of this Agreement, Borrower shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the Property has
been retained by or vested in some other Person for security purposes.
1.48 LOAN OR LOANS -- the Restructured Loan, the Winddown
Loan, the 1999 Letter of Credit, and any substitutions therefor, extensions
thereof or renewals thereof.
1.49 LOAN ACCOUNT -- The loan account established on the
books of Bank pursuant to Section 2.2 ("Loan Account").
1.50 LOAN DOCUMENTS -- this Agreement, and each and every
mortgage, deed of trust, note, indenture, security agreement, financing
statement or other instrument executed and delivered to evidence the Loans or
any other Obligation, to constitute collateral for the Loans or any other
Obligation, or to evidence security for the Loans or any other Obligation, and
any and all other agreements, instruments, and documents heretofore, now or
hereafter, executed by Borrower and
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delivered to Bank in respect to the transactions contemplated by this Agreement,
including, without limitation, the Financing Documents, as that term is defined
in the Indenture.
1.51 MATERIAL ADVERSE EFFECT -- with respect to a Person,
a material adverse effect on its business, assets, properties, prospects,
results of operation, or condition (financial or other).
1.52 XXXXXXXX APPLICATION -- the application filed by
Xxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxx against Xxxxxxxx,
Display, DTEK Signs, U.L.C., and the Bank in the Ontario Superior Court of
Justice, commencing the Court File No. 00-2379.
1.53 MORTGAGE -- the California Mortgage.
1.54 MULTIEMPLOYER PLAN -- has the meaning set forth in
Section 4001(a)(3) of ERISA.
1.55 1999 LETTER OF CREDIT --- the letter of credit #
SB2128 in amount of up to $2,546,028.00 dated June 17, 1999, issued by Bank in
favor of the Trustee under the 1999 Indenture, as security for the 1999 Notes.
1.56 NOTES -- each promissory note executed and delivered
by Borrower to Bank evidencing all or part of the Loans, as further described
hereinafter.
1.57 OBLIGATIONS -- all Loans and all other advances,
debts, liabilities, obligations, covenants, and duties owing, arising, due or
payable from Borrower to Bank of any kind or nature, present or future whether
or not evidenced by any note, guaranty or other instrument, whether arising
under this Agreement or any of the other Loan Documents or otherwise, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however evidenced or acquired. The term includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and any other
sums chargeable to Borrower under any of the Loan Documents and all rights Bank
may at any time or times have to reimbursement in connection with any letter of
credit or guaranty issued for Borrower's benefit.
1.58 ORDERLY LIQUIDATION -- means the orderly liquidation
of Ad Art in accordance with the terms of the Orderly Liquidation Budget,
pursuant to which Ad Art shall use its best efforts to liquidate all of its
assets (including, without limitation, the Ad Art Collateral) for the highest
and best prices obtainable, shall disburse the proceeds of the Ad Art Collateral
to the Bank, and shall otherwise wind up its affairs in an orderly and
reasonable means in all respects.
1.59 ORDERLY LIQUIDATION BUDGET -- means the budget
prepared by Focus for the Borrower regarding the projected Cash needed to fund
the Orderly Liquidation of Ad Art, a true and correct copy of which is attached
hereto as EXHIBIT A.
1.60 PARENT -- Display Technologies, Inc., a Nevada
corporation.
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1.61 PERMITTED LIENS -- any Lien of a kind specified as
permitted in Section 7.2 ("Liens and Security Interests").
1.62 PERSON -- an individual, partnership, corporation,
joint stock company, firm, land trust, business trust, unincorporated
organization, limited liability company, or other business entity, or a
government or agency or political subdivision thereof.
1.63 PLAN -- an employee benefit plan now or hereafter
maintained for employees of Borrower that is covered by Title IV of ERISA.
1.64 PROHIBITED TRANSACTION -- any transaction set forth
in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.
1.65 REAL ESTATE -- the California Real Estate.
1.66 REPORTABLE EVENT -- any of the events set forth in
Section 4043(h) of ERISA.
1.67 REQUIREMENT OF LAW -- as to any Person, the articles
of incorporation and bylaws or other organizational or governing documents of
the Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding on the Person or any of its property or to which the Person or a
any of its property is subject.
1.68 RESTRUCTURING AGREEMENT -- the Restructuring
Agreement of even date herewith by and among the Borrower and Lender, among
others.
1.69 RESTRUCTURED LOAN -- has the meaning set forth in
Section 2.1.
1.70 RESTRUCTURED NOTE -- has the meaning set forth in
Section 2.1.
1.71 SPECIAL COLLECTION ACCOUNT -- one or more bank
accounts established by Borrower pursuant to Section 4.2 ("Special Collection
Accounts"), from which Bank has the exclusive right to withdraw or debit funds,
and into which Borrower shall deposit on receipt all checks, drafts, cash, and
other remittances in payment or on account of the Accounts.
1.72 STANDBY LETTER OF CREDIT -- has the meaning set forth
in Section 2.3.
1.73 SUBORDINATED DEBT -- the Debt of Borrower which is
fully subordinated to the Loans (including principal, interest, and agreed
charges) in a manner satisfactory to Bank (which may be either according to its
terms or by separate agreement) and which debt arises from Borrower's actual
receipt of cash loans and not from "in kind" or non-cash consideration or
purchase money financing sources, including Debt of Borrower owed to the
Subordinate Lenders.
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1.74 SUBORDINATE LENDERS -- collectively, Renaissance
Capital Growth and Income Fund III, Inc., Renaissance U.S. Growth and Income
Trust PLC, and Xxxxxxx Enterprises, Inc.
1.75 SUBSIDIARY -- any corporate entity or partnership, or
other business entity which constitutes a subsidiary for purposes of GAAP.
Includes all Borrowers except Parent.
1.76 WINDDOWN LOAN -- has the meaning set forth in Section
2.2.
1.77 WINDDOWN NOTE -- has the meaning set forth in Section
2.2.
1.78 1999 LETTER OF CREDIT -- the Standby Letter of
Credit.
1.79 CERTAIN OTHER WORDS -- all accounting terms used herein
have the respective meanings attributed to them under, and shall be construed in
accordance with, GAAP. The terms "herein", "hereof", and "hereunder", and other
words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronouns used shall be deemed
to cover all genders. As used in this Agreement, (a) the word "including" is
always without limitation; (b) words in the singular number include words of the
plural number and vice versa; (c) the word "costs" includes all internal
out-of-pocket expenses, fees, costs, and expenses of experts and collection
agents, supersedeas bonds, and all attorneys' fees, costs, and expenses, whether
incurred before, during, or after demand or litigation, and whether pursuant to
trial, appellate, arbitration, bankruptcy, or judgment-execution proceedings;
and (d) the word "property" includes both tangible and intangible property,
unless the context otherwise requires. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including
references to any of the Loan Documents, shall include any and all modifications
or amendments thereto and any and all extensions or renewals thereof. All other
terms contained in this Agreement shall, unless otherwise defined herein or
unless the context otherwise indicate, have the meanings provided for by the
Uniform Commercial Code of the State of Alabama.
1.80 DIRECTLY AND INDIRECTLY -- when any provision of this
Agreement or any Loan Document requires or prohibits action to be taken by a
Person, the provision applies regardless of whether the action is taken directly
or indirectly by the Person.
2. THE LOANS.
2.1 RESTRUCTURED LOAN.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to make a loan to Borrower of $8,122,489.56 (the
"Restructured Loan").
(b) Borrower shall execute and deliver to Bank a
promissory note (the "Restructured Note") in the face amount of the Restructured
Loan, payable to the order of Bank and evidencing Borrower's obligation to repay
the Restructured Loan.
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(c) Borrower shall pay accrued interest on the
unpaid principal balance of the Restructured Loan at a per annum rate equal to
the Base Rate plus 2.75% on the first day of each month and continuing on the
same day of each month thereafter until the full balance of the Restructured
Loan is paid. The applicable interest rate on the Restructured Loan shall change
as and when the Base Rate changes from time to time. Borrower shall pay to Bank
all outstanding principal and interest on the Restructured Loan on or before
June 30, 2001, or on any earlier date on which the Restructured Loan becomes due
and payable.
(d) The Restructured Loan is not a revolving
loan.
2.2 WINDDOWN LOAN.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to make an additional loan to Borrower in an amount up to
$1,000,000.00 (the "Winddown Loan").
(b) Borrower shall execute and deliver to Bank
one promissory note (the "Winddown Note") in the face amount of the Winddown
Loan, payable to the order of Bank and evidencing Borrower's obligation to repay
the Winddown Loan.
(c) Borrower shall pay accrued interest on the
unpaid principal balance of the Winddown Loan at a per annum rate equal to the
Base Rate plus 2.75% on the first day of each month and continuing on the same
day of each month thereafter until the full balance of the Winddown Loan is
paid. The applicable interest rate on the Winddown Loan shall change as and when
the Base Rate changes from time to time. Borrower shall pay to Bank all
outstanding principal and interest on the Winddown Loan on or before June 30,
2001, or on any earlier date on which the Restructured Loan becomes due and
payable.
(d) The Winddown Loan is not a revolving loan.
(e) All requests for advances under the Winddown
Loan shall be in writing, signed by an officer of Borrower, and shall be
submitted to Bank at least two (2) Business Days prior to the date on which
funds are requested to be advanced. Borrower may obtain advances under the
Winddown Loan only if it complies with all the following requirements: (i) at
the time of each advance request (unless in each case Bank consents otherwise in
writing), Ad Art certifies to Bank that (A) the cumulative outstanding balance
of the Loans at such time is not more than 105% of the projected "Ending Debt"
for the last week ending prior to the date of such request, as set forth in the
Orderly Liquidation Budget, (B) the actual collections from the Orderly
Liquidation of Ad Art, during the period commencing on the date which is the
later of (1) the date which is 28 days prior to the date of such request or (2)
the date of this Agreement, and ending on the date of such request, are not less
than 95% of the projected "Total Collections" set forth on the Orderly
Liquidation Budget for such time period, and (C) the total actual disbursements
of Ad Art during the period commencing on the later of (1) the date which is 28
days prior to such request or (2) the date of this Agreement, and ending on the
date of such request, are not greater than 105% of the projected "Total
Disbursements" set forth on the Orderly Liquidation Budget for such period; (ii)
Borrower
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delivers to Bank prior to any such advance, a list of the uses of the funds
which Borrower certifies in writing are necessary to the Interim Operation of Ad
Art or in furtherance of the Orderly Liquidation and shall in no event be used
for any purpose which is inconsistent with the Interim Operation of Ad Art or
the Orderly Liquidation Budget; and (iii) at the time of each such advance
request, no Event of Default shall have occurred and be continuing and Borrower
certifies that there are no Events of Default under this Agreement or any of the
other Loan Documents.
2.3 TERMS GOVERNING ALL LOANS.
(a) The Ad Art Loan, the Ad Art Winddown Loan,
and the 1999 Letter of Credit shall be payable from the Orderly Liquidation and
from the sale or other disposition by Borrower of the Collateral.
(b) Borrower shall make all payments of interest
and principal under the Notes without setoff or counterclaim, and in such coin
or currency of the United States of America that at the time of payment is legal
tender for the payment of public and private debt. Payments shall be applied in
accordance with the terms of the Restructuring Agreement.
(c) Each borrowing under a Loan shall be
effected by crediting the amount thereof to the regular checking account of
Borrower maintained with Bank or with another bank approved by Bank.
(d) Any payments not made as and when due with
respect to any Loan (whether at stated maturity, by acceleration, or otherwise)
shall bear interest at the Default Rate from the date due until paid, payable on
demand.
(e) In case of any conflict between the terms of
the Notes and the description of the Loans contained herein, the terms of the
Notes shall control.
2.4 LOAN ACCOUNT. Amounts due under the Notes and otherwise
under this Agreement and under the Loan Documents shall be reflected in the Loan
Account. Bank shall enter disbursements hereunder or under the Notes as debits
to the Loan Account and shall also record in the Loan Account all payments made
by Borrower and all proceeds of Collateral which are finally paid to Bank, and
may record therein, in accordance with customary accounting practice, all
charges and expenses properly chargeable to Borrower hereunder.
2.5 PREPAYMENT. Subject to the provisions hereof, Borrower
shall have the right at any time and from time to time to prepay the Loans, in
whole or in part, without premium or penalty but with accrued interest to the
date of such prepayment on the amounts prepaid. Such prepayments shall be made
to Bank in immediately available funds and, shall be applied to the last of the
installment(s) to mature. Any such prepayment shall not affect or vary the
obligation of Borrower to pay any installment when due.
2.6 USE OF PROCEEDS. Borrower shall use the proceeds of the Ad
Art Loan to satisfy, in part, the Borrower's obligations under the Existing
Revolving Loan, and shall use the
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proceeds of the Ad Art Winddown Loan to support its working capital needs and to
fund the Interim Operation and Orderly Liquidation of Ad Art. Borrower shall use
the 1999 Letter of Credit as credit support for the Demand Notes, as described
in Article 2A of this Agreement.
2.7 TERM. This Agreement shall remain in force and effect
until the Loans, and any renewals or extensions, and all interest thereon and
costs provided for herein with regard to either of them have been indefeasibly
paid or satisfied in full and until Bank has no further obligation to advance
funds to Borrower hereunder and until the 1999 Letter of Credit has been
released or all reimbursement obligations of Borrower with respect to the 1999
Letter of Credit have been paid in full. Borrower may terminate the Loan
facilities at any time before the scheduled maturity date by paying in full the
Loans and all other Obligations and by obtaining the release or paying in full
the 1999 Letter of Credit. The indemnities provided for in Article 11 hereof
shall survive the payment in full of the Loans and the other Obligations and the
termination of this Agreement.
2.8 PAYMENTS. All sums paid to Bank by Borrower hereunder
shall be paid directly to Bank in immediately available funds. Bank shall send
Borrower statements of all amounts due hereunder, which statements shall be
considered correct and conclusively binding on Borrower unless Borrower notifies
Bank to the contrary within ten (10) days of its receipt of any statement which
it deems to be incorrect. Bank may, in its sole discretion charge against any
deposit account of Borrower all or any part of any amount due hereunder.
Borrower shall be deemed to have requested an advance under the Ad Art Winddown
Loan upon the occurrence of an overdraft in any of Borrower's checking accounts
maintained with Bank or another bank owned by SouthTrust Corporation.
2.9 FEES. An administrative/servicing fee of $500 will be
assessed monthly throughout the term of the Loans. Borrower shall also pay the
fees due with respect to the Letter of Credit, as provided in Section 2A.4
hereof. Further, the Borrower shall pay to Bank an agent fee of $5,000.00 that
will be assessed annually throughout the term of the Loans, and shall be due and
payable on the 1st day of March of each year of the term hereafter.
2.10 LIMITATION ON INTEREST CHARGES. Bank and Borrower intend
to comply strictly with applicable law regulating the maximum allowable rate or
amount of interest that Bank may charge and collect on the Loans to Borrower
pursuant to this Agreement. Accordingly, and notwithstanding anything in any
Note or in this Agreement to the contrary, the maximum, aggregate amount of
interest and other charges constituting interest under applicable law that are
payable, chargeable, or receivable under any Note and this Agreement shall not
exceed the maximum amount of interest now allowed by applicable law or any
greater amount of interest allowed because of a future amendment to existing
law. Borrower is not liable for any interest in excess of the maximum lawful
amount, and any excess interest charged or collected by Bank will constitute an
inadvertent mistake and, if charged but not paid, will be canceled
automatically, or, if paid, will be either refunded to Borrower or credited
against the outstanding principal balance of the applicable Note, at the
election of Borrower.
2.11 NON-PAYMENT FEE. If the Borrower fails to (a) pay in full
both the Restructured Loan and the Winddown Loan in full by their respective
maturities and (b) pay all
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obligations due to the Bank with respect to the 1999 Letter of Credit or
otherwise cause the Bank to be released from all obligations with respect to the
1999 Letter of Credit or deliver to Bank a backup letter of credit reasonably
satisfactory to the Bank for the 1999 Letter of Credit on or before the
maturities of the Restructured Loan and the Winddown Loan, then the Borrower
shall pay to Bank on the maturity date of the Restructured Loan and the Winddown
Loan a non-payment fee equal to $100,000.00 in cash.
2A. LETTER OF CREDIT.
2A.1 DEFINITIONS.
As used in this Article 2A, the following terms have the following
meanings:
A DRAWING --- means a drawing under a Letter of Credit to pay
the principal of the Demand Notes due to maturity, redemption, or acceleration.
ACTUAL/360 BASIS --- a method of computing interest or other
charges hereunder on the basis of an assumed year of 360 days for the actual
number of days elapsed, meaning that interest or other charges accrued for each
day will be computed by multiplying the rate applicable on that day by the
unpaid principal balance (or other relevant sum) on that day and dividing the
result by 360.
B DRAWING --- a drawing under a Letter of Credit to pay
interest on the Demand Notes. C DRAWING --- a drawing under a
Letter of Credit to pay the purchase price of Tendered Notes.
DEMAND NOTES --- the 1999 Notes.
FINANCING DOCUMENTS --- has the same meaning ascribed to such
term in the Indenture.
INDENTURE --- the 1999 Indenture.
1999 INDENTURE --- the Trust Indenture dated as of June 1,
1999, between Bank and Display Technologies, Inc. for the 1999 Notes.
1999 NOTES --- the Variable/Fixed Rate Credit Enhanced Notes
in initial principal amount of $2,500,000 issued pursuant to the 1999 Indenture.
PLEDGED NOTES --- Demand Notes purchased pursuant to the
Optional or Mandatory Tender provisions of the Indenture with money drawn under
the Letter of Credit.
TENDERED NOTES --- Demand Notes tendered (or Demand tendered)
for purchase pursuant to the Optional or Mandatory Tender provisions of the
Indenture.
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TERMINATION DATE --- the Stated Expiration Date, or such
earlier date on which the Letter of Credit terminates in accordance with its
terms.
In addition, other capitalized terms in this Article 2A that are not
defined in this Agreement have the meanings set forth in the Indenture.
2A.2 ISSUANCE OF LETTER OF CREDIT.
(a) Bank has issued the Letter of Credit to the
Trustee as credit support for the 1999 Notes, in accordance with the terms of
the 1999 Indenture, and shall maintain the 1999 Letter of Credit in accordance
with its terms.
(b) The initial term of Letter of Credit will
expire, subject to earlier termination, as provided in the Letter of Credit.
(c) Bank may determine in its sole discretion to
extend the term of the Letter of Credit, but no course of dealing or other
circumstance shall require Bank to extend the term of the Letter of Credit.
2A.3 REIMBURSEMENT OF AMOUNTS DRAWN UNDER LETTER OF CREDIT.
(a) On each date that Bank honors any A Drawing
or B Drawing under the Letter of Credit, Borrower shall immediately reimburse
Bank for the amount of such draw.
(b) Borrower shall reimburse Bank for the amount
of any C Drawing within 90 days after the date such C Drawing is honored (or, if
sooner, on the Termination Date). In addition, Borrower shall pay to Bank
interest on the unreimbursed amount of each C Drawing at a variable per annum
rate equal to the Base Rate per annum plus 2.75% from the date such C Drawing is
paid by Bank until the amount of such C Drawing is reimbursed in full to Bank.
Such interest shall be payable in arrears on the first day of each month
following such C Drawing and on the date that such C Drawing is reimbursed in
full to Bank.
(c) No interest shall be payable with respect to
a C Drawing if Bank is reimbursed in full after such C Drawing is honored by
2:00 p.m. (Birmingham, Alabama time) on the same date that such C Drawing is
paid by Bank.
(d) All amounts received by Bank in respect of
principal, premium or interest on Pledged Notes shall be credited first against
interest payable on the unreimbursed amount of the C Drawing with respect to
such Pledged Notes and the balance, if any, shall be credited against the amount
of such C Drawing.
(e) Anything herein to the contrary
notwithstanding, Borrower will not reimburse Bank for any A Drawing, B Drawing,
or C Drawing until the same has been honored in full by Bank, and no such
reimbursement need be prepaid.
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2A.4 LETTER OF CREDIT COMMISSIONS AND FEES.
(a) As consideration for the issuance of the
Letter of Credit, Borrower shall pay to Bank commissions at the rate of one
percent (1%) per annum on the daily average of the Credit Amount available under
the Letter of Credit for (1) the period beginning on the date of issuance of the
Letter of Credit and ending on the first anniversary of its issuance and (2)
each succeeding period thereafter. Such commissions shall be payable in advance
on the date of issuance of the Letter of Credit and thereafter on each
anniversary of the issuance date during, said period (or, if sooner, the Letter
of Credit Termination Date).
(b) The commission payable on each due date
specified in this subsection shall be calculated on the assumption that the
Credit Amount available on such due date will be available for the entire period
for which such commission is payable. At the end of such period the commission
shall be recalculated based on the actual daily average of the Credit Amount for
such period and the difference, if any, shall be added to or subtracted from, as
the case may be, the commission payable for the next ensuing period or, if no
commission is payable for the ensuing period, shall be paid to the party
entitled thereto within 10 days. If a Substitute Letter of Credit is obtained by
Borrower, no refund of commissions already paid shall be allowed for the period
after the cancellation of the Letter of Credit unless Bank has notified Borrower
(after such commission was paid) that increased costs will be payable pursuant
to Section 2A.5.
(c) On each date that the Letter of Credit is
transferred in accordance with its terms, Borrower shall pay to Bank such amount
as shall at the time of such transfer then be the charge which the Bank is
customarily making for transfers of similar letters of credit.
(d) Borrower shall pay to Bank its normal fee
for each draw under a Letter of Credit, on the date that reimbursement for the
amount of such draw is made pursuant to Section 2A.3.
2A.5 INCREASED COSTS.
(a) ADDITIONAL PAYMENTS. If any change in any
law or regulation or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, or in GAAP, shall either (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against letters of credit issued
by Bank or (ii) impose on Bank any other condition relating, directly or
indirectly, to this Agreement or the Letter of Credit, and the result of any
event referred to in the preceding clause (i) or (ii) shall be to increase the
cost to Bank of issuing or maintaining the Letter of Credit, then, upon demand
by Bank, Borrower shall pay promptly to Bank, from time to time as specified by
Bank, such additional amounts as shall be sufficient to compensate Bank for such
increased cost. A certificate of Bank claiming compensation under this
subsection and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive absent manifest error. In determining any such
amount, Bank may use any reasonable averaging and attribution methods.
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(b) CAPITAL ADEQUACY. If, after the date of this
Agreement, Bank shall have determined that the adoption or implementation of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank with any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Bank's capital, on this credit facility
or otherwise, as a consequence of its obligations hereunder and under the Letter
of Credit to a level below that which Bank could have achieved but for such
adoption, change or compliance (taking into consideration Bank's policies with
respect to capital adequacy) by an amount determined by Bank to be material,
then from time to time, promptly upon demand by Bank, Borrower shall pay Bank
such additional amount or amounts as will compensate Bank for such reduction. A
certificate of Bank claiming compensation under this subsection and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive absent manifest error. In determining any such amount, Bank may use
any reasonable averaging and attribution methods.
2A.6 PLACE AND TIME OF PAYMENTS.
(a) All payments by Borrower to Bank hereunder
shall be made in lawful currency of the United States of America and in
immediately available funds to Bank at its address set forth herein or at such
other address within the continental United States as shall be specified by Bank
by notice to Borrower; provided, nothing herein shall be construed to require
payment of any amount in advance of its due date.
(b) All amounts payable by Borrower to Bank
hereunder for which a payment date is expressly set forth herein (including
payments due pursuant to Sections 2A.4 and 2A.5) shall be payable without notice
or written demand by Bank. All amounts payable by Borrower to Bank hereunder for
which no payment date is expressly set forth herein shall be payable on written
demand by Bank to Borrower.
(c) Bank may, at its option, send written notice
to Borrower of amounts payable pursuant to sections 2A.4 and 2A.5, but the
failure to send such notice will not affect or excuse Bank's obligation to pay
the amounts required by such sections on the due date specified in such
sections.
(d) Payments which are due on a day which is not
a business day shall be payable on the next succeeding Business Day, and any
interest payable thereon shall be payable for such extended time at the
specified rate.
2A.7 LATE CHARGES AND INTEREST ON OVERDUE AMOUNTS. With
respect to all amounts payable to the Bank by Borrower pursuant to this article
which are not paid on the due date, in the case of amounts payable on a
specified date, or which are not paid within ten days of written notice to the
Borrower, in the case of amounts payable on demand, Borrower agrees to pay to
Bank on demand (i) a late charge of five percent (5%) of any such amount or
amounts which shall not have been paid within 10 days of the due date as
specified above and (ii) interest on such amounts or
16
amounts at a variable per annum rate equal to the Base Rate plus 2.75%, plus 2%
for each day from the specified date of payment, or the date of written demand
for payment, as the case may be, to the date such payment is made.
2A.8 COMPUTATION OF CHARGES. The interest and charges provided
for in this Agreement payable in arrears based upon annual rates shall be
computed on an Actual/360 Basis. All interest rates based upon the Base Rate
shall change when and as the Base Rate shall change, effective on the opening of
business on the date of any such change, unless such change is announced after
the close of regular banking hours, in which case such change shall be effective
on the following day.
2A.9 STATEMENTS OF ACCOUNT. Upon receipt of the written
request of Borrower, Bank shall account to Borrower annually with a statement of
charges and payments made pursuant to this Agreement.
2A.10 PLEDGED NOTES.
(a) As additional security for the performance
of the Obligations, Borrower pledges, assigns, hypothecates and transfers to
Bank all its right, title and interest in the Pledged Notes, and grants to Bank
a security interest in the Pledged Notes and all amounts payable thereon and the
proceeds thereof.
(b) If Bank is reimbursed for the purchase price
of less than all Pledged Notes with respect to which a C Drawing has been made,
the Pledged Notes with respect to which Bank has been reimbursed shall, upon
reinstatement of the Letter of Credit in the manner therein described and if no
Event of Default exists, be released from the pledge and delivered to Borrower.
(c) All payments of principal of and interest on
Pledged Notes shall be made directly to Bank. If, while Bank or its designated
agent or the Tender Agent holds Pledged Notes, Borrower shall receive any
interest or principal payment in respect of such Pledged Notes. Borrower shall
accept the same as agent for Bank and hold the same in trust on behalf of Bank
and to deliver the same forthwith to Bank. All sums of money so paid in respect
of principal, premium or interest on such Pledged Notes which are received by
Borrower and paid to Bank, or which are received directly by Bank from the
Trustee, shall be credited against the reimbursement obligation of Borrower as
provided in Section 2A.2(d).
(d) If an Event of Default exists, Bank may,
without notice, exercise all rights, privileges or options pertaining to any
Pledged Notes as if it were the absolute owner thereof, upon such terms and
conditions as it may determine, all without liability except to account to
Borrower for property actually received by it. In addition to the rights and
remedies granted to it in this Agreement, Bank or its designated agent shall
have the authority to exercise all rights and remedies of a secured party under
the Alabama Uniform Commercial Code. Borrower shall be liable for the deficiency
if the proceeds of any sale or other disposition of the Pledged Notes and the
Collateral are insufficient to pay all amounts to which the Bank is entitled.
The Bank has no duty to exercise any of such rights, privileges or options, and
shall not be responsible for any failure to do so
17
or any delay in so doing.
(e) Except as contemplated herein, without the
prior written consent of Bank. Borrower shall not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Pledged Notes, nor will it create, incur or permit to exist any pledge, lien,
mortgage, hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the Pledged Notes, or any interest therein,
or any proceeds thereof, except for the lien and security interest provided for
by this Agreement.
(f) Borrower shall do or cause to be done all
such other reasonable acts and things as may be necessary to make any
disposition or sale of any portion or all of the Pledged Notes permitted by this
Agreement valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all courts
or governmental authorities having jurisdiction over any such disposition or
sales, all at Borrower's expense.
2A.11 PARTICIPATIONS. Borrower understands that Bank may, in
accordance with this section, from time to time enter into a participation
agreement or agreements with one or more persons (the "Participants"), pursuant
to which the Participants shall be given participations in the Letter of Credit
and that the Participants may from time to time similarly grant to one or more
other persons (also included in the term "PARTICIPANTS") subparticipations in
the Letter of Credit. Borrower grants to each Participant (in addition to any
other rights which such Participant may have) a continuing security interest in
any money, securities and other real or personal property of Borrower which are
in the possession of such Participant. Borrower further agrees that any
Participant may exercise any and all rights of banker's lien or set-off with
respect to Borrower as fully as if such Participant had made a loan directly to
Borrower in the amount of the participation or subparticipation given to such
Participant in the Letter of Credit under the conditions herein permitting
exercise of the same. For the purposes of this Section only, Borrower shall be
deemed to be directly obligated to each Participant in the amount of its
participating interest in the amount of principal of, and interest on, the
Letter of Credit; provided, however, that nothing contained in this section
shall affect Bank's right of set-off (under this Section or applicable law) with
respect to the entire amount of any of such credit facilities, notwithstanding
any such participation or subparticipation. Bank may divulge to any Participant
all information, reports, financial statements, certificates and documents
obtained by it from Borrower or any other person under any provision of this
Agreement or otherwise.
2A.12 SPECIAL REMEDIES WITH RESPECT TO LETTER OF CREDIT.
(a) If any Event of Default shall have occurred
and be continuing, in addition to the remedies described in Article 10, Bank may
exercise any one or more of the following remedies:
(1) it may, pursuant to and in
accordance with the applicable section of an Indenture, give written
notice of such Event of Default to the Trustee and direct the Trustee
to effect a Mandatory Tender of the Demand Notes in accordance with the
terms
18
thereof and the Indenture and to make a draw under the Letter of Credit
to pay the purchase price of the Demand Notes due on the Mandatory
Tender Date therefor; or
(2) it may give written notice of such
Event of Default to the Trustee and direct the Trustee to declare the
Demand Notes to be immediately due and payable under the section of the
Indenture, whereupon an event of default shall occur under the
Indenture and the Trustee shall declare the Demand Notes immediately
due and payable under the section of the Indenture and shall make a
draw under the Letter of Credit to pay the principal of the Demand
Notes and the interest accrued thereon to the date of such declaration;
or
(3) it may, upon notice to Borrower,
declare the entire unpaid amount of the Obligations immediately due
under this Agreement to be, and all such amounts shall thereupon
become, due and payable to Bank, without presentment, demand, protest,
or other notice of any kind, all of which are expressly waived,
anything in this Agreement to the contrary notwithstanding; or
(4) it may exercise its banker's lien
of right of set-off; or
(5) it may proceed to protect its
rights by suit in equity, action at law or other appropriate
proceedings, whether for the specific performance of any covenant or
agreement of Borrower herein contained or in aid of the exercise of any
power or remedy granted to Bank under any of the other Financing
Documents.
(b) Bank may proceed directly against Borrower
hereunder without resorting to any other remedies which it may have and without
proceeding against any other security held by Bank.
2A.13 SPECIAL REMEDIES REGARDING LETTER OF CREDIT UPON AN
EVENT OF DEFAULT.
(a) If any Event of Default shall have occurred
and be continuing, and the maturity of the Demand Notes shall not have been
accelerated, Bank may make demand upon Borrower to, and forthwith upon such
demand Borrower shall, pay to Bank in immediately available funds at Banks
office designated such demand, for deposit by Bank in a special noninterest
bearing cash collateral account (the "CASH COLLATERAL ACCOUNT") to be maintained
at such office of Bank as may be designated by Bank, an amount equal to the
maximum amount then available to be drawn under the Letter of Credit (assuming
compliance with all conditions for drawing thereunder). The Cash Collateral
Account shall be in the name of Borrower (as a cash collateral account), but
under the sole dominion and control of Bank and subject to the terms of this
Agreement.
(b) If requested by Borrower and subject to the
right of Bank to withdraw funds from the Cash Collateral Account as provided
below, Bank shall from time to time invest funds on deposit in the Cash
Collateral Account in investments satisfactory to Bank, reinvest proceeds of any
such investments which may mature or be sold, and invest interest or other
income received from any such investments, in each case as Borrower may elect
and notify to Bank.
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(c) If at any time Bank determines that any
funds held in the Cash Collateral Account are subject to any right or claim of
any person or entity other than Bank and the Trustee or that the total amount of
such funds is less than the maximum amount at such time available to be drawn
under the Letter of Credit, Borrower will, forthwith upon demand by Bank, pay to
Bank, as additional funds to be deposited and held in the Cash Collateral
Account, an amount equal to the excess of (i) such maximum amount at such time
available to be drawn under the Letter of Credit over (ii) the total amount of
funds, if any, then held in the Cash Collateral Account which Bank determines to
be free and clear of any such right and claim.
(d) Borrower hereby pledges, and grants to Bank
a security interest in, all funds held in the Cash Collateral Account (including
Collateral Securities) from time to time and all proceeds thereof, as security
for the payment of all amounts due and to become due from the Borrower to Bank
under this Agreement.
(e) Bank may, at any time or from time to time
after funds are deposited in the Cash Collateral Account or invested in
Collateral Securities, after selling, if necessary, any Collateral Securities,
apply funds then held in the Cash Collateral Account to the payment of any
amounts, in such order as Bank may elect, as shall have become or shall become
due and payable by the Borrower to Bank under this Agreement. Borrower agrees
that, to the extent notice of sale of any Collateral Securities shall be
required by law, at least five days' notice to Borrower of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Bank may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.
(f) Neither Borrower nor any Person claiming on
behalf of or through Borrower shall have any right to withdraw any of the funds
held in the Cash Collateral Account, except as otherwise provided in subsection
(g) below and except that after the termination of the Letter of Credit in
accordance with its terms and the payment of all amounts payable by Borrower to
Bank under this Agreement, any funds remaining in the Cash Collateral Account
shall be returned by Bank to Borrower or paid to whomever may be legally
entitled thereto.
(g) So long as any Notes shall remain
outstanding, Bank will release to Borrower or at its order (i) interest or other
income received on Collateral Securities and (ii) at the written request of
Borrower, funds held in the Cash Collateral Account in an amount up to but not
exceeding the excess, if any (immediately prior to the release of any such
funds), of (x) the total amount of funds held in the Cash Collateral Account
over (y) the maximum amount available to be drawn under the Letter of Credit.
(h) Borrower agrees that it will not (i) sell or
otherwise dispose of any interest in the Cash Collateral Account or any funds
held therein, or (ii) create or permit to exist any lien, security interest or
other charge or encumbrance upon or with respect to the Cash Collateral Account
or any funds held therein, except as provided in or contemplated by this
Agreement.
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(i) Bank shall exercise reasonable care in the
custody and preservation of any funds held in the Cash Collateral Account and
shall be deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which Bank accords its own property, it being
understood that Bank shall not have any responsibility for taking any necessary
steps to preserve rights against any parties with respect to any such funds.
2A.14 SPECIAL INDEMNITY FOR LETTER OF CREDIT. Borrower
indemnifies and holds Bank harmless from and against any and all claims,
damages, losses, liabilities, costs or expenses which Bank may incur or which
may be claimed against Bank by any person or entity by reason of or in
connection with the execution and delivery or transfer of, or payment or failure
to make lawful payment under, the Letter of Credit; provided, however, that
Borrower shall not be required to indemnify Bank pursuant to this section for
any claims, damages, losses, liabilities, costs or expenses to the extent caused
by (1) Bank's willful misconduct or gross negligence in determining whether
documents presented under the Letter of Credit comply with the terms of the
Letter of Credit or (2) Bank's willful failure to make lawful payment under the
Letter of Credit after the presentation to it by the Trustee or a successor
trustee under the Indenture of a draft and certificate strictly complying with
the terms and conditions of the Letter of Credit. Nothing in this section limits
the Borrower's obligations contained in this Agreement. Without prejudice to the
survival of any other obligation of Borrower hereunder, the indemnities and
obligations of Borrower contained in this section shall survive the payment in
full of amounts payable pursuant herein and the termination of the Letter of
Credit.
2A.15 OBLIGATIONS OF BORROWER ABSOLUTE.
(a) The obligations, covenants and agreements of
Borrower under this Agreement shall be absolute, unconditional and irrevocable,
and Borrower separately covenants and agrees to timely pay in full in strict
accordance herewith all amounts which may become due and owing hereunder and to
timely observe and perform all other agreements and covenants to be observed and
performed by Borrower hereunder, such payment, observance and performance to be
made hereunder under all circumstances whatsoever, including, the following:
(1) any lack of validity or
enforceability of any Financing Documents;
(2) any amendment or waiver of or any
consent to departure from all or any of the Financing
Documents;
(3) the existence of any claim,
set-off, defense or other rights which Borrower may have at
any time against any Person, whether in connection with this
Agreement, the Letter of Credit, the Demand Notes or any of
the other Financing Documents, or any unrelated transaction;
(4) any statement or any other document
presented Lender a Letter of Credit proves to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein proves to be untrue or inaccurate in any
respect whatsoever;
21
(5) payment by Bank under the Letter of
Credit against presentation of a draft or certificate which
does not comply with the terms of the Letter of Credit,
provided such payment shall not have constituted gross
negligence or willful misconduct by Bank; and
(6) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing,
provided the same does not constitute gross negligence or
willful misconduct by Bank.
(b) No act of commission or omission of any kind
at any time on the part of Bank in respect of any matter whatsoever shall in any
way affect or impair any right, power or benefit of Bank under this Agreement
and, to the extent permitted by applicable law, no setoff, claim, reduction,
diminution of any obligation, or any defense of any kind or nature which
Borrower may have against Bank shall be available against Bank in any suit or
action brought by Bank to enforce any right, power or benefit under this
Agreement.
2A.16 LIABILITY OF THE BANK. Neither Bank nor any of its
officers or directors shall be liable or responsible for: (i) the use which may
be made of the Letter of Credit or for any acts or omissions of the Trustee and
any transferee in connection therewith; (ii) the validity, sufficiency or
genuineness of 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; (iii) payment by Bank against presentment of
documents which do not strictly comply with the terms of the Letter of Credit,
including but not limited to, failure of any documents to bear any reference or
adequate reference to the Letter of Credit; or (iv) any other circumstances
whatsoever in making or failing to make payment under the Letter of Credit,
except only that Borrower shall have a claim against Bank, and Bank shall be
liable to the Borrower, to the extent, but only to the extent, of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused by (A) Bank's willful misconduct or gross negligence in
determining whether documents presented under the Letter of Credit comply with
the terms of the Letter of Credit, or (B) Bank's willful or grossly negligent
failure to pay under the Letter of Credit after the presentation to it by the
Trustee of a draft and certificate strictly complying with the terms and
conditions of the Letter of Credit. In furtherance and not in limitation of the
foregoing, Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
3. CONDITIONS OF LENDING.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. In addition
to any other requirements set forth in this
Agreement, Bank shall not be obligated to make any of
the Loans or any advance under any of the Loans
(including, without limitation, the Winddown Loan),
or issue or renew the Letter of Credit, unless at the
time thereof the following conditions shall have been
met:
(a) CORPORATE PROCEEDINGS. All proper corporate
proceedings shall have been taken by Borrower to authorize this Agreement and
the transactions contemplated hereby.
22
(b) DOCUMENTATION. All instruments and
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to Bank, and Bank shall have
received on the date of this Agreement copies of all documents including records
of corporate proceedings, which it may have requested in connection therewith,
including certified copies of resolutions adopted by the Board of Directors of
Borrower, certificates of good standing, and certified copies of the Articles of
Incorporation and Bylaws, and all amendments thereto, of Borrower.
(c) LOAN DOCUMENTS. Bank shall have received
executed copies of all instruments evidencing security for the Loans and copies
of the insurance policies and related certificates of insurance referred to in
Sections 6.1 ("Insurance") and 9.5 ("Insurance") hereof.
(d) NO DEFAULT. No event shall have occurred or
be continuing which constitutes an Event of Default or which would constitute an
Event of Default with the giving of notice or the lapse of time or both.
(e) PERFECTION OF LIENS. UCC-I financing
statements, collateral assignments, trademark and patent assignments, and, if
applicable, certificates of title covering the Collateral executed by Borrower
shall have been duly recorded or filed in the manner and places required by law
to establish, preserve, protect, and perfect the interests and rights created or
intended to be created by this Agreement and any other security agreement.
(f) FEES AND EXPENSES. Bank shall have received
all amounts required to be paid by Borrower or another Person pursuant to the
Restructuring Agreement delivered in connection with the Restructured Loan.
(g) SUBORDINATION AGREEMENT. Bank shall have
received a subordination agreement from each Subordinated Lender.
(h) CERTIFICATES OF TITLE. Borrower shall have
delivered to the Bank all Certificates of Title for any vehicles constituting
part of the Equipment as shown on EXHIBIT B.
(i) ADDITIONAL DOCUMENTS. Bank shall have
received such additional legal opinions, certificates, proceedings, instruments,
and other documents as Bank or its counsel may reasonably request to evidence
(i) compliance by Borrower with legal requirements, (ii) the truth and accuracy,
as of the date of this Agreement, of the representations of Borrower contained
herein, and (iii) the due performance or satisfaction by Borrower, at or prior
to the date hereof, of all agreements required to be performed and all
conditions required to be satisfied by Borrower pursuant hereto.
(j) DELIVERIES UNDER RESTRUCTURING AGREEMENT.
Bank shall have received all instruments and other documents due to be delivered
to Bank under the Restructuring Agreement.
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3.2 CONDITIONS PRECEDENT TO EACH ADVANCE. The following
conditions, in addition to any other requirements set forth in this Agreement,
including those of Section 2.2 hereof, must have been met or performed before
each advance under the Ad Art Winddown Loan:
(a) SUPPLEMENTARY CORPORATE PROCEEDINGS. Any
supplementary corporate proceedings necessary to authorize the transaction have
been taken by Borrower.
(b) ACCURACY OF REPRESENTATIONS. All
representations and warranties made by Borrower in this Agreement or otherwise
in writing in connection with this Agreement are true and correct in all
material respects as if made on and as of the proposed date of the advance of
Loan proceeds, except for any changes in the nature of Borrower's business or
operations that would render the information contained in any exhibit attached
hereto either inaccurate or incomplete, so long as Bank has consented to such
changes or such changes are expressly permitted by this Agreement.
(c) NO DEFAULT. No Event of Default has occurred
and is continuing, and to the extent requested by Bank, Borrower has so
certified in writing.
(d) FURTHER ASSURANCES. Borrower shall have
delivered such further documentation or assurances that Bank reasonably
requires.
4. SECURITY FOR OBLIGATIONS AND SPECIAL COLLECTION ACCOUNTS.
4.1 SECURITY. The Loans, each Note, the reimbursement
obligations under this Agreement and all other Obligations shall be secured by
each of the following:
(a) A first-priority security interest in the Ad
Art Collateral;
(b) A first priority security interest in the
Xxxxxxxx Stock;
(c) A second-priority security interest in the
Xxxxxxxx Collateral (excluding the Xxxxxxxx
Stock);
(d) A first priority mortgage lien on the
California Real Estate;
Borrower agrees to execute and deliver, or cause the execution and
delivery of, such security agreements, deeds of trust, mortgages, assignments,
guaranties, consents, subordination agreements, and financing statements as may
be required by Bank to evidence such security, all in form satisfactory to Bank,
as well as such consents and agreements of the landlords of each of the premises
leased by Borrower on which the Collateral is located, all in form satisfactory
to Bank.
4.2 SPECIAL COLLECTION ACCOUNT. Borrower represents that Ad
Art has opened with Bank a special collection account bearing account number
78385-199 (Ad Art Electronic Sign Corp. - Subsidiary Special Collection Account)
(the "Special Collection Account"), in which all funds received by Ad Art from
sales of Inventory, all refunds of taxes, all remittances by Ad Art's Account
24
Debtors, and all other proceeds of Collateral, shall be deposited no later than
the next regular banking day following receipt. All returned checks shall be
charged to the Special Collection Account. Ad Art shall pay all fees for the
Special Collection Account and expenses or adjustments for collected funds.
Under no circumstances will Bank be charged for them. Ad Art shall pay normal
and customary fees to Bank for its maintenance of the Special Collection
Account. Bank shall have the exclusive right to withdraw or debit funds from the
Special Collection Account, which may be accomplished by any directive signed by
any two authorized employees of Bank. At least weekly and more often if Bank so
elects, the collected balances in the Special Collection Account shall be
withdrawn by Bank and applied, first, to the Loans and second, to any other
Obligations of the Borrower to the Bank, subject to the terms of the
Restructuring Agreement. At the request of Bank, Borrower shall execute
documents provided by Bank to allow officers of Bank to sign checks drawn on
accounts of Borrower maintained in other banks for the purpose of transferring
funds to an account or accounts of Borrower maintained with Bank or another bank
owned by SouthTrust Corporation, including, without limitation, the Special
Collection Account.
5. REPRESENTATIONS, WARRANTIES, AND GENERAL COVENANTS. Borrower
represents, warrants, and covenants to and with Bank, which
representations, warranties, and covenants shall survive until
the Obligations are indefeasibly satisfied in full, that:
5.1 ORGANIZATION AND QUALIFICATION. Borrower is a corporation
duly organized, validly existing and in good standing under the laws of its
respective state of incorporation; has the corporate power to own its properties
and to carry on its business as now being conducted; and is duly qualified to do
business and is in good standing in every jurisdiction in which the character of
the properties owned by it or in which the transaction of its business makes its
qualification necessary.
5.2 CORPORATE POWER AND AUTHORIZATION; COMPLIANCE WITH LAW.
Borrower has full power and authority to enter into this Agreement, to borrow
hereunder, to execute and deliver the Notes and the other Loan Documents, and to
incur the obligations provided for herein, all of which have been authorized by
all proper and necessary corporate action. Borrower further (x) is in compliance
with all Requirements of Law applicable to it and (y) possesses all governmental
franchises, licenses, and permits that are necessary to own or lease its assets
and to carry on its business as now conducted.
5.3 ENFORCEABILITY; NO LEGAL BAR. This Agreement has been, and
each other Loan Document to which it is a party will be, duly executed and
delivered to Bank on behalf of Borrower. This Agreement and each of the other
Loan Documents constitute, and each Note when executed and delivered for value
received will constitute, a valid and legally binding obligation of Borrower
enforceable in accordance with their respective terms. The execution, delivery,
and performance by Borrower of this Agreement and the other Loan Documents to
which it is a party, Borrower's borrowings pursuant to this Agreement, and use
of the loan proceeds, will not violate any Requirement of Law applicable to
Borrower or constitute a breach or violation of, a default under, or require any
consent under, any of its Contractual Obligations, and will not result in a
breach or violation of, or require the creation or imposition of any Lien on any
of its properties or revenues pursuant to any Requirement of Law or Contractual
Obligation.
25
5.4 PENDING ACTIONS. No action or investigation is pending or,
so far as Borrower's officers and directors know, threatened before or by any
court or administrative agency against Borrower, businesses, properties or
revenues, other than the Xxxxxxxx Application and the matters described on
EXHIBIT C, (a) with respect to any of the Loan Documents or any of the
transactions contemplated by them, or (b) which might result in any Material
Adverse Effect on Borrower.
5.5 TITLE TO PROPERTIES. Borrower has good and marketable
title to all of its assets, subject to no Lien, except inchoate Liens arising by
operation of law for obligations which are not yet due and except for the Liens
and security interests described on EXHIBIT D to this Agreement. Borrower enjoys
peaceable and undisturbed possession under all leases under which they are
operating, and none of such leases contains any provisions which may materially
and adversely affect or impair the operations of Borrower, and all of such
leases are valid and subsisting and in full force and effect.
5.6 BENEFIT PLANS. Except as set forth on EXHIBIT E to this
Agreement, Borrower has not established and is not a party to any Plan or to any
stock option or deferred compensation plan or contract for the benefit of its
employees or officers, any pension, profit sharing or retirement plan, stock
redemption agreement, or any other agreement or arrangement with any officer,
director, or stockholder, members of their families, or trusts for their
benefit. Borrower is in compliance with all applicable provisions of ERISA.
Borrower has not received any notice to the effect that it is not in full
compliance with any of the requirements of ERISA and the regulations promulgated
thereunder. No fact or situation that could result in a material adverse change
in the financial condition of Borrower, including, but not limited to, any
Reportable Event or Prohibited Transaction, exists in connection with any Plan.
Borrower has no withdrawal liability in connection with a Multiemployer Plan.
5.7 TAXES. Borrower has filed all federal, state, and local
tax returns which are required to be filed and have paid, or made adequate
provision for the payment of, all taxes which have or may become due pursuant to
said returns or to assessments received by them. Borrower has paid all
withholding, FICA and other payments required by federal, state or local
governments with respect to any wages paid to employees.
5.8 COLLATERAL. The security interests granted to Bank herein
and pursuant to any other security agreement (a) constitute and, as to
subsequently acquired property include in the Collateral covered by the security
agreement, will constitute, a security interest under the Code entitled to all
of the rights, benefits and priorities provided by the Code and (b) are, and as
to such subsequently acquired Collateral will be, fully perfected, superior, and
prior to the rights of all third persons, now existing or hereafter arising,
subject only to Liens permitted pursuant to Section 7.2 of this Agreement. All
of the Collateral is intended for use solely in Borrower's business. Borrower
shall defend the Collateral against all claims and demands of all other parties
who at any time claim any interest in the Collateral.
5.9 LABOR LAW MATTERS. No goods or services have been or will
be produced by Borrower in violation of any applicable labor laws or regulations
or any collective bargaining
26
agreement or other labor agreements or in violation of any minimum wage,
wage-and-hour, or other similar laws or regulations.
5.10 PLACE OF BUSINESS. Ad Art's chief executive office is
located at 0000 Xxxxx Xx Xxx Xxxx, Xxxxxxxx, XX 00000, and it has not changed
the location of its chief executive office from a location in a different state
within the last five (5) years. The Inventory is and shall be located only at
the locations listed on EXHIBIT F to this Agreement, or on locations of which
Bank is notified pursuant to Section 6.14, except for inventory on customer
locations being supplied under contracts with an aggregate value of less than
$50,000. Except as indicated on said exhibit, the real estate constituting each
said location is owned by Borrower. With respect to locations not owned by
Borrower, said exhibit sets forth the name and address of each landlord, vendor
or customer, the location of the property, and the remaining term of the lease
or purchase agreement. Borrower has separately furnished to Bank true and
correct copies of the lease agreements or purchase agreements for each said
parcel.
5.11 FULL DISCLOSURE. All information furnished to Bank
concerning Borrower, its financial condition, the Collateral, or otherwise for
the purpose of obtaining credit or an extension of credit, is, or will be at the
time the same is furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give Bank a true and
accurate knowledge of the subject matter. The books of account, minute books,
and stock record books of Borrower are complete and correct and have been
maintained in accordance with good business practices, and there have been no
transactions adversely affecting the business of Borrower that should have been
set forth therein and have not been so set forth.
5.12 BORROWER'S NAME. Borrower has not changed its name or
been known by any other name within the last five (5) years, nor has it been the
surviving corporation in a merger effected within the last five (5) years,
except for a merger transaction involving Ad Art.
5.13 EXISTING DEBT. Except for Ad Art, Borrower is not subject
to any federal, state or local tax liens, Borrower has not received any notice
of deficiency or other official notice to pay any taxes. Borrower has paid all
sales and excise taxes payable by it.
5.14 INTELLECTUAL PROPERTY. Borrower owns or is licensed to
use, all patents, trademarks, trade names, copyrights, technology, know-how, and
processes necessary for the conduct of their business as currently conducted
(the "Intellectual Property") all of which is described in EXHIBIT G to this
Agreement. Any material licenses of the Intellectual Property are set forth in
EXHIBIT G to this Agreement. No claim has been asserted and is pending by any
Person with respect to the use of any such Intellectual Property, or challenging
or questioning the validity or effectiveness of any such Intellectual Property
and Borrower does not know of any valid basis for any such claim. The use of the
Intellectual Property by Borrower does not infringe on the rights of any Person.
5.15 SUBSIDIARIES. Xxxxxxxx has no subsidiaries. Ad Art has no
subsidiaries other than (1) ESC of Nevada, Inc., a Nevada corporation; (2) DTEK
Signs, ULC; (3) DTEK Canada, Inc.; and (4) Xxxxxxxx.
27
5.16 ENVIRONMENTAL MATTERS. Borrower is in compliance with all
Environmental Regulations and with all other federal, state, and local laws and
regulations relating to the environment and pollution, including such laws and
regulations regulating hazardous, radioactive and toxic materials and
underground petroleum products storage tanks. No assessment, notice of (primary
or secondary) liability or notice of financial responsibility, or the amount
thereof, or to impose civil penalties has been received by Borrower, and there
are no facts, conditions, or circumstances known to Borrower which could result
in any investigation or inquiry if all such facts, conditions, and
circumstances, if any, were fully disclosed to the applicable governmental
authority. Borrower has paid any environmental excise taxes due and payable,
including without limitation, those imposed pursuant to Sections 4611, 4661, or
4681 of the Internal Revenue Code of 1986, as amended from time to time.
Borrower represents and warrants that Borrower has not obtained and is not
required to obtain any permits, licenses, or similar authorizations to
construct, occupy, operate, or use any buildings, improvements, fixtures, or
equipment in connection with its business by reason of any Environmental
Regulations. Borrower represents and warrants that no oil, toxic or hazardous
substances, or solid wastes have been disposed of or released by Borrower in
connection with the operation of its business and that Borrower will not dispose
of or release oil, toxic or hazardous substances, or solid wastes at any time in
its operation of its business (the terms "hazardous substance" and "release"
shall have the meanings specified in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), and the terms
"solid waste" and "disposal," "dispose," or "disposed" shall have the meanings
specified in the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), except that if such acts are amended to broaden the meanings thereof,
the broader meaning shall apply herein).
5.17 OWNERSHIP. All issued and outstanding capital stock of Ad
Art is owned by Parent, and all issued and outstanding capital stock of Xxxxxxxx
is owned by DTEK Signs, U.L.C., a Nova Scotia unlimited liability company.
Except as set forth in the annual fiscal year-end audited financial statements
of Parent as of June 30, 2000, there are not outstanding any warrants, options,
or rights to purchase any shares of capital stock of Borrower, nor does any
Person have a Lien upon any of the capital stock of the Borrower, except for the
Lien held by Subordinate Lenders.
5.18 INVENTORY. All Inventory is marketable in the ordinary
course of business. All Inventory has been produced, and during the term hereof
will be produced, in compliance with the requirements of the Federal Fair Labor
Standards Act. No Inventory is now, nor shall any Inventory at any time or times
hereafter be, stored with a bailee, warehouseman or similar party without Bank's
prior written consent and, if Bank gives such consent, Borrower will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to Bank, in form and substance acceptable to Bank, warehouse
receipts therefor in Bank's name. No Inventory is or will be consigned to any
Person without Bank's prior written consent, and, if such consent is given,
Borrower shall, prior to the delivery of any Inventory, on consignment, (i)
provide Bank with all consignment agreements to be used in connection with such
consignment, all of which shall be acceptable to Bank, (ii) prepare, execute,
and file appropriate financing statements with respect to any consigned
Inventory, showing Bank as assignee, (iii) conduct a search of all filings made
against the consignee in all jurisdictions in which any consigned Inventory is
to be located and deliver to Bank copies of the results of all such searches,
and (iv) notify, in writing, all the creditors of the consignee which are or may
be holders of Liens in the Inventory to be consigned that Borrower expects
28
to deliver certain Inventory to the consignee, all of which Inventory shall be
described in such notice by item or type.
5.19 REPRESENTATIONS TRUE. No representation or warranty by
Borrower contained herein or in any certificate or other document furnished by
Borrower pursuant hereto contains any untrue statement of material fact or omits
to state a material fact necessary to make such representation or warranty not
misleading in light of the circumstances under which it was made.
6. AFFIRMATIVE COVENANTS. Borrower agrees and covenants that
until the Obligations have been indefeasibly paid in full and until Bank has no
further obligation to make advances under the Loans, Borrower shall:
6.1 INSURANCE. Maintain insurance with insurance companies
satisfactory to Bank on such of its properties, in such amounts and against such
risks as is customarily maintained in similar businesses operating in the same
vicinity, and shall file with Bank upon request, from time to time, a detailed
list of the insurance then in effect, stating the names of the insurance
companies, the amounts and rates of the insurance, dates of expiration thereof,
and the properties and risks covered thereby, and, within 10 days after notice
in writing from Bank, shall obtain such additional insurance as Bank may
reasonably request. All such policies shall name Bank as a named insured and
provide that any losses payable thereunder shall (pursuant to loss payable
clauses, in form and content acceptable to Bank, to be attached to each policy)
be payable to Bank, and provide that the insurance provided thereby, as to the
interest of Bank, shall not be invalidated by any act or neglect of Borrower,
nor by the commencing of any proceedings by or against Borrower in bankruptcy,
insolvency, receivership , or any other proceedings for the relief of a debtor,
nor by any foreclosure, repossession, or other proceedings relating to the
property insured, nor by, any occupation of such property or the use of such
property for purposes more hazardous than permitted in the policy. Borrower
hereby assigns to Bank all right to receive proceeds, directs any insurer to pay
all proceeds directly to Bank, and authorizes Bank to endorse any check or draft
for such proceeds and apply the same toward satisfaction of the Obligations.
Borrower shall furnish to Bank insurance certificates, in form and substance
satisfactory to Bank, evidencing compliance by it with the terms of this Section
and, upon the request of Bank at any time, Borrower shall furnish Bank with
photostatic copies of the policies required by the terms of this Section.
Borrower will cause each insurer under each of the policies to agree (either by
endorsement upon such policy or by letter addressed to Bank) to give Bank at
least 30 days' prior written notice of the cancellation of such policies in
whole or in part or the lapse of any coverage thereunder. Borrower agrees that
it will not take any action or fail to take any action which action or inaction
would result in the invalidation of any insurance policy required hereunder.
Borrower shall furnish to Bank such evidence of insurance as Bank may require.
6.2 CORPORATE EXISTENCE; QUALIFICATION. Maintain its corporate
existence and, in each jurisdiction in which the character of the property owned
by it or in which the transaction of its business makes its qualification
necessary, maintain good standing.
6.3 TAXES. During its fiscal year, accrue all current tax
liabilities of all kinds, all required withholding of income taxes of employees,
all required old age and unemployment
29
contributions, all required payments to employee benefit plans, and pay the same
when they become due.
6.4 COMPLIANCE WITH LAWS. Comply with all Requirements of Law,
including Environmental Regulations, and pay all taxes, assessments, charges,
claims for labor, supplies, rent, and other obligations which, if unpaid, might
give rise to a Lien against property of Borrower, except claims being contested
in good faith by appropriate proceedings (provided Borrower promptly notifies
Bank in writing of such contest), and against which reserves deemed adequate by
Bank have been set up. Specifically, Borrower shall pay when due all taxes and
assessments upon the Collateral, this Agreement, the Notes, or any Loan
Document, including, without limitation, any stamp taxes or intangibles taxes
imposed by virtue of the transactions outlined herein.
6.5 INTERIM FINANCIAL STATEMENTS. Within 45 days after the
close of each calendar month, Borrower shall furnish Bank with unaudited monthly
and year-to-date financial statements of Parent and the Borrower on a
consolidated and consolidating basis, consisting of balance sheets and operating
statements and a listing of all contingent liabilities of the Borrower for the
periods involved and such other statements as Bank may request, consistently
prepared with the monthly financial statement(s) previously furnished to Bank,
taken from the books and records of the Borrower, and certified as correct by
the Chief Financial Officer of the Borrower.
6.6 CERTIFICATES; OTHER INFORMATION. Borrower shall furnish to
Bank:
(a) concurrently with the delivery of the
financial statements referred to in Section 6.5 hereof, a certificate from the
President and Chief Financial Officer of Parent (i) stating that after diligent
investigation, they have determined that Borrower during the period has observed
or performed all of its covenants in this Agreement and in the other Loan
Documents, and (ii) stating that the officers do not know of any default or
Event of Default by Borrower under this Agreement or the other Loan Documents;
and
(b) all other information regarding the affairs
of Borrower and its Subsidiaries that Bank from time to time reasonably
requests.
6.7 ORDERLY LIQUIDATION REPORTS. Furnish to Bank weekly on
each Monday a detailed report regarding the Orderly Liquidation of Ad Art, in
form substantially similar to the Orderly Liquidation Budget, and containing a
detailed accounts receivable aging report as of the last day of the previous
week, a detailed accounts payable aging report, and an inventory report, all in
form and substance, and containing such detail and information as Bank shall
request.
6.8 SEC FILINGS. (i) As soon as available and in any event
within ninety-five (95) days following the end of each of Parent's fiscal years,
a copy of its Annual Report on Form 10-K as filed with the SEC; (ii) as soon as
available and in any event within fifty (50) days following the end of each of
Parent's first three fiscal quarters of each year, a copy of its Quarterly
Report on Form 10-Q; and (iii) promptly on becoming available, any other report
or statement that Parent files with the SEC or mails to its shareholders.
30
6.9 VISITS AND INSPECTIONS. (a) Give agents and
representatives of Bank full and unrestricted access from time to time during
normal business hours to its business premises, offices, properties, books,
records, and information; (b) permit agents and representatives of Bank to make
such audit and examination thereof, and conduct such other investigation, as
they consider appropriate to determine and verify its business properties,
operation, or condition (financial or other) and to consummate the transactions
contemplated by this Agreement; and (c) furnish to Bank and its agents and
representatives such additional information with respect to its business and
affairs as they reasonably request from to time. Borrower shall bear the cost of
such audits, reports, and inspections.
Borrower shall keep true books, records, and accounts that completely,
accurately, and fairly reflect all dealings and transactions relating to its
assets, business, and activities and shall record all transactions in such
manner as is necessary to permit preparation of its financial statements in
accordance with GAAP.
6.10 PAYMENTS ON NOTES. Duly and punctually pay the principal
and interest on the Notes, in accordance with the terms of this Agreement and of
the Notes.
6.11 CONDUCT OF BUSINESS. Subject to the provisions of Section
6.21 below, do all things necessary to preserve, renew, and keep in full force
and effect its rights, patents, permits, licenses, franchises, and trade names
necessary to continue its business. Borrower shall comply with all Contractual
Obligations applicable to it and its business and properties.
6.12 MAINTENANCE OF PROPERTIES. Keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needed and proper repairs, renewals, replacements,
additions, and improvements thereto and comply with the provisions of all leases
to which it is a party or under which it occupies property so as to prevent any
loss or forfeiture thereof or thereunder.
6.13 LOCATION OF COLLATERAL. Notify Bank on a monthly basis
within thirty (30) days of a change in a location at which Collateral is
maintained, except for Inventory that is (i) shipped to customers and vendors,
(ii) shipped between locations listed on EXHIBIT F or (iii) Inventory stored at
customers' premises for those contracts involving an aggregate sale price of
less than $50,000.
6.14 ADDITIONAL DOCUMENTS. Join Bank in executing any security
agreements, assignments, consents, financing statements or other instruments, in
form satisfactory to Bank, as Bank may from time to time request in connection
with the Collateral and the other security for the Loans.
6.15 NOTICE TO BANK. Promptly notify Bank of: (a) any default
or Event of Default, (b) the acceleration of the maturity of any Debt or
Contractual Obligation; (c) a default in the performance of, or compliance with,
any Requirement of Law, Environmental Regulation, or Contractual Obligation of
Borrower; (d) any litigation, dispute, or proceeding that is pending or known by
Borrower's officers to be threatened against Borrower and that might involve a
claim
31
for damages or a request for injunctive, enforcement, or other relief that, if
granted, might reasonably be expected to have a Material Adverse Effect on
Borrower; (e) a change in either the name or the principal place of business of
Borrower or the office where its books and records are kept; (f) any change in
its accounting methods, policies, or practices for financial reporting purposes
or any material change in its accounting methods, policies, or practices for tax
reporting purposes; and (g) a change that has a Material Adverse Effect on the
business, operations, assets, property, or condition (financial or other) of
Borrower. Borrower shall provide with each notice pursuant to this section a
statement of an officer of Borrower setting forth details of the occurrence
referred to in the notice and stating what action Borrower proposes to take with
respect to it. Borrower shall also promptly notify Bank of any agreement to
acquire another company, including in the notice a copy of the acquisition
agreement and financial information regarding the acquired company.
6.16 SUBORDINATION OF DEBT. Provide Bank with a debt
subordination agreement, in form and substance satisfactory to Bank, executed by
Borrower and each Subordinate Lender, and a debt and subordination agreement, in
form and substance satisfactory to Bank, executed by Borrower and any Person who
is an officer, director, shareholder or Affiliate of Borrower to whom Borrower
is or hereafter becomes indebted, subordinating in right of payment and claim
all of such Debt and any future advances thereon to the full and final payment
of the Obligations.
6.17 COLLECTION OF ACCOUNTS. Diligently pursue collection
of all Accounts and other amounts due Borrower from others, including Affiliates
of Borrower.
6.18 LANDLORD AND STORAGE AGREEMENTS. Provide Bank with copies
of all agreements between Borrower and any landlord or warehouseman which owns
any premises at which any Inventory or other Collateral may, from time to time,
be kept.
6.19 AUDITORS' LETTERS. Furnish Bank with a copy of each
finally issued letter written to Parent by its independent certified public
accountant concerning internal controls and management review immediately upon
receipt of same.
6.20 ERISA COMPLIANCE.
(a) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in ERISA
with respect to each Plan;
(b) Promptly after the filing thereof, furnish
to Bank copies of an annual report required to be filed pursuant to ERISA in
connection with each Plan and any other employee benefit plan of it and its
Affiliates;
(c) Notify Bank as soon as practicable of any
Reportable Event and of any additional act or condition arising in connection
with any Plan which Borrower believes might constitute grounds for the
termination thereof by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States District Court of a trustee to
administer the Plan; and
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(d) Furnish to Bank, promptly upon Bank's
request therefor, such additional information concerning any Plan or any other
such employee benefit plan as may be reasonably requested.
6.21 OPERATION OF BUSINESS.
(a) INTERIM OPERATIONS. During the Interim
Period, the Borrower (i) shall continue to operate the businesses of Ad Art in
the ordinary course (the "Interim Operations"), subject to the terms of the
Orderly Liquidation Budget, (ii) shall use its best efforts to market and sell
the assets of Ad Art on a going concern basis for the highest and best price
obtainable and to obtain a binding letter of intent for the purchase thereof
(the "Letter of Intent"), and (iii) shall provide the Bank with copies of any
and all offers it receives for the purchase of any assets of Borrower.
(b) ORDERLY LIQUIDATION. If the Borrower does
not receive during the Interim Period a Letter of Intent acceptable to the Bank
in its sole and absolute discretion, then the Borrower shall immediately
commence, as of the end of the Interim Period, the Orderly Liquidation of Ad Art
in accordance with the Orderly Liquidation Budget. The Borrower shall perform
all reasonable acts to implement the Orderly Liquidation and to maximize the
value of the Ad Art Collateral for the benefit of the Bank. The Borrower shall
continue to engage Focus, or another financial consultant acceptable to the Bank
in its reasonable discretion, to assist Ad Art in the Orderly Liquidation. The
Borrower shall, within fifteen (15) days of the date of this Agreement, engage
on reasonable terms a licensed and reputable commercial real estate broker to
market and sell the California Real Estate and shall provide the Bank with a
copy of the brokerage contract with such broker.
7. NEGATIVE COVENANTS. Until the Obligations have been
indefeasibly repaid in full and until Bank has no further obligation to make
advances under the Loans, without the prior written consent of Bank, Borrower
shall not:
7.1 INDEBTEDNESS. Except as permitted or contemplated by this
Agreement and unless Borrower is in compliance with all of its financial
covenants, create, incur, assume, or suffer to exist any Debt or obligation for
money borrowed, or guarantee, or endorse, or otherwise be or become contingently
liable in connection with the obligations of any person, firm, or corporation
(including any Affiliate), except:
7.1.1 Indebtedness for taxes not at the time due and payable
or which are being actively contested in good faith by appropriate proceedings
and against which reserves deemed adequate by Bank have been established by
Borrower, but only if the non-payment of such taxes does not result in a Lien
upon any property of Borrower that has priority over the Lien held by Bank;
7.1.2 Debt, other than for borrowed money, incurred in the
ordinary course of business, including that evidenced by trade promissory notes
with a maturity of less than one year;
7.1.3 Debt for money borrowed from Bank: and
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7.1.4 Debt incurred prior to the date of this Agreement.
7.2 LIENS AND SECURITY INTERESTS. Create, incur, assume,
or suffer to exist any mortgage, security deed, deed of trust, security
interest, pledge, encumbrance, Lien or charge of any kind (including charges on
property purchased under conditional sales or other title retention agreements)
on any of its property or assets, now owned or hereafter acquired, except:
7.2.1 Liens for taxes not yet due or which are being contested
in good faith by appropriate proceeding and against which reserves deemed
adequate by Bank have been set up (excluding any Lien imposed pursuant to any of
the provisions of ERISA), but only if the non-payment of such taxes does not
result in a Lien upon any property of Borrower that has priority over the Lien
held by Bank;
7.2.2 Other Liens incidental to the conduct of its business or
the ownership of its property and assets and created by operation of law so long
as the obligations secured thereby are not past due;
7.2.3 Liens in favor of Bank; and
7.2.4 Liens reflected on EXHIBIT D to this Agreement.
7.3 DIVIDENDS AND DISTRIBUTIONS. Declare any dividends on
any shares of any class of its capital stock, or apply any of its property or
assets to the purchase, redemption or other retirement of, or set apart any sum
for the payment of any dividends on, or for the purchase, retirement of, or make
any other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of Borrower, unless after any of the
foregoing payments, Borrower remains in compliance with all of its financial
covenants.
7.4 AFFILIATE TRANSACTIONS. Purchase, acquire, or lease
property from, or sell, transfer or lease property to, any Affiliate of
Borrower, except for arms-length transactions at fair market value in the
ordinary course of business.
7.5 FINANCING STATEMENTS. Permit any financing statement
(except Bank's financing statements) to be on file with respect to the
Collateral, except for those filed to perfect Permitted Liens.
7.6 NAME CHANGE/LOCATION OF CHIEF EXECUTIVE OFFICE.
Change the name, identity or corporate structure of Borrower, or change the
location of its chief executive office, unless notice has been given to Bank in
advance of the move.
7.7 DESTRUCTION OF COLLATERAL. Waste or destroy the
Collateral or use it in violation of any statute or ordinance.
7.8 MERGER OR CONSOLIDATION. Enter into any merger or
consolidation of which it is not the surviving corporation or otherwise suffer a
"Change in Control", as defined below. For
34
purposes of this Agreement, the term "Change in Control" means (a) any "person"
or "group" of persons (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended) have acquired beneficial ownership, direct or
indirect, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over 30% or
more of the votes attributable to the voting stock of Borrower; or (b)
individuals who at the beginning of any period of twenty-four (24) consecutive
calendar months were directors of Borrower (together with any new directors
whose election to the board of directors of Borrower or whose nomination for
election by the shareholders of Borrower was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of Borrower then in office.
7.9 LOANS OR ADVANCES. Make loans or advances or pay any
management or similar fees to any Affiliate or officer of Borrower, except
advances or payment of management or similar fees made in the ordinary course of
business and the payment of the reasonable management fees of Focus. Make loans
or advances to any Affiliate of the Borrower.
7.10 CASH CAPITAL EXPENDITURES. Make or commit to make any
Cash Capital Expenditures.
7.11 ACQUISITIONS. Purchase or acquire the obligations or
stock of or any other interest in any Person.
7.12 PREPAYMENT OF DEBT. Prepay any Debt, except (i) Debt
to Bank, and (ii) as otherwise contemplated by the Orderly Liquidation Budget.
7.13 LEASE TRANSACTIONS. Enter into any sale and
lease-back arrangement, except as may be provided in the Orderly Liquidation
Budget.
7.14 AMENDMENTS. Amend any instrument evidencing a Lien
listed on EXHIBIT D hereto.
7.15 DEPOSIT OF FUNDS. Except as provided in the
Restructuring Agreement, deposit proceeds of the Ad Art Collateral into any
account other than the Special Collection Account of Ad Art.
7.16 SUBORDINATED DEBT. Make any cash payment (principal
or interest) with respect to Subordinated Debt, or with respect to any Debt that
would be Subordinated Debt but for the absence of a subordination agreement in
effect with respect thereto, except that Borrower shall be entitled to make
payments with respect to such Debt to the extent expressly permitted in any
subordination agreement in effect with respect thereto, but only during such
time as no default or Event of Default exists hereunder.
7.17 ACCOUNTS. Sell, assign, or discount any of its
Accounts, Instruments, Chattel Paper, or any promissory notes held by it other
than discount of such Accounts, Chattel Paper, or
35
notes in the ordinary course of business for collection. Borrower shall notify
Bank promptly in writing with any discount, offset, or other deductions not
shown on the face of an Account invoice and any dispute over an Account, and any
information relating to an adverse change in any Account Debtor's financial
condition or ability to pay its obligations.
7.18 MARGIN STOCK. Use any proceeds of the Loans to
purchase or carry any margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) or extend credit to others for
the purpose of purchasing or carrying any margin stock.
8. GRANT OF SECURITY INTEREST.
8.1 SECURITY INTEREST. As security for the payment of the
Loans and all other Obligations, now existing or in the future incurred, and
including any extensions or renewals or changes in form of the Loans, any
over-advances, and any other Obligations, and all costs and expenses of
collection thereof, including, without limitation, reasonable attorneys' fees,
Borrower hereby assigns to Bank and grants to Bank a security interest in and
Lien upon the following:
(a) All of Borrower's Accounts;
(b) All of Borrower's Documents;
(c) All of Borrower's Instruments;
(d) All of Borrower's General Intangibles;
(e) All of Borrower's Chattel Paper;
(f) All of Borrower's Inventory;
(g) All of Borrower's Equipment;
(h) All of the proceeds, products, and profits
as the case may be, of Borrower's Accounts, Documents, Instruments, Chattel
Paper, General Intangibles, Equipment, and Inventory;
(i) All monies and other property of any kind,
real, personal, or mixed, and tangible or intangible, now or at any time or
times hereafter, in the possession or under the control of Bank or a bailee of
Bank;
(j) All accessions to, substitutions for and all
replacements, products, profits, income, and cash and non-cash proceeds of (a)
through (g) above, including, without limitation, proceeds of any unearned
premiums with respect to insurance policies insuring any of the Collateral; and
36
(k) All books and records (including, without
limitation, customer lists, credit files, magnetic, digital and laser tapes and
disks, electronic and computer storage media, computer programs, print-outs, and
other computer materials and records) of Borrower pertaining to any of (a)
through (h) above.
In addition, the Loans and Obligations will be secured by the
California Mortgage. As Borrower obtains more trademarks or patents, Borrower
shall execute appropriate instruments granting to Bank a security interest in
those assets.
8.2 SALE OF INVENTORY. Until the occurrence of an Event of
Default, Borrower may use and dispose of the Inventory in the ordinary course of
business where such is not inconsistent with this Agreement or the Orderly
Liquidation Budget, provided that the ordinary course of business does not
include a transfer in partial or total satisfaction of Debt nor a transfer
(other than a sale on terms and conditions which would apply if disinterested
parties were involved) to an Affiliate of Borrower.
8.3 NOTICE TO ACCOUNT DEBTORS. If an Event of Default exists
hereunder, Bank may notify the Account Debtors obligated on any or all of the
Accounts to make payment thereof directly to Bank and to take control of all
proceeds of any such Accounts. Any such notice by Bank to such Account Debtors
shall be given by an officer of Bank. Borrower, if requested by Bank, shall
stamp or cause to be stamped on each Account item in legible letters "Pledged to
SouthTrust Bank," and shall turn over physical possession of the Accounts to
Bank. Borrower authorizes Bank to sign and endorse Borrower's name upon any
check, draft, money order, or other form of payment of any Account item and to
sign and endorse satisfactions and releases of Account items in Borrower's name.
Until such time as Bank elects to exercise such right by mailing to Borrower
written notice thereof, Borrower is authorized, as agent of Bank, to collect and
enforce said Accounts in Borrower's name. The costs of such collection and
enforcement, including attorneys' fees and out-of-pocket expenses and all other
expenses and liabilities resulting therefrom, shall be borne solely by Borrower
whether the same are incurred by Bank or Borrower. At the request of Bank,
Borrower shall upon receipt of all checks, drafts, cash, and other remittances
in payment or on account of the Accounts deposit the same in the Special
Collection Account referred to in Section 4.2 ("Special Collection Account").
The funds in the Special Collection Account shall be applied upon receipt
against the Loans by Bank, subject to the terms of the Restructuring Agreement.
Said proceeds shall be deposited in precisely the form received, except for the
endorsement of Borrower where necessary to permit collection of items, which
endorsement Borrower agrees to make, and which Bank is also hereby authorized to
make on Borrower's behalf. Pending such deposit, Borrower agrees that it will
not commingle any such checks, drafts, cash, and other remittances with any of
Borrower's funds or property, but will hold them separate and apart therefrom
and upon an express trust for Bank until deposit thereof made in the Special
Collection Account. Bank may, in accordance with the provisions of this
Agreement, apply the whole or any part of the collected funds on deposit in the
Special Collection Account against the principal and/or interest of the Loans or
other Obligations secured hereby, the order and method of such application to be
at the discretion of Bank. Any portion of said funds on deposit in the Special
Collection Account which Bank elects not to so apply may, at Bank's election, be
paid over by Bank to Borrower; provided, however, that if at any time Bank
grants to Borrower the right to retain the proceeds of the Accounts for
Borrower's use, or if at any time Bank
37
elects to pay funds on deposit in the Special Collection Account to Borrower,
such right to retain and use proceeds or payment from the Special Collection
Account shall be deemed to be continuing new value for the security interest
attaching hereunder on all after-acquired property.
8.4 VERIFICATION OF ACCOUNTS. Whether or not an Event of
Default has occurred, any of Bank's officers, employees, or agents shall have
the right, at any time or times hereafter, in the name of Bank, or any designee
of Bank or Borrower, to verify the validity, amount, or any other matter
relating to any Accounts by mail, telephone, telegraph, or otherwise. Borrower
shall cooperate fully with Bank in an effort to facilitate and promptly conclude
any such verification process.
8.5 POST OFFICE BOX. If an Event of Default has occurred or is
continuing, Borrower agrees to acquire at its expense a post office box in the
place designated by Bank, to which Bank and its designees alone shall have
access. (Borrower acknowledges that Ad Art will be subject to a lockbox
arrangement, even in the absence of an Event of Default.) Borrower agrees to
give notice to all of its Account Debtors to mail payments due to Borrower to
such post office box. Borrower agrees that Bank, or its designees, may open such
post office box, may receive, open, and dispose of all mail addressed to
Borrower at such post office box, and may deposit any payments contained in such
mail in a Special Collection Account referred to in Section 4.2 ("Special
Collection Accounts") hereof. Borrower agrees to give all required instructions
to the U.S. Postal Service authorities to enable Bank or its designees to attain
access to such post office box of Borrower, agrees that it will not attempt to
remove any mail from such post office box, and agrees to execute such additional
agreements as Bank may reasonably require in connection with such post office
box.
8.6 GOVERNMENTAL ACCOUNTS. If any of Borrower's Accounts in
excess of $10,000.00 arise out of contracts with the United States or any
department, agency, or instrumentality thereof, Borrower will immediately notify
Bank thereof in writing and execute any instruments and take any steps required
by Bank in order that all monies due and to become due under such Account shall
be assigned to Bank and notice thereof given to the Government under the Federal
Assignment of Claims Act.
8.7 ACCOUNTS EVIDENCED BY INSTRUMENTS. If any of Borrower's
Accounts are or should become evidenced by promissory notes, trade acceptances,
chattel paper, chattel mortgages, conditional sales contracts, or other
instruments, Borrower will immediately deliver same to Bank, endorsed or
assigned with recourse to Bank's order and, regardless of the form of such
endorsement or assignment, Borrower hereby waives presentment, demand, notice of
dishonor, protest and notice of protest, and all other notices with respect
thereto.
8.8 LEASE OF RECORDS. Borrower hereby leases to Bank, and Bank
hires from Borrower, for a term which shall be effective so long as the Loans or
other Obligations secured hereby are owing to Bank by Borrower and until Bank
has no further obligation under the Agreement, all of Borrower's present and
future books of Accounts, computer printouts, magnetic, digital and laser tapes
and disks, computer and electronic storage media, computer software programs,
trial balance records, ledgers and cabinets in which they are located, reflected
or maintained, in any way relating to the Collateral, and all present and future
supporting evidence
38
and documents relating thereto in the form of written applications, credit
information, account cards, payment records, trial balances, correspondence,
delivery receipts, certificates and the like, as well as the past and current
information stored in computer software programs for and on Borrower's behalf by
third parties. Borrower, if requested by Bank, agrees to legend all of the
foregoing to indicate the lease thereof to Bank. If an Event of Default occurs,
then, in addition to all of the other rights and remedies of Bank herein, Bank
will have the right forthwith or at any time thereafter to remove from
Borrower's premises all of the foregoing and keep and retain the same in Bank's
possession until the Loans and other Obligations secured hereby shall have been
fully paid and discharged and Bank has no further obligation under the
Agreement. The provisions of this section shall not be deemed to diminish or
contravene the security interest of Bank in Borrower's General Intangibles or in
the property, materials, and interests described in this section, but shall be
deemed to be in addition to any rights Bank may have with respect to Borrower's
grant of a security interest in its General Intangibles to Bank.
8.9 LICENSE OF RIGHTS. Bank is hereby granted a license or
other right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, and
advertising matter or any property of a similar nature as it pertains to the
Collateral, in advertising for sale and in selling any Collateral, and
Borrower's rights under all licenses and all franchise agreements shall inure to
Bank's benefit.
8.10 ATTORNEY-IN-FACT. Borrower hereby irrevocably designates,
makes, constitutes, and appoints Bank (and all Persons designated by Bank) as
Borrower's true and lawful attorney (and agent-in-fact) and Bank, or Bank's
agent, may, without notice to Borrower and in either Borrower's or Bank's name,
but at the cost and expense of Borrower:
8.10.1 At such time or times hereafter as Bank or
said agent, in its sole discretion, may determine, endorse Borrower's name on
any checks, notes, acceptances, drafts, money orders, or any other evidence of
payment or proceeds of the Collateral which come into the possession of Bank or
under Bank's control; and
8.10.2 If an Event of Default exists, Bank may: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge, or release any of the Accounts or
other Collateral; (iii) sell or collect any of the Accounts or other Collateral
upon such terms, and for such amounts and at such time or times as Bank deems
advisable; (iv) take possession, in any manner, of any item of payment or
proceeds relating to any Collateral and apply the same to the Obligations; (v)
prepare, file, and sign Borrower's name to a proof of claim in bankruptcy or
similar document against any Account Debtor or to any notice of lien,
assignment, or satisfaction of lien or similar document in connection with any
of the Collateral; (vi) receive, open, and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Bank may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Bank or any other bank on account of the
Obligations; (viii) endorse the name of Borrower upon any Chattel Paper,
document, instrument, invoice, freight xxxx, xxxx of lading, or similar document
or agreement relating
39
to the Accounts, Inventory, and any other Collateral; (ix) use Borrower's
stationery and sign the name of Borrower to verifications of the Accounts and
notices thereof to Account Debtors; (x) use the information verifications if
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, and any other Collateral and
to which Borrower has access; (xi) make and adjust claims under policies of
insurance; (xii) for and in the name of Borrower to give instructions and direct
any bank or financial institution in which proceeds of the Collateral are
deposited to turn over said proceeds to Bank; and (xiii) do all other acts and
things necessary, in Bank's determination, to fulfill Borrower's obligations
under this Agreement.
9. ADDITIONAL REPRESENTATIONS, COVENANTS, AND AGREEMENTS RELATING
TO COLLATERAL.
9.1 AFFIRMATION OF REPRESENTATIONS. Each request for a loan or
advance made by Borrower pursuant to this Agreement or any of the other Loan
Documents shall constitute (i) an automatic representation and warranty by
Borrower to Bank that there does not then exist any default or Event of Default
and (ii) a reaffirmation as of the date of said request that all of the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true in all material respects, except for any changes
in the nature of Borrower's business or operations that would render the
information contained in any exhibit attached hereto either inaccurate or
incomplete, so long as Bank has consented to such changes or such changes are
expressly permitted by this Agreement.
9.2 WAIVERS. Borrower hereby releases and waives any and all
actions, causes of action, demands and suits which it may ever have against Bank
as a result of any possession, collection, settlement, compromise, or sale by
Bank of any of the Accounts upon the occurrence of an Event of Default
hereunder, notwithstanding the effect of such possession, collection,
settlement, compromise, or sale upon the business of Borrower. Said waiver shall
include all causes of action and claims which may result from the exercise of
the power of attorney conferred upon Bank in Section 8.10 ("Attorney-in-Fact")
hereof.
9.3 DISCHARGE OF TAXES AND LIENS. At its option, Bank may
discharge taxes, liens, security interests, or other encumbrances at any time
levied or placed on the Collateral and may pay for the maintenance and
preservation of the Collateral. Borrower agrees to reimburse Bank, on demand,
for any payment made or expense incurred by Bank pursuant to the foregoing
authorization, including, without limitation, attorneys' fees.
9.4 INSURANCE. Without limiting any other provision hereof,
Borrower shall keep the Collateral insured in amounts equal to its full
insurable value, with companies, and against such risks as may be satisfactory
to Bank. Borrower will pay the costs of all such insurance and deliver policies
evidencing such insurance to Bank with mortgagee loss payable clauses in favor
of Bank. Borrower hereby assigns to Bank all right to receive proceeds, directs
any insurer to pay all proceeds directly to Bank, and authorizes Bank to endorse
any check or draft for such proceeds and apply the same toward satisfaction of
the Loans and other Obligations secured hereby.
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9.5 COMPLETE RECORDS. Borrower will at all times keep accurate
and complete records of the Collateral, and Bank or its agents shall have the
right to call at Borrower's place or places of business at intervals to be
determined by Bank, upon reasonable notice and during Borrower's regular
business hours, and without hindrance or delay, to inspect and examine the
Inventory and to inspect, audit, check, and make abstracts from the books,
records, journals, orders, receipts, computer printouts, correspondence, and
other data relating to the Collateral or to any other transactions between the
parties hereto. If requested by Bank. Borrower agrees to make its books,
records, journals, orders, receipts, computer printouts, correspondence, and
other data relating to the Collateral available for inspection, audit, and
checking by Bank or its agents.
9.6 UNIFORM COMMERCIAL CODE FINANCING STATEMENT. Borrower
agrees that a carbon, photographic, or other reproduction of this Agreement or
of a signed financing statement with respect to the Collateral shall be
sufficient as a financing statement and may be filed as such by Bank.
10. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default (unless and except to the
extent that the same is cured to the satisfaction of Bank within the applicable
cure period, if any, or, at the sole discretion of Bank, at any time
thereafter):
10.1 PAYMENT DEFAULT. If Borrower shall fail to make any
payment of any installment of principal or interest on any Note as and when the
same becomes due and payable, whether at stated maturity, by declaration, upon
acceleration, or otherwise; or
10.2 FEES AND EXPENSES. If Borrower shall fail to pay when
due any expense, fee or charge provided for in this Agreement as and when the
same becomes due and payable; or
10.3 DEFAULTS. If Borrower or any other party (except
Bank) shall fail to perform, keep or observe any covenant, agreement or
provision of the Note(s) or of this Agreement; or
10.4 REPRESENTATIONS FALSE. If any warranty,
representation, or other statement made or furnished to Bank by or on behalf of
Borrower or in any of the Loan Documents proves to be false or misleading in any
respect when made or furnished; or
10.5 FINANCIAL DIFFICULTIES. If Borrower shall be involved
in financial difficulties as evidenced:
(a) by its commencing a voluntary case under the
United States Bankruptcy Code or any similar law regarding debtor's rights and
remedies or an admission seeking the relief therein provided;
(b) by its making a general assignment for the
benefit of its creditors; or
41
(c) by applying for or consenting to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of such Person or of all or of a substantial part of its assets;
or
10.6 INVOLUNTARY PROCEEDINGS. If without its application,
approval, or consent, a proceeding shall be commenced, in any court of competent
jurisdiction, seeking in respect of Borrower any remedy under the federal
Bankruptcy Code, the liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, the appointment of a trustee, receiver,
liquidator or the like of such Person, or of all or any substantial part of the
assets of such Person, or other like relief under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, which results in the entry of an order for relief or such adjudication
or appointment remains undismissed or undischarged for a period of thirty (30)
days; or
10.7 ERISA. If a Reportable Event shall occur which Bank,
in its sole discretion, shall determine in good faith constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a trustee for
any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if Borrower is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting
from Borrower's complete or partial withdrawal from such Plan; or
10.8 DEFAULT ON REIMBURSEMENT OBLIGATION. If the Borrower
fails to reimburse the Bank, in accordance with the terms of Section 2A.3
hereof, for the amount of any draw or drawing on the 1999 Letter of Credit; or
10.9 PUT OPTION EVENT. An event occurs that would entitle
a Subordinated Lender to exercise a put option under any of the Subordinated
Debt; or
10.10 JUDGMENTS. If a final judgment for the payment of
money in excess of $100,000.00 shall be rendered against Borrower and the same
shall remain undischarged for a period of thirty (30) days during which
execution shall not be effectively stayed, unless such judgment is fully covered
by collectible insurance; or
10.11 ACTIONS. If Borrower shall be criminally indicted or
convicted under any law; or
10.12 COLLATERAL. If a creditor of Borrower shall obtain
possession of any of the Collateral by any legal means; or
10.13 CHANGE IN CONTROL. If there occurs a Change in
Control of Parent (as that term is defined in Section 7.8); or
10.14 SUBORDINATION AGREEMENTS. If a breach or default
shall occur with respect to any subordination agreement executed by any creditor
of Borrower (including any Affiliate), or if any said agreement shall otherwise
terminate or cease to have legal effect; or
42
10.15 PRIORITY OF SECURITY INTEREST. If any security
interest or Lien of Bank hereunder or under any other Security Agreement shall
not constitute a perfected security interest of first priority in the Collateral
thereby encumbered, subject only to Permitted Liens; or
10.16 LOSS OF COLLATERAL. If there shall occur any material
loss, theft, damage or destruction of any of the Collateral, which loss is not
fully insured; or
10.17 MATERIAL ADVERSE EFFECT. If Borrower suffers a change
that has a Material Adverse Effect on its business, assets, properties,
prospects, results of operation, or condition (financial or other), measured on
a consolidated basis, except as contemplated by this Agreement.
On the occurrence of any Event of Default, Bank or the holder of the
Notes may at its option proceed to protect and enforce its rights by suit in
equity, action at law and/or the appropriate proceeding either for specific
performance of any covenant or condition contained in the Notes or in any Loan
Document, and/or declare the unpaid balance of the Loans and Note together with
all accrued interest to be forthwith due and payable, and thereupon such balance
shall become so due and payable without presentation, protest or further demand
or notice of any kind, all of which are hereby expressly waived.
Borrower agrees that default under any Loan Document shall constitute
default with respect to all Loan Documents.
Without limiting the foregoing, upon the occurrence of any Event of
Default, and at any time thereafter, Bank shall have the rights and remedies of
a secured party under the Code (and the Uniform Commercial Code of any other
applicable jurisdiction) in addition to the rights and remedies provided herein
or in any other instrument or paper executed by Borrower. Bank may require
Borrower to assemble the Inventory and make the same available to Bank at a
place to be designated by Bank which is reasonably convenient to both parties.
Unless the Collateral is perishable or threatens to decline speedily in value,
or is a style customarily sold on a recognized market, Bank will give Borrower
reasonable notice of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of reasonable notice shall be
met if such notice is mailed postage prepaid to Borrower at least five (5) days
before the time of such sale or disposition. Borrower shall pay Bank on demand
any and all expenses, including legal expenses and reasonable attorneys' fees,
incurred or paid by Bank in protecting or enforcing the Loans and all other
Obligations secured hereby and other rights of Bank hereunder, including its
right to take possession of the Collateral.
Bank shall not be liable for failure to collect the Accounts or to
enforce any contract rights or for any action or omission on the part of Bank,
its officers, agents and employees, except willful misconduct. No remedy herein
conferred upon, or reserved to, Bank is intended to be exclusive of any other
remedy or remedies, including those of any note or other evidence of Debt held
by Bank, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing in law or in
equity. Exercise or omission to exercise any right of Bank shall not affect any
subsequent right of Bank to exercise the same.
43
Borrower waives notice prior to Bank's taking possession or control of
any of the Collateral or any bond or security that might be required by any
court prior to allowing Bank to exercise any of Bank's remedies, including the
issuance of an immediate writ of possession.
In addition to any other remedy available to it, Bank shall have the
right to the extent provided by law, upon the occurrence of an Event of Default,
to seek and obtain the appointment of a receiver to take possession of and
operate and/or dispose of the business and assets of Borrower and any costs and
expenses incurred by Bank in connection with such receivership shall bear
interest at the Default Rate.
11. ENVIRONMENTAL PROVISIONS; INDEMNIFICATION.
11.1 CONTAMINATION. Borrower acknowledges that certain soil
and groundwater in the parcel of California Real Estate may have been impacted
by contaminant substances (collectively, the "Contamination"). Borrower further
acknowledges that, as of the date of this Agreement, Bank's knowledge concerning
the Contamination is limited to the information set forth in the Phase I
Environmental Update issued on April 9, 1999 by National Assessment Corporation
(the "Report"). Borrower has previously conducted assessment and remediation
work to bring Area One into compliance with applicable Environmental Regulations
and otherwise satisfy the requirements of the Governmental Authorities with
jurisdiction regarding the environmental condition of the California Real
Estate.
11.2 ENVIRONMENTAL MANAGEMENT OF MORTGAGED PROPERTY FACILITY.
The parties to this Agreement acknowledge that, as of the date of this
Agreement, Bank has not participated in the operation or management of the Real
Estate or any facilities located on it and has not otherwise been in a position
to influence financial management, environmental remediation, hazardous waste
disposal, or hazardous material treatment affecting or relating to the Real
Estate. Moreover, the parties acknowledge that nothing contained in this
Agreement would grant to Bank the right or ability to meaningfully direct,
influence, or control future decisions regarding environmental remediation on
the Real Estate, the disposal or treatment of hazardous waste delivered to or
otherwise represent on the Real Estate, or the financial management of the Real
Estate. The parties also acknowledge that the obligations of Borrower and the
limited rights of Bank under this Agreement with respect to the assessment and
remediation of the Contamination are intended only to protect the value of the
Collateral securing Bank's Loans.
11.3 INDEMNIFICATION. Borrower shall defend, indemnify and
hold harmless Bank, its directors, officers, employees, accountants, attorneys,
and agents (the "Indemnitees") from and against any and all claims, demands,
judgments, damages, actions, causes of action, injuries, orders, penalties,
costs and expenses (including attorneys' fees and costs of court) of any kind
whatsoever arising out of or relating to any breach or default by Borrower or
any other Person under this Agreement or any Loan Document or the failure of
Borrower to observe, perform or discharge Borrower's duties hereunder or
thereunder. Without limiting the generality of the foregoing, Borrower's
obligation to indemnify Bank shall include indemnity from any and all claims,
demands, judgments, damages, actions, causes of action, injuries, orders,
penalties, costs, and expenses arising
44
out of or in connection with the activities of Borrower, its predecessors in
interest, third parties who have trespassed on Borrower's property, or parties
in a contractual relationship with Borrower, whether or not occasioned wholly or
in part by any condition, accident or event caused by an act or omission of the
Indemnitees, which: (a) arise out of the actual, alleged or threatened
discharge, dispersal, release, storage, treatment, generation, disposal, or
escape of radioactive materials, radioactivity, pollutants or other toxic or
hazardous substances, including any solid, liquid, gaseous, or thermal irritant
or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals,
and waste (including materials to be recycled, reconditioned or reclaimed); or
(b) actually or allegedly arise out of the use, specification, or inclusion of
any product, material, or process containing chemicals or radioactive material,
the failure to detect the existence or proportion of chemicals or radioactive
material in the soil, air, surface water or groundwater, or the performance or
failure to perform the abatement of any pollution source or the replacement or
removal of any soil, water, surface water, or groundwater containing chemicals
or radioactive material: or (c) arises out of or relates to breach by Borrower
of any of the provisions of Section 5.22 ("Environmental Matters") hereof; or
(d) arise out of the Contamination, the breach of any of Borrower's obligations
under this Agreement relating to the Contamination or the assessment or
remediation of the Contamination, including all costs of remediation or
"clean-up" of the Contamination, costs of determining whether the Real Estate is
in compliance with applicable Environmental Regulations, and all of Bank's
attorney's fees, consultants' fees, and court costs associated with the
existence, assessment, or remediation of the Contamination. The obligations of
Borrower under this section shall survive any termination of this Agreement.
12. MISCELLANEOUS.
12.1 COSTS AND EXPENSES. Borrower shall bear all expenses of
Bank (including reasonable fees and expenses of its counsel) in connection with
the preparation of this Agreement and the Loan Documents, and the issuance and
delivery of the Notes to Bank and also in connection with any amendment or
modification thereto. Borrower agrees to indemnify and save Bank harmless
against all broker's and finder's fees, if any. If, at any time or times
hereafter, whether before or after the occurrence of an Event of Default, Bank
employs counsel to advise or provide other representation with respect to this
Agreement or the other Loan Documents, or to collect the balance of the Loans or
other obligations, or to take any action in or with respect to any suit or
proceeding relating to this Agreement or any of the Loan Documents, or to
protect, collect, or liquidate the Collateral or to attempt to enforce any
security interest or Lien granted to Bank by Borrower; then in any such events,
all of the reasonable attorneys' fees arising from such services and any
expenses, costs and charges relating thereto shall constitute additional
obligations of Borrower payable on demand of Bank. Without limiting the
foregoing, Borrower shall pay or reimburse Bank for all recording and filing
fees, intangibles taxes, documentary and revenue stamps, other taxes or other
expenses and charges payable in connection with this Agreement, the Notes or any
Loan Document, or the filing of any Loan Document, financing statements or other
instruments required by Bank in connection with the Loans.
12.2 WAIVERS OF PROVISIONS. All amendments of this Agreement
and all waivers and suspensions by Bank of any provision of this Agreement or of
the Loan Documents and all waivers and suspensions by Bank of any default or
Event of Default hereunder shall be effective only
45
if (i) in writing and signed by a duly authorized representative of Bank and
(ii) accompanied by such fees and charges as may be imposed by Bank in
connection with the amendment. The fees may include out-of-pocket expenses
incurred by Bank in administration of the Loan or in evaluation of the proposed
waiver, amendment or suspension, as well as additional facility fees and
administrative fees that may be required by Bank in connection with Borrower's
request. The fees may include additional compensation to Bank for the extension
of the credit facilities represented by the Loan. Any such amendment, waiver, or
suspension may be granted only in the sole discretion of Bank.
12.3 ACTIONS NOT CONSTITUTING A WAIVER. Neither (i) the
failure at any time or times hereafter to require strict performance by Borrower
of any of its provisions, warranties, terms and conditions contained in this
Agreement or any other agreement, document or instrument now or hereafter
executed by Borrower, and delivered to Bank, nor (ii) the failure of Bank to
take action or to exercise its remedies with respect to any default or Event of
Default hereunder, nor (iii) any delay or omission of Bank to exercise any
right, remedy, power, or privilege hereunder after the occurrence of a default
or Event of Default, shall act to waive, affect, or diminish any right of Bank
to demand strict compliance with the terms of this Agreement or to exercise
remedies with respect to any default or Event of Default.
12.4 HEADINGS; EXHIBITS. Except for the definitions set forth
in Article 1, the headings of the articles, sections, paragraphs and
subdivisions of this Agreement are for convenience of reference only, are not to
be considered a part hereof, and shall not limit or otherwise affect any of the
terms hereof. Unless otherwise expressly indicated, all references in this
Agreement to a section or an exhibit are to a section or an exhibit of this
Agreement, all exhibits referred to in this Agreement are an integral part of it
and are incorporated by reference in it.
12.5 RIGHT OF SETOFF. Upon and after the occurrence of any
Event of Default, Bank may, and is hereby authorized by Borrower, at any time
and from time to time, to the fullest extent permitted by applicable laws, and
without advance notice to Borrower (any such notice being expressly waived by
Borrower), setoff and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and any other indebtedness at any
time owing by Bank to, or for the credit or the account of, Borrower against any
or all of the Obligations of Borrower now or hereafter existing whether or not
such Obligations have matured and irrespective of whether Bank has exercised any
other rights that it has or may have with respect to such Obligations,
including, without limitation, any acceleration rights. The aforesaid right of
setoff may be exercised by Bank against Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of the creditors,
receiver, or execution, judgment or attachment creditor of Borrower, or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of setoff shall not have been exercised
by Bank prior to the making, filing or issuance, or service upon Bank of, or of
notice of, any such petition, assignment for the benefit of creditors,
appointment or application for the appointment of a receiver or issuance of
execution, subpoena, order or warrant. Bank agrees to notify Borrower after any
such setoff and application, provided that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of Bank under
this Section are in addition to the other rights and remedies (including,
without limitation, other rights of setoff) which Bank may have.
46
12.6 SURVIVAL OF COVENANTS. All covenants, agreements,
representations and warranties made herein and in certificates or reports
delivered pursuant hereto shall be deemed to have been material and relied on by
Bank, notwithstanding any investigation made by or on behalf of Bank, and shall
survive the execution and delivery to Bank of any Note or Loan Document. All
provisions in this Agreement for indemnification of Bank or payment of its costs
and expenses survive any termination of this Agreement.
12.7 ADDRESSES. Any notice or demand which by any provision of
this Agreement is required or provided to be given shall be deemed to have been
sufficiently given or served for all purposes by being delivered in person or by
facsimile to the party to whom the notice or demand is directed or by being sent
as first class mail, postage prepaid, to the following address: If to Borrower,
Ad Art Electronic Sign Corporation, 0000 Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx
00000, Attention: President and WITH A COPY TO: Xxxxxxx Xxxxx Capital Partners,
L.P., 000 Xxxxxxxx Xxxxxxx, Xx. Xxxxxxxxxx, Xxxxxxx, 00000, Attention: Xxxx X.
Xxxxxxx, and Xxxxxxxxxx Xxxxxxxx LLP, Suite 2800, 0000 Xxxxxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxx, 00000, Attention: Xxxxx X. Xxxxxxxxx, Esquire, or if any other
address shall at any time be designated by Borrower in writing to the holders of
record of the Note at the time of such designation to such other address; and if
to Bank, P. O. Xxx 0000, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxxxx Xxxxx,
Vice President, Special Assets Department (telecopy no. 205-254-4852); and WITH
A COPY TO: Xxx Xxxxxx, Xxxxxxx Xxxxx Xxxx & White LLP 0000 Xxxx Xxxxx, Xxxxx
0000, Xxxxxxxxxx, Xxxxxxx 00000; or any other address shall at any time be
designated in writing to Borrower, to such other address.
12.8 VENUE AND JURISDICTION. Borrower agrees that any legal
action brought by Bank to collect the Loans or any Obligation or to assert any
claim against Borrower under any Loan Document, or any part thereof, may be
brought in any court in the State of Alabama having subject matter jurisdiction
and that any such court will have non-exclusive jurisdiction, waives its right
to object to any such action on grounds it is brought in the improper venue, and
irrevocably consents that any legal action or proceeding against it under,
arising out of, or in any manner relating to the Loans, the Obligations, or any
Loan Document may be brought in the Circuit Court of Jefferson County, Alabama,
or in any other Circuit Court of the State of Alabama or in the U.S. District
Court for the Northern District of Alabama. Any judicial proceeding by Borrower
against Bank under any Loan Document shall be brought only in one of the
foregoing courts in Alabama. Borrower, by the execution of this Agreement,
expressly and irrevocably assents and submits to the non-exclusive personal
jurisdiction of any such court in any such action or proceeding. Borrower
consents to the service of process relating to any such action or proceeding by
mail to the address set forth in this Agreement.
12.9 BENEFITS. All of the terms and provisions of this
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns. Borrower may not assign any of its rights or
obligations hereunder without the prior written consent of Bank.
12.10 CONTROLLING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Alabama; provided,
however, that if any of the Collateral shall be located in any jurisdiction
other than Alabama, the laws of such jurisdiction shall govern the
47
method, manner and procedure for foreclosure of Bank's lien upon such Collateral
and the enforcement of Bank's other remedies in respect of such Collateral to
the extent that the laws of such jurisdiction are different from or inconsistent
with the laws of Alabama.
12.11 PARTICIPATION. Borrower acknowledges that Bank may, at
its option, sell participation interests in the Loans to participating banks.
The amounts of any such participations shall be determined solely by Bank.
Borrower agrees with each present and future participant in the Loans, the names
and addresses of which will be furnished to Borrower, that if an Event of
Default should occur, each present and future participant shall have all of the
rights and remedies of Bank with respect to any deposit due from any participant
to Borrower. The execution by a participant of a participation agreement with
Bank, and the execution by Borrower of this Agreement, regardless of the order
of execution, shall evidence an agreement between Borrower and said participant
in accordance with the terms of this Section.
12.12 MISCELLANEOUS. Time is of the essence with respect to
this Agreement. This Agreement and the instruments and agreements referred to
herein or called for hereby supersede and incorporate all representations,
promises, and statements, oral or written, made by Bank in connection with the
Loans. This Agreement may not be varied, altered, or amended except by a written
instrument executed by an authorized officer of Bank. In the event of a conflict
between this Agreement and any other Loan Document, the terms of this Agreement
will control. This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be an original, but such
counterparts shall together constitute one and the same instrument. Any
provision in this Agreement which may be unenforceable or invalid under any law
shall be ineffective to the extent of such unenforceability or invalidity
without affecting the enforceability or validity of any other provisions hereof.
12.13 JOINT AND SEVERAL LIABILITY. All obligations of each
Person named as Borrower shall be joint and several obligations of all such
Persons.
12.14 LIMITATION OF GRANT. Nothing in this Agreement, whether
express or implied, is intended or should be construed to confer upon, or to
grant to, any person, except Bank and Borrower, any right, remedy, or claim
under or because of either this Agreement or any provision of it. The rights,
duties, and obligations of Borrower under this Agreement are not assignable or
delegable.
12.15 WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND BANK
HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY PERTAINING OR
RELATING TO THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS
AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT,
THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR
48
DELIVERED IN CONNECTION HEREWITH OR IN CONNECTION WITH THE TRANSACTIONS RELATED
THERETO OR CONTEMPLATED THEREBY OR THE EXERCISE OF EITHER PARTY'S RIGHTS AND
REMEDIES THEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. BORROWER
AND BANK AGREE THAT EITHER OR BOTH OF THEM MAY FILE A COPY OF THIS PARAGRAPH
WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED
AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BV JURY, AND THAT ANY
DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THEM SHALL INSTEAD BE TRIED IN A COURT
OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
49
IN WITNESS WHEREOF, each of Borrower and Bank has caused this
instrument to be executed by its duly authorized officer.
BORROWER:
AD ART ELECTRONIC SIGN CORPORATION,
a Florida corporation
By: /s/ J. Xxxxxxx Xxxxxxxx
--------------------------------------
Name: J. Xxxxxxx Xxxxxxxx
Its: Chairman
HAMILTON DIGITAL DESIGNS, LTD.
an Ontario corporation
By: /s/ J. Xxxxxxx Xxxxxxxx
--------------------------------------
Name: J. Xxxxxxx Xxxxxxxx
Title: Chairman
BANK:
SOUTHTRUST BANK
By: /s/ J. Xxxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President
50
EXHIBIT A
ORDERLY LIQUIDATION BUDGET
EXHIBIT B
CERTIFICATES OF TITLE
EXHIBIT C
PENDING ACTIONS
EXHIBIT D
LIENS AND SECURITY INTERESTS
The liens reflected on the financing statements described on the attachments
hereto.
EXHIBIT E
BENEFIT PLANS
EXHIBIT F
PLACES OF BUSINESS / INVENTORY LOCATIONS
EXHIBIT G
INTELLECTUAL PROPERTY
