LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of this 29th day of May, 1997
by and between ORYX TECHNOLOGY CORP., a Delaware corporation ("Borrower") and
KBK FINANCIAL, INC., a Delaware corporation doing business as OTC/KBK
Acceptance Corporation ("KBK"). In connection with the mutual covenants and
agreements contained herein, the parties hereto agrees as follows:
I. DEFINITIONS. The following definitions shall apply throughout this
Agreement:
"AFFILIATE" means with respect to any person or entity in question, any
other person or entity owned or controlled by, or which owns or controls
or is under common control or is otherwise affiliated with such person or
entity in question.
"BORROWING BASE" means an amount equal to 40% of Eligible Inventory.
"COLLATERAL" has the meaning given it in SECTION 4.
"CREDIT FACILITIES" has the meaning given it in SECTION 2.
"DEBIT ACCOUNT" means the bank account of Borrower which Borrower
identifies to KBK in writing prior to any advances under the Line of
Credit over which KBK has express written authority to debit pursuant to
this Agreement.
"ELIGIBLE INVENTORY" means as of any date, the aggregate value of all
inventory of raw materials and finished goods (excluding work in progress
and packaging materials, supplies and any advertising costs capitalized
into inventory) then owned by any of the Obligors and held for sale, lease
or other disposition in the ordinary course of its business, in which KBK
has a first priority lien, excluding (i) inventory which is damaged,
defective, obsolete or otherwise unsaleable in the ordinary course of
business, (ii) inventory which has been returned or rejected, (iii)
inventory subject to any consignment arrangement between any of the
Obligors and any other person or entity, (iv) inventory which is in
transit, (v) inventory not located in the United States and (vi) inventory
which KBK in KBK's reasonable discretion deems ineligible. For purposes
of this definition, Eligible Inventory shall be valued at the lower of
cost or market value.
"ENVIRONMENTAL LAWS" means any and all federal, state and local laws,
regulations, rules, orders, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges or
releases of pollutants or industrial, toxic or hazardous substances into
the environment, or otherwise relating to the manufacture, processing,
treatment, transport or handling of pollutants or industrial, toxic or
hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA PLAN" means any pension benefit plan subject to Title IV of ERISA
maintained by Borrower or any Affiliate thereof with respect to which
Borrower or any Affiliate has a fixed or contingent liability.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board
(or any generally recognized successor), consistently applied throughout
the period involved.
"GUARANTORS" means SURGX CORPORATION, ORYX INSTRUMENTS AND MATERIALS
CORPORATION, ORYX POWER PRODUCTS CORPORATION (whether one or more).
"INDEMNIFIED CLAIMS" means any and all claims, demands, actions, causes of
action, judgments, suits, liabilities, obligations, losses, damages and
consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including without limitation, fees and expenses of
attorneys and other professional consultants and experts in connection
with any investigation or defense) of every kind or nature, known or
unknown, existing or hereafter arising, foreseeable or unforeseeable,
which may be imposed upon, threatened or asserted against or incurred or
paid by any Indemnified Person at any time and from time to time,
because of or resulting from, in connection with or in any way relating
to or arising out of any of the Credit Facilities, the Collateral or any
other transaction, act, omission, event or circumstance in any way
connected with or contemplated by this Agreement or the other Loan
Documents or any action taken or omitted by any such Indemnified Person
under or in connection with any of the foregoing (including but not
limited to any investigation, litigation, proceeding, enforcement of
KBK's rights or defense of KBK's actions related to or arising out of
this Agreement or the other Loan Documents), whether or not any
Indemnified Person is a party hereto.
"INDEMNIFIED PERSON" shall collectively mean KBK and its officers,
directors, shareholders, employees, attorneys, representatives, agents,
Affiliates, successors and assigns.
"LINE OF CREDIT AMOUNT" is $750,000.00; provided, however the Line of
Credit Amount shall be $1,500,000.00 once KBK receives the inventory
appraisal described in Subsection 9(c).
"LOAN DOCUMENTS" means this Agreement, the Notes and all other documents,
agreements and instruments required by KBK to be executed and delivered in
connection herewith (including, without limitation, all documents,
agreements and instruments evidencing, securing, governing, guaranteeing
and/or pertaining to the Notes and the Credit Facilities).
"NOTES" has the meaning given it in SECTION 3.
"OBLIGORS" means Borrower and the Guarantors.
"PURCHASE AGREEMENT" means that certain account transfer and purchase
agreement of even date herewith between Oryx Power Products Corporation,
Oryx Instruments and Materials Corporation and KBK, as may be amended from
time to time.
"SUBORDINATED DEBT" means indebtedness owing by any Obligor to a creditor
other than KBK which has been subordinated and subject in right of payment
to the prior payment of all indebtedness and obligations now or hereafter
owing by such Obligor to KBK, such
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subordination to be evidenced by a written agreement between KBK and the
subordinated creditor which is in form and substance satisfactory to KBK.
"TANGIBLE NET WORTH" means, as of any date, the amount by which the
total assets of Obligors on a consolidated basis exceeds the Obligors'
total liabilities, plus Subordinated Debt, less any intangible assets
(as defined by GAAP, including, without limitation, trademarks, patents,
copyrights, goodwill, covenants not to compete and customer lists), less
deferred charges.
2. CREDIT FACILITIES. Subject to the terms and conditions set forth in this
Agreement and the other Loan Documents, KBK hereby agrees to provide to
Borrower the following Credit Facility or Facilities (whether one or more,
the "Credit Facilities"):
a. LINE OF CREDIT. Subject to the terms and conditions set forth
herein, KBK agrees to provide to Borrower a revolving line of
credit (the "Line of Credit") during the period commencing on the
date hereof and continuing through the 30' day prior to the
maturity date of the promissory note evidencing the Line of
Credit from time to time. Borrower may request advances under
the Line of Credit; PROVIDED, HOWEVER, the total principal amount
outstanding at any time under the Line of Credit shall not exceed
the lesser of (i) an amount equal to the Borrowing Base, or (ii)
the Line of Credit Amount. If at any time the aggregate
principal amount outstanding under the Line of Credit shall
exceed an amount equal to the Borrowing Base, Borrower agrees to
immediately repay to KBK such excess amount, plus all accrued but
unpaid interest thereon. Borrower may request advances under the
Line of Credit no more often than once each business day.
Subject to the terms and conditions set forth in this Agreement
and in the promissory note evidencing the Line of Credit from
time to time, Borrower may borrow, repay and reborrrow under the
Line of Credit. The sums advanced under the Line of Credit shall
be used for working capital purposes.
3. PROMISSORY NOTE. Borrower agrees to execute, contemporaneously herewith,
a promissory note payable to the order of KBK, in form and substance
acceptable to KBK in KBK's sole and absolute discretion, for each Credit
Facility provided hereunder to evidence the indebtedness owing by Borrower
to KBK under each such facility (whether one or more, together with any
renewals, extensions and increases thereof, the "Notes"). Interest on the
Notes shall accrue at the rate set forth therein. The principal of and
interest on the Notes shall be due and payable and may be prepaid in
accordance with the terms and conditions set forth in the Notes and in
this Agreement.
4. COLLATERAL. As collateral and security for the indebtedness evidenced by
the Notes and any and all other indebtedness or obligations from time to
time owing by Borrower to KBK, Borrower and Guarantors shall each grant to
KBK, its successors and assigns, a first and prior lien and security
interest in and to the property described hereinbelow, together with any
and all PRODUCTS AND PROCEEDS thereof (the "Collateral"):
a. ACCOUNTS. All present and future accounts, contract rights, chattel
paper, documents, instruments, deposit accounts and general
intangibles (including, without limitation, all patents and patent
applications, and all trademarks and goodwill of the business related
to such trademarks, along with any divisions, renewals or reissues
thereof, and variations or modifications and new applications of the
technology covered by such patents and trademarks) now or hereafter
owned by any of the Obligors, all money and
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other funds of any of the Obligors which may now or hereafter come
into the possession, custody or control of Secured Party, all books
of account and customer lists, and in any case where an account
arises from the sale of goods, the interest of Obligors in such
goods.
b. INVENTORY. All present and hereafter acquired inventory (including
without limitation, all raw materials, work in process and finished
goods) owned by any of the Obligors wherever located.
c. EqUIPMENT. All equipment of whatsoever kind and character now or
hereafter owned by any of the Obligors and used or usable in any of
the Obligor's business, together with all replacements, accessories,
additions, substitutions and accessions to all of the foregoing.
The term "Collateral" shall also include all records and data relating to
any of the foregoing (including, without limitation, any computer software
on which such records and data may be located). Borrower agrees to
execute, and to cause the Guarantors to execute, such security agreements,
assignments, mortgages, deeds of trust and other agreements and documents
as KBK shall deem appropriate and otherwise require from time to time to
more fully create and perfect KBK's lien and security interests in the
Collateral.
5. GUARANTORS. As a condition precedent to KBK's obligation to provide the
Credit Facilities to Borrower, Borrower agrees to cause the Guarantors to
each execute and deliver to KBK contemporaneously herewith a guaranty
agreement, in form and substance acceptable to KBK in KBK's sole and
absolute discretion.
6. FEES.
a. COMMITMENT FEE. Borrower shall pay to KBKA a commitment fee in the
amount of $11,250.00. Such fee shall be payable as follows: (i)
$5,625.00 concurrently with the execution hereof, (ii) $2,812.50 on
or before the 30' day after the date of execution hereof, and (iii)
$2,812.50 on or before the 60' day after the date of execution
hereof, provided, however, the amount due in clause (ii) and (iii)
shall in no event be due unless and until the Line of Credit Amount
has been increased to $1,500,000.00. Borrower hereby authorizes
KBK, in KBK's sole discretion, to collect any such commitment fees
(i) by deducting such fees from the first advance under the subject
Credit Facility, (ii) by debiting the Debit Account, (iii) by
applying that portion of any up-front deposit delivered to KBK by
Borrower which is in excess of KBK's costs and expenses (including,
without limitation, attorneys' fees), or (iv) by using any
combination of the foregoing. This authorization does not affect
Borrower's obligation to pay such sums to KBK. Borrower and KBK
acknowledge and agree that the commitment fees are reasonable
compensation to KBK for making the Credit Facilities available to
Borrower and for no other purpose.
b. SERVICING FEE. Borrower agrees to pay KBK a servicing fee
("Servicing Fee") on the first day of each calendar month equal to
one tenth percent (.10%) per annum (computed on the basis of a year
consisting of 360 days and actual days elapsed) of the average
daily amount outstanding under the Line of Credit during the
immediately
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preceding calendar month. If the first calendar month covers less
than a full month, the Servicing Fee for such month shall be
prorated. Borrower hereby authorizes KBK, in KBK's sole
discretion, to collect such Servicing Fee (i) by deducting such fee
from the first advance, if any, under the subject Credit Facility
after such fee is due, (ii) by debiting the Debit Account, or (iii)
by using any combination of the foregoing. This authorization does
not affect Borrower's obligation to pay such sums to KBK when due.
Borrower and KBK acknowledge and agree that such fees are
reasonable compensation to KBK for making the Credit Facilities
available to Borrower and for no other purpose.
c. MONTHLY FEE. Borrower agrees to pay KBK a monthly fee ("Monthly
Fee") on the first day of each calendar month equal to $1,500.00,
the accrued interest under the Line of Credit and the Servicing
Fee which are collected by KBK in and for the prior calendar month.
Borrower hereby authorizes KBK, in KBK's sole discretion, to
collect such Monthly Fee (i) by deducting such fee from the first
advance, if any, under the subject Credit Facility after such fee
is due, (ii) by debiting the Debit Account, or (iii) by using any
combination of the foregoing. This authorization does not affect
Borrower's obligation to pay such sums to KBK when due. Borrower
and KBK acknowledge and agree that such fees are reasonable
compensation to KBK for making the Credit Facilities available to
Borrower and for no other purpose.
7. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants,
and upon each request for an advance under the Credit Facilities further
represents and warrants, to KBK as follows:
a. EXISTENCE. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation and is duly licensed, qualified to do business and is
in good standing in all other states in which such licensing,
qualification and good standing are necessary. Borrower has all
requisite power and authority to execute and deliver this Agreement
and the other Loan Documents to which it is a party.
b. BINDING OBLIGATIONS. The execution, delivery, and performance of
this Agreement and all of the other Loan Documents by Borrower have
been duly authorized by all necessary action by Borrower, and
constitute legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights and
except to the extent specific remedies may generally be limited by
equitable principles.
c. NO CONSENT. The execution, delivery and performance of this
Agreement and the other Loan Documents, and the consummation of the
transactions contemplated hereby and thereby, do not (i) conflict
with, result in a violation of, or constitute a default under (A)
any provision of Borrower's articles or certificate of
incorporation or bylaws, (B) any law, governmental regulation,
court decree or order applicable to Borrower, or (C ) any other
document or agreement to which Borrower is a party, or (ii) require
the consent, approval or authorization of any third party.
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d. FINANCIAL CONDITION. Each financial statement of Obligors supplied
to KBK fairly presents the financial condition as of the date of
each such statement. There has been no material adverse change in
such financial condition or results of operations of any of the
Obligors subsequent to the date of the most recent financial
statement supplied to KBK.
e. LITIGATION. There are no actions, suits or proceedings, pending or,
to the knowledge of Borrower, threatened against or affecting any of
the Obligors or the properties of any of the Obligors, before any
court or governmental department, commission or board, which, if
determined adversely to any of the Obligors, would have a material
adverse effect on the financial condition, properties, or operations
of any of the Obligors.
f. TAXES; GOVERNMENTAL CHARGES. The Obligors have filed all federal,
state and local tax reports and returns required by any law or
regulation to be filed by it and has either duly paid all taxes,
duties and charges indicated due on the basis of such returns and
reports, or made adequate provision for the payment thereof, and the
assessment of any material amount of additional taxes in excess of
those paid and reported is not reasonably expected. There is no tax
lien notice against any of the Obligors presently on file.
g. ERISA COMPLIANCE. The Obligors are in compliance with ERISA
concerning Borrower's ERISA Plan, if any, or is not required to
contribute to any "multi-employer plan" as defined in Section 401 of
ERISA.
h. COMPLIANCE WITH LAWS. The Obligors are each conducting its respective
business in material compliance with all statutes, rules, regulations
and/or ordinances imposed by any governmental unit upon each Obligor
or upon its businesses, operations and property (including, without
limitation, all Environmental Laws).
8. CONDITIONS PRECEDENT TO ADVANCES. KBK's obligation to make any advance
under this Agreement and the other Loan Documents shall be subject to the
conditions precedent that, as of the date of such advance and after giving
effect thereto (i) all representations and warranties made to KBK in this
Agreement and the other Loan Documents shall be true and correct, as of
and as if made on such date, except to the extent such representations and
warranties are with respect to financial statements which are delivered to
KBK that speak as of a particular date, (ii) no material adverse change in
the financial condition of any of the Obligors or their respective
business since the effective date of the most recent financial
statements furnished to KBK shall have occurred, (iii) no event has
occurred and is continuing, or would result from the requested advance,
which with notice or lapse of time, or both, would constitute an Event
of Default (as hereinafter defined), (iv) KBK's receipt of all Loan
Documents appropriately executed by Borrower, Guarantors and all other
proper parties, and (iv) KBK's receipt of all fees and expenses owing to
KBK under this Agreement and the other Loan Documents.
9. AFFIRMATIVE COVENANTS. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) KBK has no further commitment to
lend hereunder, Borrower agrees and covenants that it will, unless KBK
shall otherwise consent in writing:
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a. ACCOUNTS AND RECORDS. Maintain the Obligor's books and records in
accordance with generally accepted accounting principles.
b. RIGHT OF INSPECTION. Permit KBK to visit the Obligors' properties
and installations and to examine, audit and make and take away copies
or reproductions of the Obligor's books and records, at all
reasonable times. Borrower agrees to pay all costs associated with
any such audits, at a rate equal to $700.00 per person, plus
out-of-pocket expenses, but prior to an Event of Default, Borrower
shall not be required to pay for more than one such audit per fiscal
quarter.
c. INVENTORY APPRAISAL. Provide KBK with an appraisal satisfactory to
KBK of the forced liquidation value of the inventory of Oryx
Instruments and Materials Corporation and Oryx Power Products
Corporation by an appraiser acceptable to KBK within 30 days from the
date hereof.
d. LANDLORD'S WAIVER. Obligors will cause each landlord of real
property leased by the Obligors and where Collateral may be kept to
execute and deliver to KBK, within 60 days from the initial advance
under the Line of Credit, an agreement satisfactory in form and
substance to KBK which such landlord waives any lien or other
rights landlord may have in the Collateral and gives KBK access to
the leased premises.
e. RIGHT TO ADDITIONAL INFORMATION. Furnish KBK with such additional
information and statements, lists of assets and liabilities, tax
returns, and other reports with respect to each Obligor's financial
condition and business operations as KBK may request from time to
time.
f. COMPLIANCE WITH LAWS. Conduct its business, and cause Guarantors to
each conduct their businesses, in an orderly and efficient manner
consistent with good business practices, and perform and comply with
all statutes, rules, regulations and/or ordinances imposed by any
governmental unit upon their respective businesses, operations and
properties (including without limitation, all Environmental Laws).
g. TAXES. Pay and discharge when due all assessments, taxes,
governmental charges and levies, of every kind and nature, imposed
upon any of the Obligors or their properties, income or profits,
prior to the date on which penalties would attach, and all lawful
claims that, if unpaid, might become a lien or charge upon any of
Obligor's property, income or profits; provided, however, Obligors
will not be required to pay and discharge any such assessment, tax,
charge, levy or claim so long as (i) same shall be contested in
good faith by appropriate judicial, administrative or other legal
proceedings timely instituted, and (ii) Obligors shall have
established adequate reserves with respect to such contested
assessment, tax, charge, levy or claim in accordance with generally
accepted accounting principles, consistently applied.
h. INSURANCE. Maintain, and cause Guarantors to maintain, insurance,
including but not limited to, fire insurance, comprehensive property
damage, public liability, worker's compensation, business
interruption and other insurance deemed necessary or otherwise
required by KBK.
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i. NOTICE OF MATERIAL CHANGE/LITIGATION. Borrower shall promptly notify
KBK in writing (i) of any material adverse change in the financial
condition of any of the Obligors or their respective businesses, and
(ii) of any litigation or claims against any Obligor which is
reasonably likely to materially affect the financial condition of
such Obligor.
j. ADDITIONAL DOCUMENTATION. Execute and deliver, or cause to be
executed and delivered, any and all other agreements, instruments or
documents which KBK may reasonably request in order to give effect to
the transactions contemplated under this Agreement and the other Loan
Documents.
10. NEGATIVE COVENANTS. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) KBK has no further commitment to
lend hereunder, Borrower will not and will cause the Guarantors to not,
without the prior written consent of KBK:
a. NATURE OF BUSINESS. Make any material change in the nature of its
business as carried on as of the date hereof, except in connection
with the sale of substantially all of the assets or capital stock of
Oryx Power Products Corporation.
b. LIQUIDATIONS, MERGERS, CONSOLIDATIONS: ACQUISITIONS. Liquidate,
merge or consolidate with or into any other entity, or form or
acquire any new subsidiary or acquire by purchase or otherwise all or
substantially all of the assets of any other entity except a merger
of a subsidiary into Borrower or into any other subsidiary of
Borrower.
c. TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including,
without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of its business
and upon fair and reasonable terms no less favorable to it than would
be obtained in a comparable arm's-length transaction with a person or
entity not an Affiliate.
d. SALE OF ASSETS. Sell, lease, transfer or otherwise dispose of any of
its assets or properties, other than (i) inventory sold in the
ordinary course of business, (ii) as necessary to replace obsolete
equipment, and (iii) all of the stock of Oryx Power Products
Corporation, Borrower agreeing to give KBK 10 days prior written
notice of any such sale of stock.
e. LIENS. Create or incur any lien or encumbrance on any of its assets,
other than (i) liens and security interests securing indebtedness
owing to KBK, (ii) pledges or deposits to secure the payment of
obligations under any worker's compensation laws or similar laws,
(iii) deposits to secure the payment of public or statutory
obligations, (iv) mechanic's, carriers', xxxxxxx'x, repairman's or
other liens arising by operation of law in the ordinary course of
business which secure obligations that are not overdue or are being
contested in good faith and for which Borrower has established
adequate reserves in accordance with generally accepted accounting
principles, (v) liens securing purchase money indebtedness permitted
hereunder provided such lien does not extend beyond the property
purchased with such indebtedness, (vi) liens securing capital
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leases provided such lien does not extend beyond the property
subject to such lease, and (vii) liens and security interest
existing as of the date hereof which have been disclosed to and
approved by KBK in writing.
f. INDEBTEDNESS. Create, incur or assume any indebtedness for borrowed
money or issue or assume any other note, debenture, bond or other
evidences of indebtedness, or guarantee any such indebtedness or such
evidences of indebtedness of others, other than (i), borrowings from
KBK, (ii) current accounts payable and other current obligations
(other than for borrowed money), (iii) borrowings outstanding on the
date hereof which have been disclosed and approved in writing by KBK,
(iv) inter-company borrowings between the Obligors, (v) purchase
money indebtedness used to purchase equipment which is secured only
by the equipment so purchased, and (vi) capital lease obligations;
provided, however, Borrower agrees to give KBK prior notification
of any single purchase money transaction or capital lease in excess
of $50,000.00.
g. TRANSFER OF OWNERSHIP. Permit the sale, pledge or other transfer of
any of the ownership interest in any of the Guarantors (except all of
the capital stock of Oryx Power Products Corporation, Borrower
agreeing to give KBK 10 days prior written notice of any such sale).
h. CHANGE IN MANAGEMENT. Permit a change in the senior management of
any Obligor without giving KBK five (5) days prior written notice, if
possible.
II. FINANCIAL COVENANTS. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) KBK has no further commitment to
lend hereunder, Borrower will maintain the following financial covenant on
a consolidated basis with the Guarantors:
a. TANGIBLE NET WORTH. At the end of each fiscal quarter, its Tangible
Net Worth, calculated on a pro forma basis (i.e. add back accounts
purchased by KBK and the factored balance), of not less than
$4,250,000.00.
Borrower shall have an opportunity to cure any breach of this financial
covenant within 25 days from the earlier of (i) the date which KBK is due to
receive financial statements of Borrower hereunder which would indicate any
breach of this financial covenant, or (ii) the date KBK receives receipt of
financial statements indicating any breach of this financial covenant.
Unless otherwise specified, all accounting and financial terms and covenants
set forth above are to be determined according to generally accepted
accounting principles, consistently applied.
12. REPORTING REQUIREMENTS. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) KBK has no further commitment to
lend hereunder, Borrower will, unless KBK shall otherwise consent in
writing, furnish to KBK:
a. FINANCIAL STATEMENTS. Borrower agrees to furnish to KBK (i) within
90 days after the last day of each fiscal year of Borrower a
consolidated statement of income and a consolidated statement of
cash flows of Borrower for such fiscal year, and a consolidated
balance sheet of Borrower as of the last day of such fiscal year,
together with an auditor's report thereon by an independent
certified public accountant, and (ii)
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within 30 days after the last day of each fiscal month of Borrower,
an unaudited consolidated statement of income and statement of cash
flows of Borrower for such fiscal month, and an unaudited
consolidated balance sheet of Borrower as of the last day of such
fiscal month. Borrower represents and warrants that each such
statement of income and statement of cash flows will fairly
present, in all material respects, the results of operations and
cash flows of Borrower for the period set forth therein, and that
each such balance sheet will fairly present, in all material
respects, the financial condition of Borrower as of the date set
forth therein, all in accordance with GAAP, (or, with respect to
unaudited financial statements, in the notes thereto and subject to
year-end review adjustments).
b. INVENTORY MAINTENANCE CERTIFICATE. An Inventory Maintenance
Certificate, in the form attached hereto as Schedule A, signed by an
officer of the Borrower, and an Inventory Maintenance Certificate in
the form attached hereto as Schedule B, from each Guarantor, each to
be delivered to KBK within three (3) business days after the end of
each week.
c. INVENTORY LISTING. A list of each of the Obligor's inventory by
location and type (to include the following: raw materials, work in
process and finished goods) within three (3) business days after the
end of each week of each fiscal year, in form and detail satisfactory
to KBK.
13. EVENTS OF DEFAULT. Each of the following shall constitute an "Event of
Default" under this Agreement:
a. FAILURE TO PAY INDEBTEDNESS. Borrower shall fail to pay as and when
due any part of the principal of, or interest on, the Notes or any
other indebtedness or obligations now or hereafter owing to KBK by
Borrower.
b. NON-PERFORMANCE OF COVENANTS. Any of the Obligors shall breach any
covenant or agreement made herein, in any of the other Loan
Documents, in the Purchase Agreement or in any other agreement now
or hereafter entered into between any of the Obligors and KBK.
c. FALSE REPRESENTATION. Any warranty or representation made herein, in
any of the other Loan Documents or in the Purchase Agreement shall be
false or misleading in any material respect when made.
d. DEFAULT UNDER OTHER LOAN DOCUMENTS. The occurrence of an event of
default under any of the other Loan Documents, the Purchase Agreement
or any other agreement now or hereafter entered into between any of
the Obligors and KBK.
e. UNTRUE FINANCIAL REPORT. Any report, certificate, schedule,
financial statement, profit and loss statement or other statement
furnished by Borrower or any Guarantor, or by any other person on
behalf of Borrower or any Guarantor, to KBK is not true and correct
in any material respect.
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