FINANCING AGREEMENT
THIS FINANCING AGREEMENT, dated as of December 29, 1997 is by and between
INSIGNIA SYSTEMS, INC. a Minnesota corporation (the "Borrower"), and REPUBLIC
ACCEPTANCE CORPORATION, a Minnesota corporation (the "Lender").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the following terms
shall have the following respective meanings:
"Accounts": Each and every right to payment of Borrower, whether such right
to payment arises out of a sale or lease of goods by Borrower, or other
disposition of goods or other property of Borrower, out of a rendering of
services by Borrower, out of a loan by Borrower, out of damage to or loss of
goods in the possession of a railroad or other carrier or any other bailee, out
of overpayment of taxes or other liabilities of Borrower, or which otherwise
arises under any contract or agreement, or from any other cause, whether such
right to payment now exists or hereafter arises and whether such right to
payment is or is not yet earned by performance and howsoever such right to
payment may be evidenced, together with all other rights and interest (including
all liens and security interests) which Borrower may at any time have by law or
agreement against any account debtor (as defined in the Uniform Commercial Code
in effect in the State of Minnesota) or other obligor obligated to make any such
payment or against any of the property of such account debtor or other obligor;
specifically (but without limitation), the term includes all present and future
instruments, documents, chattel papers, accounts and contract rights of
Borrower.
"Accounts Advance": As defined in Section 2.1(a).
"Advance": An Accounts Advance and/or an Inventory Advance, as the context
may require.
"Affiliate": When used with reference to any Person, (a) each Person that,
directly or indirectly, controls, is controlled by or is under common control
with, the Person referred to, (b) each Person which beneficially owns or holds,
directly or indirectly, five percent or more of any class of voting stock of the
Person referred to (or if the Person referred to is not a corporation, five
percent or more of the equity interest), (c) each Person, five percent or more
of the voting stock (or if such Person is not a corporation, five percent or
more of the equity interest) of which is beneficially owned or held, directly or
indirectly, by the Person referred to, and (d) each of such Person's officers,
directors, joint venturers and partners. The term control (including the terms
"controlled by" and "under common control with") means the possession, directly,
of the power to direct or cause the direction of the management and policies of
the Person in question.
"Borrowing Base Certificate": As defined in Section 2.2.
"Business Day": Any day (other than a Saturday, Sunday or legal holiday in
the State of where the Lender is located).
"Change in Control": The occurrence, after the Closing Date, of any one
entity owning, directly or indirectly, securities of the Borrower representing
25% of the securities of the Borrower entitled to vote in the election of
directors.
"Closing Date" The date of this Agreement; provided that all the conditions
precedent to the making of the initial Advance, as set forth in Article III,
have been, or, on such Closing Date, will be, satisfied. The Borrower shall give
the Lender not less than one Business Day's prior notice of the day selected as
the Closing Date.
"Eligible Accounts": Accounts owned by the Borrower which the Lender, in its
sole and absolute discretion, deems eligible for Advances, but which, at a
minimum, are subject to a first priority perfected security interest in favor of
the Lender and not subject to any assignment, claim or Lien other than the Lien
in favor of the Lender and other Liens consented to by the Lender in writing,
but specifically excluding (a) Accounts which are not earned; (b) Accounts which
are unpaid more than ninety (90) days after the original invoice date, except
dated Accounts with payment terms beyond sixty (60) days are ineligible
thirty-one (31) days past the due date; (c) Accounts owed by debtors 10% or more
of whose Accounts owed are otherwise ineligible; (d) Accounts representing
progress xxxxxxxx, or retainages, or for work covered by any payment or
performance bond; (e) Accounts owed by any of the Borrower' s Affiliates; (f)
Accounts owed by debtors not located in the United States, unless supported by
(i) a letter of credit issued by a U.S. bank in favor of the Borrower which has
been delivered to the Lender, or (ii) or credit insurance acceptable to Lender
in its sole discretion; (g) Accounts as to which any warranty or representation
contained in any security agreement or other agreement of the Borrower with or
given to the Lender with respect to any such Receivable is untrue in any
material respect; (h) Accounts as to which the account debtor has disputed
liability, or made any claim with respect to any other Receivable due from such
account debtor to the Borrower; (i) Accounts subject to setoff; Ci) Accounts as
to which the account debtor has filed a petition for bankruptcy or any other
petition for relief under the Bankruptcy Code, assigned any assets for the
benefit of creditors, or if any petition or other application for relief under
the Bankruptcy Code has been filed against the account debtor, or if the account
debtor has failed, suspended business, become insolvent, or has had or suffered
a receiver or a trustee to be appointed for all or a significant portion of its
assets or affairs; (k) Accounts owed by any government or government agency; (1)
Accounts evidenced by a promissory note or other instrument; and (m) Accounts as
to which the Lender believes that collection of any such Receivable is insecure
or that any such Receivable may not be paid by reason of the account debtor's
financial inability to pay.
"Eligible Inventory": Inventory of the Borrower which the Lender, in its sole
and absolute discretion, deems eligible for Advances, but which meets the
following minimum requirements: (a) it is owned by the Borrower, is subject to a
first priority perfected security interest in favor of the Lender, and is not
subject to any assignment, claim or Lien other than (i) a Lien in favor of the
Lender and (ii) Liens consented to by the Lender in writing; (b) it consists of
raw materials or finished product (not including work in process and supplies);
(c) if held for sale or lease or furnishing under contracts of service, it is
(except as the Lender may otherwise consent in writing) new and unused; (d)
except as the Lender may otherwise consent, it is not stored with a bailee,
warehouseman or similar party; if so stored with the Lender's consent, such
bailee, warehouseman or similar party has issued and delivered to the Lender, in
form and substance acceptable to the Lender, such documents and agreements as
the Lender may require, including, without limitation, warehouse receipts
therefor in the Lender's name; (e) the Lender has determined, in its sole and
absolute discretion, that it is not unacceptable due to age, type, category,
quality and/or quantity; (f) it is not held by the Borrower on consignment and
is not subject to any other repurchase or return agreement; (g) it is not held
by a customer of the Borrower or any other Person on consignment; (h) it
complies with all standards imposed by any governmental agency having regulatory
authority over such goods and/or their use, manufacture or sale; and (i) the
warranties, representations and covenants contained in any security agreement or
other agreement of the Borrower with or given to the Lender relating directly or
indirectly to the Borrower's Inventory are applicable to it without exception.
"GAAP": Generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of any date of determination.
"Inventory": Any and all of the Borrower's goods, including, without
limitation, goods in transit, wherever located which are or may at any time be
leased by the Borrower to a lessee, held for sale or lease, furnished under any
contract of service or held as raw materials, work in process, or supplies or
materials used or consumed in the Borrower's business, or which are held for use
in connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, and all goods, the sale or other disposition of which
has given rise to a Receivable, which are returned to and/or repossessed and/or
stopped in transit by the Borrower or the Lender, or at any time hereafter in
the possession or under the control of the Borrower or the Lender, or any agent
or bailee of either thereof, and all documents of title or other documents
representing the same.
"Inventory Advance": As defined in Section 2.l(b).
"Landlord's Waiver": That Waiver to be executed by Duke Realty Investments in
form and substance satisfactory to the Lender.
"Loan Documents": This Agreement, the Security Agreement, and any documents
described in Section 3.l(a).
"Lien": With respect to any Person, any security interest, mortgage, pledge,
lien, charge, encumbrance, title retention agreement or analogous instrument or
device (including the interest of each lessor under any capitalized lease), in,
of or on any assets or properties of such Person, now owned or hereafter
acquired, whether arising by agreement or operation of law.
"Person": Any natural person, corporation, partnership, limited partnership,
joint venture, firm, association, trust, unincorporated organization, government
or governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Reference Rate": The rate of interest from time to time publicly announced
by First Bank NationalAssociation as its "reference rate"; First Bank National
Association may lend to its customers at rates that are at, above or below the
Reference Rate. For purposes of determining any interest rate hereunder which is
based on the Reference Rate, such interest rate shall change as and when the
Reference Rate changes.
"Security Agreement": That Security Agreement to be executed by the Borrower
in form and substance satisfactory to the Lender.
Section 1.2 Accounting Terms and Calculations. Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP.
Section 1.3 Other Definitional Terms Terms of Construction. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to Sections, Exhibits, Schedules and the
like references are to Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise expressly provided. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". All
incorporations by reference of covenants, terms, definitions or other provisions
from other agreements are incorporated into this Agreement as if such provisions
were fully set forth herein, and include all necessary definitions and related
provisions from such other agreements. All covenants, terms, definitions and
other provisions from other agreements incorporated into this Agreement by
reference shall survive any termination of such other agreements until the
obligations of the Borrower under this Agreement are irrevocably paid in full.
ARTICLE II
TERMS OF LENDING
Section 2.1 The Advances. On the terms and subject to the conditions hereof,
at the Borrower's request, the Lender, in its absolute and sole discretion and
without any commitment to do so, may make the following Advances available to
the Borrower:
2.l(a) up to seventy-five percent (75%) of the net amount of Eligible
Accounts which are listed in the Borrower's most current Borrowing Base
Certificate and which are deemed eligible for advances by the Lender, or such
greater or lesser percentage at the Lender's sole and absolute discretion, not
to exceed a maximum amount of $3,000,000 (the "Accounts Advances");
2.1(b) up to thirty percent (30%) of Ihe net amount of Eligible Inventory
which is listed in the Borrower's most current Borrowing Base Certificate and
which is deemed eligible for advances by the Lender, or such greater or lesser
percentage at the Lender's sole and absolute discretion, not to exceed a maximum
amount of $500,000 (the "Inventory Advances");
Notwithstanding the previous clauses 2.l(a) and 2.l(b), the maximum aggregate
amount advanced against all Eligible Accounts and all Eligible Inventory from
time to time shall not exceed $3,000,000.
Loans for additional sums requested by the Borrower may be made at the
Lender's sole discretion based upon the Lender's valuation of the Borrower's
collateral or other factors. The Borrower acknowledges and agrees that the
Lender may from time to time, for the Lender's convenience, segregate or
apportion the Borrower's collateral for purposes of determining the amounts and
maximum amounts of Advances which may be made hereunder. Nevertheless, the
Lender's security interest in all such collateral, and any other collateral
rights, interests and properties which may now or hereafter be available to the
Lender, shall secure and may be applied to the payment of any and all Advances
and other indebtedness secured by the Lender's security interest, in any order
or manner of application and without regard to the method by which the Lender
determines to make Advances hereunder.
Section 2.2 Procedure for Advances; Wire Transfer Fees. Any request by the
Borrower for an Advance shall be in writing and must be given so as to be
received by the Lender not later than 10:30 a.m. Central time on the requested
Advance date, or such later time as may be acceptable to the Lender in its sole
discretion. Each request for an Advance shall be irrevocable and shall be deemed
a representation by the Borrower that on the requested Advance date and after
giving effect to such Advance the applicable conditions specified in Article III
have been and will continue to be satisfied and the representations and
warranties set forth in Article IV will continue to be true. Each request for an
Advance shall specify the requested Advance date (which must be a Business Day)
and the amount of such Advance. Each request for an Advance shall be accompanied
by a Borrowing Base Certificate signed by a duly authorized officer of the
Borrower
in form and substance satisfactory to the Lender (the "Borrowing Base
Certificate"). If the Lender deterrnines, in its absolute and sole discretion,
to make the requested Advance, the Lender will wire transfer to the Borrower's
Account on the requested Advance date the amount of the requested Advance. The
Borrower will pay to the Lender a wire transfer fee of $15 per wire transfer.
Section 2.3 Interest Rates and Interest Payments. Interest shall accrue on
the unpaid balance of the Advances at a floating rate per annum equal to the sum
of the Reference Rate plus 3% provided, however, that in the event that
Borrower's retained earnings for fiscal year end December 31, 1998 (as reported
in the Borrower's audited financial statements for fiscal year end December 31,
1998 as required by and prepared in accordance with, Section 5.1 (a)), exceeds
$500,000, then Interest shall accrue on the Advances at a floating rate per
annum equal to the sum of the Reference Rate plus 2% from and after the first
day of the first calendar month following the date of Lender' s receipt of the
December 31, 1998 audited financial statements (the "Applicable Rate") and shall
be due and payable monthly in arrears on the last day of each calendar month;
provided, further, that upon the occurrence and during the continuance of any
failure by the Borrower to comply with any agreement or covenant of the Borrower
under any Loan Document, the unpaid balance of the Advances shall thereafter
bear interest at a floating rate equal to the sum of (a) the Applicable Rate,
plus (b) 2% and shall be due and payable on demand; and provided further that
the minimum amount of interest due and payable in any month shall not be less
than $7,500.
Section 2.4 RePayment and PrePayment.
ALL ADVANCES SHALL BE DUE AND PAYABLE ON DEMAND. NOTHING SET FORTH IN THIS
AGREEMENT, THE SECURITY AGREEMENT OR ANY OTHER AGREEMENT BETWEEN THE BORROWER
AND THE LENDER SHALL IN ANY WAY LIMIT THE LENDER'S RIGHT TO DEMAND PAYMENT OF
THE ADVANCES IN WHOLE OR IN PART.
Section 2.5 Computation. Interest on the Advances shall be computed on the
basis of actual days elapsed and a year of 360 days.
Section 2.6 Annual Fee. The Borrower shall pay to the Lender an annual fee in
an amount equal to .75 percent of the maximum aggregate amount of the Advances
(the "Annual Fee"). The Annual Fee shall be payable in advance on the Closing
Date and on each anniversary of the date of this Agreement.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent. No Advances shall be made hereunder except
upon the prior or simultaneous fulfillment of each of the following conditions:
3.l(a) Documents. The Lender shall have received the following:
(i) This Agreement executed by a duly authorized officer (or officers) of
the Borrower and dated the Closing Date.
(ii) A copy of the corporate resolutions of the Borrower authorizing the
execution, delivery and performance of this Agreement and containing an
incumbency certificate showing the names and titles, and bearing the
signatures of,
the officers of the Borrower authorized to execute this Agreement, certified
as of the Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
(iii) A copy of the Articles of Incorporation of the Borrower with all
amendments thereto, certified by the appropriate governmental official of the
jurisdiction of its incorporation as of a recent date acceptable to Lender
and its counsel.
(iv) A certificate of good standing for the Borrower in the jurisdiction
of its incorporation, certified by the appropriate governmental officials as
of a recent date acceptable to Lender and its counsel.
(v) A copy of the bylaws of the Borrower, certified as of the Closing Date
by the Secretary or an Assistant Secretary of the Borrower.
(vi) The Security Agreement, duly executed by the Borrower.
(vii) An initial Borrowing Base Certificate.
(viii) Evidence of insurance required to be maintained under Section 5.3,
naming the Lender as loss payee in form and substance satisfactory to the
Lender.
(ix) The opinion of counsel to the Borrower covering such matters as the
Lender may request.
(x) The Landlord's Waiver, duly executed by Duke Realty Investments.
3.1(b) Other Matters. All organizational and legal proceedings relating to
the Borrower and all instruments and agreements in connection with the
transactions contemplated by this Agreement shall be satisfactory in scope, form
and substance to the Lender and its counsel, and the Lender shall have received
all information and copies of all documents, including records of corporate
proceedings, which it may reasonably have requested in connection therewith,
such documents where appropriate to be certified by proper Borrower or
governmental authorities.
3.1(c) Fees and Expenses. The Lender shall have received all fees and other
amounts due and payable by the Borrower on or prior to the Closing Date,
including the reasonable fees and expenses of counsel to the Lender payable
pursuant to Section 8.2.
3.l(d) Perfection. The Security Agreement and/or any and all financing
statements with respect thereto shall have been appropriately filed to the
satisfaction of the Lender; the Lender shall have received UCC searches and/or
other Lien searches satisfactory to the Lender; and the priority and perfection
of the Lien created thereby shall have been established to the satisfaction of
the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender:
Section 4.1 Organization; Standing; Etc. The Borrower is a corporation duly
incorporated and validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now
conducted, to enter into this Agreement and to perform its obligations hereunder
and thereunder. This Agreement has been duly authorized by all necessary
corporate action and when executed and delivered will be the legal and binding
obligations of the Borrower. The execution and delivery of this Agreement will
not violate the Borrower's Articles of Incorporation or bylaws or any law
applicable to the Borrower. No governmental consent or exemption is required in
connection with the Borrower's execution and delivery of this Agreement.
Section 4.2 Financial Statements and No Material Adverse Change. The
Borrower's audited financial statements as at December 31, 1996 and its
unaudited financial statements as at October 31, 1997, as heretofore furnished
to the Lender, have been prepared in accordance with GAAP. The Borrower has no
material obligation or liability not disclosed in such financial statements, and
there has been no material adverse change in the condition of the Borrower since
the dates of such financial statements.
Section 4.3 Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of the Borrower, threatened against or affecting the
Borrower which, if determined adversely to the Borrower, would have, a material
adverse effect on the condition of the Borrower. The Borrower is not in
violation of any law or regulation (including environmental laws and regulations
and laws relating to employee benefit plans) where such violation could
reasonably be expected to impose a material liability on the Borrower.
Section 4.4 Taxes. The Borrower has filed all federal, state and local tax
returns required to be filed and has paid or made provision for the payment of
all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property (other than taxes, fees or
charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).
Section 4.5 Subsidiaries. The Borrower has no subsidiaries.
ARTICLE V
AFFIRMATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of the
Borrower's other obligations to the Lender under this Agreement shall have been
paid in full, unless the Lender shall otherwise consent in writing:
Section 5.1 Financial Statements and Reports. The Borrower will furnish to
the Lender:
5.1(a) As soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, financial statements of the Borrower
consisting of at least statements of income, cash flow and changes in
stockholders' equity, and a balance sheet as at the end of such year, setting
forth in each case in comparative form corresponding figures from the previous
annual audit, certified without qualification by independent certified public
accountants selected by the Borrower and acceptable to the Lender.
5.1(b) As soon as available and in any event within 30 days after the end of
each fiscal month, unaudited financial statements for the Borrower for such
month and for the period from the beginning of such fiscal year to the end of
such month, substantially similar to the annual audited statements.
5.1(c) Concurrently with each request for an Advance, and in any event not
less than weekly, a Borrowing Base Certificate.
5.l(d) As soon as practicable and in any event within fifteen days of the end
of each month, (i) a listing of all accounts, together with an aging of all
accounts and a reconciliation of such accounts against the listing submitted
pursuant hereto for the immediately preceding month, (ii) a list of all
inventory, setting forth the fair market value and cost of such inventory and
all sales, returns and allowances and miscellaneous charges, and (iii) a listing
of all accounts payable, together with an aging of all accounts payable all in
form and substance satisfactory to the Lender.
5.l(e) Within five days after the due date, proof of payment or deposit, when
due, of all withholding and F.I.C.A. taxes owing by the Borrower from time to
time, in form and substance satisfactory to the Lender by a payroll service
satisfactory to the Lender and whose services the Borrower shall at all times
retain.
5.l(f) From time to time, such other information regarding the business,
operation and financial condition of the Borrower as the Lender may reasonably
request.
Section 5.2 Corporate Existence. The Borrower will maintain its corporate
existence in good standing under the laws of its jurisdiction of incorporation
and its qualification to transact business in each jurisdiction where failure so
to qualify would permanently preclude the Borrower from enforcing its rights
with respect to any material asset or would expose the Borrower to any material
liability.
Section 5.3 Insurance. The Borrower will maintain with financially sound and
reputable insurance companies such insurance as may be required by law and such
other insurance in such amounts and against such hazards as is customary in the
case of reputable corporations engaged in the same or similar business and
similarly situated, including without limitation such insurance as may be
required under the Security Agreement.
Section 5.4 Payment of Taxes and Claims. The Borrower will file all tax
returns and reports which are required by law to be filed by it and will pay
before they become delinquent, all taxes, assessments and governmental charges
and levies imposed upon it or its property and all claims or demands of any kind
(including those of suppliers, mechanics, carriers, warehousemen, landlords and
other like Persons) which, if unpaid, might result in the creation of a Lien
upon its property.
Section 5.5 Inspection. The Borrower will permit any Person designated by the
Lender to visit and inspect any of the properties, books and financial records
of the Borrower, to examine and to make copies of the books of accounts and
other financial records of the Borrower, and to discuss the affairs, finances
and accounts of the Borrower with its officers at such reasonable times and
intervals as the Lender may designate. The Borrower shall also allow the Lender
and its agents to conduct periodic collateral audits of the Borrower' s assets
at such intervals as the Lender may choose, and the Borrower shall pay to Lender
a fee in the amount of $750 per day per collateral audit, plus out-of-pocket
costs and expenses incurred in connection with such collateral audits, (provided
that so long as no Event of Default (as that term is defined in the Security
Agreement) has occurredunder the Security Agreement and is continuing, the
Borrower shall not be require to pay for more than 4 collateral audits in any
calendar year).
Section 5.6 Maintenance of Properties. The Borrower will maintain its
properties in good condition, repair and working order, and supplied with all
necessary equipment, and make all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 5.7 Books and Records. The Borrower will keep adequate and proper
records and books of account in which full and correct entries will be made of
its dealings, business and affairs.
Section 5.8 Compliance. The Borrower will comply in all material respects
with all laws, rules and regulations to which it may be subject.
Section 5.9 Notice of Litigation. The Borrower will give prompt written
notice to the Lender of the commencement of any action, suit or proceeding
affecting the Borrower.
Section 5.10 Plans. The Borrower will maintain any employee benefit plans in
compliance with all material requirements of applicable laws and regulations.
Section 5.11 Special Agreements Regarding Accounts.
5.11(a) Collection of Accounts and all other amounts due to the Borrower
shall be subject to the provisions of paragraphs 5 and 6 of the Security
Agreement concerning the Lockbox and Collateral Account (as those terms are
defined in the Security Agreement). The Borrower shall provide to the Lender a
daily collection report of all Accounts collected. All collections received in
the Collateral Account and reported to Republic before 8:00 a.m. (Central time)
on any Business Day that is a Monday through Thurdday, or before 2:00 p.m.
(Central time) on any Business Day that is a Friday, shall be applied to the
payment of the Advances (in such order of application as the Lender may
determine) on the day so received, or otherwise on the next business day;
provided however, that for purposes of determining the interest due and payable
on the unpaid balance of the Advances under Section 2.3, all collections
received in the Collateral Account shall be applied to the unpaid balance of the
Advances when such collections become finally collected funds after allowing not
less than two (2) Business Days for collection. At Lender's request, the
Borrower will deliver all customer billing statements to the Lender for
examination and for mailing in the Borrower's stamped and addressed envelopes.
5.1l(b) Subject to the rights granted to the Lender in paragraph 5 of the
Security Agreement, all ledger sheets or cards, invoices, shipping records,
correspondence, and other writings relating to accounts shall, until delivered
to the Lender or removed by the Lender from the Borrower's premises, be kept on
the Borrower's premises without cost to the Lender in appropriate containers in
safe places.
5.11(c) Upon the Lender's demand for payment, the Lender may remove from the
Borrower's premises all books and records, correspondence, documents and files
relating to accounts; and the Lender may without cost or expense to the Lender
use such of the Borrower's personnel, supplies, space and equipment at the
Borrower's place of business as the Lender may desire for the handling of
collections. The Borrower will pay any and all out of pocket expenses and cost
of collection (including reasonable attorney fees) incurred by the Lender in the
Lender's handling of or effort to enforce collections.
5.11(d) The Borrower warrants that, except as may be disclosed in the
lists of Accounts furnished to the Lender: each customer billing statement
correctly states the subject matter and terms of sale; the merchandise conforms
thereto and is in all respects acceptable to the customer; the date of the
billing statement is not prior to the date of shipment; the Account is not
subject to any dispute, defense, offset or counterclaim; the account debtor is
not a subsidiary or affiliated company; and the Borrower has no reason to
believe the Account will not be paid in the
regular course of business. The Borrower will notify the Lender promptly of any
event, circumstance or communication with respect to any Account that is
inconsistent with the foregoing representation.
ARTICLE VI
NEGATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of the
Borrower's other obligations to the Lender under this Agreement shall have been
paid in full, unless the Lender shall otherwise consent in writing:
Section 6.1 Merger. The Borrower will not merge or consolidate or enter
into any analogous reorganization or transaction with any Person or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution).
Section 6.2 Sale of Assets. The Borrower will not sell, transfer, lease or
otherwise convey all or any substantial part of its assets except for sales and
leases of inventory in the ordinary course of business.
Section 6.3 Dividends. The Borrower will not pay any dividends or otherwise
make any distributions on, or redemptions of, any of its outstanding stock;
provided, however, that if the Borrower shall be eligible and shall have elected
"S" Corporation status in accordance with Sections 1361 et seq. of the Internal
Revenue Code of 1986, as amended, for any fiscal year, the Borrower may pay
dividends in its capital stock to enable its shareholders to pay income taxes on
income of the Borrower for such fiscal year that it is taxable to the
shareholders].
Section 6.4 Investments. The Borrower will not make any loans, advances or
extensions of credit to any other Person (except for trade and customer accounts
receivable for inventory sold or services rendered in the ordinary course of
business and payable in accordance with customary trade terms) or purchase or
acquire any stock or other debt or equity securities of or any interest in any
other Person or any integral part of any business or the assets comprising such
business or part thereof, except for:
6.4(a) Investments in readily marketable direct obligations issued or
unconditionally guaranteed by the United States government or any agency thereof
and supported by the full faith and credit of the United States.
6.4(b) Certificates of deposit or bankers' acceptances issued by any
commercial Bank organized under the laws of the United States or any State
thereof which has (i) combined capital and surplus of at least $100,000,000, and
(ii) a credit rating with respect to its unsecured indebtedness from a
nationally recognized rating service that is satisfactory to the Lender.
6.4(c) Commercial paper given the highest rating by a nationally recognized
rating service.
6.4(d) Repurchase agreements relating to securities of the kind described in
Section 6.4 (a).
6.4(e) Other readily marketable investments in debt securities which are
reasonably acceptable to the Lender.
6.4(f) Travel advances to officers and employees in the ordinary course of
business. Any investments under clauses (a),(b),(c) or (d) above must mature
within one year of the acquisition thereof by the Borrower.
Section 6.5 Indebtedness. The Borrower will not borrow any money or issue
any bonds, debentures or other debt securities or otherwise become obligated on
any interest-bearing indebtedness except for the Advances under this Agreement
and except for existing indebtedness as disclosed on the most recent financial
statement of the Borrower referred to in Section 4.1.
Section 6.6 Liens. The Borrower will not create, incur, assume or suffer to
exist any Lien, or enter into any arrangement for the acquisition of any
property through conditional sale, lease-purchase or other title retention
agreements except:
6.6(a) Liens granted to the Lender.
6.6(b) Liens existing on the date of this Agreement and disclosed in those
UCC or other Lien searches referred to in Section 3.l(d).
6.6(c) Deposits or pledges to secure payment of workers' compensation,
unemployment insurance, old age pensions or other social security obligations
arising in the ordinary course of business of the Borrower.
6.6(d) Liens for taxes, fees, assessments and governmental charges not
delinquent.
6.6(e) Liens of carriers, warehousemen, mechanics and materialmen, and other
like Liens arising in the ordinary course of business, for sums not due.
6.6(f) Liens incurred or deposits or pledges made or given in connection
with, or to secure payment of, indemnity, performance or other similar bonds.
6.6(g) Encumbrances in the nature of zoning restrictions, easements and
rights or restrictions of record on the use of real property and landlord's
Liens under leases on the premises rented, which do not materially detract from
the value of such property or impair the use thereof in the business of the
Borrower.
Section 6.7 Contingent Obligations. The Borrower will not guarantee or
otherwise become liable on the indebtedness of any other Person.
Section 6.8 Change in Control. The Borrower will not allow a Change in
Control to occur.
ARTICLE VII
TERMINATION BY BORROWER
This agreement shall continue in effect until terminated upon not less than
30 days prior written notice delivered by the Borrower certified mail to Lender
by certified mail.Termination shall not impair or affect the Lender' s rights
existing as of the time notice of
Termination is given. Borrowers obligations with respect to payment of any
Termination fee shall be fixed and owing as of date such notice is given and not
when such notice becomes effective.
In the event that the Borrower gives notice to the Lender of the termination
of this Agreement under Section VII hereof at any time prior to the second
anniversary of the date of this Agreement, the Borrower will pay to the Lender a
prepayment charge, as additional compensation for the Lender's costs of entering
into this Agreement, in the amount of (i) 3% of the maximum aggregate amount of
the Advances if the notice of termination occurs prior to the first anniversary
of the date of this Agreement; and (ii) 2% of the maximum aggregate amount of
the Advances if the notice of termination occurs after the first anniversary,
but before the second anniversary, of the date of this Agreement, unless the
outstanding amount of Borrower's obligations hereunder are refinanced in full
by an affiliate of U.S. Bancorp after the first anniversary of the date of this
Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Modifications. Notwithstanding any provisions to the contrary
herein, any term of this Agreement may be amended with the written consent of
the Borrower; provided that no amendment, modification or waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modifications, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
Section 8.2 Costs and Expenses. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Lender upon demand
for all reasonable out-of-pocket expenses paid or incurred by the Lender
(including filing and recording costs and fees and expenses of Xxxxxx & Xxxxxxx
LLP, counsel to the Lender) in connection with the negotiation, preparation,
approval, review, execution, delivery, amendment, modification, interpretation,
collection and enforcement of this Agreement including all fees due Lender
incurred pursuant to this Agreement. The obligations of the Borrower under this
Section shall survive any termination of this Agreement. In the event such
costs, fees or expenses are not promptly paid by Borrower on demand Lender may
set off the amount of any such costs, fees or expenses from funds available to
Borrower. If the Borrower elects, the Borrower may treat the amount of any such
costs, fees or expenses as an Advance hereunder.
Section 8.3 Waivers, etc. No failure on the part of the Lender to exercise
and no delay in exercising any power or right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. The rights and remedies of the Lender hereunder are cumulative
and not exclusive of any right or remedy the Lender otherwise has.
Section 8.4 Notices. Except when telephonic notice is expressly authorized
by this Agreement, any notice or other communication to any party in connection
with this Agreement shall be in writing and shall be sent by manual delivery,
telegram, telex, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to
the Lender under Article II hereof shall be deemed to have been given only when
received by the Lender.
Section 8.5 Successors and Assigns: Disposition of Loans. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign its
rights or delegate its obligations hereunder without the prior written consent
of the Lender. The Lender may at any time sell, assign, transfer, grant
participations in, or otherwise dispose of any portion of the Advances to banks
or other financial institutions. The Lender may disclose any information
regarding the Borrower in the Lender's possession to any prospective buyer or
participant.
Section 8.6 Offset. The Borrower hereby irrevocably authorizes the Lender to
set off all sums owing by the Borrower to the Lender against all deposits and
credits of the Borrower with, and any and all claims of the Borrower against,
the Lender. The Borrower further agrees that any bank participating with the
Lender in Advances hereunder may exercise any and all rights of setoff with
respect to such participation as fully as if such participant had lent directly
to the Borrower the amount of such participation.
SECTION 8.7 GOVERNING LAW AND CONSTRUCTION, THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF,
SECTION 8.8 CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER, THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING
IN HENNEPIN COUNTY, MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND
VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT, IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE LENDER AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE,
SECTION 8.9 WAIVER OF JURY TRIAL, EACH OF THE BORROWER AND THE LENDER
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ADVANCES AND ANY OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
Section 8.10 Indemnification. The Borrower hereby agrees to defend, protect,
indemnify and hold harmless the Lender and its affiliates and the directors,
officers, employees, attorneys and agents of the Lender and its affiliates (each
of the foregoing being an "Indemnitee" and all of the foregoing being
collectively the "Indemnitees") from and against any and all claims, actions,
damages, liabilities, judgments, costs and expenses (including all reasonable
fees and disbursements of counsel which may be incurred in the investigation or
defense of any matter) imposed upon, incurred by or asserted against any
Indemnitee, whether direct, indirect or
consequential and whether based on any federal, state, local or foreign laws or
regulations (including securities laws, environmental laws, commercial laws and
regulations), under common law or on equitable cause, or on contract or
otherwise: (a) by reason of, relating to or in connection with the execution,
delivery, performance or enforcement of any Loan Document, any commitments
relating thereto, or any transaction contemplated by any Loan Document; or (b)
by reason of, relating to or in connection with any credit extended or used
under the Loan Documents or any act done or omitted by any Person, or the
exercise of any rights or remedies thereunder, including the acquisition of any
collateral by the Lender by way of foreclosure of the Lien thereon, deed or xxxx
of sale in lieu of such foreclosure or otherwise; provided, however, that the
Borrower shall not be liable to any Indemnitee for any portion of such claims,
damages, liabilities and expenses resulting from such Indemnitee's negligence or
willful misconduct. In the event this indemnity is unenforceable as a matter of
law as to a particular matter or consequence referred to herein, it shall be
enforceable to the full extent permitted by law.
Section 8.11 Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
Section 8.12 Entire Agreement. This Agreement and the other Loan Documents
embody the entire agreement and understanding between the Borrower and the
Lender with respect to the subject matter hereof and thereof. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof.
Section 8.13 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INSIGNIA SYSTEMS, INC.
By: ILLEGIBLE
Its President
Borrower's Address:
00000 Xxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
REPUBLIC ACCEPTANCE CORPORATION
By: Xxxxx Xxxxxx
Its Relationship Manager
Lender's Address:
0000 Xxxxxxx Xxxxxx XX, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
