LOAN AND SECURITY AGREEMENT
BETWEEN
SANWA BUSINESS CREDIT CORPORATION
AND
XXXXXX MANUFACTURING, INC.
DATED AS OF DECEMBER 31, 1995
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. RESTRUCTURED OBLIGATIONS: GENERAL TERMS. . . . . . . . . . . . . . . . . 6
2.1 Total Obligation. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 One Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 7
3. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Loan Account; Method of Making Payments . . . . . . . . . . . . . 7
3.2 Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Application of Payments and Collections . . . . . . . . . . . . . 7
4. COLLATERAL: GENERAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Security Interest and Mortgage. . . . . . . . . . . . . . . . . . 8
4.2 Disclosure of Security Interest . . . . . . . . . . . . . . . . . 8
4.3 Special Collateral. . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Inspection and Field Reviews. . . . . . . . . . . . . . . . . . . 9
4.6 Perfected Security Interest; Location of Collateral . . . . . . . 9
4.7 Lender's Payment of Claims Asserted Against Borrower. . . . . . . 9
5. COLLATERAL: ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.1 Assignments, Records and Accounts Report. . . . . . . . . . . . .10
5.2 Sale or Encumbrance of Accounts . . . . . . . . . . . . . . . . .10
6. COLLATERAL: INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . .10
6.1 Sale of Inventory . . . . . . . . . . . . . . . . . . . . . . . .10
6.2 Safekeeping of Inventory; Inventory Covenants . . . . . . . . . .10
6.3 Records and Schedules of Inventory. . . . . . . . . . . . . . . .10
6.4 Evidence of Ownership of Inventory. . . . . . . . . . . . . . . .11
7. COLLATERAL: EQUIPMENT. . . . . . . . . . . . . . . . . . . . . . . . . .11
7.1 Maintenance of the Equipment. . . . . . . . . . . . . . . . . . .11
7.2 Evidence of Ownership of Equipment. . . . . . . . . . . . . . . .11
7.3 Proceeds of the Equipment . . . . . . . . . . . . . . . . . . . .11
8. COLLATERAL: REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . .11
8.1 After-Acquired Real Property. . . . . . . . . . . . . . . . . . .11
-i-
PAGE
9. WARRANTIES AND REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . .12
9.1 General Warranties and Representations. . . . . . . . . . . . . .12
9.2 Survival of Warranties and Representations. . . . . . . . . . . .15
10. COVENANTS AND CONTINUING AGREEMENTS . . . . . . . . . . . . . . . . . . .15
10.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . .15
10.2 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . .17
10.3 Lender Covenants. . . . . . . . . . . . . . . . . . . . . . . . .19
10.4 Contesting Charges. . . . . . . . . . . . . . . . . . . . . . . .19
10.5 Payment of Charges. . . . . . . . . . . . . . . . . . . . . . . .19
10.6 Insurance: Payment of Premiums . . . . . . . . . . . . . . . . .20
10.7 Survival of Obligations Upon Termination of Agreement . . . . . .20
11. EVENT OF DEFAULT: RIGHTS AND REMEDIES ON EVENT OF DEFAULT. . . . . . . .20
11.1 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . .20
11.2 Acceleration of the Liabilities . . . . . . . . . . . . . . . . .22
11.3 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
11.4 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
12. CONDITIONS PRECEDENT TO AGREEMENT . . . . . . . . . . . . . . . . . . . .24
13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
13.1 Appointment of Lender as Borrower's Lawful Attorney-In-Fact . . .26
13.2 Modification of Agreement: Sale of Interest. . . . . . . . . . .26
13.3 Attorneys' Fees and Expenses: Lender's Out-of-Pocket
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
13.4 No Waiver by Lender . . . . . . . . . . . . . . . . . . . . . . .27
13.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .28
13.6 Parties; Entire Agreement . . . . . . . . . . . . . . . . . . . .28
13.7 Conflict of Terms . . . . . . . . . . . . . . . . . . . . . . . .28
13.8 Waiver by Borrower. . . . . . . . . . . . . . . . . . . . . . . .28
13.9 Governing Law; Submission to Jurisdiction . . . . . . . . . . . .29
13.10 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
13.11 Section Titles, Etc . . . . . . . . . . . . . . . . . . . . . . .30
13.12 Representation by Counsel . . . . . . . . . . . . . . . . . . . .30
13.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . .31
-ii-
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") is made as of December
31, 1995, by and between SANWA BUSINESS CREDIT CORPORATION, A DELAWARE
CORPORATION ("LENDER"), and XXXXXX MANUFACTURING, INC., A MINNESOTA CORPORATION
("BORROWER").
W I T N E S S E T H:
WHEREAS, Pursuant to the terms of that certain Loan and Security Agreement
dated May 6, 1988 by and between Lender and EPR, Inc., Lender made certain loans
and extended other financial obligations to EPR, Inc. (the "EPR OBLIGATIONS");
WHEREAS, Borrower guaranteed the EPR Obligations pursuant to the terms of
that certain guarantee dated May 6, 1988 (the "GUARANTEE");
WHEREAS, Borrower has requested Lender to restructure its obligations under
the Guarantee;
WHEREAS, Lender has agreed to the foregoing restructuring in accordance
with the terms of this Agreement.
NOW THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extension of credit heretofore, now or hereafter
made to or for the benefit of Borrower by Lender, the parties hereto hereby
agree as follows:
1. DEFINITIONS.
A. GENERAL.
1.1 "ACCOUNTS" shall mean all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter acquired by Borrower.
1.2 "ACCOUNT DEBTOR" shall mean any Person who is or who may become
obligated to Borrower under, with respect to, or on account of an Account.
1.3 "AFFILIATE" shall mean any and all Persons which, in the reasonable
judgment of Lender, directly or indirectly, own or control, are controlled by or
are under common control with Borrower, and any and all Persons from whom, in
the reasonable judgment of Lender, Borrower has not or is not likely to exhibit
independence of decision or action. For the purpose of this definition,
"control" means the possession, directly or indirectly, of the power
-1-
to direct or cause the direction of management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
1.4 "ANCILLARY AGREEMENTS" shall mean all Security Documents and all
agreements, instruments and documents, including without limitation, the Income
Sharing Agreement, the Senior Subordinated Secured Promissory Note, the Junior
Subordinated Second Promissory Note, and any and all other notes, guaranties,
mortgages, deeds of trust, chattel mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, leases,
financing statements, subordination agreements, trust account agreements and all
other written matter whether heretofore, now, or hereafter executed by or on
behalf of Borrower or any other Person or delivered to Lender or any Participant
with respect to this Agreement or with respect to any agreement entered into by
Borrower.
1.5 "BORROWER'S KNOWLEDGE" or words of such import shall mean all
knowledge, including, actual knowledge and knowledge of matters which any
reasonable person in such position knew or should have known, of the respective
officers, directors and managers of Borrower.
1.6 "BUDGET" shall mean a forecast of Borrower's operating income and
expenses for a period of not less than twelve (12) months, in form reasonably
acceptable to Lender, but under no circumstances containing fewer line items of
revenue and expense as are contained in the budget attached hereto as Exhibit
1.6.
1.7 "CAPITAL EXPENDITURES" shall mean as to any Person, any and all
expenditures of such Person for fixed or capital assets, including, without
limitation, the incurrence of capitalized lease obligations, all as determined
in accordance with generally accepted accounting principles.
1.8 "CHARGES" shall mean all national, federal, state, county, city,
municipal, or other governmental (including, without limitation, the Pension
Benefit Guaranty Corporation) taxes, levies, assessments, charges, liens, claims
or encumbrances upon or relating to (i) the Collateral, (ii) the Liabilities,
(iii) Borrower's employees, payroll, income or gross receipts, (iv) Borrower's
ownership or use of any of its assets, or (v) any other aspect of Borrower's
business.
1.9 "CIT" shall mean The CIT Group/Commercial Finance, Inc., or any
other entity which replaces CIT as Borrower's primary working capital lender in
an amount not to exceed and on terms substantially similar to the terms of the
agreements in existence as of the date hereof between Borrower and CIT.
1.10 "CLOSING DATE" shall mean the date on which the transactions
contemplated by this Agreement are consummated.
1.11 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
-2-
1.12 "COLLATERAL" shall mean all of the property and interests in
property described in Section 4.1 and all other property and interests in
property which shall, from time to time, secure any part of the Liabilities.
1.13 "DEFAULT RATE" shall mean a rate per annum equal to two percent
(2%) in excess of the interest rate then in effect for the respective
Liabilities.
1.14 "ENVIRONMENTAL LAWS" shall mean the Resource Conservation and
Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic
Substances Control Act, or any other federal state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic or
dangerous waste, substance or material, as now or at any time hereafter in
effect.
1.15 "ENVIRONMENTAL LIEN" shall mean a lien in favor of any governmental
entity for (i) any liability under any Environmental Laws, or (ii) damages
arising from or costs incurred by such governmental entity in response to a
release of a Hazardous Material into the environment.
1.16 "EQUIPMENT" shall mean all of Borrower's now owned and hereafter
acquired equipment and Fixtures, including without limitation, furniture,
machinery, vehicles and trade fixtures, together with any and all accessories,
parts and appurtenances thereto, substitutions therefor and replacements
thereof.
1.17 "EVENT OF DEFAULT" shall mean the occurrence or existence of any
one or more of the events described in Section 11.1 if the same has not been
cured within any applicable cure period contained therein.
1.18 "FINANCIALS" shall mean those financial statements of Borrower or
delivered to Lender pursuant to Section 10.1(C).
1.19 "FIXTURES" shall mean all "fixtures" as such term is defined in the
Uniform Commercial Code as adopted and in effect in the State of Illinois, now
owned or hereafter acquired by Borrower.
1.20 "GENERAL INTANGIBLES" shall mean all choses in action, general
intangibles, causes of action and all other intangible personal property of
Borrower or every kind and nature (other than Accounts) now owned or hereafter
acquired by Borrower. Without in any way limiting the generality of the
foregoing, General Intangibles specifically includes, without limitation, all
corporate or other business records, security deposits, inventions, designs,
patents, patent applications, trademarks, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, and tax refund claims owned by
Borrower and all letters of credit, guarantee claims, security interests or
other security held by or granted to Borrower to secure payment by an Account
Debtor of any Accounts.
-3-
1.21 "HAZARDOUS MATERIALS" shall mean any hazardous substance or
pollutant or contaminant defined as such in (or for the purposes of) any
Environmental Law and shall include, but not be limited to, petroleum, any
radioactive material, and asbestos in any form or condition.
1.22 "INCOME SHARING AGREEMENT" shall mean that certain Income Sharing
Agreement dated as of the date hereof by and between Borrower and Lender, a copy
of which is attached hereto as Exhibit 2.1(C).
1.23 "INDEBTEDNESS" shall mean all of Borrower's liabilities,
obligations and indebtedness to any Person of any and every kind and nature,
whether primary, secondary, direct, indirect, absolute, contingent, fixed, or
otherwise, heretofore, now or hereafter owing, due, or payable, however
evidenced, created, incurred, acquired or owing and however arising, whether
under written or oral agreement, by operation of law, or otherwise. Without in
any way limiting the generality of the foregoing, Indebtedness specifically
includes (i) the Liabilities, (ii) all obligations or liabilities of any Person
that are secured by any lien, claim, encumbrance, or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable for the payment thereof, (iii) all obligations or liabilities created or
arising under any lease of real or personal property, or conditional sale or
other title retention agreement with respect to property used or acquired by
Borrower, even though the rights and remedies of the lessor, seller or lender
thereunder are limited to repossession of such property, (iv) all obligations
and liabilities in respect of unfunded vested benefits under any Employee
Benefit Plan or in respect of withdrawal liabilities incurred under ERISA by the
Borrower or any ERISA Affiliate to any Multiemployer Plan, and (v) accrued taxes
for which Borrower has not reserved a source of payment.
1.24 "INVENTORY" shall mean all goods, inventory, merchandise and other
personal property, including, without limitation, goods in transit, wherever
located and whether now owned or hereafter acquired by Borrower which is or may
at any time be held for sale or lease, furnished under any contract of service
or held as raw materials, work in process, supplies or materials used or
consumed in Borrower's business, and all such property the sale or other
disposition of which has given rise to Accounts and which has been returned to
or repossessed or stopped in transit by Borrower.
1.25 "LIABILITIES" shall mean all of Borrower's liabilities, obligations
and indebtedness to Lender of any and every kind and nature, whether primary,
secondary, direct, absolute, contingent, fixed, or otherwise (including, without
limitation, interest, charges, expenses, attorneys' fees and other sums
chargeable to Borrower by Lender, future advances made to or for the benefit of
Borrower and obligations of performance), whether arising under this Agreement,
under any of the Ancillary Agreements or acquired by Lender from any other
source, whether heretofore, now or hereafter owing, arising, due, or payable
from Borrower to Lender, however evidenced, created, incurred, acquired or owing
and however arising, whether under written or oral agreement, operation of law,
or otherwise.
-4-
1.26 "PARTICIPANT" shall mean any Person, now or at any time or times
hereafter, participating with Lender in the loans made by Lender to Borrower
pursuant to this Agreement and the Ancillary Agreements.
1.27 "PAYMENT IN FULL" or "PAID IN FULL" or any similar term(s) with
respect to any Indebtedness means (a) the indefeasible satisfaction and final
payment in full of such Indebtedness in cash or cash equivalents reasonably
acceptable to the payee and the termination of any obligation on the part of the
holder of such Indebtedness to make any loans or to afford any financial
accommodation to the Borrower or (b) in the case of any Indebtedness consisting
of contingent obligations (including without limitation contingent obligations
in respect of letters of credit or other reimbursement guarantees), the setting
apart of cash sufficient to discharge such portion of such Indebtedness in an
account for the exclusive benefit of the holders thereof, in which account such
holders shall be granted by the Borrower a first priority perfected security
interest in a manner acceptable to such holders which payment or perfected
security interest shall have been retained by the holders, for a period of time
in excess of all applicable preference or other similar periods under applicable
bankruptcy, insolvency or creditors' rights laws.
1.28 "PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, entity, party, or
government (whether national, federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
1.29 "REAL PROPERTY" shall mean the real estate now owned or leased or
hereafter acquired or leased by Borrower, all fixtures and personal property
used in connection therewith and Borrower's rights to leases, rents and profits
with respect thereto.
1.30 "SECURITY DOCUMENTS" shall mean this Agreement and all other
agreements, instruments, documents, financing statements, warehouse receipts,
bills of lading, notices of assignment, schedules, assignments, mortgages and
other written matter necessary or requested by Lender to create, perfect and
maintain perfected Lender's security interest in, and/or lien on, the
Collateral.
1.31 "STOCK" shall mean all shares, options, interests, participations
or other equivalents (however designated) of or in a corporation, whether voting
or non-voting, including, without limitation, all agreements, instruments and
documents convertible, in whole or in part, into any one or more or all of the
foregoing.
1.32 "UNMATURED EVENT OF DEFAULT" shall mean any event or condition
which, with the passage of time or the giving of notice or both, would
constitute an Event of Default.
-5-
B. ACCOUNTING TERMS. Any accounting terms used in this Agreement
which are not specifically defined shall have the meanings customarily given
them in accordance with generally accepted accounting principles.
C. OTHER TERMS. All other terms contained in this Agreement which are
not otherwise defined in this Agreement shall, unless the context indicates
otherwise, have the meanings provided for by the Uniform Commercial Code of the
State of Illinois to the extent the same are used or defined therein.
2. RESTRUCTURED OBLIGATIONS: GENERAL TERMS.
2.1 TOTAL OBLIGATION. Lender agrees to restructure Borrower's
obligations under the Guarantee into three separate obligations:
(A) A term loan (the "SENIOR SUBORDINATED SECURED NOTE") in an
aggregate principal amount not to exceed Two Million Seven Hundred Eighty
Thousand Dollars ($2,780,000) evidenced by a Senior Subordinated Secured Note in
the form attached hereto as Exhibit 2.1(A) and repayable as provided therein;
(B) A term loan (the "JUNIOR SUBORDINATED SECURED NOTE") in an
aggregate principal amount not to exceed One Million Dollars ($1,000,000)
evidenced by a Junior Subordinated Secured Note in the form attached hereto as
Exhibit 2.1(B) and repayable as provided therein;
(C) An obligation to make payments pursuant to the Income Sharing
Agreement.
2.2 ONE OBLIGATION. All indebtedness and obligations of Borrower to
Lender under this Agreement and the Ancillary Agreements shall constitute one
general obligation secured by the Collateral.
2.3 INTEREST RATE. Borrower shall pay Lender interest on the
outstanding principal balance of the Senior Subordinated Secured Note and the
Junior Subordinated Secured Note at the rate per annum of eight percent (8%);
provided, however, that upon the occurrence and during the continuance of any
Unmatured Event of Default, Lender may at its option, raise the interest rate
charged on the Liabilities to the Default Rate from the date of the occurrence
of the Event of Default until the Event of Default is cured or waived by Lender
or until the Liabilities are Paid In Full. Interest shall be computed on the
basis of a year of 360 days and actual days elapsed and shall be payable as
provided in Section 3.2. In no contingency or event whatsoever shall the rate
or amount of interest paid by Borrower under this Agreement or any of the
Ancillary Agreements exceed the maximum amount permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that Lender has received
interest hereunder or under any Ancillary Agreement in excess of the maximum
amount permitted by law, (i) Lender
-6-
shall apply such excess to any unpaid principal owed by Borrower to Lender or,
if the amount of such excess exceeds any unpaid balance of such principal,
Lender shall promptly refund such excess interest to Borrower and (ii) the
provisions hereof shall be deemed amended to provide for such permissible rate.
2.4 TERM OF AGREEMENT. This Agreement shall be in effect until all of
the Liabilities are Paid In Full, subject to earlier termination by Lender upon
the occurrence of an Event of Default as provided in Section 11; provided,
however, that with regard to the Income Sharing Agreement, this Agreement shall
be in effect until the earlier of (i) all of the Liabilities due under the
Income Sharing Agreement are Paid In Full or (ii) December 31, 2010. Until all
of the Liabilities shall have been fully paid and satisfied, Lender shall be
entitled to retain its security interest in the Collateral.
3. PAYMENTS.
3.1 LOAN ACCOUNT; METHOD OF MAKING PAYMENTS. Lender shall maintain a
loan account (the "LOAN ACCOUNT") on its books in which shall be recorded (i)
all liabilities of Borrower pursuant to this Agreement, (ii) all payments made
by Borrower on all of Borrower's obligations and (iii) all other appropriate
debits and credits as provided in this Agreement, including, without limitation,
all fees, charges, expenses and interest. All entries in the Loan Account shall
be made in accordance with Lender's customary accounting practices as in effect
from time to time. Lender may, in its sole and absolute discretion, elect to
xxxx Borrower for such amounts in which case the amount shall be immediately due
and payable with interest thereon at the rate set forth in Section 2.3.
3.2 PAYMENT TERMS. All of the Liabilities shall be payable to Lender
at the address set forth in Section 13.10. The Liabilities will be repayable as
follows in the following order: (i) first, principal and interest on the Senior
Subordinated Secured Note shall be payable as provided therein, (ii) second, all
payments pursuant to the Income Sharing Agreement shall be payable as provided
therein; (iii) third, all payments pursuant to the Junior Subordinated Secured
Note shall be payable as provided therein; (iv) fourth, fees, costs, expenses
and similar charges shall be payable as and when provided for in this Agreement
or the Ancillary Agreements and (v) fifth, the principal balance of the
remaining Liabilities shall be payable as and when provided for in this
Agreement or the Ancillary Agreements.
3.3 APPLICATION OF PAYMENTS AND COLLECTIONS. Notwithstanding anything
to the contrary contained herein, upon an occurrence of an Unmatured Event of
Default, Lender shall have the sole and absolute right to direct the application
of payments and collections received by Lender from or on behalf of Borrower,
and Borrower agrees that Lender shall have the continuing exclusive right to
apply and reapply any and all such payments and collections against the
Liabilities in such manner as Lender may deem appropriate, notwithstanding any
entry by Lender upon any of its books and records. To the extent that Borrower
makes a payment or payments to Lender or Lender receives any payment or
-7-
proceeds of the Collateral for Borrower's benefit, which payment(s) or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy act, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
obligations to make such payments shall continue in full force and effect, as if
such payments or proceeds had not been received by Lender.
4. COLLATERAL: GENERAL TERMS.
4.1 SECURITY INTEREST AND MORTGAGE. To secure the prompt payment to
Lender of the Liabilities, Borrower hereby grants to Lender a continuing
security interest in and to all of the following property and interest in
property of Borrower, whether now owned or existing or hereafter acquired or
arising and wherever located: (i) all Accounts, Inventory, Equipment, Real
Property, vehicles, contract rights, General Intangibles, tax refunds, chattel
paper, instruments, letters of credit, documents and documents of title; (ii)
all of the Borrower's deposit accounts (general or special) with and credits and
other claims against any financial institutions with which Borrower maintains
deposits; (iii) all of Borrower's now owned or hereafter acquired monies, and
any and all other property of Borrower now or hereafter coming into the actual
possession, custody or control of CIT or Lender or any agent or affiliate of CIT
or Lender in any way or for any purpose (whether for safekeeping, deposit,
custody, pledge, transmission, collection or otherwise); (iv) all insurance
proceeds of or relating to any of the foregoing; (v) all of Borrower's books and
records relating to any of the foregoing; and (vi) all accessions and additions
to, substitutions for, and replacements, products and proceeds of any of the
foregoing.
4.2 DISCLOSURE OF SECURITY INTEREST. Borrower shall make appropriate
entries upon its financial statements and books and records disclosing Lender's
security interest in the Collateral.
4.3 SPECIAL COLLATERAL. Immediately upon Borrower's receipt of any
Collateral which is evidenced or secured by an agreement, chattel paper, letter
of credit, instrument or document, including, without limitation, promissory
notes, documents of title and warehouse receipts (the "SPECIAL COLLATERAL"),
Borrower shall deliver the original thereof to Lender or to such agent of Lender
as Lender shall designate, together with appropriate endorsements, the documents
required to draw thereunder (as may be relevant to letters of credit) or other
specific evidence (in form and substance acceptable to Lender) of assignment
thereof to Lender. Borrower shall be required to provide title certificates
noting Lender as a security holder for each item of Equipment constituting a
titled vehicle.
4.4 FURTHER ASSURANCES. At Lender's request, Borrower shall, from time
to time, (i) execute and deliver to Lender all Security Documents that Lender
may reasonably request, in form and substance acceptable to Lender, and pay the
costs of any recording or filing of the same and (ii) take such other actions as
Lender may reasonably request in order to fully effect
-8-
the purposes of this Agreement and to protect Lender's interest in the
Collateral. Borrower hereby irrevocably makes, constitutes and appoints Lender
(and all Persons designated by Lender for that purpose) as Borrower's true and
lawful attorney and agent-in-fact to sign the name of Borrower on any of the
Security Documents and to deliver any of the Security Documents to such Persons
as Lender, in its sole discretion, may elect. Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
4.5 INSPECTION AND FIELD REVIEWS. Lender (by any of its officers,
employees or agents) shall have the right, at any time or times during
Borrower's usual business hours, without prior notice, to inspect and perform
field reviews with regard to the Collateral and all books and records related
thereto (and to make extracts from such records) and the premises upon which any
of the Collateral is located, to discuss Borrower's affairs and finances with
any Person (including Borrower's independent certified public accountants) and
to verify the amount, quality, value and condition of, or any other matter
relating to, the Collateral. All of the foregoing shall be done in a manner
which does not unreasonably interfere with the operation of Borrower's business.
All of Lender's reasonable out of pocket costs and expenses shall be incurred by
and charged to Borrower and shall be payable by Borrower within 10 days of the
request for payment by Lender.
4.6 PERFECTED SECURITY INTEREST; LOCATION OF COLLATERAL. Borrower
hereby warrants and represents to and covenants with Lender that, subject to the
terms and conditions of this Agreement, Lender's security interest in the
Collateral is now and at all times shall be perfected and, upon proper filing of
financing statements, have priority over all other liens except for: (i) liens
arising by operation of law; (ii) the liens set forth on Exhibit 9.1(I) attached
hereto; and (iii) purchase money liens permitted under Section 7.3 hereof.
Borrower's chief executive office, principal place of business and all other
offices and locations of the Collateral and books and records related thereto
(including, without limitation, computer programs, printouts and other computer
materials and records concerning the Collateral) are set forth on Exhibit 4.6.
Borrower shall not remove its books and records or the Collateral from any such
locations (except for removal of items of Inventory upon its sale in accordance
with the terms of this Agreement) and shall not open any new offices or relocate
any of its books and records or the Collateral except within the continental
United States of America with at least thirty (30) days prior notice thereof to
Lender.
4.7 LENDER'S PAYMENT OF CLAIMS ASSERTED AGAINST BORROWER. Lender may,
but shall not be obligated to, at any time or times hereafter, in its sole
discretion, and without waiving any Unmatured Event of Default or Event of
Default or waiving or releasing any obligation, liability or duty of Borrower
under this Agreement or the Ancillary Agreements, pay, acquire or accept an
assignment of any security interest, lien, claim or other encumbrance asserted
by any Person against the Collateral. All sums paid by Lender under this
Section 4.7, shall be payable by Borrower to Lender on demand and shall be
additional Liabilities secured by the Collateral, PROVIDED, HOWEVER, that if
Lender acquires a claim prior to an Event
-9-
of Default, Borrower shall be responsible to Lender only for the amount of the
claim without regard to other costs incurred by Lender in connection therewith.
5. COLLATERAL: ACCOUNTS.
5.1 ASSIGNMENTS, RECORDS AND ACCOUNTS REPORT. Borrower shall keep
accurate and complete records of its Accounts and upon the date they are due to
be delivered to CIT without regard to any extension or waiver by CIT shall
furnish to Lender a copy of all reports of Accounts submitted or required to be
submitted by Borrower to CIT.
5.2 SALE OR ENCUMBRANCE OF ACCOUNTS. Borrower shall not, without the
prior written consent of Lender, sell, transfer, grant a security interest in or
otherwise dispose of or encumber any of its Accounts to any Person other than
CIT and Lender.
6. COLLATERAL: INVENTORY.
6.1 SALE OF INVENTORY. Unless an Event of Default occurs and Lender
directs otherwise, Borrower may sell Inventory in the ordinary course of its
business (which does not include a transfer of Inventory with a book value in
excess of $10,000 in partial or total satisfaction of Indebtedness or sales in
bulk). All proceeds of any sales shall be part of the Collateral. Borrower
shall not rent, lease or otherwise transfer or dispose of any of the Inventory
without Lender's prior written consent, except as set forth in this Section 6.1
or except as permitted by CIT until the indebtedness due CIT is Paid in Full and
then as permitted or directed by Lender.
6.2 SAFEKEEPING OF INVENTORY; INVENTORY COVENANTS. Borrower shall
maintain all Inventory in good and saleable condition at all times. Lender
shall not be responsible for (i) the safekeeping of the Inventory; (ii) any loss
or damage thereto or destruction thereof occurring or arising in any manner or
fashion from any cause; (iii) any diminution in the value of Inventory or (iv)
any act or default of any carrier, warehouseman, bailee or forwarding agency or
any other Person in any way dealing with or handling the Inventory. All risk of
loss, damage, distribution or diminution in value of the Inventory shall be
borne by Borrower.
6.3 RECORDS AND SCHEDULES OF INVENTORY. Borrower shall keep correct
and accurate monthly records on a lower of cost or market basis itemizing and
describing the kind, type, quality and quantity of Inventory, Borrower's cost
therefor and selling price thereof, and the withdrawals therefrom and additions
thereto and Inventory then on consignment, and upon the date they are to be
delivered to CIT without regard to any extension or waiver by CIT shall furnish
to Lender a copy of its most recent report of Inventory submitted or required to
be submitted by Borrower to CIT.
-10-
6.4 EVIDENCE OF OWNERSHIP OF INVENTORY. Borrower shall, upon Lender's
request, deliver to Lender all evidence of ownership of the Inventory.
7. COLLATERAL: EQUIPMENT.
7.1 MAINTENANCE OF THE EQUIPMENT. Borrower shall keep and maintain the
Equipment in good operating condition and repair, ordinary wear and tear
excepted, and shall make all necessary replacements thereof so that the value,
utility and operating efficiency thereof shall at all times be maintained and
preserved, ordinary wear and tear excepted, and shall promptly inform Lender of
any additions to or deletions from the Equipment. Borrower shall not permit any
such items to become affixed to real estate in such manner that such items of
Equipment will become a fixture or an accession to other personal property.
7.2 EVIDENCE OF OWNERSHIP OF EQUIPMENT. Borrower shall, upon Lender's
request, deliver to Lender all evidence of ownership of the Equipment
(including, without limitation, bills of sale, certificates of title and
applications for title).
7.3 PROCEEDS OF THE EQUIPMENT. Borrower shall not sell, transfer,
lease, grant a security interest in or otherwise dispose of or encumber the
Equipment or any part thereof to any Person other than CIT or Lender except for
purchase money liens (including capitalized leases and other forms of
installment purchase financing in an amount not to exceed $1 million in the
aggregate during the Term or which creates annual debt service obligations not
in excess of $225,000 annually, including both new and existing capital
equipment financing) granted to the Person financing a purchase of Equipment so
long as the lien granted is limited to the specific fixed assets so acquired,
and the transaction does not violate any other provision of this Agreement
(notification of such purchase money lien to be provided within ten (10) days of
acquisition of such fixed asset); PROVIDED, HOWEVER, that Borrower may sell or
otherwise dispose of any single piece of Equipment at the price set forth in
that certain appraisal of Borrower's Equipment dated May, 1995 conducted by The
Gronick Company, Incorporated, ("GRONICK") upon five (5) days' prior written
notice to Lender; PROVIDED, HOWEVER, Borrower shall not dispose of Equipment
with an appraised value (per Gronick) in excess of $100,000 in the aggregate
during the term hereof without Lender's consent. In the event any Equipment is
sold, transferred or otherwise disposed of as permitted in this Section 7.3,
Borrower shall promptly notify Lender of such fact and hold, use or deliver all
of the cash proceeds of such sale, transfer or disposition as permitted or
directed by CIT until the indebtedness due CIT is Paid in Full and then as
permitted or directed by Lender.
8. COLLATERAL: REAL PROPERTY.
8.1 AFTER-ACQUIRED REAL PROPERTY. If Borrower acquires any Real
Property or interests in Real Property after the date hereof it shall provide
Lender an opportunity to finance such acquisition in accordance with the
provisions of Section 10.1(J). If Lender
-11-
provides such financing in accordance with the provisions of Section 10.3,
Borrower will grant liens on or security interests in such Real Property to
Lender, by way of mortgages, leasehold mortgages, landlord waivers, assignment
of rents and profits, deeds of trust, deeds to secure debt or comparable
instruments in form and substance acceptable to Lender, modified as necessary
with respect to the laws of the jurisdiction in which such real estate is
located, and will furnish to Lender a mortgagee's title insurance policy in an
amount satisfactory to Lender insuring that Lender has a valid first priority
lien in such Real Property. If Lender does not finance the acquisition of such
Real Property, and if permitted by the Person(s) who provide financing in
connection with such acquisition Borrower will grant Lender a subordinate lien
in such Real Property and furnish to Lender a mortgagee's title insurance policy
and, if any Collateral is located in the Real Property, a landlord's and
mortgagee's waiver to Lender's reasonable satisfaction, in accordance with the
provisions of this Section 8.1. If Borrower is prohibited from granting a
subordinate lien in the Real Estate, Borrower shall enter into an agreement with
Lender under which Borrower will covenant and agree for the benefit of Lender
not to grant any other Person an interest in the Real Property and, if any
Collateral is located in the Real Property, will deliver a landlord's and/or
mortgagee's waiver, as appropriate.
9. WARRANTIES AND REPRESENTATIONS.
9.1 GENERAL WARRANTIES AND REPRESENTATIONS. Borrower warrants and
represents that:
(A) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota, and is qualified or
licensed as a foreign entity to do business in all other countries, states and
provinces in which the laws thereof require Borrower to be so qualified or
licensed;
(B) Borrower has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and the
Ancillary Agreements;
(C) The execution, delivery and performance by Borrower of this
Agreement and the Ancillary Agreements shall not, by their execution or
performance, the lapse of time, the giving of notice or otherwise, constitute a
violation of any applicable law, rule, regulation, judgment, order or decree or
a breach of any provision contained in Borrower's articles of incorporation or
by-laws, or contained in any agreement, instrument, indenture or other document
to which Borrower is now a party or by which it is bound which violation would
have a material adverse affect on Borrower;
(D) This Agreement and the Ancillary Agreements are and will be the
legal, valid and binding agreements of Borrower enforceable in accordance with
their terms, except as enforcement thereof may be subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and to general
-12-
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law);
(E) Borrower's use of the proceeds of any advances made by Lender are,
and will continue to be, legal and proper uses (duly authorized by its board of
directors), in accordance with applicable laws, rules and regulations, as in
effect as of the date hereof;
(F) Borrower has, and is current and in good standing with respect to,
all governmental approvals, permits, certificates, inspections, consents and
franchises necessary to conduct and to continue to conduct its present and
intended business as heretofore conducted by it;
(G) Except as disclosed on Exhibit 9.1(G) attached hereto or in the
Financials, Borrower has no litigation pending, or to the best of its knowledge,
threatened, and no Indebtedness (except for trade payables arising in the
ordinary course of its business since the dates reflected in the Financials) and
has not guaranteed the obligations of any other Person;
(H) Borrower is not a party to any contract or agreement or subject to
any charge, restriction, judgment, decree or order materially and adversely
affecting its business, property, assets, operations or condition, financial or
other, and is not a party to any labor dispute; there are no lockouts, strikes
or walkouts relating to any labor contracts and no such contract is scheduled to
expire during the Term;
(I) Borrower has good, indefeasible and merchantable title to and
ownership of the Collateral, free and clear of all liens, claims, security
interests and other encumbrances, except those of CIT, Lender and those, if any,
described on Exhibit 9.1(I) attached hereto and those described on Exhibit B to
Borrower's Mortgage of even date herewith in favor of Lender;
(J) Except as set forth on Exhibit 9.1(J) attached hereto, Borrower is
not in violation of any applicable statute, rule, regulation or ordinance of any
governmental entity, including, without limitation, the United States of
America, any state, city, town, municipality, county or of any other
jurisdiction, or of any agency thereof, in any respect materially and adversely
affecting the Collateral or Borrower's business, property, assets, operations or
condition, financial or other;
(K) Except as set forth on Exhibit 9.1(K) attached hereto, Borrower is
not in default under any indenture, loan agreement, mortgage, lease, trust deed,
deed of trust or other similar agreement relating to the borrowing of monies to
which it is a party or by which it is bound;
(L) The Financials fairly present the assets, liabilities and financial
condition and results of operations of Borrower and such other Persons described
therein as of the dates thereof; there are no omissions or other facts or
circumstances which are or may be material and there has been no material and
adverse change in the assets, liabilities or financial or
-13-
other condition of Borrower since the date of the Financials; there exist no
equity or long term investments in or outstanding advances to any Person not
reflected in the Financials; there are no actions or proceedings which are
pending or, to the best of Borrower's knowledge, threatened, against Borrower or
any other Person which might result in any material adverse change in Borrower's
financial condition or materially and adversely affect Borrower's operations,
its assets or the Collateral;
(M) Borrower has filed all federal, state and local tax returns and
other reports, or has been included in consolidated returns or reports filed by
an Affiliate, which Borrower is required by law, rule or regulation to file and
all Charges that are due and payable have been paid;
(N) Borrower's execution and delivery of this Agreement and of the
Ancillary Agreements does not directly or indirectly violate or result in a
violation of any applicable laws, rules or regulations;
(O) Borrower's deconsolidation of its Florida subsidiary will have no
impact on Borrower's profit and loss statement for calendar year 1995 and
thereafter as computed under generally accepted accounting principles; and
(P) Except as set forth on Exhibit 9.1(P) attached hereto, (i) the
operations of Borrower comply in all material respects with all applicable
Environmental Laws; (ii) none of the operations of Borrower are subject to any
judicial or administrative proceeding alleging the violation of any
Environmental laws; (iii) none of the operations of Borrower are the subject of
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any Hazardous Material into the environment;
(iv) Borrower has not filed any notice under any federal or state law indicating
past or present treatment, storage or disposal of a Hazardous Material or
reporting a spill or release of a Hazardous Material into the environment; and
(v) Borrower does not have any known material contingent liability in connection
with any release of any Hazardous Material into the environment. The
materiality standard used in this Section 9.1(N) shall be exceeded if the facts
giving rise to a breach or breaches of the representations or warranties
contained herein might result in liability in excess of $50,000 in the
aggregate. For purposes of this Section, "Borrower" shall mean Borrower and any
subsidiary or affiliate of Borrower acquired or created after the date of this
Agreement.
Borrower hereby indemnifies Lender, its successors and assignees, and
agrees to hold Lender harmless from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims of any and every kind whatsoever
(including, without limitation, court costs and attorneys' fees) which at any
time or from time to time may be paid, incurred or suffered by, or asserted
against, Lender for, with respect to, or as a direct or indirect result of the
violation by Borrower, any other obligor or any of Borrower's subsidiaries, of
any laws, including but not limited to, the Environmental Laws or any laws or
regulations relating to Hazardous Material, treatment, storage, disposal,
generation and transportation, air, water and
-14-
noise pollution, soil or ground or water contamination, the handling, storage or
release into the environmental of Hazardous Materials; or with respect to, or as
a direct or indirect result of the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission or release from, properties utilized by
Borrower, any other obligor or any of Borrower's subsidiaries in the conduct of
their respective business into or upon any land, the atmosphere, or any
watercourse, body of water or wetlands, of any Hazardous Material (including,
without limitation, any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under the Environmental Laws); and the provisions
of and undertakings and indemnification set out in this Section 9.1 shall
survive the satisfaction and payment of the Liabilities and the termination of
this Agreement.
9.2 SURVIVAL OF WARRANTIES AND REPRESENTATIONS. Borrower covenants,
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement and the Ancillary Agreements shall be true
at the time of Borrower's execution of this Agreement and the Ancillary
Agreements, and shall survive the execution, delivery and acceptance hereof and
thereof by the parties thereto and the closing of the transactions described
herein and therein or related hereto or thereto. Borrower and Lender expressly
agree that any misrepresentation or breach of any representation or warranty
whatsoever contained in this Agreement or in any of the Ancillary Agreements
shall be deemed material.
10. COVENANTS AND CONTINUING AGREEMENTS.
10.1 AFFIRMATIVE COVENANTS. Borrower covenants that it shall, unless
Lender consents in writing otherwise:
(A) At its sole cost and expense, keep and maintain the Collateral
insured for its full insurable value against loss or damage by fire, theft,
explosion, sprinklers, flood, business interruption, boiler and all other
hazards and risks which are specified by Lender from time to time by obtaining
policies naming Lender as mortgagee, additional insured and lender loss payee
and which satisfy all terms and conditions of Exhibit 10.1(A) hereto. Lender
reserves the right to change the terms and provisions of Exhibit 10.1(A) from
time to time. In the event of such change, Borrower shall apply for renewal of
all applicable insurance policies upon the terms and conditions of Exhibit
10.1(A) in effect at the time of such renewal application;
(B) Notify Lender promptly of any event or occurrence causing a
material loss or decline in value of the Collateral and the estimated (or
actual, if available) amount of such loss or decline;
(C) Keep books of account and prepare financial statements and furnish
to Lender the following (all of the foregoing and following to be kept and
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the Financials, unless Borrower's independent certified
public accountants concur in any changes therein and
-15-
such changes are disclosed to Lender and are consistent with then generally
accepted accounting principles):
(i) as soon as available, but not later than ten (10) days
after the date such information must be filed with the Securities and
Exchange Commission, without giving effect to any extension, all reports
filed or required to be filed with the Securities and Exchange Commission,
with all exhibits;
(ii) as soon as available, but not later than sixty (60)
days before the beginning of each fiscal year, a cash flow projection for
such fiscal year, together with appropriate supporting documents reasonably
acceptable to Lender;
(iii) not later than the 10th day of each calendar quarter,
an updated form of the cash flow projection supplied pursuant to Section
10.1(C)(ii) projecting cash flow for the next succeeding 12 month period;
(iv) Exhibit A to the Junior Subordinated Secured Promissory
Note in the manner set forth in the Junior Subordinated Secured Promissory
Note;
(v) Exhibit A to the Income Sharing Agreement in the manner
set forth in the Income Sharing Agreement;
(vi) as soon as available, but not later than the 10th day
of each calendar quarter, information relating to any transfer of
Borrower's Stock, together with an analysis of the impact, if any, of such
charge, upon the amount of net operating loss carryforward available to
Borrower;
(vii) as soon as available, but not less than sixty (60) days
prior to the end of each fiscal year of Borrower, a Budget for the next
fiscal year; and
(viii) such other data and information (financial and other)
as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral, Borrower's financial condition or results of its
operations, or the financial condition of any Person who is a guarantor of
any of the Liabilities, including, without limitation, Accounts agings,
Accounts Payable agings, and detailed reports of inventory;
(D) Notify Lender, promptly upon, but in no event later than ten (10)
days after, Borrower's learning of (i) any litigation affecting Borrower,
whether or not the claim is considered by Borrower to be covered by insurance;
and (ii) the institution of any suit or administrative proceeding which may
materially and adversely affect the operations, financial condition or business
of Borrower or which may affect Lender's security interest in the Collateral;
-16-
(E) Maintain insurance in the type, amount and form which satisfies the
requirements of Exhibit 10.1(A) hereto, as amended from time to time. In
addition, Borrower will deliver renewals for all of such policies at least
thirty (30) days prior to the expiration date of the subject policy;
(F) Give written notice to Lender of any proposed expenditures not
approved in the Budget;
(G) Give written notice to Lender immediately upon receipt of any
notice that (i) the operations of Borrower, any other obligor or any Affiliate
are not in full compliance with requirements of applicable Environmental Laws;
(ii) Borrower, any other obligor or any Subsidiary is subject to any Federal or
state investigation evaluating whether any remedial action is needed to respond
to the release of any Hazardous Material into the environment; or (iii) any
properties or assets of Borrower, any other obligor or any Subsidiary are
subject to any Environmental Lien;
(H) Without limiting the generality of any of Borrower's other
covenants and agreements, the operations of Borrower, any other obligor and each
of Borrower's Affiliates shall at all times comply in all material respects with
all applicable Environmental Laws. The materiality standard used in this
Section 10.1(H) shall be exceeded if the facts giving rise to a breach or
breaches of the covenant contained herein might result in liability in excess of
$50,000 in the aggregate;
(I) Promptly provide Lender with all documents requested by Lender
which are required from time to time by federal regulations and/or regulators;
and
(J) Provide Lender an opportunity to provide all of Borrower's
financing needs for purposes of providing working capital, financing to effect
an acquisition or otherwise; PROVIDED, HOWEVER Borrower may request that CIT
extend the current loan with CIT upon maturity and PROVIDED, FURTHER that if
another Person commits to provide financing to Borrower (a "Commitment")
Borrower will provide Lender an opportunity to review such request for 5 days
and to provide financing under the terms and conditions contained in the
Commitment. Except as specifically provided in this Section 10.1 (J), Borrower
shall have no obligation to obtain additional credit from Lender.
10.2 NEGATIVE COVENANTS. Borrower covenants that it shall not, without
the written consent of Lender:
(A) Merge or consolidate with, purchase, lease or otherwise acquire all
or substantially all of the assets or properties of, or acquire any capital
stock, equity interests, debt or other securities of, any Person or sell all or
substantially all of its assets to any Person;
-17-
(B) Other than in the ordinary course of its business, acquire,
purchase or make any investment in the obligations, stock securities or equity
of any Person;
(C) Declare or pay dividends upon any of Borrower's Stock or make any
distribution of Borrower's property or assets or make any loans, advances or
extensions of credit to any Person including, without limitation, to any
Affiliate, officer or employee of Borrower, other than with respect to sales in
the ordinary course of Borrower's business;
(D) Enter into, or be a party to, any transaction or agreement, whether
oral or in writing, with any Affiliate, director, officer or Stockholder of
Borrower, except agreements to pay salary and similar compensation to Borrower's
employees in the ordinary course of and pursuant to the reasonable requirements
of Borrower's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would obtain in a
comparable arm's length transaction with a Person not an Affiliate, director,
officer or Stockholder of Borrower;
(E) Pay compensation in any form in the aggregate to any current or
former member of Borrower's Board of Directors or officer in any fiscal year in
excess of Two Hundred Thousand Dollars ($200,000), excluding from such limit any
deferred payments made to a board member pursuant to the Standstill Agreements
described in Section 12.1 herein;
(F) Enter into any transaction which materially and adversely affects
the benefit potentially available to Lender under the Income Sharing Agreement,
the Collateral or Borrower's ability to repay the Indebtedness;
(G) Guarantee or otherwise, in any way, become liable with respect to
the obligations or liabilities of any Person;
(H) Except as otherwise expressly permitted herein or in the Ancillary
Agreements, encumber, pledge, mortgage, grant a security interest in, assign,
sell, lease or otherwise dispose of or transfer, whether by sale, merger,
consolidation, liquidation, dissolution, or otherwise, any of Borrower's
properties, assets, rights or businesses or the Collateral;
(I) Incur or otherwise acquire any Indebtedness for borrowed money
(other than the obligations owed to CIT and the Liabilities), except for (i)
trade payables arising in the ordinary course of Borrower's business; (ii)
Indebtedness which is unsecured or secured by assets other than the Collateral
and in each case is to Persons who execute and deliver to Lender (in form and
substance acceptable to Lender and its counsel) subordination agreements
subordinating their claims against Borrower to the payment of the Liabilities;
and (iii) financing provided by others offered to Lender under Section 10.1(I);
-18-
(J) Make Capital Expenditures (excluding therefrom the annual debt
service payments permitted in Section 7.3 hereinbefore) which, in the aggregate,
exceed (i) Two Hundred Fifty Thousand and No/100 Dollars ($250,000) during each
of Borrower's 1996 or 1997 fiscal years and (ii) Five Hundred Thousand Dollars
($500,000) during each of Borrower's fiscal years thereafter;
(K) Expend funds not authorized in the Budget for such fiscal year;
provided, however, that Borrower shall not be deemed to have violated this
Covenant if Borrower's expenditures related to any particular line item in the
Budget are within five percent (5%) of the budgeted amount;
(L) Materially modify, amend or supplement Borrower's Articles of
Incorporation or similar document; and
(M) Enter into any agreement (other than employment agreements) with
any Person that confers upon such Person the right or authority to control or
direct a major portion of the business or assets of Borrower.
10.3 LENDER COVENANTS. Lender covenants and agrees that:
(A) It will agree to consider, on its customary credit terms: (i)
taking out Borrower's current loan with CIT on expiration, and (ii) providing
financing for one or more acquisitions proposed by Borrower. Except as
specifically provided in this Section 10.3 Lender shall have no obligation to
make available any credit facility to Borrower; and
(B) On the Closing Date it shall return to Borrower all promissory
notes, guarantees and other agreements currently in full force and effect
between Borrower, EPR, Inc. and Lender and thereafter agree not to pursue any
claims against EPR, Inc. or Borrower except pursuant to the terms of this
Agreement and the Ancillary Agreements.
10.4 CONTESTING CHARGES. Notwithstanding anything to the contrary
herein, Borrower may dispute any Charges without prior payment thereof, even if
such non-payment may cause a lien to attach to Borrower's assets, provided that
Borrower shall give Lender prompt notice of such dispute and shall be diligently
contesting the same in good faith and by an appropriate proceeding and there is
no danger of a loss or forfeiture of any of the Collateral and provided further
that, if the same are potentially or actually in excess of $50,000 in the
aggregate at any time hereafter, Borrower shall give Lender such additional
collateral and assurances as Lender, in its reasonable discretion, deems
necessary under the circumstances, immediately upon demand by Lender.
10.5 PAYMENT OF CHARGES. Subject to the provisions of Section 10.4,
Borrower shall pay promptly when due all of the Charges. In the event Borrower,
at any time or times hereafter, shall fail to pay the Charges or to promptly
obtain the satisfaction of such Charges, Borrower shall promptly so notify
Lender thereof and Lender may, without waiving or releasing any obligation or
liability of Borrower hereunder or any Unmatured Event of Default or Event of
Default, in its sole discretion, at any time or times thereafter, make such
-19-
payment or any part thereof, (but shall not be obligated so to do) or obtain
such satisfaction and take any other action with respect thereto which Lender
deems advisable. All sums so paid by Lender and any expenses, including
reasonable attorneys' fees, court costs, expenses and other charges relating
thereto, shall be payable by Borrower to Lender upon demand and shall be
additional Liabilities.
10.6 INSURANCE: PAYMENT OF PREMIUMS. Attached here to as
Exhibit 10.6(A) is a true and correct list of all insurance policies on the
Collateral and on Borrower. Borrower shall deliver to Lender the original (or
certified copy) of each policy of insurance and evidence of payment of all
premiums therefor and shall deliver renewals of all such policies to Lender at
least thirty (30) days prior to their expiration dates. Upon the occurrence and
during the continuation of an Event of Default or Unmatured Event of Default,
Borrower irrevocably makes, constitutes and appoints Lender (and all officers,
employees or agents designated by Lender) as Borrower's true and lawful attorney
and agent-in-fact for the purpose of making, settling and adjusting claims under
such policies, endorsing the name of Borrower in writing or by stamp on any
check, draft, instrument or other item of payment for the proceeds of such
policies and for making all determinations and decisions with respect to such
policies. If Borrower shall fail to obtain or to maintain any of the policies
required by this Agreement or to pay any premium relating thereto, then
Lender,without waiving or releasing any obligation or default by Borrower
hereunder, may (but shall be under no obligation to do so) obtain and maintain
such policies of insurance and pay such premiums and take any other action with
respect thereto which Lender deems advisable. All sums so disbursed by Lender,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable by Borrower to Lender upon demand and shall
be additional Liabilities.
10.7 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT. Except as
otherwise expressly provided for in this Agreement and in the Ancillary
Agreements, and except upon Payment in Full by Borrower under this Agreement and
the Ancillary Agreements, no termination or cancellation (regardless of cause or
procedure) of this Agreement or the Ancillary Agreements shall in any way affect
or impair the powers, obligations, duties, rights, and liabilities of Borrower
or Lender in any way or respect relating to any transaction or event occurring
prior to such termination or cancellation, the Collateral, or any of the
undertakings, agreements, covenants, warranties and representations of Borrower
or Lender contained in this Agreement or the Ancillary Agreements. All such
undertakings, agreements, covenants, warranties and representations shall
survive such termination or cancellation.
11. EVENT OF DEFAULT: RIGHTS AND REMEDIES ON EVENT OF DEFAULT.
11.1 EVENT OF DEFAULT. The occurrence and continuation of any one or
more of the following events shall constitute an Event of Default:
-20-
(A) Borrower fails to pay any part of the Liabilities within ten (10)
days after the same shall be due and payable or declared due and payable;
(B) A "Default" or an "Event of Default" occurs pursuant to any
agreement between Borrower and CIT and same is not cured within any applicable
cure period;
(C) Borrower or any Affiliate fails or neglects for a period of thirty
(30) days to perform, keep or observe any other term, provision, condition or
covenant contained in this Agreement or in the Ancillary Agreements, which is
required to be performed, kept or observed by Borrower or such Affiliate if the
same has not been cured within any applicable cure or grace period contained
therein;
(D) (i) a default shall occur under any agreement, document or
instrument, other than this Agreement or any of the Ancillary Agreements, now or
hereafter existing, to which Borrower is a party, if the same has not been cured
within any applicable cure or grace period contained therein, or (ii) any
Indebtedness for money borrowed or credit extended has been accelerated or is
not paid as and when it becomes due and payable if the same has not been cured
within any applicable cure or grace period contained therein;
(E) Any statement, warranty, representation, report, financial
statement, or certificate made or delivered by Borrower, or any of its officers,
employees or agents, to Lender is not true and correct in any material respect;
(F) There shall occur any material uninsured damage to or loss, theft,
or destruction of any of its assets in an amount in excess of $50,000, unless
(i) Borrower is disputing such uninsured damage, loss, theft or destruction,
(ii) Borrower gives Lender prompt notice of such dispute, diligently contests
the same in good faith and by an appropriate proceeding, (iii) there is no
danger of a loss or forfeiture of any of the Collateral and (iv) Borrower shall
give Lender such additional collateral and assurances as Lender, in its
reasonable discretion, deems necessary under the circumstances, immediately upon
demand by Lender;
(G) The Collateral or any of Borrower's other assets are attached,
seized, levied upon or subjected to a writ or distress warrant, or come within
the possession of any receiver, trustee, custodian or assignee for the benefit
of creditors and the same is not cured within forty-five (45) days thereafter;
an application of a receiver, trustee, or custodian for any of the Collateral or
any of Borrower's other assets and the same is not dismissed within forty-five
(45) days after the application therefor;
(H) An application is made by Borrower for the appointment of a
receiver, trustee or custodian for any of the Collateral or any of Borrower's
other assets; a petition under any section or chapter of the Bankruptcy Code or
any similar law or regulation is filed by or against Borrower and is not
dismissed within sixty (60) days after filing; Borrower makes an assignment for
the benefit of its creditors or any case or proceeding is filed by or against
-21-
Borrower for its dissolution, liquidation, or termination and is not dismissed
within sixty (60) days; Borrower ceases to conduct its business as now conducted
or is enjoined, restrained or in any way prevented by court order from
conducting all or any material party of its business affairs; provided, however,
notwithstanding anything stated to the contrary in this paragraph no cure time
is allowed or permitted Borrower upon the happening of any of the foregoing
events or occurrences stated in this Section 11.1(H) if the same are the
voluntary actions taken by Borrower;
(I) Except as permitted in Section 11.1(G), a notice of lien, levy or
assessment is filed of record with respect all or any substantial portion of
Borrower's assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency including, without limitation, the Pension Benefit Guaranty
Corporation, or any taxes or debts owing to any of the foregoing becomes a lien
or encumbrance upon the Collateral or any of Borrower's other assets and such
lien or encumbrance is not released within forty-five (45) days after its
creation;
(J) Judgment(s) is or are rendered against Borrower in excess of
$25,000 and Borrower fails to commence appropriate proceedings to appeal such
judgment within the applicable appeal period or, after such appeal is filed,
Borrower fails to diligently prosecute such appeal or such appeal is denied;
(K) Borrower fails generally to pay its debts as they become due; or
(L) If any material adverse change in the business or financial
condition of Borrower occurs, or if any event that materially increases Lender's
risk or materially impairs the Collateral occurs.
11.2 ACCELERATION OF THE LIABILITIES. Upon and after the occurrence of
an Event of Default, all or any portion of the Liabilities may, at the option of
Lender and without demand, notice, or legal process of any kind, be declared,
and immediately shall become, due and payable; provided, however, that Borrower
may not accelerate the sums owing under the Income Sharing Agreement -- it being
the intention of the parties hereto that such sums shall continue to be due in
accordance with the payment terms contained in the Income Sharing Agreement and
such obligations shall continue to be secured by the Collateral until the
earlier of (i) all obligations under the Income Sharing Agreement are Paid In
Full or (ii) December 31, 2010.
11.3 REMEDIES. Upon and after the occurrence of an Event of Default,
Lender shall have all of the following rights and remedies:
(A) All of the rights and remedies of a secured party under the
Illinois Uniform Commercial Code or other applicable law, all of which rights
and remedies shall be cumulative, and none exclusive, to the extent permitted by
law, and in addition to any other rights and remedies contained in this
Agreement and in any of the Ancillary Agreements;
-22-
(B) The right to (i) peacefully enter upon the premises of Borrower or
any other place or places where the Collateral is located and kept, without any
obligation to pay rent to Borrower through self-help and without judicial
process or first obtaining a final judgment or giving Borrower notice and
opportunity for a hearing on the validity of Lender's claim, and remove the
Collateral from such premises and places to the premises of Lender or any agent
of Lender, for such time as Lender may require to collect or liquidate the
Collateral, and/or (ii) require Borrower to assemble and deliver the Collateral
to Lender at a place to be designated by Lender;
(C) The right to (i) open Borrower's mail and collect any and all
amounts due from Account Debtors provided that Lender forwards such mail to
Borrower, (ii) notify Account Debtors that the Accounts have been assigned to
Lender and that Lender has a security interest therein and (iii) direct such
Account Debtors to make all payments due from them upon the Accounts, including
the Special Collateral, directly to Lender or to a lock box designated by
Lender. Lender shall promptly furnish Borrower with a copy of any such notice
sent and Borrower hereby agrees that any such notice in Lender's sole
discretion, may be sent on Lender's stationery, in which event, Borrower shall,
upon demand, co-sign such notice with Lender; and
(D) The right to sell, lease or to otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as
provided in Section 11.4, in lots or in bulk, for cash or on credit, all as
Lender, in its sole discretion, may deem advisable. At any such sale or sales
of the Collateral, the Collateral need not be in view of those present and
attending the sale, nor at the same location at which the sale is being
conducted. Lender shall have the right to conduct such sales on Borrower's
premises or elsewhere and shall have the right to use Borrower's premises
without charge for such sales for such time or times as Lender may see it.
Lender hereby is granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit but Lender shall have no
obligations thereunder. Lender may purchase all or any part of the Collateral
at public or, if permitted by law, private sale and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the
Liabilities. The proceeds realized from the sale of any Collateral shall be
applied first to the reasonable costs, expenses and attorneys' and paralegals'
fees and expenses incurred by Lender for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of the Collateral;
second to interest due upon any of the Liabilities; and third to the principal
of the Liabilities. Lender shall account to Borrower for any surplus. If any
deficiency shall arise, Borrower shall remain liable to Lender therefor.
11.4 NOTICE. Borrower agrees that any notice required to be given by
Lender of a sale, lease, other disposition of any of the Collateral or any other
intended action by Lender,
-23-
which is personally delivered to Borrower or which is deposited in the United
States mail, postage prepaid and duly addressed to Borrower at the address set
forth in Section 13.10, at least ten (10) days prior to any such public sale,
lease or other disposition or other action being taken, or the time after which
any private sale of the Collateral is to be held, shall constitute commercially
reasonable and fair notice thereof to Borrower.
12. CONDITIONS PRECEDENT TO AGREEMENT.
12.1 The obligation of Lender to enter into this Agreement is subject to
the condition precedent that, Lender shall have received the following, duly
executed in form and substance satisfactory to Lender:
(A) This Agreement;
(B) A Senior Subordinated Secured Note in the original face amount of
$2,780,000 duly executed by Borrower, payable to the order of Lender in the form
of Exhibit 2.1(A) hereto;
(C) A Junior Subordinated Secured Note in the original face amount of
$1,000,000, duly executed by Borrower, payable to the order of Lender in the
form of Exhibit 2.1(B) hereto;
(D) An Income Sharing Agreement, in the form of Exhibit 2.1(C) hereto,
duly executed by Borrower and Lender;
(E) An Intercreditor and Subordination Agreement, in the form of
Exhibit 12.1(E) hereto, duly executed by Borrower, CIT and Lender;
(F) A Release, in the form of Exhibit 12.1(F) hereto, duly executed by
Borrower and EPR, Inc.;
(G) A Mortgage, in the form of Exhibit 12.1(G) hereto, duly executed by
Borrower and recorded in the recorder's office of the county in which the Real
Property is located;
(H) A Mortgagee's title insurance policy acceptable to Lender;
(I) A Standstill Agreement by any current or former member of
Borrower's Board of Directors holding more than 5% of Borrower's Stock, in the
form of Exhibit 12.1(I) hereto;
(J) A Standstill Agreement executed by Xxxxx Xxxxxx in the form of
Exhibit 12.1(I) hereto;
-24-
(K) A Standstill Agreement executed by Xxxxxx X. Xxxxxxxxxx in the form
of Exhibit 12.1(I) hereto;
(L) An acknowledgement by any bank or financial institution holding any
funds or negotiable instruments of Borrower in which Borrower or CIT has or may
have an interest that such bank or financial institution is holding such funds
or negotiable instruments for Lender's benefit and to perfect Lender's security
interest therein;
(M) UCC-1 and UCC-2 Financing Statements, as appropriate, duly executed
by Borrower, as Debtor, in favor of Lender, as Secured Party, in the
jurisdiction in which Borrower maintains its chief executive office and in each
other jurisdiction in which Borrower conducts its business operations and/or
maintains Collateral;
(N) UCC/Tax/Judgment Lien Search Reports dated not later than 30 days
prior to the Closing Date with respect to Borrower, together with duly executed
releases and/or termination statements of entities other than CIT as Lender may
request;
(O) Certificate of the Secretary of Borrower as to Officers and
Directors, Directors' Resolutions and miscellaneous matters dated not later than
30 days prior to the Closing Date;
(P) Favorable opinions of counsel for Borrower as to such matters as
Lender may reasonably request;
(Q) Certified copies of all policies (unless Lender is willing to
accept Certificate(s) of Insurance) in respect of all property, casualty,
liability and other insurance maintained by Borrower in respect to the
Collateral or otherwise in respect to its business, together with loss payable
and other endorsements acceptable as to form and substance to Lender;
(R) A Budget for the period January 1 through December 31, 1996
certified by an officer of Borrower as to the Closing Date;
(S) Schedule of Equipment certified by an officer of Borrower as to the
Closing Date;
(T) A fully executed escrow agreement, substantially in the form of
Exhibit 12.1(T) attached hereto;
(U) Payments by Borrower of legal, professional and appraisal fees in
the amount of $13,500;
(V) Payments by Borrower of accrued interest of $13,000; and
(W) Such other opinions, documents, assignments, certificates or
approvals as Lender reasonably may request.
-25-
All of the foregoing shall be in form and substance reasonably acceptable
to Lender and its counsel.
12.2 The obligation of Lender to enter into this Agreement is subject to
the further condition precedent that all proceedings taken in connection with
the transaction contemplated by this Agreement, and all instruments,
authorizations and other documents applicable thereto, shall be satisfactory in
form and substance to Lender and its counsel.
13. MISCELLANEOUS.
13.1 APPOINTMENT OF LENDER AS BORROWER'S LAWFUL ATTORNEY-IN-FACT.
Borrower, irrevocably designates, makes, constitutes and appoints Lender (and
all persons designated by Lender) as Borrower's true and lawful attorney and
agent in-fact and Lender, or Lender's agent, may, without notice to Borrower:
(A) At any time after the occurrence of an Event of Default, in
Borrower's or Lender's name: (i) demand payment of the Collateral; (ii) enforce
payment of the Collateral, by legal proceedings or otherwise; (iii) exercise all
of Borrower's rights and remedies with respect to the collection of the
Collateral; (iv) settle, adjust, compromise, extend or renew the Accounts and
the Special Collateral; (v) settle, adjust or compromise any legal proceedings
brought to collect the Collateral; (vi) if permitted by applicable law, sell or
assign the Collateral upon such terms, for such amounts and at such time or
times as Lender deems advisable; (vii) satisfy and release the Accounts and
Special Collateral; (viii) take control, in any manner, of any item of payment
or proceeds referred to in Section 4.1; (ix) prepare, file and sign Borrower's
name on any proof of claim in Bankruptcy or similar document against any Account
Debtor; (x) prepare, file and sign Borrower's name on any notice of lien,
assignment or satisfaction of lien or similar document in connection with the
Collateral; (xi) do all acts and things necessary, in Lender's sole discretion,
to fulfill Borrower's obligations under this Agreement; and (xii) endorse by
writing or stamp the name of Borrower upon any chattel paper, document,
instrument, invoice, freight xxxx, xxxx of lading or similar information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Collateral to which Borrower has access; and
(B) At any time after the occurrence of an Event of Default, notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by Lender and receive, open and dispose of all mail
addressed to Borrower.
13.2 MODIFICATION OF AGREEMENT: SALE OF INTEREST. This Agreement and
the Ancillary Agreements may not be modified, altered or amended, except by an
agreement in writing signed by Borrower and Lender. Borrower may not sell,
assign or transfer this Agreement or the Ancillary Agreements or any portion
hereof or thereof, including, without limitation, Borrower's right, title,
interest, remedies, powers, or duties hereunder or thereunder. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or
-26-
other disposition, at any time or times hereafter, of this Agreement or the
Ancillary Agreements or of any portion hereof or thereof, including, without
limitation, Lender's right, title, interest, remedies, powers, or duties
hereunder or thereunder.
13.3 ATTORNEYS' FEES AND EXPENSES: LENDER'S OUT-OF-POCKET EXPENSES.
If, at any time or times, whether prior to or subsequent to the date hereof and
regardless of the existence of an Unmatured Event of Default or an Event of
Default, Lender incurs legal or other costs and expenses or employs counsel,
accountants or other professionals for advice or other representation or
services in connection with:
(A) The preparation, negotiation and execution of this Agreement, all
Ancillary Agreements, and any amendment of or modification of this Agreement or
the Ancillary Agreements or any sale or attempted sale of any interest herein to
a Participant;
(B) Any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, Borrower or any other Person) in any way relating
to the Collateral, this Agreement, the Ancillary Agreements or Borrower's
affairs;
(C) Any attempt to enforce any rights of Lender or any Participant
against Borrower or any other Person which may be obligated to Lender or such
Participant by virtue of this Agreement or the Ancillary Agreements, including,
without limitation, the Account Debtors;
(D) Any attempt to inspect, verify, protect, collect, sell, liquidate
or otherwise dispose of any of the Collateral; or
(E) Any inspection, verification, protection, collection, sale,
liquidation or other disposition of any of the Collateral, including without
limitation, Lender's periodic or special audits of Borrower's books and records;
then in any such event, the reasonable attorneys' and paralegals' fees and
expenses arising from such services and all reasonably incurred expenses, costs,
charges and other fees of or paid by Lender in any way or respect arising in
connection with or relating to any of the events or actions described in this
Section 13.3 shall be payable by Borrower to Lender upon demand and shall be
additional Liabilities. Without limiting the generality of the foregoing, such
reasonable expenses, costs, charges and fees may include accountants' fees,
costs and expenses; court costs, fees and expenses; photocopying and duplicating
expenses; court reporter fees, costs and expenses; long distance telephone
charges; air express charges; telegram charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of all such
services.
13.4 NO WAIVER BY LENDER. Lender's failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement or of any Ancillary Agreement shall not constitute a waiver, or affect
or diminish any rights of Lender
-27-
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Unmatured Event of Default or Event of
Default under this Agreement or any Ancillary Agreement shall not suspend, waive
or affect any other Unmatured Event of Default or Event of Default under this
Agreement or the Ancillary Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or the Ancillary Agreements and no Unmatured Event
of Default or Event of Default under this Agreement or the Ancillary Agreements
shall be deemed to have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing signed by an officer of
Lender and directed to Borrower specifying such suspension or waiver.
13.5 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13. PARTIES; ENTIRE AGREEMENT. This Agreement and the Ancillary
Agreements shall be binding upon and inure to the benefit of the respective
successors and assigns of Borrower and Lender. Borrower's successors and
assigns shall include, without limitation, a trustee, receiver or debtor-in-
possession of or for Borrower. Nothing contained in this Section 13.6 shall be
deemed to modify Section 13.2. This Agreement is the complete statement of the
agreement by and between Borrower and Lender and supersedes all prior
negotiations, understandings and representations between them with respect to
the subject matter of this Agreement.
13.7 CONFLICT OF TERMS. The provisions of the Ancillary Agreements are
incorporated in this Agreement by this reference. Except as otherwise provided
in this Agreement and except as otherwise provided in the Ancillary Agreements
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in conflict with, or inconsistent with,
any provision in any Ancillary Agreement, the provision contained in this
Agreement shall govern and control.
13.8 WAIVER BY BORROWER. Except as otherwise provided for in this
Agreement, Borrower waives (i) presentment, demand and protest, notice of
protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard; (ii) except as
otherwise provided herein, all rights to notice and a hearing prior to Lender's
taking possession or control of, or to Lender's replevy, attachment or levy upon
the Collateral or any bond or security which might be required by any court
prior to allowing Lender to exercise any of Lender's remedies; and (iii) the
benefit of all valuation, appraisement, extension and
-28-
exemption laws. Borrower acknowledges that is has been advised by its own
counsel with respect to this Agreement and the transactions evidenced by this
Agreement.
13.9 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT HAS BEEN
DELIVERED FOR ACCEPTANCE BY LENDER IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS
OF LAW PROVISIONS) OF THE STATE OF ILLINOIS. BORROWER HEREBY (i) WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS AGREEMENT; (ii) SUBMITS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED IN XXXX COUNTY, ILLINOIS, OVER ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT;
(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING; (iv) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (v) AGREES NOT TO
INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST LENDER OR ANY OF LENDER'S
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN ONE LOCATED
IN XXXX COUNTY, ILLINOIS. NOTHING IN THIS SECTION 13.9 SHALL AFFECT OR IMPAIR
LENDER'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR LENDER'S
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION. LENDER HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR
RELATED TO THIS AGREEMENT.
13.10 NOTICE. Except as otherwise expressly provided for herein, any and
all notices given in connection with this Agreement shall be deemed adequately
given only if in writing and addressed to the party for whom such notices are
intended at the address set forth below. All notices shall be sent by personal
delivery, Federal Express or other overnight messenger service, first class
registered or certified mail, postage prepaid, return receipt requested,
facsimile transmission with a duplicate copy sent contemporaneously by U.S.
Mail, or by other means at least as fast and reliable as first class mail. A
written notice shall be deemed to have been given to the recipient party on the
earlier of (a) the date it shall be delivered to the address required by this
Agreement; (b) the date delivery shall have been refused at the address required
by this Agreement; or (c) with respect to notices sent by mail, the date as of
which the postal service shall have indicated such notice to be undeliverable at
the address required by this Agreement. Any and all notices referred to in this
Agreement, or which either party desires to give to the other, shall be
addressed as follows:
(a) If to Lender, at: Sanwa Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Group Vice President
Fax: (000) 000-0000
-29-
with a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxxx & Xxxxxx, Ltd.
00 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
If to Borrower, at: Xxxxxx Manufacturing, Inc.
000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx Xxxxxx, President and
Chief Executive Officer
Fax: (000) 000-0000
with a copy to: Xxxx Xxxxxx, Esq.
Winthrop & Weinstine, P.A.
3200 Minneapolis World Trade Center
00 Xxxx Xxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
The above addresses may be changed by notice of such changed, mailed as
provided herein, to the last address designated.
13.11 SECTION TITLES, ETC. The section titles and table of contents, if
any, contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto. All references herein to Sections, paragraphs, clauses and
other subdivisions refer to the corresponding Sections, paragraphs, clauses and
other subdivisions of this Agreement; and the words "herein", "hereof",
"hereby", "hereto", "hereunder", and words of similar import refer to this
Agreement as a whole and not to any particular Section, paragraph, clause or
subdivision hereof. All Exhibits which are referred to herein or attached
hereto are hereby incorporated by reference.
13.12 REPRESENTATION BY COUNSEL. Borrower hereby represents that it has
been represented by competent counsel of its choice in the negotiation and
execution of this Agreement and the Ancillary Agreements; that it has read and
fully understood the terms hereof and intends to be bound hereby. This
Agreement has been thoroughly reviewed by counsel for Borrower and in the event
of an ambiguity or conflict in the terms hereof, there shall be no presumption
against Lender as the drafter hereof.
-30-
13.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original agreement, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
specified at the beginning hereof.
XXXXXX MANUFACTURING, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Group Vice President
-31-
