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LOAN AGREEMENT
by and among
FINOVA PUBLIC FINANCE, INC.
as Lender,
CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
as Issuer,
and
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
as Borrower
Dated as of August 1, 1997
This instrument constitutes a security agreement under the California Commercial
Code.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01. Definitions.............................................................2
Section 1.02. Exhibits................................................................6
Section 1.03. Rules of Construction...................................................7
ARTICLE II
FINANCING OF EQUIPMENT AND TERMS OF LOAN
Section 2.01. Acquisition of Equipment..............................................7
Section 2.02. Loan..................................................................7
Section 2.03. Interest..............................................................7
Section 2.04. Payments..............................................................8
Section 2.05. Payment on Non-Business Days..........................................8
Section 2.06. Loan Payments to be Unconditional.....................................8
Section 2.07. Prepayments...........................................................9
Section 2.08. Special Obligations...................................................9
Section 2.09. Additional Payments..................................................10
Section 2.10. Use of Equipment.....................................................11
ARTICLE III
CONDITIONS PRECEDENT .......................................11
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF ISSUER AND BORROWER
Section 4.01. Representations, Warranties and Covenants of Issuer .................13
Section 4.02. Representations, Warranties and Covenants of Borrower ...............16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LENDER ..................................20
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ARTICLE VI
TITLE TO EQUIPMENT; SECURITY INTEREST
Section 6.01. Title to the Equipment ..............................................21
Section 6.02. Security Interest in Equipment ......................................22
Section 6.03. Change in Name or Corporate Structure of Borrower; Change in
Location of Borrower's Principal Place of Business ..................22
Section 6.04. Liens and Encumbrances to Title .....................................22
Section 6.05. Personal Property ...................................................22
Section 6.06. Assignment of Insurance .............................................23
Section 6.07. Occupancy ...........................................................23
Section 6.08. Agreement as Financing Statement ....................................23
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
Section 7.01. Reporting Requirements ..............................................24
Section 7.02. Books and Records; Inspection and Examination .......................25
Section 7.03. Compliance with Laws; Environmental Indemnity .......................26
Section 7.04. Payment of Taxes and Other Claims ...................................26
Section 7.05. Maintenance of Equipment ............................................27
Section 7.06. Insurance ...........................................................27
Section 7.07. Preservation of Corporate Existence .................................29
Section 7.08. Performance by Lender ...............................................29
Section 7.09. Limitations of liability ............................................30
Section 7.10. Ratio of Debt to Tangible Net Worth .................................30
Section 7.11. Debt Service Coverage Ratio .........................................31
Section 7.12. Net Worth ...........................................................31
Section 7.13. Tangible Net Worth ..................................................31
Section 7.14. Related Party Notes Payable .........................................31
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
Section 8.01. Lien ................................................................32
Section 8.02. Sale of Assets ......................................................32
Section 8.03. Consolidation and Merger ............................................32
Section 8.04. Accounting ..........................................................32
Section 8.05. Transfers ...........................................................32
Section 8.06. Other Defaults ......................................................32
Section 8.07. Place of Business ...................................................32
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Section 8.08. Modifications and Substitutions......................................32
Section 8.09. Use of the Equipment.................................................33
ARTICLE IX
DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS.................................33
ARTICLE X
ASSIGNMENT, SUBLEASING AND SELLING
Section 10.01. Assignment by Lender.................................................34
Section 10.02. No Sale or Assignment by Borrower....................................34
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. Events of Default....................................................34
Section 11.02. Remedies on Default..................................................36
Section 11.03. Return of Equipment..................................................37
Section 11.04. No Remedy Exclusive..................................................37
Section 11.05. Late Charge..........................................................37
ARTICLE XII
MISCELLANEOUS
Section 12.01. Disclaimer of Warranties.............................................38
Section 12.02. Notices..............................................................38
Section 12.03. Further Assurance and Corrective Instruments.........................38
Section 12.04. Binding Effect; Time of the Essence..................................39
Section 12.05. Severability.........................................................39
Section 12.06. Amendments...........................................................39
Section 12.07. Execution in Counterparts............................................39
Section 12.08. Applicable Law.......................................................39
Section 12.09. Captions.............................................................39
Section 12.10. Entire Agreement.....................................................39
Section 12.11. Usury................................................................39
EXHIBIT A-Schedule of Equipment and Loan Payments...........................................A-1
EXHIBIT B-Form of Certificate of Acceptance.................................................B-1
EXHIBIT C-Form of Opinion of Counsel to Borrower............................................C-1
EXHIBIT D-Form of Investor's Letter of Representation.......................................D-1
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LOAN AGREEMENT
Lender: FINOVA Public Finance, Inc.
000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Issuer: California Economic Development Financing Authority
000 X Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chair
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Borrower: The American Materials & Technologies Corporation
0000 Xxxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
THIS LOAN AGREEMENT dated as of August 1, 1997 (this "Loan Agreement")
among FINOVA Public Finance, Inc., a Delaware corporation, as lender (and its
successors and assigns, "Lender"), the California Economic Development Financing
Authority, a body public and corporate, and a public instrumentality of the
State of California (the "State"), as issuer ("Issuer"), and The American
Materials & Technologies Corporation, a Delaware corporation, as borrower
("Borrower"); and
WHEREAS, the Issuer was established for the purpose of promoting and
encouraging commerce and industry, and generally to xxxxxx economic development
in the State and is authorized to provide financing for private activity
economic development projects pursuant to the provisions of Section 15710 et
seq. of the California Government Code (constituting Part 10.2 of Division 3 of
Title 2 of the Government Code of the State of California, as now in effect and
as it may from time to time hereafter be amended or supplemented) (the "Act");
and
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WHEREAS, Issuer is authorized to enter into loan agreements, contracts
and other instruments and documents necessary or convenient for the purpose of
facilitating the financing of economic development projects as described in the
Act; and
WHEREAS, in furtherance of the purposes of the Act, Issuer proposes to
finance all or a portion of the acquisition and installation of the Equipment
(as hereinafter defined) by Borrower pursuant to this Loan Agreement by
obtaining a loan from Lender and lending the proceeds thereof to Borrower; and
WHEREAS, Borrower proposes to borrow the proceeds of the loan made by
Lender to Issuer upon the terms and conditions set forth herein to finance the
acquisition and installation of the Equipment; and
WHEREAS, Borrower shall make Loan Payments (as hereinafter defined)
directly to Lender, as assignee of Issuer, pursuant to the terms set forth in
this Loan Agreement;
NOW, THEREFORE, in consideration of the payments to be made hereunder and
the mutual covenants contained in this Loan Agreement, Lender, Issuer and
Borrower agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01. DEFINITIONS. The following terms used herein will have the
meanings indicated below unless the context clearly requires otherwise:
"Accredited Investor" shall have the meaning ascribed thereto in Section
2(15) of the Securities Act.
"Acquisition Costs" means the contract price paid or to be paid to the
Vendors for any portion of the Equipment upon Borrower's acceptance thereof,
including administrative, engineering, legal, financial and other costs incurred
by Lender, Issuer, Borrower, Escrow Agent and Vendors in connection with the
acquisition, installation and financing by Lender of such Equipment, which
Acquisition Costs are set forth in Exhibit A hereto.
"Additional Payments" means the amounts, other than Loan Payments,
payable by Borrower pursuant to the provisions of this Loan Agreement.
"Affiliate" means a corporation 100% of whose common stock is directly
or indirectly owned by FINOVA Public Finance, Inc.
"Borrower" means The American Materials & Technologies Corporation, a
Delaware corporation.
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"Business Day" means a day other than a Saturday or Sunday on which
banks are generally open for business in New York, New York.
"Certificate of Acceptance" means a Certificate of Acceptance, in
substantially the form set forth as Exhibit B hereto, whereby Borrower
acknowledges receipt in good condition of particular items of Equipment
identified therein and confirms the date of delivery thereof and certain other
matters.
"Closing" means the date of August 13, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, and United
States Treasury Regulations promulgated thereunder.
"Costs of Issuance" means all items of expense directly or indirectly
payable by or reimbursable to Issuer or Borrower and related to the
authorization and funding of the loan to the Issuer by Lender and the Loan to
Borrower by Issuer, including but not limited to costs of preparation and
reproduction of documents, printing expenses, application, filing and recording
fees, initial fees and charges of the Escrow Agent, legal fees and charges,
including the fees and charges of bond counsel, fees and disbursements of
consultants and professionals, and any other cost, charge or fee in connection
with the loan to the Issuer by Lender and the Loan to the Borrower by Issuer
which constitute a "cost of issuance" within the meaning of Section 147(g) of
the Code.
"Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default as provided in Article XI hereof.
"Determination of Taxability" means any determination, decision or
decree by the Commissioner of Internal Revenue, or any District Director of
Internal Revenue or any court of competent jurisdiction, or an opinion obtained
by Lender from counsel qualified in such matters and reasonably acceptable to
Issuer, that an Event of Taxability shall have occurred. A Determination of
Taxability also shall be deemed to have occurred on the first to occur of the
following:
(a) the date when Borrower files any statement, supplemental
statement, or other tax schedule, return or document, which
discloses that an Event of Taxability shall have occurred;
or
(b) the effective date of any federal legislation enacted
after the date of this Loan Agreement or promulgation of any income
tax regulation or ruling by the Internal Revenue Service that causes
an Event of Taxability after the date of this Loan Agreement.
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"Equipment" means the personal property identified in Exhibit A hereto
to be used in connection with Borrower's operations (including, to the extent
permitted pursuant to the Code without jeopardizing the tax-exempt status of the
Interest, certain items originally financed through internal advances of
Borrower in anticipation of obtaining permanent financing through Issuer),
together with all replacement parts, additions, repairs, accessions and
accessories incorporated therein and/or affixed to such personal property and
all proceeds of the foregoing.
"Escrow Agent" means First Trust of California, National Association, as
escrow agent under the Escrow Agreement, and its successors and assigns
permitted under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of August 1, 1997
among Lender, Issuer, Borrower and Escrow Agent.
"Escrow Fund" means the fund established and held by Escrow Agent
pursuant to the Escrow Agreement.
"Event of Taxability" means if as the result of any act, failure to act
or use of the proceeds of the Loan, a change in use of the Equipment or any
misrepresentation or inaccuracy in any of the representations, warranties or
covenants contained in this Loan Agreement or the Tax Agreement by Issuer or
Borrower, the enactment of any federal legislation after the date of this Loan
Agreement, or the promulgation of any income tax regulation or ruling by the
Internal Revenue Service after the date of this Loan Agreement, or there is a
non-appealable final judgment or determination by the Internal Revenue Service
or a court of competent jurisdiction that the interest on the loan from Lender
to Issuer is includable in Lender's gross income (but not including the effect
of any alternative minimum tax, environmental tax or other similar tax effect).
"Gross-Up Rate" means, with respect to any Interest payment (including
payments made prior to the Event of Taxability), the rate necessary to calculate
an additional payment in an amount sufficient such that the sum of the Interest
payment plus the additional payments would, after being reduced by the federal
tax (including interest and penalties, but not including the effect of any
alternative minimum tax, environmental tax or other similar tax effect) actually
imposed thereon, equal the amount of the Interest payment.
"Interest" means the portion of any payment from Issuer to Lender
designated as and comprising interest as shown in Exhibit A hereto.
"Issuer" means the California Economic Development Financing Authority,
a body public and corporate, and a public instrumentality of the State organized
and existing pursuant to the laws of the State acting as issuer under this Loan
Agreement.
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"Lender" means (a) FINOVA Public Finance, Inc., acting as lender under
this Loan Agreement, (b) any surviving, resulting or transferee corporation of
FINOVA Public Finance, Inc. and (c) except where the context requires otherwise,
any assignee(s) of Lender.
"Loan" means the loan from Issuer to Borrower pursuant to this Loan
Agreement.
"Loan Agreement" means this Loan Agreement, including all exhibits
hereto, as any of the same may be supplemented or amended from time to time in
accordance with the terms hereof.
"Loan Payments" means the loan payments payable by Borrower pursuant to
the provisions of this Loan Agreement as specifically set forth in Exhibit A
hereto. As provided in Article II hereof, Loan Payments shall be payable by
Borrower directly to Lender, as assignee of Issuer, in the amounts and at the
times as set forth in Exhibit A hereto.
"Loan Proceeds" means the total amount of money to be paid pursuant to
Section 2.02 hereof by Lender to be delivered to Escrow Agent for deposit and
application in accordance with the Escrow Agreement.
"Payment Date" means the date the Borrower is required to make any Loan
Payment pursuant to Section 2.04 hereof and the date the Borrower elects or is
required to make a prepayment pursuant to Section 2.07 hereof.
"Permitted Encumbrances" means, so long as an Event of Default under
this Loan Agreement has not occurred and is not continuing, liens for taxes not
yet due or liens for taxes being contested in good faith and by appropriate
proceedings if adequate reserves in the amount of such liens are set aside in a
separate account and maintained on the books of Borrower in accordance with
generally accepted accounting principles.
"Prepayment Amount" means, as of any Payment Date, the amount which
Borrower may or must from time to time pay or cause to be paid to Lender as
assignee of Issuer in order to prepay the Loan, as provided in Section 2.07
hereof, such amount being equal to the principal amount of the Loan outstanding
on such date together with all other amounts due on such date (including accrued
interest) and the Prepayment Premium calculated on the principal amount prepaid
on any such date.
"Prepayment Premium" means as of any Payment Date, an amount equal to:
(i) five percent (5%) of the principal amount prepaid if the prepayment occurs
after the thirtieth (30th) day following the Closing and prior to the 24th
Payment Date; (ii) four percent (4%) of the principal amount prepaid if the
prepayment occurs on or after the 24th Payment Date and prior to the 36th
Payment Date; (iii) three percent (3%) of the principal amount prepaid if the
prepayment occurs on or after the 36th Payment Date and prior to the 48th
Payment Date; (iv) two percent (2%) of the principal amount prepaid if the
prepayment occurs on or after the 48th Payment Date and prior to the 60th
Payment date; and (v) one percent (1%) of the amount
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principal amount prepaid if the prepayment occurs on or after the 60th Payment
Date and prior to the 72nd payment date; provided, further, that no Prepayment
Premium shall be due hereunder if Borrower prepays the Loan in full with the
proceeds of a taxable financing provided by FINOVA Public Finance, Inc. in a
principal amount not less than the principal amount prepaid hereunder if such
refinancing is completed to avoid an Event of Taxability.
"Principal" means the portion of any Loan Payment designated as
principal in Exhibit A hereto.
"Purchase Agreements" means Borrower's purchase agreements with Vendors of
the Equipment.
"Qualified Institutional Buyer" shall have the meaning ascribed thereto
in Rule 144A of the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"State" means the State of California.
"Tax Agreement" means the Tax Regulatory Agreement and the Non Arbitrage
Certificate of even date herewith between the Borrower and the Issuer, as such
Tax Regulatory Agreement and Non Arbitrage Certificate may be amended from time
to time in accordance with their terms.
"UCC" means the Uniform Commercial Code as adopted and in effect in the
State.
"User" means Xxxxxx City Composites Corporation, a Delaware corporation.
"Vendor" means the manufacturer or vendor of an item of Equipment, as well
as the agents or dealers of the manufacturer, from whom Borrower has purchased
or is purchasing items of Equipment.
Section 1.02. EXHIBITS. The following exhibits are attached hereto and
made a part hereof:
Exhibit A: Form of Schedule of Equipment and Loan Payments
describing the Equipment and setting forth the Loan Payments and
Prepayment Prices. Issuer hereby authorizes Lender to insert in Exhibit
A the serial or other identifying numbers relating to the Equipment when
available.
Exhibit B: Form of Certificate of Acceptance.
Exhibit C: Form of opinion of counsel to Borrower.
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Exhibit D: Form of Investor's Letter of Representation.
Section 1.03. RULES OF CONSTRUCTION.
(a) The singular form of any word used herein, including the
terms defined Section 1.01 hereof, shall include the plural, and
vice versa. The use herein of a word of any gender shall include
correlative words of all genders.
(b) Unless otherwise specified, references to Articles,
Sections and other subdivisions of this Loan Agreement are to the
designated Articles, Sections and other subdivision of this Loan
Agreement as originally executed. The words "hereof," "herein,"
"hereunder" and words of similar import refer to this Loan Agreement
as a whole.
(c) The headings or titles of the several articles and
sections shall be solely for convenience of reference and shall not
affect the meaning, construction or effect of the provisions hereof.
ARTICLE II
FINANCING OF EQUIPMENT AND TERMS OF LOAN
Section 2.01. ACQUISITION OF EQUIPMENT. Borrower either has ordered or
shall order the Equipment pursuant to one or more Purchase Agreements from one
or more Vendors. Borrower shall remain liable to the Vendor or Vendors in
respect of its duties and obligations in accordance with each Purchase Agreement
and shall bear the risk of loss with respect to any loss or claim relating to
any item of Equipment covered by any Purchase Agreement, and neither Lender nor
Issuer shall assume any such liability or risk of loss. Borrower covenants and
agrees to pay or cause to be paid such amounts as may be necessary to complete
the acquisition and installation of the Equipment and to ensure that the
Equipment is operational to the extent that the Loan Proceeds are insufficient
to cause such acquisition and installation.
Section 2.02. LOAN. Lender hereby agrees, subject to the terms and
conditions of this Loan Agreement, to make a loan to Issuer in the amount of
$2,500,000; Issuer hereby agrees, subject to the terms and conditions of this
Loan Agreement, to borrow such amount from Lender and to lend such amount to
Borrower; and Borrower hereby agrees to borrow such amount from Issuer. Upon
fulfillment of the conditions set forth in Article III hereof, Lender shall
deposit the Loan Proceeds in the Escrow Fund to be held, invested and disbursed
as provided in the Escrow Agreement. Issuer's obligation to repay the loan from
Lender, and Borrower's obligation to repay the Loan, shall commence, and
interest shall begin to accrue, on the date that Loan Proceeds are deposited in
the Escrow Fund.
Section 2.03. INTEREST. The principal amount of the loan from Lender to
Issuer and the Loan hereunder outstanding from time to time shall bear interest
(computed on the basis of a
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year of 360 days and 12 months of 30 days each) at the rate of 7.1645% per
annum. Interest accruing on the principal balance of such loans outstanding from
time to time shall be payable as provided in Exhibit A and upon earlier demand
in accordance with the terms hereof or prepayment in accordance with Section
2.07 hereof. Upon the occurrence of a Determination of Taxability, Borrower
shall, with respect to future interest payments, begin making Loan Payments
calculated at the Gross-Up Rate. In addition, Borrower shall make immediately
upon demand of Lender a payment to Lender sufficient to supplement prior Loan
Payments to the Gross-Up Rate.
Section 2.04. PAYMENTS. Issuer shall pay the principal of, premium, if
any, in accordance with Section 2.07 hereof, and interest on the loan from
Lender to Issuer, but only out of the amounts paid to Issuer by Borrower
pursuant to this Loan Agreement. Borrower shall pay to Lender, as assignee of
Issuer, Loan Payments, in the amounts and on the dates set forth in Exhibit A
hereto. As security for its obligation to pay the principal of, premium, if any,
in accordance with Section 2.07 hereof, and interest on the loan from Lender,
Issuer assigns to Lender all of Issuer's right to receive Loan Payments
hereunder, all of Issuer's rights hereunder (except for the right to receive any
Additional Payments to the extent payable to Issuer, any rights of Issuer to
indemnification and rights of notice, inspection and consent) and all of
Issuer's right, title and interest in and to the Equipment, and Issuer appoints
Lender and any officer or agent of Lender to collect the Loan Payments and any
other payments due to Lender, as Issuer's assignee, hereunder and to xxx in any
court for such Loan Payments or other payments and to exercise all rights
hereunder with respect to the Equipment and to withdraw or settle any claim,
suits or proceedings pertaining thereto. Such Loan Payments and other payments
shall be made by Borrower directly to Lender, as Issuer's assignee, and shall be
credited against Issuer's payment obligations hereunder. No provision, covenant
or agreement contained in this Loan Agreement or any obligation herein imposed
on Issuer, or the breach thereof, shall constitute or give rise to or impose
upon Issuer a pecuniary liability, a charge upon its general credit or taxing
powers or a pledge of its general revenues. In making the agreements, provisions
and covenants set forth in this Loan Agreement, Issuer has not obligated itself
except with respect to the application of the Loan Payments to be paid by
Borrower hereunder. All amounts required to be paid by Borrower hereunder shall
be paid in lawful money of the United States of America in immediately available
funds. No recourse shall be had by Lender or Borrower for any claim based on
this Loan Agreement or the Tax Agreement against any director, officer, employee
or agent of Issuer alleging personal liability on the part of such person,
unless such claim is based on the willful dishonesty, gross negligence of or
intentional violation of law by such person.
Section 2.05. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of interest or the
fees hereunder, as the case may be.
Section 2.06. LOAN PAYMENTS TO BE UNCONDITIONAL. The obligations of
Borrower to make the Loan Payments and Additional Payments required under this
Article II and to make
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other payments hereunder and to perform and observe the covenants and
agreements contained herein shall be absolute and unconditional in all events,
without abatement, diminution, deduction, setoff or defense for any reason,
including (without limitation) any failure of the Equipment to be delivered or
installed, any defects, malfunctions, breakdowns or infirmities in the Equipment
or any accident, condemnation, destruction or unforeseen circumstances.
Notwithstanding any dispute between Borrower and any of Issuer, Lender, any
Vendor or any other person, Borrower shall make all Loan Payments when due and
shall not withhold any Loan Payments pending final resolution of such dispute,
nor shall Borrower assert any right of set-off or counterclaim against its
obligation to make such payments required under this Loan Agreement.
Section 2.07. PREPAYMENTS.
(a) Borrower may, in its discretion, prepay the Loan in full
(i) on any date on or prior to the thirtieth (30th) day following
the Closing by paying the principal amount of the Loan outstanding
at such time together with accrued interest on the Loan and a
prepayment premium in an amount equal to 1 1/2% of the principal
amount of the Loan, and (ii) after the 30th day following the
Closing by paying the applicable Prepayment Amount.
(b) Borrower shall prepay the Loan in whole or in part at any
time pursuant to Article IX hereof by paying the applicable
Prepayment Amount.
(c) Borrower shall prepay the Loan in full immediately upon
demand of Lender after the occurrence of an Event of Default by
paying the applicable Prepayment Amount.
(d) Borrower shall prepay the Loan in full immediately upon
demand of Lender after the occurrence of a Determination of
Taxability by paying the applicable Prepayment Amount plus an amount
necessary to supplement the prior Loan Payments to the Gross-Up
Rate.
(e) The Loan shall be prepaid in part with funds remaining in
the Escrow Fund upon termination of the Escrow Agreement as provided
in Sections 2.03 or 2.04 of the Escrow Agreement.
Upon any prepayment in part of the Loan, the prepayment shall be applied
first to interest accrued thereon and next to the Principal portion of the Loan
Payments in the inverse order of maturity.
Section 2.08. SPECIAL OBLIGATIONS. The loan from Lender to Issuer as
provided herein, together with the interest thereon, shall not be deemed to
constitute a debt or liability of the State or any political subdivision thereof
or a pledge of the faith and credit of the State or any political subdivision
thereof, but shall be payable solely from the funds provided therefor pursuant
to this
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Loan Agreement. The loan from Lender to Issuer as provided herein is only a
special obligation of Issuer as provided by the Act, and Issuer shall under no
circumstances be obligated to pay such loan and the interest thereon or any
Acquisition Cost except from Loan Payments received from Borrower and other
funds pledged therefor.
Neither the faith and credit nor the taxing power of the State or any
political subdivision of the State, is pledged to the payment of the principal
of, premium, if any, or interest on the loan from Lender to Issuer as provided
herein, nor is the State or any political subdivision of the State, in any
manner obligated to make any appropriation for such payment. Issuer has no
taxing power.
Section 2.09. ADDITIONAL PAYMENTS. Borrower shall pay to the Issuer or
to Lender, as appropriate, the following "Additional Payments" in addition to
the Loan Payments payable by Borrower: such amounts incurred by Lender or Issuer
after the Closing as shall be required by Lender or Issuer in payment of any
reasonable costs and expenses incurred in connection with the performance or
enforcement of this Loan Agreement, and the financing of the Equipment,
including but not limited to: (a) application, commitment or financing fees, if
any; (b) indemnification payments pursuant to Sections 7.03 and 7.06 hereof; all
taxes and assessments of any type or character charged to the Issuer or Lender
affecting the amount available to the Issuer from payments to be received
hereunder or in any way arising due to the transactions contemplated hereby
(including taxes and assessments assessed or levied by any public agency or
governmental authority of whatsoever character having power to levy taxes or
assessments), but excluding franchise taxes based upon the capital and/or income
of the Issuer or Lender and taxes based upon or measured by the net income of
the Issuer or Lender; provided, however, that Borrower shall have the right to
protest and contest any such taxes or assessments and to require Issuer and/or
Lender, at Borrower's expense, to protest and contest any such taxes or
assessments levied upon them and that Borrower shall have the right to withhold
payment of any such taxes or assessments pending disposition of any such protest
or contest unless such withholding, protest or contest would adversely affect
the rights or interests of Lender or Issuer; reasonable expenses, reasonable
fees of auditors or attorneys; (c) the fees and expenses of such accountants,
consultants, attorneys and other experts as may be engaged by Issuer or Lender
to prepare audits, financial statements, reports or opinions or to provide such
other services required under this Loan Agreement, or otherwise in connection
with the enforcement of the Loan; (d) insurance premiums necessary to provide
the insurance coverage required hereunder which insurance premiums are not
otherwise paid by the Borrower; and (e) all other reasonable, direct and
necessary administrative costs of Lender or Issuer and such other charges
required to be paid in order to enforce its rights under this Loan Agreement.
Such Additional Payments shall be billed to Borrower by Lender or Issuer, as the
case may be, from time to time, together with a statement certifying that the
amount so billed has been paid for one or more of the items described, or that
such amount is then payable for such items. Amounts so billed shall be due and
payable by Borrower within 30 days after receipt of the xxxx by Borrower.
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Section 2. 10. USE OF EQUIPMENT. Borrower will acquire Equipment for use
by the User, a wholly owned subsidiary of Borrower, at 0000 Xxxxx Xxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000.
ARTICLE III
CONDITIONS PRECEDENT
Lender's agreement to make the loan to Issuer hereunder and to disburse
the Loan Proceeds shall be subject to the condition precedent that Lender shall
have received all of the following, each in form and substance satisfactory to
Lender:
(a) this Loan Agreement, properly executed by Lender, Issuer
and Borrower, and each of the Exhibits hereto properly completed;
(b) the Tax Agreement, properly executed by Issuer and
Borrower;
(c) the Escrow Agreement, properly executed on behalf of
Issuer, Lender, Borrower and Escrow Agent;
(d) a certificate of the Secretary or an Assistant Secretary
of Borrower, certifying as to (i) the resolutions of the board of
directors and, if required, the shareholders of Borrower,
authorizing the execution, delivery and performance of this Loan
Agreement, the Escrow Agreement and the Tax Agreement and any
related documents, (ii) the bylaws of Borrower, and (iii) the
signatures of the officers or agents of Borrower authorized to
execute and deliver this Loan Agreement, the Escrow Agreement and
the Tax Agreement and other instruments, agreements and certificates
on behalf of Borrower;
(e) a copy of the Certificate of Incorporation of Borrower
certified by the Secretary of State of the State of Delaware;
(f) a Certificate of Good Standing issued by the Secretary of
State of the State of Delaware to be dated not more than 10 days
prior to the date of Closing;
(g) a Certificate of Qualification issued by the Secretary of
State of the State to be dated not more than 10 days prior to the
date of Closing;
(h) a Certificate of Status - Foreign Corporation issued by
the Secretary of State of the State to be dated not more than 10
days prior to the date of Closing;
(i) certificates of the insurance required hereunder,
containing a lender's loss payable clause or endorsement in favor of
Lender and naming the Lender as an additional insured;
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(j) a completed and executed Form 8038 or evidence of filing
thereof with the Internal Revenue Service;
(k) a resolution or evidence of other official action taken by
or on behalf of Issuer to authorize the transactions contemplated
hereby;
(l) evidence that the financing of the Equipment has been
approved by the "applicable elected representative" (as defined in
Section 147(f) of the Code) of the State, after a public hearing
held upon reasonable notice;
(m) a true and correct copy of any and all leases pursuant to
which Borrower is leasing the property where the Equipment will be
located, together with a landlord's disclaimer and consent with
respect to each such lease;
(n) as applicable, financing statements executed by Borrower
and the User, as debtor, and naming Issuer, as secured party, and
Lender, as assignee, and/or the original certificate of title or
manufacturer's certificate of origin and title application if any of
the Equipment is subject to certificate of title laws;
(o) current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against Borrower, (ii) no financing statements have been
filed and remain in effect against Borrower relating to the
Equipment except those financing statements filed by Lender and
(iii) Lender has duly filed all financing statements necessary to
perfect the security interest created pursuant to this Loan
Agreement;
(p) an opinion of counsel to Borrower, addressed to Lender and
Issuer, in the form attached hereto as Exhibit C;
(q) an opinion of counsel to Issuer, addressed to Lender, in
form and substance satisfactory to Lender;
(r) an opinion of special counsel, addressed to Issuer and
Lender, in form and substance satisfactory to Issuer and Lender;
(s) payment of Lender's fees, commissions and expenses
required by Section 12.01 hereof;
(t) payment of Issuer's fees, commissions and expenses
incurred in connection with this Loan Agreement and the transactions
contemplated hereby;
(u) an investor letter of representation executed by Lender
and addressed to Issuer and Borrower, in the form attached hereto as
Exhibit D;
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(v) an inter-creditor agreement between Lender and LaSalle
Business Credit in form and substance acceptable to Lender; and
(w) any other documents or items required by Lender or Issuer.
Lender's agreement to disburse the Loan Proceeds and to consider approval
of any disbursement from the Escrow Fund shall be subject to the further
conditions precedent that on the date thereof:
(a) Lender shall have received each of the items required for
a disbursement pursuant to the Escrow Agreement;
(b) With respect to any disbursement for portions of the
Equipment that are functionally complete and operationally
independent, Lender shall have received in form and substance
satisfactory to Lender the Vendor invoice(s) and/or xxxx(s) of sale
relating to the Equipment and, if such invoices have been paid by
Borrower, evidence of payment thereof and, if applicable, evidence
of official intent of Issuer to reimburse such payment as required
by the Code;
(c) With respect to any disbursement for portions of the
Equipment that are not functionally complete and operationally
independent, Lender shall have received in form and substance
satisfactory to Lender, a properly completed assignment of the
purchase order or contract relating to the Equipment signed by the
Vendor;
(d) the representations and warranties contained in Articles
IV and V hereof are correct on and as of the date of such loan as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date or
are not prohibited by this Loan Agreement;
(e) no event has occurred and is continuing, or would result
from such loan to Issuer or the Loan which constitutes a Default, an
Event of Default or a Determination of Taxability; and
(f) Exhibit A to this Loan Agreement has been amended to
identify the Equipment for which the disbursement from the Escrow
Fund is being requested.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF ISSUER AND BORROWER
Section 4.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER. Issuer
represents, warrants and covenants for the benefit of Lender and Borrower, as
follows:
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(a) Issuer is a body public and corporate, and a public
instrumentality of the State, organized and existing by virtue of
the laws of the State.
(b) Issuer will exercise its best efforts to preserve and keep
in full force and effect its existence as a body public and
corporate, and a public instrumentality of the State or take such
actions as may be necessary to permit the transfer or assignment of
this Loan Agreement to any successor to Issuer.
(c) Issuer is authorized to enter into this Loan Agreement,
the Escrow Agreement, the Tax Agreement and the transactions
contemplated hereby and to perform all of its obligations hereunder.
(d) Issuer has duly authorized the execution and delivery of
this Loan Agreement, the Escrow Agreement and the Tax Agreement
under the terms and provisions of the resolution adopted by its
Board of Directors, and further represents, covenants and warrants
that all requirements have been met and procedures have occurred in
order to ensure the enforceability of this Loan Agreement, the
Escrow Agreement and the Tax Agreement against Issuer. Issuer has
taken all necessary action and has complied with all provisions of
the Act, including but not limited to the making of the findings
required by the Act, required to make this Loan Agreement, the
Escrow Agreement and the Tax Agreement the valid and binding
obligation of Issuer.
(e) The authorized officer of the Board of Directors of Issuer
executing this Loan Agreement and any related documents has been
duly authorized to execute and deliver this Loan Agreement, the
Escrow Agreement and the Tax Agreement and such related documents
under the terms and provisions of a resolution of the Issuer, or by
other appropriate official action.
(f) This Loan Agreement, the Escrow Agreement and the Tax
Agreement are legal, valid and binding obligations of Issuer,
enforceable in accordance with their respective terms, except to the
extent limited by bankruptcy, reorganization or other laws of
general application relating to the enforcement of creditors'
rights, to the application of equitable principles, and to the
limitations on enforcement remedies against public entities in
California.
(g) Issuer has assigned to Lender all of Issuer's rights in
the Equipment and this Loan Agreement (except for the right to
receive any Additional Payments to the extent payable to Issuer, any
rights of Issuer to indemnification and rights of notice, inspection
and consent) including the assignment of all rights in the security
interest granted to Issuer by Borrower.
(h) Issuer will not pledge, mortgage or assign this Loan
Agreement or its duties and obligations hereunder to any person,
firm or corporation, except as provided under the terms hereof.
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(i) None of the execution and delivery of this Loan Agreement,
the Escrow Agreement or the Tax Agreement, the consummation of the
transactions contemplated hereby or the fulfillment of or compliance
with the terms and conditions of this Loan Agreement, the Escrow
Agreement or the Tax Agreement violates any law, rule, regulation or
order, conflicts with or results in a breach of any of the terms,
conditions or provisions of any restriction or any agreement or
instrument to which Issuer is now a party or by which it is bound or
constitutes a default under any of the foregoing or results in the
creation or imposition of any prohibited lien, charge or encumbrance
of any nature whatsoever upon any of the property or assets of
Issuer under the terms of any instrument or agreement.
(j) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court,
regulatory agency, public board or body pending or, to the best of
Issuer's knowledge, threatened against or affecting Issuer,
challenging Issuer's authority to enter into this Loan Agreement,
the Escrow Agreement or the Tax Agreement or any other action
wherein an unfavorable ruling or finding would adversely affect the
enforceability of this Loan Agreement, the Escrow Agreement or the
Tax Agreement or any other transaction of Issuer which is similar
hereto, or the exclusion of the Interest from gross income for
federal tax purposes under the Code, or would materially and
adversely affect any of the transactions contemplated by this Loan
Agreement.
(k) Issuer will submit or cause to be submitted to the
Internal Revenue Service a Form 8038 (or other information reporting
statement) at the time and in the form required by the Code.
(l) The financing of the Equipment has been approved by an
"applicable elected representative" (as defined in Section 147(f) of
the Code) of the State after a public hearing held upon reasonable
notice.
(m) Issuer will comply fully at all times with the provisions
contained in the Tax Agreement that directly relate to Issuer, and
Issuer will not take any action, or omit to take any action, which,
if taken or omitted, respectively, would violate the Tax Agreement.
(n) Issuer will take no action that would cause the Interest
to become includable in gross income for federal income tax purposes
under the Code, and Issuer will take and will cause its officers,
employees and agents to take all affirmative actions legally within
its power necessary to ensure that the Interest does not become
includable in gross income of the recipient for federal income tax
purposes under the Code (including, without limitation, the
calculation and payment of any rebate required to preserve such
exclusion).
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(o) No member, officer or other official of the Issuer has any
financial interest whatsoever in the Borrower or in the transactions
contemplated by this Loan Agreement.
Section 4.02. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
Borrower represents, warrants and covenants for the benefit of Lender and
Issuer, as follows:
(a) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has
power to enter into this Loan Agreement, the Escrow Agreement and
the Tax Agreement and by proper corporate action has duly authorized
the execution and delivery of this Loan Agreement, the Escrow
Agreement and the Tax Agreement. Borrower is in good standing and is
duly licensed or qualified to transact business in the State and in
all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such
licensing or qualification necessary except where the failure to be
licensed or qualified would not have a material adverse effect on
the business or property of the Borrower.
(b) Borrower has been fully authorized to execute and deliver
this Loan Agreement, the Escrow Agreement and the Tax Agreement
under the terms and provisions of the resolution of its board of
directors, or by other appropriate official approval, and further
represents, covenants and warrants that all corporate requirements
have been met, and corporate procedures have occurred in order to
ensure the enforceability of this Loan Agreement, the Escrow
Agreement and the Tax Agreement and this Loan Agreement, the Escrow
Agreement and the Tax Agreement have been duly authorized, executed
and delivered.
(c) The authorized officer of Borrower executing this loan
Agreement, the Escrow Agreement and the Tax Agreement and any
related documents has been duly authorized to execute and deliver
this Loan Agreement, the Escrow Agreement and the Tax Agreement and
such related documents under the terms and provisions of a
resolution of Borrower's board of directors.
(d) This Loan Agreement, the Escrow Agreement and the Tax
Agreement constitute valid and legally binding obligations of
Borrower, enforceable against Borrower in accordance with their
respective terms, except to the extent limited by bankruptcy,
reorganization or other laws and equitable principles of general
application relating to effecting the enforcement of creditors'
rights.
(e) The execution and delivery of this Loan Agreement, the
Escrow Agreement and the Tax Agreement, the consummation of the
transactions contemplated hereby and the fulfillment of the terms
and conditions hereof do not and will not violate any law, rule,
regulation or order, conflict with or result in a breach of any of
the terms or conditions of the certificate of incorporation or
bylaws of Borrower or of any corporate restriction or of any
agreement or instrument to which Borrower is now a party
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and do not and will not constitute a default under any of the
foregoing or result in the creation or imposition of any liens,
charges or encumbrances of any nature upon any of the property or
assets of Borrower contrary to the terms of any instrument or
agreement.
(f) The authorization, execution, delivery and performance of
this Loan Agreement by Borrower do not require submission to,
approval of, or other action by any governmental authority or
agency, which action with respect to this Loan Agreement has not
been taken and which is final and nonappealable (except that no
representation is being made with respect to qualification under
Blue Sky or other state or federal securities laws).
(g) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court,
regulatory agency, public board or body pending or, to the best of
Borrower's knowledge, threatened against or affecting Borrower,
challenging Borrower's authority to enter into this Loan Agreement,
the Escrow Agreement or the Tax Agreement or any other action
wherein an unfavorable ruling or finding would adversely affect the
enforceability of this Loan Agreement, the Escrow Agreement or the
Tax Agreement or any other transaction of Borrower which is similar
hereto, or the exclusion of the Interest from gross income for
federal tax purposes under the Code, or would materially and
adversely affect any of the transactions contemplated by this Loan
Agreement.
(h) The property at which the Equipment is located is properly
zoned for its current and anticipated use and the use of the
Equipment will not violate any applicable zoning, land use,
environmental or similar law or restriction. Borrower has all
licenses and permits to use the Equipment. Borrower has obtained all
material permits, licenses and other authorizations which are
required under federal, state and local laws relating to emissions,
discharges, releases of pollutants, contaminants, hazardous or toxic
materials, or wastes into ambient air, surface water, ground water
or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials
or wastes ("Environmental Laws") at the Borrower's facilities or in
connection with the operation of its facilities and, to the extent
applicable, the Borrower's failure to obtain any permit, license or
authorization will not have a material adverse effect on the
business or property of the Borrower. Except as previously disclosed
to Lender in writing, Borrower and all activities of the Borrower at
its facilities comply with all material Environmental Laws and with
all terms and conditions of any required permits, licenses and
authorizations applicable to Borrower with respect thereto and, to
the extent applicable, the failure to comply with any Environmental
Laws will not have a material adverse effect on the business or
property of the Borrower. Except as previously disclosed to Lender
in writing, Borrower is also in compliance with all material
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
Environmental Laws or contained in any plan, order, decree, judgment
or notice of which Borrower is aware. Except as previously
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disclosed to Lender in writing, Borrower is not aware of, nor has
Borrower received notice of, any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance with, or which may
give rise to any liability under, any Environmental Laws.
(i) The Equipment will be used in an industrial facility to
manufacture tangible personal property.
(j) Borrower owns or will own the Equipment and intends to
operate the Equipment, or cause the Equipment to be operated, as an
"economic development project," within the meaning of the Act, until
the date on which all of the Loan Payments have been fully paid or
the applicable Prepayment Amount has been fully paid.
(k) Borrower will not take any action that would cause the
Interest to become includable in gross income of the recipient for
federal income tax purposes under the Code, and Borrower will take
and will cause its officers, employees and agents to take all
affirmative actions legally within its power necessary to ensure
that the Interest does not become includable in gross income of the
recipient for federal income tax purposes under the Code (including,
without limitation, the calculation and payment of any rebate
required to be paid by, or imposed upon, the Issuer to preserve such
exclusion).
(l) Borrower has heretofore furnished to Lender the audited
financial statements of Borrower for its fiscal year ended December
31, 1996 and the unaudited financial statements of Borrower for the
quarter ended March 31, 1997, and those statements fairly present
the financial condition of Borrower on the dates thereof and the
results of its operations and cash flows for the periods then ended
and were prepared in accordance with generally accepted accounting
principles except for the absence of footnotes and year end
adjustments in the case of the unaudited statements. Since the date
of the most recent of such financial statements, there has been no
material adverse change in the business, properties or condition
(financial or otherwise) of Borrower.
(m) Borrower has paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to
be withheld by it. Borrower has filed all federal, state and local
tax returns which are required to be filed, and Borrower has paid or
caused to be paid to the respective taxing authorities all taxes as
shown on said returns or on any assessment received by it to the
extent such taxes have become due.
(n) Borrower has or will have good title to all Equipment and
all proceeds thereof, free and clear of all mortgages, security
interests, liens and encumbrances except for the security interest
created pursuant to this Loan Agreement and Permitted Encumbrances.
(o) All financial and other information provided to Lender by
or on behalf of Borrower in connection with Borrower's request for
the Loan contemplated hereby is true
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and correct in all material respects and Borrower has not omitted to
provide Lender with any information which would be material to
Lender's decision to enter into this Loan Agreement and, any
projections, valuations or pro forma financial statements provided
by Borrower to Lender reflect a good faith opinion as to such
projections, valuations and pro forma condition and results.
(p) Borrower has provided to Lender signed financing
statements sufficient when filed to perfect the security interest
created pursuant to this Loan Agreement. When such financing
statements are filed in the offices noted therein, Lender, as
assignee of Issuer, will have a valid and perfected security
interest in the Equipment, subject to no other security interest,
assignment, lien or encumbrance. None of the Equipment is or will
become a fixture on real estate.
(q) Upon delivery and installation of the Equipment, Borrower
will provide to Issuer and Lender a completed and executed copy of
the Certificate of Acceptance attached hereto as Exhibit B.
(r) Borrower will aid and assist Issuer in connection with
preparing and submitting to the Internal Revenue Service a Form 8038
(or other applicable information reporting statement) at the time
and in the form required by the Code.
(s) Borrower will comply fully at all times with the Tax
Agreement; Borrower will not take any action, or omit to take any
action, which, if taken or omitted, respectively, would violate the
Tax Agreement, and the representations of the Borrower contained in
the Tax Agreement are true and correct.
(t) Expenses for work done by officers or employees of
Borrower in connection with the Equipment will be included as an
Acquisition Cost, if at all, only to the extent (i) such persons
were specifically employed for such particular purpose, (ii) the
expenses do not exceed the actual cost thereof and (iii) such
expenses are treated or capable of being treated (whether or not so
treated) on the books of Borrower as a capital expenditure in
conformity with generally accepted accounting principles applied on
a consistent basis.
(u) To the best of the Borrower's knowledge, no member,
officer or other official of Issuer has any financial interest
whatsoever in the Borrower or in the transactions contemplated by
this Loan Agreement.
(v) No event has occurred and no condition exists which would
constitute an Event of Default on the part of the Borrower or which,
with the passing of time or with the giving of notice or both, would
constitute an Event of Default.
(w) Borrower assumes full responsibility for the safety and
any consequences of lack of safety with respect to the operation and
maintenance of the Equipment;
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provided, however, that the foregoing shall in no way absolve Vendor
or any maintenance contractor of any liability with respect to the
Equipment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LENDER
Lender represents and warrants for the benefit of Issuer and
Borrower, as follows:
(a) Lender is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has
power to enter into this Loan Agreement and by proper corporate
action has duly authorized the execution and delivery of this Loan
Agreement, the Escrow Agreement and the Tax Agreement.
(b) This Loan Agreement, the Escrow Agreement and the Tax
Agreement constitute valid and legally binding obligations of
Lender, enforceable against Lender in accordance with their
respective terms, except to the extent limited by bankruptcy,
reorganization or other laws of general application relating to
effecting the enforcement of creditors' rights.
(c) The execution and delivery of this Loan Agreement, the
Escrow Agreement and the Tax Agreement, the consummation of the
transactions contemplated hereby and the fulfillment of the terms
and conditions hereof do not and will not violate any law, rule,
regulation or order, conflict with or result in a breach of any of
the terms or conditions of the articles or certificate of
incorporation or bylaws of Lender or of any corporate restriction or
of any agreement or instrument to which Lender is now a party and do
not and will not constitute a default under any of the foregoing or
result in the creation or imposition of any liens, charges or
encumbrances of any nature upon any of the property or assets of
Lender contrary to the terms of any instrument or agreement.
(d) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court,
regulatory agency, public board or body pending or, to the best of
Lender's knowledge, threatened against or affecting Lender,
challenging Lender's authority to enter into this Loan Agreement,
the Escrow Agreement or the Tax Agreement or any other action
wherein an unfavorable ruling or finding would adversely affect the
enforceability of this Loan Agreement, the Escrow Agreement or the
Tax Agreement or any other transaction of Lender which is similar
hereto, or the exclusion of the Interest from gross income for
federal tax purposes under the Code, or would materially and
adversely affect any of the transactions contemplated by this Loan
Agreement.
(e) Lender has sufficient knowledge and experience in
financial and business matters, including purchase and ownership of
municipal and other tax-exempt obligations, to be able to evaluate
the risks and merits of the investment represented by this Loan
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Agreement including the payments of principal of, premium, if any,
and interest on the loan from Lender to Issuer and the Loan
Payments, and is able to bear the economic risk of such investment.
Lender has made its own inquiry and analysis with respect to
Borrower, Issuer, this Loan Agreement, the payments of principal of,
premium, if any, and interest on the loan from Lender to Issuer and
the Loan Payments and the security therefor, and other material
factors affecting the security and payment of this Loan Agreement,
the payments of principal of, premium, if any, and interest on the
loan from Lender to Issuer and the Loan Payments.
(f) Lender has either been supplied with or has had access to
information, including financial statements and other financial
information which it has requested, and has had the opportunity to
ask questions and receive answers concerning Borrower, Issuer, this
Loan Agreement, the payments of principal of, premium, if any, and
interest on the loan from Lender to Issuer and the Loan Payments and
the security therefor, so that as a reasonable investor, it has been
able to make its decision to make the Loan Proceeds available in
accordance with the provisions hereof and of the Escrow Agreement in
exchange for the right to receive the payments of principal of,
premium, if any, and interest on the loan from Lender to Issuer and
the Loan Payments and enter into and perform its obligations under
this Loan Agreement.
(g) Lender acknowledges that this Loan Agreement, including
the right to receive payments of principal of, premium, if any, and
interest on the loan from Lender to Issuer and Loan Payments (i) are
not being registered or otherwise qualified for sale under the "Blue
Sky" laws and regulations of any state, (ii) shall not be listed on
any stock or other securities exchange and (iii) shall be issued in
a form which may not be readily marketable.
(h) Lender acknowledges that this Loan Agreement, including
the right to receive payments of principal of, premium, if any, and
interest on the loan from Lender to Issuer and Loan Payments, have
not been registered under the Securities Act of 1933, as amended,
and that such registration is not legally required. Lender
represents to Issuer that it is entering into this Loan Agreement,
including obtaining the right to receive payments of principal of,
premium, if any, and interest on the loan from Lender to Issuer and
Loan Payments, for investment for its own account and not with a
present view toward resale or the distribution thereof, except for
sale to an Affiliate.
ARTICLE VI
TITLE TO EQUIPMENT; SECURITY INTEREST
Section 6.01. TITLE TO THE EQUIPMENT. Legal title to the Equipment and any
and all repairs, replacements, substitutions and modifications to such Equipment
shall be in Borrower. Borrower will at all times protect and defend, at its own
cost and expense, its title from and
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against all claims, liens and legal processes of creditors of Borrower, and keep
all Equipment free and clear of all such claims, liens and processes except
Permitted Encumbrances.
Section 6.02. SECURITY INTEREST IN EQUIPMENT. This Loan Agreement is
intended to constitute a security agreement within the meaning of the UCC. As
security for Borrower's payment to Lender, as assignee of Issuer, of Loan
Payments and all other amounts payable to Lender hereunder, Borrower hereby
grants to Issuer, and Issuer hereby assigns to Lender, a security interest
constituting a first lien on the Equipment, all repairs, replacements,
substitutions and modifications thereto or thereof and all proceeds of the
foregoing. Borrower agrees to execute such additional documents, including
financing statements, assignments, affidavits, notices and similar instruments,
in form satisfactory to Lender, and take such other actions that Lender deems
necessary or appropriate to establish and maintain the security interest created
by this Section. If requested by Lender, Borrower shall obtain a landlord and/or
mortgagee's consent and waiver with respect to the property where the Equipment
is located. If requested by Lender, Borrower shall conspicuously xxxx the
Equipment with appropriate lettering, labels or tags, and maintain such
markings, so as clearly to disclose Lender's security interest in the Equipment.
Section 6.03. CHANGE IN NAME OR CORPORATE STRUCTURE OF BORROWER; CHANGE IN
LOCATION OF BORROWER'S PRINCIPAL PLACE OF BUSINESS. Borrower's chief executive
office is located at the address set forth above, and all of Borrower's records
relating to its business and the Equipment are kept at such location. Borrower
hereby agrees to provide written notice to Lender and Issuer of any change or
proposed change in its name, corporate structure, place of business or chief
executive office or change or proposed change in the location of the Equipment.
Such notice shall be provided 30 days in advance of the date that such change or
proposed change is planned to take effect. Borrower does business, and has done
business, only under its own name and the trade names, if any, set forth on the
execution page hereof.
Section 6.04. LIENS AND ENCUMBRANCES TO TITLE. Borrower shall not,
directly or indirectly, create, incur, assume or suffer to exist any mortgage,
pledge, lien, charge, encumbrance or claim on or with respect to the Equipment
(together, "Liens") other than the respective rights of Lender and Issuer as
herein provided and Permitted Encumbrances. Borrower shall promptly, at its own
expense, take such action as may be necessary duly to discharge or remove any
such Lien except Permitted Encumbrances. Borrower shall reimburse Lender for any
expenses incurred by Lender to discharge or remove any Lien.
Section 6.05. PERSONAL PROPERTY. The parties hereby agree that the
Equipment is, and during the period this Loan Agreement is in force will remain,
personal property and, when subjected to use by Borrower hereunder, will not be
or become fixtures; provided, however, that if contrary to the parties' intent
the Equipment is or may be deemed to be a fixture, Borrower shall cause filings
to be made with the applicable government officials or filing offices to create
and preserve for Lender as assignee of Issuer a perfected first priority
security interest in the Equipment.
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Section 6.06. ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of Borrower's obligations hereunder, Borrower hereby
assigns to Lender, as assignee of Issuer, any and all moneys (including, without
limitation, proceeds of insurance and refunds of unearned premiums) due or to
become due under, and all other rights of Borrower with respect to, any and all
policies of insurance now or at any time hereafter covering the Equipment or any
evidence thereof or any business records or valuable papers pertaining thereto,
and Borrower hereby directs the issuer of any such policy to pay all such moneys
directly to Lender. Borrower hereby assigns to Lender, as assignee of Issuer,
any and all moneys due or to become due with respect to any condemnation
proceeding affecting the Equipment. At any time, whether before or after the
occurrence of any Event of Default, Lender may (but need not), in Lender's name
or in Borrower's name, execute and deliver proof of claim, receive all such
moneys, endorse checks and other instruments representing payment of such
moneys, and adjust, litigate, compromise or release any claim against the issuer
of any such policy or party in any condemnation proceeding.
Section 6.07. OCCUPANCY.
(a) Borrower hereby irrevocably grants to Lender the right to
enter the property where the Equipment is located (the "Premises")
at any time after the occurrence and during the continuance of an
Event of Default.
(b) Lender may enter the Premises only to hold, sell, store,
liquidate, realize upon or otherwise dispose of the Equipment and
for other purposes that Lender may in good xxxxx xxxx to be related
or incidental purposes.
(c) The right of Lender to enter the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of
all obligations of Borrower and Issuer hereunder, and (ii) final
sale or disposition of all of the Equipment and delivery of all such
Equipment to purchasers.
(d) Lender shall not be obligated to pay or account for any
rent or other compensation for the occupancy of the Premises.
Borrower will pay, or reimburse Lender for, all taxes, fees, duties,
levies, charges and expenses at any time incurred by or imposed upon
Lender by reason of the execution, delivery, existence, recordation,
performance or enforcement of this Section.
Section 6.08. AGREEMENT AS FINANCING STATEMENT. To the extent permitted by
applicable law, a carbon, photographic or other reproduction of this Loan
Agreement or of any financing statements signed by Borrower is sufficient as a
financing statement in any state to perfect the security interests granted in
this Loan Agreement. Pursuant to Section 5451 of the Government Code of the
State of California, pledge of the Equipment by Issuer for the repayment of the
principal of, premium, if any, and interest on the loan from Lender to Issuer
constitutes a first lien and security interest which immediately attaches to the
Equipment, all repairs, replacements, substitutions and modifications thereto or
thereof and all proceeds of the foregoing, and is
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effective and binding against Issuer, Borrower, User, the landlord, their
successors, purchasers of the collateral, creditors, and all others asserting
rights therein irrespective of whether those parties have notice of the pledge,
irrespective of whether the Equipment is or may be deemed to be a fixture and
without the need for any physical delivery, recordation, filing or further act.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
So long as the Loan shall remain unpaid, Borrower will comply with the
following requirements, unless Lender shall otherwise consent in writing:
Section 7.01. REPORTING REQUIREMENTS. Borrower will deliver, or cause to
be delivered, to Lender, and to Issuer if requested by Issuer, each of the
following, which shall be in form and detail acceptable to Lender:
(a) as soon as available, and in any event within 120 days
after the end of each fiscal year of Borrower, audited financial
statements (including any footnotes thereto) of Borrower with the
unqualified opinion of independent certified public accountants
selected by Borrower and acceptable to Lender, which annual
financial statements (including any footnotes thereto) shall include
the balance sheet of Borrower as at the end of such fiscal year and
the related statements of income, retained earnings and cash flows
of Borrower for the fiscal year then ended, all in reasonable detail
and prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the accounting
practices applied in the financial statements (including any
footnotes thereto) referred to in Article V hereof, together with
(i) a report signed by such accountants stating to the effect that
in making the investigations necessary for said opinion they
obtained no knowledge, except as specifically stated, of any Default
or Event of Default hereunder; and (ii) a certificate of the chief
financial officer of Borrower stating to the effect that such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with
the accounting practices reflected in the annual financial
statements referred to in Article V hereof and whether or not such
officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of Borrower, an unaudited/internal
balance sheet and statements of income and retained earnings of
Borrower as at the end of and for such quarter and for the year to
date period then ended, in reasonable detail and stating in
comparative form the figures for the corresponding date and periods
in the previous year, all prepared in accordance with generally
accepted accounting principles applied on a basis consistent with
the accounting practices reflected in the financial statements
referred to in Article V hereof (except for the absence of
footnotes) and certified by the chief financial officer
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of Borrower, subject to year-end audit adjustments; and accompanied
by a certificate of that officer stating to the effect (i) that such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with
the accounting practices reflected in the financial statements
referred to in Article V hereof (except for the absence of footnotes
and subject to year end adjustments), and (ii) whether or not such
officer has knowledge of the occurrence of any Default or Event of
Default hereunder not therefore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto;
(c) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting Borrower of the type
described in Article V hereof or which seek a monetary recovery
against Borrower in excess of $100,000;
(d) as promptly as practicable (but in any event not later
than five Business Days) after an officer of Borrower obtains
knowledge of the occurrence of any event that constitutes a Default
or an Event of Default hereunder, notice of such occurrence,
together with a detailed statement by a responsible officer of
Borrower of the steps being taken by Borrower to cure the effect of
such Default or Event of Default;
(e) promptly upon knowledge thereof, notice of any loss or
destruction of or damage in excess of $100,000 to any Equipment or
of any material adverse change in any Equipment;
(f) promptly after the amending thereof, copies of any and all
amendments to its certificate of incorporation or bylaws;
(g) promptly upon knowledge thereof, notice of the violation
by Borrower of any law, rule or regulation, the violation of which
would have a material adverse effect on the financial or operating
condition of Borrower;
(h) promptly upon knowledge thereof, notice of any material
adverse change in the financial or operating condition of Borrower;
and
(i) such other information as Lender may request.
Section 7.02. BOOKS AND RECORDS; INSPECTION AND EXAMINATION. Borrower will
keep accurate books of record and account for itself pertaining to the Equipment
and pertaining to Borrower's business and financial condition and such other
matters as Lender and/or Issuer may from time to time request in which true and
complete entries will be made in accordance with generally accepted accounting
principles consistently applied and, upon request of Lender and/or Issuer, will
permit any officer, employee, attorney or accountant for Lender and/or Issuer to
audit, review, make extracts from, or copy any and all corporate and financial
books, records and properties of Borrower at all times during ordinary business
hours, and to discuss the affairs
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of Borrower with any of its directors, officers, employees or agents. Borrower
will permit Lender and/or Issuer, or its employees, accountants, attorneys or
agents, to examine and copy any or all of its records and to examine and inspect
the Equipment at any time during Borrower's business hours.
Section 7.03. COMPLIANCE WITH LAWS; ENVIRONMENTAL INDEMNITY. Borrower will
(a) comply with the requirements of applicable laws and regulations, the
noncompliance with which would materially and adversely affect its business or
its financial condition, (b) comply with all applicable material environmental,
hazardous waste or substance, toxic substance and underground storage laws and
regulations and obtain any permits, licenses or similar approvals required by
any such laws or regulations and (c) use and keep the Equipment, and will
require that others use and keep the Equipment, only for lawful purposes,
without violation of any material federal, state or local law, statute or
ordinance. Borrower shall secure all permits and licenses, if any, necessary for
the installation and operation of the Equipment. Borrower shall comply in all
material respects (including, without limitation, with respect to the use,
maintenance and operation of each item of the Equipment) with all laws of the
jurisdictions in which its operations involving any component of Equipment may
extend and of any legislative, executive, administrative or judicial body
exercising any power or jurisdiction over the items of the Equipment or its
interest or rights under this Loan Agreement. Borrower will indemnify, defend
and hold Lender and Issuer harmless from and against any claims, loss or damage
to which Lender and Issuer may be subjected as a result of any past, present or
future existence, use, handling, storage, transportation or disposal of any
hazardous waste or substance or toxic substance by Borrower or on property
owned, leased or controlled by Borrower. This indemnification shall survive the
termination of this Loan Agreement and payment of the indebtedness hereunder.
Section 7.04. PAYMENT OF TAXES AND OTHER CLAIMS. Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, upon any properties belonging
to it (including, without limitation, the Equipment) or upon or against the
creation, perfection or continuance of the security interest created pursuant to
this Loan Agreement, prior to the date on which penalties attach thereto, (b)
all federal, state and local taxes required to be withheld by it, and (c) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien or charge upon any properties of Borrower; provided, that Borrower
shall not be required to pay any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings. Borrower will pay, as the same respectively come due,
all taxes and governmental charges of any kind whatsoever that may at any time
be lawfully assessed or levied against or with respect to the Equipment, as well
as all gas, water, steam, electricity, heat, power, telephone, utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Equipment.
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Section 7.05. MAINTENANCE OF EQUIPMENT.
(a) Borrower shall, at its own expense, maintain, preserve and keep
the Equipment in good repair, working order and condition, and shall from
time to time make all repairs and replacements necessary to keep the
Equipment in such condition, and in substantial compliance with state and
federal laws, ordinary wear and tear excepted. Borrower shall maintain the
Equipment in a condition suitable for certification by the manufacturer
thereof (if certification is available) and in conformance with all
manufacturer's recommended maintenance requirements. In the event that any
parts or accessories forming part of any item or items of Equipment become
worn out, lost, destroyed, damaged beyond repair or otherwise rendered
unfit for use, Borrower, at its own expense and expeditiously, will
replace or cause the replacement of such parts or accessories by
replacement parts or accessories free and clear of all liens and
encumbrances and with a value and utility at least equal to that of the
parts or accessories being replaced (assuming that such replaced parts and
accessories were otherwise in good working order and repair). All such
replacement parts and accessories shall be deemed to be incorporated
immediately into and to constitute an integral portion of the Equipment
and, as such, shall be subject to the terms of this Loan Agreement.
Neither Lender nor Issuer shall have any responsibility in any of these
matters, or for the making of improvements or additions to the Equipment.
(b) Borrower will defend the Equipment against all claims or demands
of all persons (other than Lender) claiming the Equipment or any interest
therein except for Permitted Encumbrances.
(c) Borrower will keep the Equipment free and clear of all security
interests, liens and encumbrances except the security interest created
pursuant to this Loan Agreement except for Permitted Encumbrances.
Section 7.06. INSURANCE.
(a) Borrower shall, at its own expense, procure and maintain
continuously in effect: (i) comprehensive third party bodily injury and
property damage liability insurance, on an occurrence basis, including
coverage for "premises/operations", "products and completed operations"
and "blanket contractual" liabilities arising out of or in any way
relating to the Equipment sufficient to protect Lender and Issuer from
liability in all events with a coverage limit of not less than $2,000,000
per occurrence unless a different coverage minimum with respect to
particular equipment is reasonably required by Lender, and (ii) "special
form" or equivalent thereof, property insurance, including, but not
limited to, boiler and machinery, earthquake and flood insurance, insuring
the Equipment and all replacements and additions thereto in an amount not
less than the full insurable value on a replacement cost basis of the
insured Equipment or the applicable Prepayment Amount.
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(b) If required by State law, Borrower shall carry workers'
compensation insurance covering all employees on, in, near or about the
Equipment, and upon request, shall furnish to Lender certificates
evidencing such coverage.
(c) All insurance policies required by this Article shall be taken
out and maintained with insurance companies with an A.M. Best Company,
Inc. rating of "A VIII" or better; and shall contain a provision that the
insurer shall not cancel or revise coverage thereunder without giving
written notice to the insured parties at least thirty (30) days before the
cancellation or revision becomes effective. No insurance shall be subject
to any coinsurance clause. Each insurance policy required by this Article
shall, (i) name Lender as an additional insured party and loss payee and
shall include a lender's loss payable endorsement for the benefit of
Lender, (ii) shall provide that all insurance, as required in (a)(i)
above, except the limits of liability, operate as if there were a separate
policy covering each insured, (iii) be primary and without right of
contribution from any other insurance not specifically purchased by
Borrower to be excess of, or in contribution with, the insurance required
herein, (iv) include a waiver of any subrogation rights Borrower's
insurers may have against Lender, (v) provide that all insurance shall
insure the interest of Lender regardless of any breach or violation by
Borrower or any other party or entity of any warranties, declarations or
conditions contained in such policies and (vi) be reasonably satisfactory
in form, substance, limits, deductibles and retentions to Lender. A
certificate of insurance, signed by an authorized insurer representative,
shall be delivered to Lender prior to the Closing and prior to the
expiration date of each insurance policy as evidence of renewal of such
policies. Complete copies of each insurance policy described above shall
be delivered to Lender within sixty (60) days of the Closing and renewal.
(d) As among Lender, Borrower and Issuer, Borrower assumes all risks
and liabilities from any cause whatsoever, whether or not covered by
insurance, for loss or damage to any Equipment and for injury to or death
of any person or damage to any property, whether such injury or death be
with respect to agents or employees of Borrower or of third parties, and
whether such property damage be to Borrower's property or the property of
others. Whether or not covered by insurance, Borrower hereby assumes
responsibility for and agrees to reimburse Lender and Issuer for and will
indemnify, defend and hold harmless Lender and Issuer and its members,
agents, officers, directors and attorneys, at Borrower's expense from and
against all liabilities, obligations, losses, damages, penalties, claims,
actions, costs and expenses (including reasonable attorneys' fees) of
whatsoever kind and nature, imposed on, incurred by or asserted against
Lender or Issuer that in any way relate to or arise out of this Loan
Agreement, the transactions contemplated hereby and the Equipment, (unless
caused by or resulting from the gross negligence or intentional misconduct
of any such party) including but not limited to, (i) the selection,
manufacture, purchase, acceptance or rejection of Equipment or the
ownership of the Equipment, (ii) the delivery, lease, possession,
maintenance, use, condition, return or operation of the Equipment, (iii)
the condition of the Equipment sold or otherwise disposed of after
possession by Borrower,
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(iv) any patent or copyright infringement, (v) the conduct of Borrower,
its officers, employees and agents, (vi) a breach of Borrower of any of
its covenants or obligations hereunder, (vii) any claim, loss, cost or
expense involving alleged damage to the environment relating to the
Equipment, including, but not limited to investigation, removal, cleanup
and remedial costs, (viii) any untrue statement or alleged untrue
statement of any material fact or omission or alleged omission to state a
material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading in connection
with this Loan Agreement, the Escrow Agreement and the Tax Agreement or
the transactions contemplated thereby, (ix) any violation of any
environmental law, rule or regulation or the release of any hazardous or
toxic substance on or near the premises on which the Equipment is located,
(x) the ownership of any item of the Equipment governed hereby, (xi) any
act of negligence of Borrower, its officers, agents, contractors,
servants, employees, licensees or invitees in connection with the
Equipment or this Loan Agreement, the Escrow Agreement and the Tax
Agreement, (xii) the recovery of claims under insurance policies on the
Equipment, (xiii) any accident in connection with the operation, use,
condition, possession, storage or return of any item of the Equipment, any
of the foregoing of which result in damage to property or the injury to or
death of any person including, without limitation, latent and other
defects, whether or not discernable by Lender, Issuer or Borrower. All
amounts payable by Borrower pursuant to clause (vii) above shall be paid
immediately upon demand of Issuer or Lender, as the case may be. The
provisions of this Section 7.06(d) shall survive the termination of this
Loan Agreement.
Section 7.07. PRESERVATION OF CORPORATE EXISTENCE. Borrower will preserve
and maintain its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business; and
shall conduct its business in an orderly, efficient and regular manner.
Section 7.08. PERFORMANCE BY LENDER. If Borrower at any time fails to
perform or observe any of the covenants or agreements contained in this Loan
Agreement, and if such failure shall continue for a period of 10 calendar days
after Lender gives Borrower written notice thereof (or in the case of the
agreements contained in Sections 7.05 and 7.06 hereof, immediately upon the
occurrence of such failure, without notice or lapse of time), Lender may, but
need not, perform or observe such covenant on behalf and in the name, place and
stead of Borrower (or, at Lender's option, in Lender's name) and may, but need
not, take any and all other actions which Lender may reasonably deem necessary
to cure or correct such failure (including, without limitation, the payment of
taxes, the satisfaction of security interests, liens or encumbrances, the
performance of obligations owed to account debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and
Borrower shall thereupon pay to Lender on demand the amount of all moneys
expended and all costs and expenses (including reasonable attorneys' fees and
legal expenses) incurred by Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by
Lender, together with interest thereon from the date expended or incurred at the
lesser of
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18% per annum or the highest rate permitted by law. To facilitate the
performance or observance by Lender of such covenants of Borrower, Borrower
hereby irrevocably appoints Lender, or the delegate of Lender, acting alone, as
the attorney-in-fact of Borrower with the right (but not the duty) from time to
time to create, prepare, complete, execute, deliver, endorse or file in the name
and on behalf of Borrower any and all instruments, documents, assignments,
security agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by Borrower under this Loan Agreement.
Section 7.09. LIMITATIONS OF LIABILITY. In no event, whether as a result
of breach of contract, warranty, tort (including negligence or strict
liability), indemnity or otherwise, shall Lender, its assignees, if any, or
Issuer be liable for any special, consequential, incidental, punitive or penal
damages including, but not limited to, loss of profit or revenue, loss of use of
the Equipment or any associated equipment, service materials or software, damage
to associated equipment, service materials or software, cost of capital, cost of
substitute equipment, service materials or software, facilities, services or
replacement power or down time costs.
Section 7. 10. RATIO OF DEBT TO TANGIBLE NET WORTH. Borrower will maintain
at all times during the term of this Loan Agreement its ratio of Debt (as
defined below) to Tangible Net Worth (as defined below) at not more than 4.5:1.
"Debt" shall mean on a consolidated basis (i) all items of indebtedness or
liability which in accordance with generally accepted accounting principles
would be included in determining total liabilities as shown on the liabilities
side of a balance sheet except for Debt which is expressly subordinate to the
obligation created hereunder, (ii) indebtedness secured by any mortgage, pledge,
lien or security interest existing on property owned by Borrower, whether or not
the indebtedness secured thereby shall have been assumed, and (iii) guaranties
and endorsements (other than for purposes of collection in the ordinary course
of business) by Borrower and other contingent obligations of Borrower in respect
of, or to purchase or otherwise acquire, indebtedness of others except for
warranties provided by the Borrower in connection with the sale of its products
in the ordinary course of business. "Tangible Net Worth" means the excess of:
(a) the tangible assets of Borrower on a consolidated basis, which,
in accordance with generally accepted accounting principles, are tangible
assets, after deducting adequate reserves in each case where, in
accordance with generally accepted accounting principles, a reserve is
proper over
(b) all Debt of Borrower on a consolidated basis;
provided, however, that (i) inventory shall be taken into account on the basis
of the cost (determined on a first-in, first-out basis) or current market value,
whichever is lower, (ii) in no event shall there be included as such tangible
assets patents, trademarks, trade names, copyrights, licenses, good will,
advances or loans to, or receivables from, directors, officers, employees or
affiliates, prepaid or intangible assets, amounts relating to covenants not to
compete, pension assets, deferred charges or treasury stock or any securities or
Debt of
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Borrower or any other securities unless the same are readily marketable in the
United States of America or entitled to be used as a credit against federal
income tax liabilities, (iii) securities included as such tangible assets shall
be taken into account at their current market price or cost, whichever is lower,
and (iv) any write-up in the book value of any assets shall not be taken into
account.
Section 7. 1 1. DEBT SERVICE COVERAGE RATIO. Borrower will maintain for
each fiscal year from and after fiscal year 1997 during the term of this Loan
Agreement its Debt Service Coverage Ratio (as defined below) at not less than
1.25 to 1.0. "Debt Service Coverage Ratio" means the ratio of (i) Borrower's
Cash Flow Available for Debt Service (as defined below) to (ii) Borrower's Debt
Service (as defined below). "Cash Flow Available for Debt Service" of Borrower
means, with respect to the applicable period of determination, Borrower's
consolidated income, less dividends and distributions paid plus interest
expense, depreciation, amortization and other non-cash charges (including the
benefit derived from the use of the tax loss carry forward) less non-financed
capital expenditures. "Debt Service" of Borrower means on a consolidated basis,
with respect to the applicable period of determination, the aggregate of (i)
interest expense of Borrower, (ii) all installments of principal on Debt of
Borrower that are due on demand or during the period of determination, and (iii)
all installments of rent under capitalized lease obligations (to the extent not
already accounted for in computation of net income or Debt) of Borrower that are
due during the period of determination.
Section 7.12. NET WORTH. Borrower will maintain at all times during the
term of this Loan Agreement its consolidated Net Worth at not less than
$13,000,000. "Net Worth" of Borrower means Borrower's consolidated assets less
liabilities (excluding Debt which is expressly subordinate to the obligation
created hereunder), determined in accordance with generally accepted accounting
principles.
Section 7.13. TANGIBLE NET WORTH. Borrower will maintain Tangible Net
Worth of $3,500,000 from the date hereof to December 31, 1997. Thereafter,
Borrower will maintain its Tangible Net Worth at the greater of $3,500,000 or
eighty percent (80%) of the prior fiscal years Tangible Net Worth.
Section 7.14. RELATED PARTY NOTES PAYABLE. Borrower shall not create or
assume any Note Payable or similar obligation payable to Shareholders,
affiliates, or related parties unless (i) such Note Payable or similar
obligation is incurred in the normal course of business and in an aggregate
amount not to exceed $100,000 or (ii) such Note Payable or similar obligation is
expressly subordinate to the obligations created hereby.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
So long as the Loan shall remain unpaid, Borrower agrees that, without the
prior written consent of Lender and Issuer:
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Section 8.01. LIEN. Borrower will not create, incur or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest, assignment or transfer
upon or of any of the Equipment except for the security interest created
pursuant to this Loan Agreement and Permitted Encumbrances.
Section 8.02. SALE OF ASSETS. Borrower will not sell, lease, assign,
transfer or otherwise dispose of all or a substantial part of its assets or of
any of the Equipment or any interest therein (whether in one transaction or in a
series of transactions), except the lease of the Equipment to the User.
Section 8.03. CONSOLIDATION AND MERGER. Borrower will not consolidate with
or merge into any person, or permit any other person to merge into it, or
acquire (in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all the assets of any other person.
Section 8.04. ACCOUNTING. Borrower will not adopt, permit or consent to
any material change in accounting principles other than as required by generally
accepted accounting principles. Borrower will not adopt, permit or consent to
any change in its fiscal year.
Section 8.05. TRANSFERS. Borrower will not in any manner transfer any
property without prior or present receipt of full and adequate consideration.
Section 8.06. OTHER DEFAULTS. Borrower will not permit the acceleration or
the enforcement of rights against any collateral securing any note, loan
agreement, indenture, lease, mortgage, contract for deed, security agreement or
other contractual obligation binding upon Borrower in an amount in excess of
$100,000 or any judgment, decree, order or determination applicable to Borrower.
Section 8.07. PLACE OF BUSINESS. Borrower will not permit any of the
Equipment or any records pertaining to the Equipment to be located in any state
or area. in which, in the event of such location, a financing statement covering
such Equipment would be required to be, but has not in fact been, filed in order
to perfect the security interest created pursuant to this Loan Agreement.
Section 8.09. MODIFICATIONS AND SUBSTITUTIONS.
(a) Borrower will not make any material alterations, modifications
or additions to the Equipment which cannot be removed without materially
damaging the functional capabilities or economic value of the Equipment.
Upon return of the Equipment to Lender and at the request of Lender,
Borrower, at its sole cost and expense, will remove all alterations,
modifications and additions and repair the Equipment as necessary to
return the Equipment to the condition in which it was furnished, ordinary
wear and tear and permitted modifications excepted.
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(b) Notwithstanding the provisions of subparagraph (a) of this
section, Borrower may, with the prior written consent of Lender,
substitute for parts, elements, portions or all of the Equipment, other
parts, elements, portions, equipment or facilities; provided, however,
that any substitutions made pursuant to Borrower's obligations to make
repairs referenced under any provision of this Loan Agreement shall not
require such prior written consent. Borrower shall provide such documents
or assurances as Lender may reasonably request to maintain or confirm the
security interest assigned to Lender in the Equipment as so modified or
substituted.
Section 8.09. USE OF THE EQUIPMENT. Borrower will not install, use,
operate or maintain the Equipment improperly, carelessly, in violation of any
applicable law or in a manner contrary to that contemplated by this Loan
Agreement.
ARTICLE IX
DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS
Borrower shall provide a complete written report to Lender immediately
upon any loss, theft, damage or destruction of any Equipment and of any accident
involving any Equipment. If all or any part of the Equipment is lost, stolen,
destroyed or damaged beyond repair ("Damaged Equipment"), Borrower shall as soon
as practicable after such event either: (a) replace the same at Borrower's sole
cost and expense with equipment having substantially similar specifications and
of equal or greater value to the Damaged Equipment immediately prior to the time
of the loss occurrence, such replacement equipment to be subject to Lender's
approval, whereupon such replacement equipment shall be substituted in this Loan
Agreement and the other related documents by appropriate endorsement or
amendment; or (b) pay the applicable Prepayment Amount of the Damaged Equipment.
Borrower shall notify Lender of which course of action it will take within
fifteen (15) calendar days after the loss occurrence. If, within forty-five (45)
calendar days of the loss occurrence, (i) Borrower fails to notify Lender; (ii)
Borrower and Lender fail to execute an amendment to this Loan Agreement to
delete the Damaged Equipment and add the replacement equipment or (iii) Borrower
fails to pay the applicable Prepayment Amount, then Lender may, at its sole
discretion, declare the applicable Prepayment Amount to be immediately due and
payable, and Borrower will be required to pay the same. The Net Proceeds of
insurance with respect to the Damaged Equipment shall be made available by
Lender to be applied to discharge Borrower's obligation under this Article, and
after being so applied any excess shall be paid directly to Borrower. The
payment of the Prepayment Amount and the termination of Lender's interest in the
Damaged Equipment is subject to the terms of Section 2.07 hereof. For purposes
of this Article, the term "Net Proceeds" shall mean the amount remaining from
the gross proceeds of any insurance claim or condemnation award after deducting
all expenses (including reasonable attorneys' fees) incurred in the collection
of such claim or award.
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ARTICLE X
ASSIGNMENT, SUBLEASING AND SELLING
Section 10.01. ASSIGNMENT BY LENDER. This Loan Agreement, and the right to
receive payments of principal of, premium, if any, and interest on the loan from
Lender to Issuer and Loan Payments, as assignee of Issuer, directly from
Borrower, may be transferred, assigned and reassigned in whole or in part to one
or more assignees or subassignees by Lender without the consent of Borrower or
Issuer at any time to an Affiliate, Accredited Investor or Qualified
Institutional Buyer. In the event of a transfer to an Affiliate, Lender shall
certify to Issuer and Borrower that such transferee entity is an Affiliate. In
the event of a sale or transfer to an Accredited Investor or a Qualified
Institutional Buyer, the Lender shall provide to Issuer and Borrower a written
statement representing that the purchaser is an Accredited Investor or a
Qualified Institutional Buyer and the purchaser shall include in its letter of
representations substantially in the form of Exhibit D hereto a representation
that it is an Accredited Investor or a Qualified Institutional Buyer. In the
event that such assignment or reassignment is made to a bank or trust company as
trustee for holders of certificates representing interests in this Loan
Agreement, such bank or trust company agrees to maintain, or cause to be
maintained, a book-entry system by which a record of the names and addresses of
such holders as of any particular time is kept and agrees, upon request of
Issuer or Borrower, to furnish such information to Issuer or Borrower. Upon
assignment, Borrower will reflect in a book-entry the assignee designated in the
written request of assignment or in a written certification of an Affiliate
delivered to Borrower pursuant to this Section, and shall agree to make all
payments to the assignee designated in the such written request, notwithstanding
any claim, defense, setoff or counterclaim whatsoever (whether arising from a
breach of this Loan Agreement or otherwise) that Issuer and Borrower may from
time to time have against Lender or the assignee. Issuer and Borrower agree to
execute all documents, including notices of assignment and chattel mortgages or
financing statements, which may be reasonably requested by Lender or its
assignee to protect their interest in the Equipment and in this Loan Agreement.
Lender or assignee shall pay all reasonable expenses of Issuer, including
reasonable fees and expenses of counsel, in connection with such transfer and
assignment.
Section 10.02. NO SALE OR ASSIGNMENT BY BORROWER. This Loan Agreement and
the interest of Borrower in the Equipment may not be sold, assumed, assigned or
encumbered by Borrower without the prior written consent of Lender and Issuer
except as otherwise permitted hereunder.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. EVENTS OF DEFAULT. The following constitute "Events of
Default" under this Loan Agreement:
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(a) failure by Borrower to pay to Lender, as assignee of Issuer,
when due any Loan Payment or to pay any other payment required to be paid
hereunder and the continuation of such failure for a period of ten (10)
days;
(b) failure by Borrower to maintain insurance on the Equipment in
accordance with Section 7.06 hereof;
(c) failure by Borrower or Issuer to observe and perform any other
covenant, condition or agreement contained herein, in the Escrow
Agreement, in the Tax Agreement or in any other document or agreement
executed in connection herewith on its part to be observed or performed
for a period of 30 days after written notice is given to Borrower or
Issuer, as the case may be, specifying such failure and requesting that it
be remedied; provided, however, that, if the failure stated in such notice
cannot be corrected within such 30-day period, Lender will not
unreasonably withhold its consent to an extension of such time if
corrective action is instituted by Borrower or Issuer, as the case may be,
within the applicable period and diligently pursued until the default is
corrected;
(d) initiation by Issuer of a proceeding under any federal or state
bankruptcy or insolvency law seeking relief under such laws concerning the
indebtedness of Issuer;
(e) Borrower shall be or become insolvent, or admit in writing its
inability to pay its debts as they mature, or make an assignment for the
benefit of creditors; or Borrower shall apply for or consent to the
appointment of any receiver, trustee or similar officer for it or for all
or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of
Borrower; or Borrower shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against Borrower and any such proceeding against Borrower is not
terminated for a period of sixty (60) consecutive days or such court
enters an order granting the relief sought in such proceeding; or any
judgment, writ, warrant of attachment or execution or similar process
shall be issued or levied against a substantial part of the property of
Borrower;
(f) determination by Lender that any representation or warranty made
by Borrower or Issuer herein, in the Tax Agreement or in any other
document executed in connection herewith was untrue in any material
respect when made;
(g) an Event of Taxability shall occur; and
(h) an event of default under any instrument, agreement or other
document evidencing or relating to any indebtedness or other monetary
obligation of Borrower in an amount greater than $100,000;
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Section 11.02. REMEDIES ON DEFAULT. Whenever any Event of Default shall
have occurred and be continuing, Lender, as assignee of Issuer, shall have the
right, at its sole option without any further demand or notice, to take any one
or any combination of the following remedial steps insofar as the same are
available to secured parties under Article 9 of the UCC in effect in the State
from time to time and which are otherwise accorded to Lender, as assignee of
Issuer, by applicable law:
(a) by notice to Issuer and Borrower, declare the entire unpaid
principal amount of the Loan then outstanding, all interest accrued and
unpaid thereon and all amounts payable under this Loan Agreement to be
forthwith due and payable, whereupon the Loan, all such accrued interest
and all such amounts shall become and be forthwith due and payable,
without presentment, notice of dishonor, protest or further notice of any
kind, all of which are hereby expressly waived by Borrower;
(b) take possession of the Equipment wherever situated, without any
court order or other process of law and without liability for entering the
premises, and lease, sublease or make other disposition of the Equipment
for use over a term in a commercially reasonable manner, all for the
account of Lender, provided that Borrower shall remain directly liable for
the deficiency, if any, between the rent or other amounts paid by a lessee
or sublessee of the Equipment pursuant to such lease or sublease during
the same period of time, after deducting all costs and expenses, including
reasonable attorneys' fees and expenses, incurred with respect to the
recovery, repair and storage of the Equipment during such period of time;
(c) take possession of the Equipment wherever situated, without any
court order or other process of law and without liability for entering the
premises, and sell the Equipment in a commercially reasonable manner;
(d) proceed by appropriate court action to enforce specific
performance by Issuer or Borrower of the applicable covenants of this Loan
Agreement or to recover for the breach thereof, including the payment of
all amounts due from Borrower. Borrower shall pay or repay to Lender or
Issuer all costs of such action or court action, including, without
limitation, reasonable attorneys' fees; and
(e) take whatever action at law or in equity may appear necessary or
desirable to enforce its rights with respect to the Equipment. Borrower
shall pay or repay to Lender or Issuer all costs of such action or court
action, including, without limitation, reasonable attorneys' fees.
All proceeds from the exercise of remedies shall be applied in the
following manner:
First, to pay all proper and reasonable costs and
expenses associated with the recovery, repair, storage and
sale of the Equipment, including reasonable attorneys' fees
and expenses;
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Second, to pay (i) Lender the amount of all unpaid Loan
Payments, if any, which are then due and owing, together with
interest and late charges thereon, (ii) Lender the then
applicable Prepayment Amount (taking into account the payment
of past-due Loan Payments as aforesaid), plus a pro rata
allocation of interest, at the rate utilized to calculate the
Loan Payments, from the next preceding due date of a Loan
Payment until the date of payment by the Borrower, and (iii)
any other amounts due hereunder, including indemnity payments,
taxes, charges, reimbursement of any advances and other
amounts payable to Lender or Issuer hereunder; and
Third, to pay the remainder of such proceeds, including
purchase moneys or other amounts paid by a buyer of the
Equipment to Borrower.
Notwithstanding any other remedy exercised hereunder, Borrower shall
remain obligated to pay to Lender any unpaid portion of the Prepayment Amount.
Section 11.03. RETURN OF EQUIPMENT. Upon an Event of Default, Borrower
shall within ten (10) calendar days after notice from Lender, at its own cost
and expense: (a) perform any testing and repairs required to place the Equipment
in the condition required by Article VII; (b) if deinstallation, disassembly or
crating is required, cause the Equipment to be deinstalled, disassembled and
crated by an authorized manufacturer's representative or such other service
person as is satisfactory to Lender; and (c) deliver the Equipment to a location
specified by Lender, freight and insurance prepaid by Borrower. If Borrower
refuses to deliver the Equipment in the manner designated, Lender may enter upon
Borrower's premises where the Equipment is kept and take possession of the
Equipment and charge to Borrower the costs of such taking. Borrower hereby
expressly waives any damages occasioned by such taking.
Section 11.04. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to Lender or Issuer is intended to be exclusive and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Loan Agreement or now or hereafter existing at law or in equity. No delay
or omission to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle Lender or Issuer to
exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice other than such notice as may be required by this Article. All
remedies herein conferred upon or reserved to Lender or Issuer shall survive the
termination of this Loan Agreement.
Section 11.05. LATE CHARGE. Any Loan Payment not paid by Borrower on the
due date thereof shall, to the extent permissible by law, bear a late charge
equal to the lesser of five cents ($.05) per dollar of the delinquent amount or
the lawful maximum, and Borrower shall be obligated to pay the same immediately
upon receipt of Lender's written invoice therefor.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. DISCLAIMER OF WARRANTIES. LENDER AND ISSUER MAKE NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN,
CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR FITNESS FOR
USE OF THE EQUIPMENT, OR ANY OTHER WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT THERETO. IN NO EVENT SHALL LENDER OR ISSUER BE LIABLE FOR
ANY LOSS OR DAMAGE IN CONNECTION WITH OR ARISING OUT OF THIS LOAN AGREEMENT, THE
EQUIPMENT OR THE EXISTENCE, FURNISHING, FUNCTIONING OR BORROWER'S USE OF ANY
ITEM OR PRODUCTS OR SERVICES PROVIDED FOR IN THIS LOAN AGREEMENT.
Section 12.02. NOTICES. All notices, certificates, requests, demands and
other communications provided for hereunder or under the Escrow Agreement or the
Tax Agreement shall be in writing and shall be (a) personally delivered, (b)
sent by first-class United States mail, (c) sent by overnight courier of
national reputation, or (d) transmitted by telecopy, in each case addressed to
the party to whom notice is being given at its address as set forth above and,
if telecopied, transmitted to that party at its telecopier number set forth
above or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(i) the date received if personally delivered, (ii) when deposited in the mail
if delivered by mail, (iii) the date sent if sent by overnight courier, or (iv)
the date of transmission if delivered by telecopy. If notice to Borrower of any
intended disposition of the Equipment or any other intended action is required
by law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in this Section) at least ten (10)
calendar days prior to the date of intended disposition or other action.
Section 12.03. FURTHER ASSURANCE AND CORRECTIVE INSTRUMENTS. Issuer and,
Borrower hereby agree that they will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such further
acts, instruments, conveyances, transfers and assurances, as Lender reasonably
deems necessary or advisable for the implementation, correction, confirmation or
perfection of this Loan Agreement, the Escrow Agreement or the Tax Agreement and
any rights of Lender hereunder or thereunder. Lender shall pay all reasonable
expenses of Issuer and Borrower, including fees and expenses of counsel, in
connection with such implementation, correction, confirmation or perfection of
this Loan Agreement. Borrower hereby further agrees to amend from time to time
Exhibit A hereto to identify each item of Equipment being financed hereunder
prior to requesting any disbursements from the Escrow Fund therefor.
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Section 12.04. BINDING EFFECT; TIME OF THE ESSENCE. This Loan Agreement
shall inure to the benefit of and shall be binding upon Lender, Issuer, Borrower
and their respective successors and assigns. Time is of the essence.
Section 12.05. SEVERABILITY. In the event any provision of this Loan
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 12.06. AMENDMENTS. To the extent permitted by law, the terms of
this Loan Agreement shall not be waived, altered, modified, supplemented or
amended in any manner whatsoever except by written instrument signed by the
parties hereto, and then such waiver, consent, modification or change shall be
effective only in the instance and for the specific purpose given;
provided, however, that Borrower and Lender only may amend Exhibit A hereto to
identify each item of Equipment being financed hereunder, as permitted in the
last sentence of Section 12.03 hereof; provided further, however, that Borrower
or Lender shall deliver as soon as practicable to Issuer a copy of any such
amendment to Exhibit A hereto.
Section 12.07. EXECUTION IN COUNTERPARTS. This Loan Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute one and the same instrument, and any of the parties
hereto may execute this Loan Agreement by signing any such counterpart, provided
that only the original marked "Original: 1 of 6" on the execution page thereof
shall constitute chattel paper under the Uniform Commercial Code.
Section 12.08. APPLICABLE LAW. This Loan Agreement shall be governed by
and construed in accordance with the laws of the State.
Section 12.09. CAPTIONS. The captions or headings in this Loan Agreement
are for convenience only and in no way define, limit or describe the scope or
intent of any provisions or sections of this Loan Agreement.
Section 12.10. ENTIRE AGREEMENT. This Loan Agreement, the Tax Agreement,
the Escrow Agreement and the exhibits hereto and thereto constitute the entire
agreement among Lender, Issuer, Borrower and Escrow Agent. There are no
understandings, agreements, representations or warranties, express or implied,
not specified herein or in such documents regarding this Loan Agreement or the
Equipment financed hereby.
Section 12.11. USURY. It is the intention of the parties hereto to
comply with any applicable usury laws; accordingly, it is agreed that,
notwithstanding any provisions to the contrary in this Loan Agreement, in no
event shall this Loan Agreement require the payment or permit the collection of
interest or any amount in the nature of interest or fees in excess of the
maximum permitted by applicable law.
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IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement
in their respective corporate names by their duly authorized officers, all as of
the date first written above.
LENDER: FINOVA PUBLIC FINANCE, INC.
By /s/ XXXX XXXXXXX
-------------------------------
Name: Xxxx Xxxxxxx, Xx.
----------------------------
Title: Vice President
---------------------------
ISSUER: CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
By /s/ XXXXXXXXXXX X. XXXXXX
-------------------------------
Name: Xxxxxxxxxxx X. Xxxxxx
----------------------------
Title: Chair
---------------------------
BORROWER: THE AMERICAN MATERIALS &
TECHNOLOGIES CORPORATION
By /s/ XXXX XXXXXXX
-------------------------------
Name: Xxxx Xxxxxxx
----------------------------
Title: President
---------------------------
Trade Names of Borrower, if any:
-------------------------------
-------------------------------
-------------------------------
Original: 6 of 6
[EXECUTION PAGE OF LOAN AGREEMENT]
