LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") made this 30th day
of April, 1996 by and between LASALLE NATIONAL BANK, a national banking
association ("BANK"), 000 X. XxXxxxx Xx., Xxxxxxx, XX 00000, and USA Skate Co.,
Inc., a New York corporation, having its principal place of business at 0
Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx 00000 ("BORROWER") [Insert entity
designation(s) and address(es) of principal place of business].
WITNESSETH:
WHEREAS, Borrower may, from time to time, request Loans from Bank, and
the parties wish to provide for the terms and conditions upon which such Loans,
if made by Bank, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by
renewal or extension) hereafter made to Borrower by Bank, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrower, the parties agree as follows:
1. DEFINITIONS
(a) "ACCOUNT," "ACCOUNT DEBTOR," "CHATTEL PAPER," "DOCUMENTS,"
"EQUIPMENT," "GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS," "INVENTORY," AND
"INVESTMENT PROPERTY" shall have the respective meanings assigned to such terms,
as of the date of this Agreement, in the Illinois Uniform Commercial Code.
(b) "AFFILIATE" shall mean any Person directly or indirectly
controlling, controlled by or under common control with Borrower.
(c) "COLLATERAL" shall mean all of the property of Borrower described
in paragraph 4 hereof, together with all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Bank to secure, either
directly or indirectly, repayment of any of the Liabilities.
(d) "ELIGIBLE ACCOUNT" shall mean an Account owing to Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without limiting
Bank's discretion, Bank shall, in general, consider an Account to be an Eligible
Account if it meets, and so long as it continues to meet, the following
requirements:
(i) it is genuine and in all respects what it purports to
be;
(ii) it is owned by Borrower and Borrower has the right to
subject it to a security interest in favor of Bank or assign it to
Bank;
(iii) it arises from (A) the performance of services by
Borrower and such services have been fully performed and acknowledged
and accepted by the Account Debtor thereunder; or (B) the sale or lease
of Goods by Borrower, and such Goods have been completed in accordance
with the Account Debtor's specifications (if any) and delivered to and
accepted by the Account Debtor, such Account Debtor has not refused to
accept and has not returned or offered to return any of the Goods, or
has not refused to accept any of the services, which are the subject of
such Account, and Borrower has possession of, or has delivered to Bank
at Bank's request, shipping and delivery receipts evidencing delivery
of such Goods;
(iv) [intentionally omitted];
(v) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens
and the security interest granted to Bank hereunder;
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(vi) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not subject to
setoff, counterclaim, credit, allowance or adjustment by such Account
Debtor, or to any claim by such Account Debtor denying liability
thereunder in whole or in part;
(vii) it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of applicable
law;
(viii) the Account Debtor thereunder is not a director,
officer, employee or agent of Borrower, or a Subsidiary, Parent or
Affiliate, unless the Account arises out of a transaction permitted by
paragraph 10(l) hereof and is otherwise an Eligible Account;
(ix) it is not an Account with respect to which the Account
Debtor is the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment
of such Account to Bank pursuant to, and in full compliance with, the
Assignment of Claims Act of 1940, as amended;
(x) it is not an account with respect to which the Account
Debtor is located in a state which requires Borrower, as a precondition
to commencing or maintaining an action in the courts of that state,
either to (A) receive a certificate of authority to do business and be
in good standing in such state, or (B) file a notice of business
activities report or similar report with such state's taxing authority,
unless (x) Borrower has taken one of the actions described in clauses
(A) or (B), (y) the failure to take one of the actions described in
either clause (A) or (B) may be cured retroactively by Borrower at its
election or (z) Borrower has proven, to Bank's satisfaction, that it is
exempt from any such requirements under any such state's laws;
(xi) it is an Account which arises out of a sale made in the
ordinary course of Borrower's business;
(xii) the Account Debtor is a resident or citizen of, and is
located within, the United State of America, unless the Accounts owing
by such Account Debtor are the subject of foreign credit insurance
which is in an amount satisfactory to Bank and has been assigned to
Bank in a manner satisfactory to Bank;
(xiii) it is not an Account with respect to which the Account
Debtor's obligation to pay is conditional upon the Account Debtor's
approval of the Goods or services or is otherwise subject to any
repurchase obligation or return right, as with sales made on a
xxxx-and-hold, guaranteed sale, sale on approval, sale or return or
consignment basis;
(xiv) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue or (B)
which violates any of the covenants of Borrower contained in this
Agreement;
(xv) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to Borrower, exceeds a credit limit
determined by Bank in its sole discretion for that Account Debtor
(except that Accounts excluded from Eligible Accounts solely by reason
of this paragraph 1(d)(xv) hereof shall be Eligible Accounts to the
extent of such credit limit); and
(xvi) it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired,
as determined by Bank in its sole discretion.
(e) "ELIGIBLE INVENTORY" shall mean Inventory of Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without limiting
Bank's discretion, Bank shall, in general, consider Inventory to be Eligible
Inventory if it meets, and so long as it continues to meet, the following
requirements:
(i) it is owned by Borrower and Borrower has the right to
subject it to a security interest in favor of Bank;
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(ii) it is located on the premises listed on Exhibit B and
is not in transit;
(iii) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens
and the security interest granted to Bank hereunder;
(iv) if held for sale or lease or furnishing under contracts
of service, it is (except as Bank may otherwise consent in writing) new
and unused and free from defects which would, in Bank's sole
determination, affect its market value;
(v) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Bank has given its prior written
approval and Borrower has caused any such bailee, consignee,
warehouseman, processor or similar party to issue and deliver to Bank,
in form and substance acceptable to Bank, such UCC financing
statements, warehouse receipts, waivers and other documents as Bank
shall require;
(vi) Bank has determined in accordance with Bank's customary
business practices that it is not unacceptable due to age, type,
category or quantity; and
(vii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue
or (B) which violates any of the covenants of Borrower contained in
this Agreement.
(f) "EVENT OF DEFAULT" shall have the meaning specified in paragraph 12
hereof.
(g) "EXHIBIT A" shall mean the exhibit entitled Exhibit A - Special
Provisions which is attached hereto and made a part hereof.
(h) "EXHIBIT B" shall mean the exhibit entitled Exhibit B - Business
and Collateral Locations which is attached hereto and made a part hereof.
(i) "INDEMNIFIED PARTY" shall have the meaning specified in paragraph
14 hereof.
(j) "LIABILITIES" shall mean any and all obligations, liabilities and
indebtedness of Borrower to Bank or to any parent, affiliate or subsidiary of
Bank of any and every kind and nature, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct, indirect,
absolute, contingent or otherwise (including, without limitation, obligations of
performance), whether several, joint or joint and several, and whether arising
or existing under written or oral agreement or by operation of law.
(k) "LOAN" or "LOANS" shall mean all advances made by Bank to Borrower
pursuant to paragraph 2 hereof and all other loans, advances and financial
accommodations made by Bank to or on behalf of Borrower hereunder.
(l) "LOAN LIMIT" shall have the meaning specified in paragraph 1 of
Exhibit A.
(m) "LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings specified
in paragraph 7 hereof.
(n)"OBLIGOR" shall mean Borrower and each Person who is or shall become
primarily or secondarily liable for any of the Liabilities.
(o) "ORIGINAL TERM" shall have the meaning specified in paragraph 9
hereof.
(p) "OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, including, without limitation, guaranties, mortgages, trust deeds,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or
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any other Person and delivered to Bank or to any parent, affiliate or subsidiary
of Bank in connection with the Liabilities or the transactions contemplated
hereby.
(q) "PARENT" shall mean any Person now or at any time or times
hereafter owning or controlling (alone or with any other Person) at least a
majority of the issued and outstanding stock of Borrower or any Subsidiary.
(r) "PERMITTED LIENS" shall mean (i) statutory liens of landlord's,
carriers, warehousemen, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder, (ii) liens or security interests in favor of
Bank, (iii) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on Borrower's ability to use such
real property for its intended purpose in connection with Borrower's business,
and (iv) liens specifically permitted by Bank in writing.
(s) "PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.
(t) "RENEWAL TERM" shall have the meaning specified in paragraph 9
hereof.
(u) "SUBSIDIARY" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower or by any partnership or joint
venture of which more than fifty percent (50%) of the outstanding equity
interests are at the time, directly or indirectly, owned by Borrower.
(v) "TANGIBLE NET WORTH" shall have the meaning specified in paragraph
11(o) hereof.
2. LOANS.
Subject to the terms and conditions of this Agreement (including
Exhibit A) and the Other Agreements, during the Original Term and any Renewal
Term, Bank may, in its sole discretion, make such Loans to Borrower as Borrower
shall from time to time request. The aggregate unpaid principal of all Loans
outstanding at any one time shall not exceed the Loan Limit set forth in Exhibit
A and shall bear interest at the rates set forth in Exhibit A. ALL LOANS SHALL
BE REPAID BY BORROWER UPON DEMAND BY BANK. Prior to Bank making such demand,
Loans shall be repaid as provided elsewhere in this Agreement. If at any time
the outstanding principal balance of the Loans exceeds the Loan Limit, or any
portion of the Loans exceeds any applicable sublimit set forth in Exhibit A,
Borrower shall immediately, and without the necessity of a demand by Bank, pay
to Bank such amount as may be necessary to eliminate such excess and Bank shall
apply such payment to the Liabilities in such order as Bank shall determine in
its sole discretion. Borrower hereby authorizes Bank, in its sole discretion, to
charge any of Borrower's accounts to make any payments of principal or interest
required by this Agreement. All Loans shall, in Bank's sole discretion, be
evidenced by one or more promissory notes in form and substance satisfactory to
Bank. However, if such Loans are not so evidenced, such Loans may be evidenced
solely by entries upon the books and records maintained by Bank.
3. FEES AND CHARGES.
Borrower shall pay to Bank, in addition to all other amounts payable
hereunder, the fees and charges set forth in Exhibit A. It is the intent of the
parties that the rate of interest and the other charges to Borrower under this
Agreement shall be lawful; therefore, if for any reason the interest or other
charges payable under this Agreement are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Bank may
lawfully charge Borrower, then the obligation to pay interest and other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to Borrower.
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4. GRANT OF SECURITY INTEREST TO BANK.
As security for the payment of all Loans now or in the future made by
Bank to Borrower hereunder and for the payment or other satisfaction of all
other Liabilities, Borrower hereby assigns to Bank and grants to Bank a
continuing security interest in the following property of Borrower, whether now
or hereafter owned, existing, acquired or arising and wherever now or hereafter
located: (a) all Accounts (whether or not Eligible Accounts) and all Goods whose
sale, lease or other disposition by Borrower has given rise to Accounts and have
been returned to or repossessed or stopped in transit by Borrower; (b) all
Chattel Paper, Instruments, Investment Property, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, tradenames, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to indemnification;
(c) all Inventory (whether or not Eligible Inventory); (d) all Goods (other than
Inventory), including, without limitation, Equipment, vehicles and fixtures; (e)
all deposits and cash and any other property of Borrower now or hereafter in the
possession, custody or control of Bank or any agent or any parent, affiliate or
subsidiary of Bank or any participant with Bank in the Loans for any purpose
(whether for safekeeping, deposit, collection, custody, pledge, transmission or
otherwise); and (f) all additions and accessions to, substitutions for, and
replacements, products and proceeds of the foregoing property, including,
without limitation, proceeds of all insurance policies insuring the foregoing
property, and all of Borrower's books and records relating to any of the
foregoing and to Borrower's business.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN.
Borrower shall, at Bank's request, at any time and from time to time,
execute and deliver to Bank such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed necessary or desirable by Bank) and do such other acts
and things as Bank may deem necessary or desirable in order to establish and
maintain a valid, attached and perfected security interest in the Collateral in
favor of Bank (free and clear of all other liens, claims and rights of third
parties whatsoever, whether voluntarily or involuntarily created, except
Permitted Liens) to secure payment of the Liabilities, and in order to
facilitate the collection of the Collateral. Borrower irrevocably hereby makes,
constitutes and appoints Bank (and all Persons designated by Bank for that
purpose) as Borrower's true and lawful attorney and agent-in-fact to execute
such financing statements, documents and other agreements and instruments and do
such other acts and things as may be necessary to preserve and perfect Bank's
security interest in the Collateral. Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement shall be sufficient as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Until an "Event of Default" (as hereinafter defined) has occurred,
Borrower shall have the right, except as otherwise provided in this Agreement,
in the ordinary course of Borrower's business, to (a) sell, lease or furnish
under contracts of service any of Borrower's Inventory normally held by Borrower
for any such purpose, and (b) use and consume any raw materials, work in process
or other materials normally held by Borrower for such purpose; provided,
however, that a sale in the ordinary course of business shall not include any
transfer or sale in satisfaction, partial or complete, of a debt owed by
Borrower.
7. COLLECTIONS.
(a) Borrower shall direct all of its Account Debtors to make all
payments on the Accounts directly to a post office box (the "LOCK BOX")
designated by, and under the exclusive control of, Bank or another financial
institution acceptable to Bank. Borrower shall establish an account (the "LOCK
BOX ACCOUNT") in Borrower's name with Bank or such other financial institution
acceptable to Bank, into which all payments received in the Lock Box shall be
deposited, and into which Borrower will immediately deposit all payments made
for Inventory or services and received by Borrower in the identical form in
which such payments were made, whether by cash or check. If Borrower, any
Affiliate or Subsidiary, or any shareholder, officer, director, employee or
agent of Borrower or any Affiliate or Subsidiary, or any other Person acting for
or in concert with Borrower shall receive any monies, checks, notes,
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drafts or other payments relating to or as proceeds of Accounts or other
Collateral, Borrower and each such Person shall receive all such items in trust
for, and as the sole and exclusive property of, Bank and, immediately upon
receipt thereof, shall remit the same (or cause the same to be remitted) in kind
to the Lock Box Account. If the Lock Box Account is not established with Bank,
the financial institution with which the Lock Box Account is established shall
acknowledge and agree, in a manner satisfactory to Bank, that the amounts on
deposit in such Lock Box Account are the sole and exclusive property of Bank,
that such financial institution has no right to setoff against the Lock Box
Account or against any other account maintained by such financial institution
into which the contents of the Lock Box Account are transferred, and that such
financial institution shall wire, or otherwise transfer in immediately available
funds in a manner satisfactory to Bank, funds deposited in the Lock Box Account
on a daily basis as such funds are collected. Borrower agrees that all payments
made to such Lock Box Account or otherwise received by Bank, whether in respect
of the Accounts or as proceeds of other Collateral or otherwise, will be applied
on account of the Liabilities in accordance with the terms of this Agreement. If
the Lock Box Account is established with Bank, Borrower agrees to pay all fees,
costs and expenses which Bank incurs in connection with opening and maintaining
the Lock Box Account and depositing for collection by Bank any check or other
item of payment received by Bank on account of the Liabilities. All of such
fees, costs and expenses shall constitute Loans hereunder, shall be payable to
Bank by Borrower upon demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder. All checks, drafts, instruments
and other items of payment or proceeds of Collateral shall be endorsed by
Borrower to Bank, and, if that endorsement of any such item shall not be made
for any reason, Bank is hereby irrevocably authorized to endorse the same on
Borrower's behalf. For the purpose of this paragraph, Borrower irrevocably
hereby makes, constitutes and appoints Bank (and all Persons designated by Bank
for that purpose) as Borrower's true and lawful attorney and agent-in-fact (i)
to endorse Borrower's name upon said items of payment and/or proceeds of
Collateral and upon any Chattel Paper, document, instrument, invoice or similar
document or agreement relating to any Account of Borrower or goods pertaining
thereto; (ii) to take control in any manner of any item of payment or proceeds
thereof; and (iii) to have access to any lock box or postal box into which any
of Borrower's mail is deposited, and open and process all mail addressed to
Borrower and deposited therein.
(b) Bank may, at any time and from time to time, whether before or
after notification to any Account Debtor and whether before or after the
maturity of any of the Liabilities, (i) enforce collection of any of Borrower's
Accounts or contract rights by suit or otherwise; (ii) exercise all of
Borrower's rights and remedies with respect to proceedings brought to collect
any Accounts; (iii) surrender, release or exchange all or any part of any
Accounts, or compromise or extend or renew for any period (whether or not longer
than the original period) any indebtedness thereunder; (iv) sell or assign any
Account of Borrower upon such terms, for such amount and at such time or times
as Bank deems advisable; (v) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against any Account Debtor; and
(vi) do all other acts and things which are necessary, in Bank's sole
discretion, to fulfill Borrower's obligations under this Agreement and to allow
Bank to collect the Accounts. In addition to any other provision hereof, Bank
may at any time, after the occurrence of an Event of Default, at Borrower's
expense, notify any parties obligated on any of the Accounts to make payment
directly to Bank of any amounts due or to become due thereunder.
(c) Bank shall, within two (2) business days after receipt by Bank at
its office in Chicago, Illinois of cash or other immediately available funds
from collections of items of payment and proceeds of any Collateral, apply the
whole or any part of such collections or proceeds against the Liabilities in
such order as Bank shall determine in its sole discretion.
(d) Bank, in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Bank in respect thereof and all costs, fees and
expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Bank shall constitute
Loans, payable by Borrower to Bank on demand and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
(e) Immediately upon Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document, including, without
limitation, any Chattel Paper, Borrower shall deliver the original thereof to
Bank together with an appropriate endorsement or other specific evidence of
assignment thereof to Bank (in form and substance acceptable to Bank). If an
endorsement or assignment of any such items shall not be made for any reason,
Bank is hereby irrevocably authorized, as Borrower's attorney and agent-in-fact,
to endorse or assign the same on Borrower's behalf.
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8. SCHEDULES AND REPORTS.
(a) Within ten (10) days after the close of each calendar month, and at
such other times as may be requested by Bank from time to time hereafter,
Borrower shall deliver to Bank (i) a schedule identifying each Eligible Account
together with copies of the invoices when requested by Bank (with evidence of
shipment attached) pertaining to each such Eligible Account, for the month (or
other applicable period) immediately preceding; (ii) such additional schedules,
certificates, reports and information with respect to the Collateral as Bank may
from time to time require; and (iii) an assignment of any or all items of
Collateral to Bank. Bank, through its officers, employees or agents, shall have
the right, at any time and from time to time in Bank's name, in the name of a
nominee of Bank or in Borrower's name, to verify the validity, amount or any
other matter relating to any of Borrower's Accounts, by mail, telephone,
telegraph or otherwise. Borrower shall reimburse Bank, on demand, for all costs,
fees and expenses incurred by Bank in this regard.
(b) Without limiting the generality of the foregoing, Borrower shall
deliver to Bank, at least once a month (or more frequently when requested by
Bank), a report with respect to Borrower's Inventory. Borrower shall immediately
notify Bank of any event causing loss or depreciation in value of Borrower's
Inventory (other than normal depreciation occurring in the ordinary course of
business).
(c) All schedules, certificates, reports, and assignments and other
items delivered by Borrower to Bank hereunder shall be executed by an authorized
representative of Borrower and shall be in such form and contain such
information as Bank shall specify.
9. TERMINATION.
This Agreement shall be in effect from the date hereof until May 31,
1999 (the "ORIGINAL TERM") and shall automatically renew itself from year to
year thereafter (each such one-year renewal being referred to herein as a
"RENEWAL TERM") unless (a) Bank makes demand for repayment prior to the end of
the Original Term or the then current Renewal Term; (b) the due date of the
Liabilities is accelerated pursuant to paragraph 13 hereof; or (c) Borrower
elects to terminate this Agreement at the end of the Original Term or at the end
of any Renewal Term by giving Bank written notice of such election at least
ninety (90) days prior to the end of the Original Term or the then current
Renewal Term and by paying all of the Liabilities in full on the last day of
such term. If one or more of the events specified in clauses (a), (b) and (c)
occurs, this Agreement shall terminate on the date thereafter that the
Liabilities are paid in full, provided, however, that the security interests and
liens created under this Agreement and the Other Agreements shall survive such
termination until the payment of the Liabilities has become indefeasible. At
such time as Borrower has repaid all of the Liabilities and this Agreement has
terminated, Borrower shall deliver to Bank a release, in form and substance
satisfactory to Bank, of all obligations and liabilities of Bank and its
officers, directors, employees, agents, parents, subsidiaries and affiliates to
Borrower, and if Borrower is obtaining new financing from another lender,
Borrower shall deliver such lender's indemnification of Bank, in form and
substance satisfactory to Bank, for checks which Bank has credited to Borrower's
account, but which subsequently are dishonored for any reason. If, during the
term of this Agreement, Borrower prepays all or any portion of the Liabilities,
and in connection therewith, either (a) permits any security agreement,
financing statement or analogous instrument to be executed or filed with respect
to the Collateral for the benefit of someone other than Bank, or (b) creates,
incurs or assumes any liability for borrowed money (except for borrowings from
Bank and borrowings permitted pursuant to paragraph 10(q) hereof), Borrower
agrees to pay to Bank, as a prepayment fee, in addition to the payment of all
other Liabilities, an amount equal to the product of (i) fifty percent (50%) of
the average monthly interest earned by Bank on the Loans made hereunder
preceding the date of prepayment, multiplied by (ii) the number of full and
partial months remaining from the date of prepayment to the end of the Original
Term or the then current Renewal Term. At such time as Borrower has repaid all
of the Liabilities and this Agreement has terminated, Bank shall deliver to
Borrower such releases and termination statements as Borrower may reasonably
request in order to terminate the perfected status of Bank's liens and security
interests upon the Collateral.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Borrower hereby represents, warrants and covenants that:
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(a) the financial statements delivered or to be delivered by Borrower
to Bank at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect the financial condition of Borrower, and there has
been no adverse change in the financial condition, the operations or any other
status of Borrower since the date of the financial statements delivered to Bank
most recently prior to the date of this Agreement;
(b) the office where Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of Collateral
and post office boxes are as set forth in Exhibit B; Borrower shall promptly
(but in no event less than ten (10) days prior thereto) advise Bank in writing
of the proposed opening of any new place of business, the closing of any
existing place of business, any change in the location of Borrower's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of Borrower.
(c) the Collateral, including, without limitation, the Equipment
(except any part thereof which prior to the date of this Agreement Borrower
shall have advised Bank in writing consists of Collateral normally used in more
than one state) is and shall be kept, or, in the case of vehicles, based, only
at the addresses set forth on the first page of this Agreement or on Exhibit B,
and at other locations within the continental United States of which Bank has
been advised by Borrower in writing;
(d) if any of the Collateral consists of Goods of a type normally used
in more than one state, whether or not actually so used, Borrower shall
immediately give written notice to Bank of any use of any such Goods in any
state other than a state in which Borrower has previously advised Bank such
Goods shall be used, and such Goods shall not, unless Bank shall otherwise
consent in writing, be used outside of the continental United States;
(e) no security agreement, financing statement or analogous instrument
exists or shall exist with respect to any of the Collateral other than any
security agreement, financing statement or analogous instrument evidencing
security interests in favor of Bank or evidencing Permitted Liens;
(f) each Account or item of Inventory which Borrower shall, expressly
or by implication, request Bank to classify as an Eligible Account or as
Eligible Inventory, respectively, shall, as of the time when such request is
made, conform in all respects to the requirements of such classification as set
forth in the respective definitions of "Eligible Account" and "Eligible
Inventory" as set forth herein and as otherwise established by Bank from time to
time, and Borrower shall promptly notify Bank in writing if any such Eligible
Account or Eligible Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Original Term or any
Renewal Term be the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Borrower, and Borrower's execution, delivery and
performance of this Agreement and the Other Agreements shall not result in the
imposition of any lien or other encumbrance upon any of Borrower's property
under any existing indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument by which Borrower or any of its property may be
bound or affected;
(i) there are no actions or proceedings which are pending or threatened
against Borrower which might result in any material adverse change in its
financial condition or materially adversely affect the Collateral and Borrower
shall, promptly upon becoming aware of any such pending or threatened action or
proceeding, give written notice thereof to Bank;
(j) Borrower has obtained all licenses, authorizations, approvals and
permits, the lack of which would have a material adverse effect on the operation
of its business, and Borrower is and shall remain in compliance in all material
respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statutes,
9207_1
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orders, regulations, rules and ordinances relating to taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety or environmental matters), the
failure to comply with which would have a material adverse effect on its
business, property, assets, operations or condition, financial or otherwise;
(k) all written information now, heretofore or hereafter furnished by
Borrower to Bank is and shall be true and correct as of the date with respect to
which such information was or is furnished;
(l) Borrower is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Liabilities remain outstanding) be owned by any Affiliate;
provided, however, that Borrower may enter into transactions with Affiliates in
the ordinary course of business pursuant to terms that are no less favorable to
Borrower than the terms upon which such transfers or transactions would have
been made had they been made to or with a Person that is not an Affiliate and,
in connection therewith, may transfer cash or property to Affiliates for fair
value;
(m) Borrower's name has always been as set forth on the first page of
this Agreement and Borrower uses no tradenames or division names in the
operation of its business, except as otherwise disclosed in writing to Bank;
Borrower shall notify Bank in writing within ten (10) days of the change of its
name or the use of any tradenames or division names not previously disclosed to
Bank in writing;
(n) with respect to Borrower's Equipment: (i) Borrower has good and
indefeasible and merchantable title to and ownership of all Equipment,
including, without limitation, the Equipment described or listed on the schedule
of Equipment delivered to Bank concurrently with this Agreement; (ii) Borrower
shall keep and maintain the Equipment in good operating condition and repair and
shall make all necessary replacements thereof and renewals thereto so that the
value and operating efficiency thereof shall at all times be preserved and
maintained; (iii) Borrower shall not permit any such items to become a fixture
to real estate or an accession to other personal property; and (iv) Borrower,
immediately on demand by Bank, shall deliver to Bank any and all evidence of
ownership of including, without limitation, certificates of title and
applications of title to, any of the Equipment;
(o) this Agreement and the Other Agreements to which Borrower is a
party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms;
(p) Borrower is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(q) Borrower is not now obligated, nor shall it create, incur, assume
or become obligated (directly or indirectly), for any loans or other
indebtedness for borrowed money other than the Loans, except that Borrower may
(i) borrow money from a Person other than Bank on an unsecured and subordinated
basis if a subordination agreement in favor of Bank and in form and substance
satisfactory to Bank is executed and delivered to Bank relative thereto; (ii)
maintain any present indebtedness to any Person which has been disclosed to Bank
in writing and consented to in writing by Bank; and (iii) incur unsecured
indebtedness to trade creditors in the ordinary course of Borrower's business;
(r) Borrower does not own any margin securities, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation G or Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed in writing to Bank, Borrower has no
Parents, Subsidiaries or divisions, nor is the Borrower engaged in any joint
venture or partnership with any other Person;
9207_1
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(t) if Borrower is a corporation or partnership, Borrower is duly
organized and in good standing in its state of organization and Borrower is duly
qualified and in good standing in all states where the nature and extent of the
business transacted by it or the ownership of its assets makes such
qualification necessary;
(u) Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Borrower
know of any dispute regarding any contract, lease or commitment which is
material to the continued financial success of Borrower;
(v) there are no controversies pending or threatened between Borrower
and any of its employees, other than employee grievances arising in the ordinary
course of business which are not, in the aggregate, material to the continued
financial success of Borrower, and Borrower is in compliance in all material
respects with all federal and state laws respecting employment and employment
terms, conditions and practices; and
(w) Borrower possesses, and shall continue to possess, adequate
licensees, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it.
Borrower represents, warrants and covenants to Bank that all
representations, warranties and covenants of Borrower contained in this
Agreement (whether appearing in paragraphs 10 or 11 hereof or elsewhere) shall
be true at the time of Borrower's execution of this Agreement, shall survive the
execution, delivery and acceptance hereof by the parties hereto and the closing
of the transactions described herein or related hereto, shall remain true until
the repayment in full of all of the Liabilities and termination of this
Agreement, and shall be remade by Borrower at the time each Loan is made
pursuant to this Agreement.
11. ADDITIONAL COVENANTS OF BORROWER.
Until payment or satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrower obtains Bank's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit B;
(b) Borrower agrees to deliver to Bank the following financial
information, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied: (i) no later than twenty
(20) days after each calendar month, copies of internally prepared financial
statements, including, without limitation, balance sheets and statements of
income, retained earnings and cash flow of Borrower, certified by the Chief
Financial Officer of Borrower; (ii) no later than forty-five (45) days after the
end of each of the first three quarters of Borrower's fiscal year a balance
sheet, operating statement and reconciliation of surplus of Borrower, which
quarterly financial statements may be unaudited but shall be certified by the
Chief Financial Officer of Borrower; and (iii) no later than ninety (90) days
after the end of each of Borrower's fiscal years, annual financial statements
certified by independent certified public accountants selected by Borrower and
reasonably satisfactory to Bank, which financial statements shall be accompanied
by a letter from such accountants acknowledging that they are aware that a
primary intent of Borrower in obtaining such financial statements is to
influence Bank and that Bank is relying upon such financial statements in
connection with the exercise of its right hereunder;
(c) Borrower shall promptly advise Bank in writing of any material
adverse change in the business, assets or condition, financial or otherwise, of
Borrower, the occurrence of any Event of Default hereunder or the occurrence of
any event which, if uncured, will become an Event of Default hereunder after
notice of lapse of time (or both);
9207_1
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(d) Bank, or any Persons designated by it, shall have the right, at any
time, to call at Borrower's places of business at any reasonable times, and,
without hindrance or delay, to inspect the Collateral and to inspect, audit,
check and make extracts from Borrower's books, records, journals, orders,
receipts and any correspondence and other data relating to Borrower's business,
the Collateral or any transactions between the parties hereto, and shall have
the right to make such verification concerning Borrower's business as Bank may
consider reasonable under the circumstances. Borrower shall furnish to Bank such
information relevant to Bank's rights under this Agreement as Bank shall at any
time and from time to time request. Borrower authorizes Bank to discuss the
affairs, finances and business of Borrower with any officers, employees or
directors of Borrower or with any Affiliates or the officers, employees or
directors of any Affiliate, and to discuss the financial condition of Borrower
with Borrower's independent public accountants. Any such discussions shall be
without liability to Bank or to Borrower's independent public accountants.
Borrower shall pay to Bank all customary fees and out-of-pocket expenses
incurred by Bank in the exercise of its rights hereunder, and all of such fees
and expenses shall constitute Loans hereunder, payable on demand and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder;
(e) Borrower shall:
(i) keep the Collateral properly housed and shall keep the
Collateral insured for the full insurable value thereof against loss or
damage by fire, theft, explosion, sprinklers, collision (in the case of
motor vehicles) and such other risks as are customarily insured against
by Persons engaged in businesses similar to that of Borrower with such
companies, in such amounts and under policies in such form as shall be
satisfactory to Bank. Original (or certified) copies of such policies
of insurance have been or shall be delivered to Bank within fifteen
(15) days after the date hereof, together with evidence of payment of
all premiums therefor, and shall contain an endorsement, in form and
substance acceptable to Bank, showing loss under such insurance
policies payable to Bank. Such endorsement, or an independent
instrument furnished to Bank, shall provide that the insurance company
shall give Bank at least thirty (30) days written notice before any
such policy of insurance is altered or cancelled and that no act,
whether willful or negligent, or default of Borrower or any other
Person shall affect the right of Bank to recover under such policy of
insurance in case of loss or damage. Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds payable
thereunder directly to Bank. Borrower irrevocably, makes, constitutes
and appoints Bank (and all officers, employees or agents designated by
Bank) as Borrower's true and lawful attorney (and agent-in-fact) for
the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of Borrower on any check,
draft, instrument or other item of payment for the proceeds of such
policies of insurance and making all determinations and decisions with
respect to such policies of insurance; and
(ii) maintain, at its expense, such public liability and third
party property damage insurance as is customary for Persons engaged in
businesses similar to that of Borrower with such companies and in such
amounts, with such deductibles and under policies in such form as shall
be satisfactory to Bank and original (or certified) copies of such
policies have been or shall be delivered to Bank within fifteen (15)
days after the date hereof, together with evidence of payment of all
premiums therefor; each such policy shall contain an endorsement
showing Bank as additional insured thereunder and providing that the
insurance company shall give Bank at least thirty (30) days written
notice before any such policy shall be altered or cancelled.
If Borrower at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
in whole or in part relating thereto, then Bank, without waiving or releasing
any obligation or default by Borrower hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as Bank deems
advisable. All sums disbursed by Bank in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall constitute Loans hereunder and
shall be payable on demand by Borrower to Bank and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
(f) Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; shall keep the Collateral in good condition, repair and order;
shall permit
9207_1
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Bank to examine any of the Collateral at any time and wherever the Collateral
may be located; shall not permit the Collateral, or any part thereof, to be
levied upon under execution, attachment, distraint or other legal process; shall
not sell, lease, grant a security interest in or otherwise dispose of any of the
Collateral except as expressly permitted by this Agreement; and shall not
secrete or abandon any of the Collateral, or remove or permit removal of any of
the Collateral from any of the locations listed on Exhibit B or in any written
notice to Bank pursuant to paragraph 10(b) hereof, except for the removal of
Inventory sold in the ordinary course of Borrower's business as permitted
herein;
(g) All monies and other property obtained by Borrower from Bank
pursuant to this Agreement will be used solely for business purposes of
Borrower;
(h) Borrower shall, at the request of Bank, indicate on its records
concerning the Collateral a notation, in form satisfactory to Bank, of the
security interest of Bank hereunder, and Borrower shall not maintain duplicates
or copies of such records at any address other than Borrower's principal place
of business set forth on the first page of this Agreement;
(i) Borrower shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements, (ii) the contesting of
any such payment does not give rise to a lien for taxes, (iii) Borrower keeps on
deposit with Bank (such deposit to be held without interest) an amount of money
which, in the sole judgment of Bank, is sufficient to pay such taxes and any
interest or penalties that may accrue thereon, and (iv) if Borrower fails to
prosecute such contest with reasonable diligence, Bank may apply the money so
deposited in payment of such taxes. If Borrower fails to pay any such taxes and
in the absence of any such contest by Borrower, Bank may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by Bank shall
constitute Loans hereunder, shall be payable by Borrower to Bank on demand, and,
until paid, shall bear interest at the highest rate then applicable to Loans
hereunder;
(j) Borrower shall not assume, guarantee or endorse, or otherwise
become liable in connection with, the obligations of any Person, except by
endorsement of instruments for deposit or collection or similar transactions in
the ordinary course of business;
(k) Borrower shall not enter into any merger or consolidation, or sell,
lease or otherwise dispose of all or substantially all of its assets, or enter
into any transaction outside the ordinary course of Borrower's business,
including, without limitation, any purchase, redemption or retirement of any
shares of any class of its stock, and any issuance of any shares of, or warrants
or other rights to receive or purchase any shares of, any class of its stock;
(l) Borrower shall not declare or pay any dividend or other
distribution (whether in cash or in kind) on any class of its stock (if Borrower
is a corporation) or on account of any equity interest in Borrower (if Borrower
is a partnership or other type of entity);
(m) Borrower shall not purchase or otherwise acquire, or contract to
purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States;
(n) Borrower shall not amend its organizational documents or change
its fiscal year;
(o) Borrower's tangible net worth shall not at any time be less than
that shown on the financial statement most recently presented to Bank prior to
the date hereof; "TANGIBLE NET WORTH" being defined for purposes of this
paragraph as Borrower's shareholders' equity (including retained earnings) less
the book value of all intangible assets plus the amount of any LIFO reserve, all
as determined under generally accepted accounting principles applied on a basis
consistent with the aforesaid financial statement; and
9207_1
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(p) Borrower shall reimburse Bank for all costs and expenses,
including, without limitation, legal expenses and reasonable attorneys' fees,
incurred by Bank in connection with documentation and consummation of this
transaction and any other transactions between Borrower and Bank, including,
without limitation, Uniform Commercial Code and other public record searches,
lien filings, Federal Express or similar express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs, and in seeking to collect, protect or enforce any rights in or to the
Collateral or incurred by Bank in seeking to collect any Liabilities and to
administer and enforce any of Bank's rights under this Agreement. Borrower shall
also pay all normal service charges with respect to all accounts maintained by
Borrower with Bank and for any additional services requested by Borrower from
Bank. All such costs, expenses and charges shall constitute Loans hereunder,
shall be payable by Borrower to Bank on demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
12. DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "EVENT OF DEFAULT" by Borrower hereunder:
(a) the failure of any Obligor to pay when due, declared due, or
demanded by Bank, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements; provided that any such failure by
Borrower under this Agreement shall not constitute an Event of Default hereunder
until the fifth (5th) day following written notice thereof from Bank to
Borrower;
(c) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
any other agreement with any Person if such failure may have a material adverse
effect on such Obligor's business property, assets, operations or condition,
financial or otherwise;
(d) the making or furnishing by any Obligor to Bank of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and Bank, which is
untrue or misleading in any respect;
(e) the loss, theft, damage or destruction of, or (except as permitted
hereby) sale, lease or furnishing under a contract of service of, any of the
Collateral;
(f) the creation (whether voluntary or involuntary) of, or any attempt
to create, any lien or other encumbrance upon any of the Collateral, other than
the Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof;
(g) the commencement of any proceedings in bankruptcy by or against any
Obligor or for the liquidation or reorganization of any Obligor, or alleging
that such Obligor is insolvent or unable to pay its debts as they mature, or for
the readjustment or arrangement of any Obligor's debts, whether under the United
States Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any Obligor;
provided, however, that if such commencement of proceedings against such Obligor
is involuntary, such action shall not constitute an Event of Default unless such
proceedings are not dismissed within thirty (30) days after the commencement of
such proceedings;
(h) the appointment of a receiver or trustee for any Obligor, for any
of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within thirty (30) days after the
commencement of such proceedings;
9207_1
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(i) the entry of any judgment or order against any Obligor which
remains unsatisfied or undischarged and in effect for thirty (30) days after
such entry without a stay of enforcement or execution;
(j) the death of any Obligor who is a natural Person, or of any partner
of any Obligor which is a partnership, or of any natural Person who owns a
material interest in a corporate Obligor, or the dissolution of any Obligor
which is a partnership or corporation;
(k) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Bank pursuant to which such Person has guaranteed to Bank the
payment of all or any of the Liabilities or has granted Bank a security interest
in or lien upon some or all of such Person's real and/or personal property to
secure the payment of all or any of the Liabilities;
(l) the institution in any court of a criminal proceeding against any
Obligor, or the indictment of any Obligor for any crime, other than any
misdemeanor not punishable by incarceration; and
(m) Bank shall reasonably feel insecure for any material reason
whatsoever, including, without limitation, fear of removal or waste of the
Collateral, or any part thereof.
13. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in paragraph
12(g) hereof, all of Borrower's Liabilities shall immediately and automatically
become due and payable, without notice of any kind. Upon the occurrence of any
other Event of Default, all Liabilities may, at the option of Bank, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.
(b) Upon the occurrence of an Event of Default, Bank may exercise from
time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of Bank's rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law. In particular, but not by way of
limitation of the foregoing, Bank may, without notice, demand or legal process
of any kind, take possession of any or all of the Collateral (in addition to
Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found, and may enter
into any of Borrower's premises where any of the Collateral may be, and search
for, take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Bank shall have the right to
store the same at any of Borrower's premises without cost to Bank. At Bank's
request, Borrower shall, at Borrower's expense, assemble the Collateral and make
it available to Bank at one or more places to be designated by Bank and
reasonably convenient to Bank and Borrower. Borrower recognizes that if Borrower
fails to perform, observe or discharge any of its Liabilities under this
Agreement or the Other Agreements, no remedy at law will provide adequate relief
to Bank, and agrees that Bank shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages. Any notification of intended disposition of any of the Collateral
required by law will be deemed reasonably and properly given if given at least
five (5) calendar days before such disposition. Any proceeds of any disposition
by Bank of any of the Collateral may be applied by Bank to the payment of
expenses in connection with the Collateral, including, without limitation, legal
expenses and reasonable attorneys' fees, and any balance of such proceeds may be
applied by Bank toward the payment of such of the Liabilities, and in such order
of application, as Bank may from time to time elect.
14. INDEMNIFICATION.
Borrower agrees to defend (with counsel satisfactory to Bank), protect,
indemnify and hold harmless Bank, each affiliate or subsidiary of Bank, and each
of their respective officers, directors, employees, attorneys and agents (each
an "INDEMNIFIED PARTY") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each
9207_1
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Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws and regulations, including, without
limitation, securities, environmental and commercial laws and regulations, under
common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any Other Agreement, or any act,
event or transaction related or attendant thereto, the making and the management
of the Loans or any letters of credit or the use or intended use of the proceeds
of the Loans or any letters of credit; provided, however, that Borrower shall
not have any obligation hereunder to any Indemnified Party with respect to
matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnified Party. To the extent that the undertaking to indemnify set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Borrower shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage,
penalty, cost or expense covered by this Indemnity shall be paid to each
Indemnified Party on demand, and, failing prompt payment, shall, together with
interest thereon at the highest rate then applicable to Loans hereunder from the
date incurred by each Indemnified Party until paid by Borrower, be added to the
Liabilities of Borrower and be secured by the Collateral. The provisions of this
paragraph 14 shall survive the satisfaction and payment of the Other Liabilities
and the termination of this Agreement.
15. NOTICE.
All written notices and other written communications with respect to
this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Bank shall be sent to it at
LaSalle and Xxxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Asset Based
Lending Division, and in the case of Borrower shall be sent to it at its
principal place of business set forth on the first page of this Agreement.
16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
This Agreement and the Other Agreements are submitted by Borrower to
Bank for Bank's acceptance or rejection at Bank's principal place of business as
an offer by Borrower to borrow monies from Bank now and from time to time
hereafter, and shall not be binding upon Bank or become effective until accepted
by Bank, in writing, at said place of business. If so accepted by Bank, this
Agreement and the Other Agreements shall be deemed to have been made at said
place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS,
INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER
CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL,
WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION.
If any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
To induce Bank to accept this Agreement, Borrower irrevocably agrees
that, subject to Bank's sole and absolute election, ALL ACTIONS OR PROCEEDINGS
IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID CITY AND STATE. Borrower hereby irrevocably appoints and
designates the Secretary of State of Illinois, whose address is Springfield,
Illinois (or any other person having and maintaining a place of business in such
state whom Borrower may from time to time hereafter designate upon ten (10) days
written notice to Bank and who Bank has agreed in its sole discretion in writing
is satisfactory and who has executed an agreement in form and substance
satisfactory to Bank agreeing to act as such attorney and agent), as Borrower's
true and lawful attorney and duly authorized agent for acceptance of service of
legal process. Borrower agrees that service of such process upon such person
shall constitute personal service of such process upon Borrower. BORROWER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
9207_1
-15-
17. MODIFICATION AND BENEFIT OF AGREEMENT.
This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Bank. Borrower
may not sell, assign or transfer this Agreement, or the Other Agreements or any
portion thereof, including, without limitation, Borrower's rights, titles,
interest, remedies, powers or duties thereunder. Borrower hereby consents to
Bank's sale, assignment, transfer or other disposition, at any time and from
time to time hereafter, of this Agreement, or the Other Agreements, or of any
portion thereof, or participations therein, including, without limitation,
Bank's rights, titles, interest, remedies, powers and/or duties and agrees that
it shall execute and deliver such documents as Bank may request in connection
with any such sale, assignment, transfer or other disposition.
18. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of this Agreement.
19. POWER OF ATTORNEY.
Borrower acknowledges and agrees that its appointment of Bank as its
attorney and agent-in-fact for the purposes specified in this Agreement is an
appointment coupled with an interest and shall be irrevocable until all of the
Liabilities are paid in full and this Agreement is terminated.
20. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) BORROWER HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE
OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT
BY BORROWER OR BANK OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF
OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND BANK. IN NO EVENT SHALL BANK
BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(c) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY BANK OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(d) Bank's failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement or any of the Other
Agreements shall not waive, affect or diminish any right of Bank thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Bank of an Event of Default under this Agreement or any default under any of the
Other Agreements shall not suspend, waive or affect any other Event of Default
under this Agreement or any other default under any of the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different kind or character. No delay on the part of Bank in the exercise of any
right or remedy under this Agreement or any Other Agreement shall preclude other
or further exercise thereof or the exercise of any right or remedy. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or any of the Other Agreements and no Event of
Default under this Agreement or default under any of the Other Agreements shall
be deemed to have been suspended or waived by Bank unless such suspension or
waiver is in writing, signed by a duly authorized officer of Bank and directed
to Borrower specifying such suspension or waiver.
9207_1
-16-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 30th day of Xxxxx, 0000.
USA Skate Co., Inc. LASALLE NATIONAL BANK
By /s/ Xxxxxxx X. Xxxxxxx By /s/ Xxxxxx Xxxxxx
----------------------------- --------------------------
Title President Title Sr. VP
-------------------------- -----------------------
and
By /s/ Xxxxx Xxxxxxxxx
-----------------------------
Title CFO
--------------------------
9207_1
-17-
EXHIBIT A - SPECIAL PROVISIONS
------------------------------
Attached to and made a part of that certain Loan and Security Agreement of even
date herewith between USA SKATE CO., INC., A NEW YORK CORPORATION ("Borrower")
and LASALLE NATIONAL BANK ("Bank").
CREDIT TERMS
------------
(1) LOAN LIMIT:
Bank may, in its sole discretion, advance an amount up to the sum of
the following sublimits (the "Loan Limit"):
(a) Up to seventy-five percent (75%) of the face amount (less
maximum discounts, credits and allowances which may be taken
by or granted to Account Debtors in connection therewith) of
Borrower's Eligible Accounts; plus
(b) Up to fifty percent (50%) of the lower of the cost or market
value of Borrower's Eligible Inventory, provided that the
advance rate for Inventory which is over one year old and
which is otherwise Eligible Inventory shall be twenty-five
percent (25%) less one percent (1%) for each month over twelve
(12) that such Eligible Inventory remains part of Inventory;
plus
(c) Up to fifty percent (50%) against the face amount of
Commercial Letters of Credit issued by Bank for the purpose of
purchasing Inventory, provided that such Commercial Letters of
Credit are in form and substance satisfactory to Bank; minus
(d) Such reserves as Bank elects, in its sole discretion, to
establish from time to time;
provided, that the availability described in Paragraphs (1)(b) and
(1)(c) above shall in no event exceed Two Million and No/100 Dollars
($2,000,000.00). However, the aggregate Loan Limit shall in no event
exceed Five Million Dollars ($5,000,000), except as such amount may be
increased or decreased by Bank, in its sole discretion, from time to
time.
(2) INTEREST RATE:
Each Loan shall bear interest at the rate of one percent (1%) per annum
in excess of Bank's publicly announced prime rate (which is not
intended to be Bank's lowest or most favorable rate in effect at any
time) (the "Prime Rate") in effect from time to time, payable on the
last business day of each month in arrears. Said rate of interest shall
increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the effective date of each such change
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
----
Date: April 30, 1996 Initialed for Bank by: JF
----
9207_1
in the Prime Rate. Upon the occurrence of an Event of Default each Loan
shall bear interest at the rate of two percent (2%) per annum in excess
of the interest rate otherwise payable thereon, which interest shall be
payable on demand. All interest shall be calculated on the basis of a
360- day year.
(3) FEES AND CHARGES:
FACILITIES FEES: For the first year of the Original Term, Borrower
shall pay to Bank a facilities fee of One Hundred Thousand and No/100
Dollars ($100,000.00), which fee shall be fully earned by Bank and
payable on the date that Bank makes its initial disbursement under this
Agreement. Thereafter, Borrower shall pay to Bank an annual facilities
fee equal to Fifty Thousand Dollars ($50,000), which fee shall be fully
earned by Bank and payable on each anniversary of the date of this
Agreement during the Original Term and any Renewal Term.
(4) LETTERS OF CREDIT:
Subject to the terms and conditions of this Agreement, including
Exhibit A, and the Other Agreements, during the Original Term or any
Renewal Term, Bank may, in its sole discretion from time to time issue,
upon Borrower's request, Commercial and/or Standby Letters of Credit,
provided that the aggregate undrawn face amount of all such Letters of
Credit shall at no time exceed Two Million and No/100 Dollars
($2,000,000.00). Bank's contingent liability under the Letters of
Credit shall automatically reduce, dollar for dollar, the amount which
Borrower may borrow based upon the Loan Limit. Payments made by Bank to
any Person on account of any Letter of Credit shall constitute Loans
hereunder. At no time shall the aggregate of direct Loans by Bank to
Borrower plus the contingent liability of Bank under the outstanding
Letters of Credit be in excess of the Loan Limit. Borrower shall remit
to Bank a Letter of Credit fee equal to one-quarter of one percent (1/4
of 1%) per month on the aggregate undrawn face amount of all Letters of
Credit outstanding, which fee shall be payable monthly in arrears on
each day that interest is payable hereunder. Borrower shall also pay on
demand Bank's normal and customary administrative charges for issuance
of any Letter of Credit.
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
Date: April 30, 1996 ----
Initialed for Bank by: JF
----
-2-
9207_1
(5) ELIGIBLE ACCOUNTS:
The following is inserted in lieu of clause (iv) of the definition of
the term "Eligible Account" which is contained in Paragraph 1(d) of the
Agreement:
(iv) it is evidenced by an invoice rendered to the Account
Debtor thereunder, is due and payable within ninety (90) days after the
date of the invoice and does not remain unpaid past the due date
thereof, or it is evidenced by an invoice rendered to the Account
Debtor thereunder, is due and payable more than ninety (90) but no more
than one hundred eighty (180) days after the date of the invoice and
does not remain unpaid past the due date thereof; provided, however,
that if more than twenty-five percent (25%) of the aggregate dollar
amount of invoices owing by a particular Account Debtor remain unpaid
after the respective due dates thereof, then all Accounts owing by that
Account Debtor shall be deemed ineligible;
(6) ELIGIBLE INVENTORY:
In addition to the criteria set forth in the term "Eligible Inventory",
which are set forth in Paragraph 1(e) of the Agreement, and without
limiting Bank's discretion under paragraph 1(e)(vi), work-in-process
shall not be Eligible Inventory.
ADDITIONS AND CHANGES TO COVENANTS
----------------------------------
(7) PERMITTED BORROWINGS:
Notwithstanding the provisions of Paragraph 10(q) of the Agreement,
Borrower may (a) finance or refinance the acquisition of Equipment
and/or real estate in an aggregate amount not to exceed One Hundred
Thousand and No/100 Dollars ($100,000.00), whether by purchase money
financing, lease or otherwise; (b) borrow money from a Person other
than Bank, provided that any such borrowing is on an unsecured and
subordinated basis, and further provided that a Subordination Agreement
in favor of Bank and in form and substance satisfactory to Bank shall
have been executed and delivered relative thereto; (c) maintain the
present indebtedness to Xxxxxx Xxxxxxxx, Xx. as evidenced by that
certain License Agreement dated April 30, 1996 between Borrower and
Xxxxxx Xxxxxxxx, Xx. (the "License Agreement"); (d) maintain existing
indebtedness of Six Hundred Seventy-Seven and no/100 Canadian Dollars
(CDN $677,000.00) owing to Xxxxx Xx; (e) maintain existing indebtedness
of approximately Three Hundred Forty- Four Thousand and no/100 Dollars
($344,000.00) owing to Xxxxxx Xxxxxxxx, Xx., Xxxxxxx Xxxxxxxx, Xxxxxxx
Xxxxxxxx and the Three R Profit Sharing Retirement Plan; and (f) incur
unsecured indebtedness to trade creditors of Borrower in the ordinary
course of Borrower's business.
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
Date: April 30, 1996 ----
Initialed for Bank by: JF
----
-3-
9207_1
(8) ENVIRONMENTAL AUDITS:
Bank's rights under Paragraph 11(d) of the Agreement shall include,
without limitation, the right to cause environmental audits of
Borrower's owned and leased properties to be conducted from time to
time by environmental auditors satisfactory to Bank in its sole
discretion; provided that Bank shall endeavor, for such purposes, to
retain environmental auditors charging reasonable fees to perform such
audits.
(9) RESTRICTION ON MANAGEMENT FEES AND OTHER COMPENSATION;
PERMITTED DIVIDENDS:
In addition to the restrictions contained in Paragraph 11(l) of the
Agreement, Borrower shall not (a) pay any management or consulting fees
to any Person (other than Twelve Thousand and No/100 Dollars
($12,000.00) per month, payable to CPS) or make any loan to any Person
(except travel advances made to employees in the ordinary course of
business), or (b) pay any compensation, whether as salary, bonus or
otherwise, to any of Borrower's officers other than Ninety Thousand and
No/100 Dollars ($90,000.00) payable to Xxxxxx Xxxxxxxx, Xx.
Notwithstanding the restrictions contained in Paragraph 11(l) of the
Agreement, in the absence of an Event of Default and if after giving
effect thereto the outstanding Liabilities do not exceed the Loan
Limit, Borrower may pay dividends to USA Skate to permit USA Skate to
pay regularly scheduled interest on all debt instruments of USA Skate
existing on the date hereof.
(10) CHECKING ACCOUNT PROVISIONS:
Borrower shall maintain its general checking account with Bank. Normal
charges shall be assessed thereon. Although no compensating balance is
required, Borrower must keep monthly balances in order to merit
earnings credits which will cover Bank's service charges for demand
deposit account activities.
(11) OWNERSHIP:
Xxxxx Xxxx ("Xxxx") and Xxxxxxx X. Xxxxxxx ("Xxxxxxx") shall at all
times own, on a fully diluted basis, not less than twenty percent (20%)
of the outstanding capital stock of California Pro Sports, Inc., a
Delaware corporation ("CPS"), which, together with Xxxx and Xxxxxxx
shall at all times own, on a fully diluted basis, not less than
thirty-five percent (35%) of the outstanding equity securities of USA
Skate Corporation, a Delaware corporation ("USA Skate"), which shall at
all times own, on a fully diluted basis, not less than fifty-eight and
one-third percent (58 1/3%) of the outstanding equity securities of
Borrower and not less one hundred percent (100%) of the outstanding
equity securities of Three R Sales, Inc., a New York corporation
("Three R Sales"). Three R Sales shall at all times own, on a fully
diluted basis,
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
----
Date: April 30, 1996 Initialed for Bank by: JF
----
-4-
9207_1
not less than forty-one and two-thirds percent (41 2/3%) of the
outstanding equity securities of Borrower.
(12) PERMITTED GUARANTIES:
Notwithstanding the provisions of Paragraph 11(j) of the Agreement,
Borrower may execute a Continuing Unconditional Guaranty of any and all
indebtedness of California Pro, Inc.
("California Pro") to Bank.
(13) PROHIBITED LOANS:
In addition to the restrictions contained in the Agreement, Borrower
shall not make any loans to, or other investments in, any other Person,
including without limitation loans to direct or indirect stockholders
of Borrower and loans to, or other investments in, direct or indirect
subsidiaries of Borrower. Borrower may, however, make loans to USA
Skate to permit USA Skate to satisfy the costs associated with its
contemplated initial public offering and other financing arrangements,
provided that such loans are repaid with the proceeds derived
therefrom.
ADDITIONS AND CHANGES TO DEFAULT PROVISIONS
-------------------------------------------
(14) LOSS OF COLLATERAL:
Notwithstanding the provisions of Paragraph 12(e) of the Agreement, no
Event of Default shall arise under such paragraph as the result of any
loss, theft, damage or destruction of Collateral, unless the Collateral
which is the subject thereof has a value, determined by Bank in its
sole discretion, in excess of Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00).
(15) ADDITIONAL LIENS:
Notwithstanding the provisions of Paragraph 12(f) of the Agreement, no
Event of Default shall arise under such paragraph as the result of any
levy, seizure or attachment of Collateral, unless the Collateral which
is the subject thereof has a value, determined by Bank in its sole
discretion, in excess of One Hundred Thousand and No/100 Dollars
($100,000.00).
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
----
Date: April 30, 1996 Initialed for Bank by: JF
----
-5-
9207_1
(16) CROSS DEFAULTS:
In addition to the Events of Default contained in Paragraph 12 of the
Agreement, the occurrence of any of the following shall constitute an
Event of Default by Borrower hereunder:
(a) The occurrence of an Event of Default under, or the revocation
or termination of, that certain Loan and Security Agreement
dated April 1, 1993, as amended, by and between Bank and
California Pro;
(b) The occurrence of an event of default under, or the revocation
or termination of, the License Agreement as it exists on the
date hereof; and
(c) The occurrence of an event of default under, or the revocation
or termination of, that certain Consulting and Non-Competition
Agreement dated April 30, 1996, by and between Xxxxxx
Xxxxxxxx, Xx., and USA Skate (the "Consulting Agreement") as
it exists on the date hereof.
CONDITIONS TO CLOSING
---------------------
(17) ADDITIONAL CONDITIONS TO CLOSING:
Bank shall be under no obligation to consummate the transactions
contemplated by this Agreement until each of the conditions listed in
this Paragraph 17 has been satisfied. Whenever a condition contained
herein requires delivery of an agreement or other document to Bank,
each such agreement or other document shall be in form and substance
satisfactory to Bank in its sole discretion.
(a) ADDITIONAL RIGHTS AS COLLATERAL: Each of USA Skate and CPS
shall assign to Bank all of USA Skate's and CPS's rights and
remedies, but none of USA Skate's or CPS's duties or
obligations, under that certain Stock Purchase Agreement dated
April 30, 1996, as amended (the "Stock Purchase Agreement"),
by and among CPS, USA Skate, the Three R Profit Sharing
Retirement Plan, Xxxxxx Xxxxxxxx, Xx., Xxxxxxxx Xxxxxxxx,
Xxxxxx Xxxxxxxx, Xx., Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx
(the members of the Xxxxxxxx family and Three R Plan are
collectively referred to herein as the "Sellers").
(b) GUARANTIES: Borrower shall cause to be executed in favor of
Bank and delivered to Bank the Continuing Unconditional
Guaranty of each of CPS, USA Skate, California Pro, Three R
Sales, Xxxx and Xxxxxxx of any and all indebtedness of
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
----
Date: April 30, 1996 Initialed for Bank by: JF
----
-6-
9207_1
(b) GUARANTIES: Borrower shall cause to be executed in favor of
Bank and delivered to Bank the Continuing Unconditional
Guaranty of each of CPS, USA Skate, California Pro, Three R
Sales, Xxxx and Xxxxxxx of any and all indebtedness of
Borrower to Bank. Additionally, Borrower shall execute in
favor of Bank and deliver to Bank a Continuing Unconditional
Guaranty of any and all indebtedness of California Pro to
Bank.
(c) SUBORDINATION AGREEMENTS: Borrower shall cause its
indebtedness to Xxxxxx Xxxxxxxx, Xx. under the License
Agreement and USA Skate's indebtedness to the Sellers under
the Consulting Agreement, that certain Registration Rights
Agreement dated April 30, 1996, among USA Skate and the
Sellers (the "Registration Agreement") and that certain
$1,050,000 Promissory Note dated April 30, 1996, executed by
USA Skate in favor of the Sellers (the "Promissory Note") to
be subordinated to the indebtedness of Borrower to Bank on
terms acceptable to Bank in its sole discretion and shall
cause Xxxxxx Xxxxxxxx, Xx. and the other Sellers to execute
and deliver to Bank appropriate Subordination Agreements.
Borrower shall further cause Xxxxxx Xxxxxxxx, Xx. and the
other Sellers to execute and deliver to Bank a Subordination
Agreement with respect to (i) the Guaranties of CPS, Xxxx and
Xxxxxxx under the Promissory Note, the License Agreement and
with respect to the return of a treasury xxxx to Xxxxxxxx
Xxxxxxxx; (ii) the Guaranties of Xxxx and Xxxxxxx under the
Registration Agreement and the Consulting Agreement; (iii) the
obligations of CPS under the Consulting Agreement; (iv) the
Guaranty of USA Skate under the License Agreement; and (v) the
Guaranty of CPS under that certain $125,000 Promissory Note
dated April 30, 1996, executed by Les Equipments Sportifs
Davtec, Inc. in favor of Xxxxxx Xxxxxxxx, Xx.
(d) RELATED TRANSACTIONS: Borrower and USA Skate shall have
consummated the transactions set forth in the Stock Purchase
Agreement. Borrower shall provide Bank with copies of said
Stock Purchase Agreement and all related documentation, and
evidence satisfactory to Bank that any and all approvals of
the transactions contemplated therein have been obtained.
(e) ATTORNEY'S OPINION LETTER: Borrower shall cause to be
executed and delivered to Bank an Attorney's Opinion Letter.
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
----
Date: April 30, 1996 Initialed for Bank by: JF
----
-7-
9207_1
(f) LANDLORD'S AGREEMENT: Borrower shall provide Bank with a
Landlord's Agreement from the lessor of property commonly
known as 0 Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx 00000 which
Landlord's Agreement shall include a copy of the relevant
lease.
(g) PLEDGE OF TREASURY XXXX: Borrower shall cause Xxxxxxxx
Xxxxxxxx to pledge, as additional collateral for the
Liabilities, a treasury xxxx having a face value of not less
than Three Hundred Thousand and No/100 Dollars ($300,000.00)
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: MC
----
Date: April 30, 1996 Initialed for Bank by: JF
----
-8-
9207_1
EXHIBIT B-BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement
(Standard Form) of even date herewith between USA Skate Co., Inc. ("BORROWER")
and LASALLE NATIONAL BANK ("BANK").
A. Borrower's Business Locations (please indicate which location is the
principal place of business and at which locations originals and all
copies of Borrower's books, records and accounts are kept).
1. 0 Xxxxxxx Xxxxx Sole place of business and sole
Commack, New York, 11725 location of books, records and
accounts
2.
3.
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post
office boxes of Borrower. Please indicate the relationship of such
location to Borrower (i.e. public warehouse, processor, etc.)
1.
2.
3.
9207_1
