EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of this 11th day
of August, 2006 by and between SLS INTERNATIONAL, INC., A DELAWARE CORPORATION
with an address at 0000 X. Xxxxxxx, Xxxxx, Xxxxxxxx 00000 ("Borrower") and
CAPITAL GROWTH ASSET BASED BRIDGE LOAN FUND II, LLC, with an address at 0000 XX
Xxxxxxxxx Xxxx., Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000 ("LENDER"). In connection
with the mutual covenants and agreements contained herein, the parties hereto
agrees as follows:
1. DEFINITIONS. All terms and phrases used herein which are defined in the
Uniform Commercial Code in the State of Florida, as amended from time
to time (the "UCC"), shall have the meanings given them in the UCC
unless otherwise defined herein. The following definitions shall apply
throughout this Agreement:
"AFFILIATE" means with respect to any Person in question, any other
Person owned or controlled by, or which owns or controls or is under
common control or is otherwise affiliated with such Person in question.
A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"BUSINESS DAY" means any day other than Saturday, Sunday or any other
day on which LENDER's office in Boca Raton, Florida is closed.
"COLLATERAL" has the meaning given it in Section 4.
"COST" means the lesser of actual cost or market value of Inventory.
"CREDIT FACILITIES" has the meaning given it in Section 2.
"ELIGIBLE INVENTORY" means and includes that inventory (other than
packaging materials, labels and supplies) which LENDER, in its sole
credit judgment, deems to be Eligible Inventory. Without limiting the
generality of the forgoing, no inventory shall be Eligible Inventory
unless: (i) it is finished goods or raw materials, (ii) at all times it
strictly complies with all of Borrower's warranties and representations
to LENDER, (iii) it is in good, new and salable condition (iv) it is
not slow moving or is not obsolete or unmerchantable, in LENDER's sole
and absolute discretion, (v) it meets all standards imposed by any
insurance company or underwriter or governmental agency or authority,
(vi) it is at all times subject to LENDER's duly perfected, first
priority security interest and there exists no other lien or
encumbrance other than as permitted hereunder, (vii) it is in
Borrower's possession and control situated at a location in compliance
with this Agreement, (viii) it is not in the hands of any third party,
including a warehouseman, finisher, consignee, etc., (ix) it is not
subject to any license or other agreement that limits, conditions, or
restricts Borrower's or LENDER's right to sell or otherwise dispose of
such Inventory, (x) is not of a type that LENDER, in its sole and
absolute discretion, has determined is not Eligible Inventory and (xi)
is not in the Borrower's possession based upon consignment, guaranteed
sale, or other terms by reason of which the payment by the Borrower may
be conditional.
"ENVIRONMENTAL LAWS" means any and all federal, state and local laws,
regulations, rules, orders, licenses, agreements or other governmental
restrictions relating to the protection of human health or the
environment or to emissions, discharges or releases of pollutants or
industrial, toxic or hazardous substances into the environment, or
otherwise relating to the manufacture, processing, treatment, transport
or handling of pollutants or industrial, toxic or hazardous substances.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA AFFILIATE" means with respect to any Person in question, any
Person that would be treated as a single employer with Borrower.
"ERISA PLAN" means any pension benefit plan subject to Title IV of
ERISA maintained by Borrower or any ERISA Affiliate thereof with
respect to which Borrower or any ERISA Affiliate has a fixed or
contingent liability.
"EVENT OF DEFAULT" has the meaning given it in Section 13.
"FACTOR" means Prestige Capital Corporation, or such other party as may
enter into Factor Loan Documents with Borrower.
"FACTOR LOAN DOCUMENTS" means that certain Purchase and Sale Agreement
and related documents between Factor and Borrower.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting
Standards Board (or any generally recognized successor), consistently
applied throughout the period involved.
"GUARANTORS" means Xxxx Xxxx, Xxxxxxx Xxxxxx and Xxxxxx Moist,
individually, who shall provide validity guarantees.
"INDEMNIFIED CLAIMS" means any and all claims, demands, actions, causes
of action, judgments, suits, liabilities, obligations, losses, damages
and consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including without limitation, fees and expenses of
attorneys and other professional consultants and experts in connection
with any investigation or defense) of every kind or nature, known or
unknown, existing or hereafter arising, foreseeable or unforeseeable,
which may be imposed upon, threatened or asserted against or incurred
or paid by any Indemnified Person at any time and from time to time,
because of or resulting from, in connection with or in any way relating
to or arising out of any of the Credit Facilities, the Collateral or
any other transaction, act, omission, event or circumstance in any way
connected with or contemplated by this Agreement or the other Loan
Documents or any action taken or omitted by any such Indemnified Person
under or in connection with any of the foregoing (including but not
limited to any investigation, litigation, proceeding, enforcement of
LENDER's rights or defense of LENDER's actions related to or arising
out of this Agreement or the other Loan Documents), whether or not any
Indemnified Person is a party hereto.
"INDEMNIFIED PERSON" shall collectively mean LENDER and its officers,
directors, shareholders, employees, attorneys, representatives, agents,
Affiliates, successors and assigns.
"INV BORROWING BASE" means an amount equal to the lesser of (a) 50% of
the Cost of Eligible Inventory or (b) 75% of net forced liquidation
value of the Eligible Inventory.
"INV LINE OF CREDIT" has the meaning given it in Section 2.
"INV LINE OF CREDIT AMOUNT" has the meaning given it in Section 2.
"LIEN" means any mortgage, lien, pledge, assignment, adverse claim,
charge, security interest or other encumbrance.
"LOAN" means the loans made by the LENDER to the Borrower hereunder,
and other the under the Note and otherwise in connection with the
Credit Facilities.
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"LOAN DOCUMENTS" means this Agreement, the Note, and all other
documents, agreements and instruments now or hereafter required by
LENDER to be executed and delivered in connection herewith, including,
without limitation, all documents, agreements and instruments
evidencing, securing, governing, guaranteeing and/or pertaining to the
Note and the Credit Facilities.
"NOTE" has the meaning given it in Section 3.
"OBLIGATIONS" means any and all loans, advances, debts, liabilities
(including, without limitation, any and all amounts charged to
Borrower's account pursuant to any agreement authorizing LENDER to
charge Borrower's account), obligations, covenants and duties owing by
Borrower to LENDER of any kind and description (whether advanced
pursuant to or evidenced by this Agreement, any of the other Loan
Documents, or any other instrument, or by any other agreement between
LENDER and Borrower and whether or not for the payment of money),
whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, whether pursuant to this
Agreement, as may be amended, modified, extended and/or restated, or
any of the other Loan Documents, or otherwise, and including, without
limitation, any debt, liability or obligation owing from Borrower to
others which LENDER may have obtained by assignment or otherwise, and
further including, without limitation, all interest not paid when due
and all costs and expenses which Borrower is required to pay or
reimburse by this Agreement, by law, or otherwise. All Obligations are
due and payable in full upon the expiration of the Term or any renewal
Term, if applicable.
"OBLIGORS" means Borrower and Guarantors.
"PERSON" means a corporation, association, partnership, limited
liability company, organization, business, individual, governmental or
political subdivision thereof or governmental agency.
"SUBORDINATED DEBT" means indebtedness owing by Borrower to a creditor
other than LENDER which has been subordinated and subject in right of
payment to the prior payment of all indebtedness and obligations now or
hereafter owing by Borrower to LENDER, such subordination to be
evidenced by a written agreement between LENDER and the subordinated
creditor which is in form and substance satisfactory to LENDER.
"TERM" means one (1) year from the date hereof, but shall be
automatically renewed for consecutive one (1) year terms unless
terminated by written notice of either party sixty (60) days prior to
the end of the initial Term or any renewal Term, which termination
shall be effective on an anniversary date of this Agreement. Notice of
such termination shall be effectuated by the mailing of a certified
letter, return receipt requested, not less than sixty (60) days
immediately prior to the effective date of such termination, addressed
to the other party at the address set forth in the opening paragraph of
this Agreement. A Facility Fee shall be due and payable upon every
renewal of the Term.
"TERMINATION EVENT" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) of
ERISA or (ii) any other reportable event described in Section 4043 of
ERISA other than a reportable event not subject to the provision for
30-day notice to the Pension Benefit Guaranty Corporation pursuant to a
waiver by such corporation under Section 4043(a) of ERISA; (b) the
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withdrawal of Borrower or any Affiliate of Borrower from any ERISA Plan
during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; or (c) any event or condition which
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
ERISA Plan.
2. CREDIT FACILITIES. Subject to the terms and conditions set forth in
this Agreement and the other Loan Documents, LENDER hereby agrees to
provide to Borrower the following Credit Facility or Facilities
(whether one or more, the "Credit Facilities"):
(a) INV Line of Credit. Subject to the terms and conditions set
forth herein, LENDER agrees to provide to Borrower a revolving
line of credit (the "INV Line of Credit") during the period
commencing on the date hereof and continuing through the
maturity date of the Note evidencing the INV Line of Credit
from time to time or such shorter period as provided herein.
Borrower may request advances under the INV Line of Credit
from time to time; provided; however, the total principal
amount outstanding at any time under the INV Line of Credit
shall not exceed the lesser of (i) an amount equal to the INV
Borrowing Base, or (ii) $2,000,000.00 (the "INV Line of Credit
Amount"). If at any time the aggregate principal amount
outstanding under the INV Line of Credit shall exceed an
amount equal to the INV Borrowing Base or the INV Line of
Credit Amount (an "Over Advance"), LENDER may, in LENDER's
sole and absolute discretion, require Borrower to (i)
immediately repay to LENDER such excess amount, plus all
accrued but unpaid interest thereon, or (ii) furnish LENDER
with such additional collateral (i.e., equipment or machinery)
that is valued, in LENDER's sole and absolute opinion, at or
greater than the excess amount. In the event of the existence
of an Over Advance, Borrower shall pay to LENDER, at LENDER's
discretion, an Over Advance Fee in the amount of $250.00 for
each day that the Over Advance is outstanding. Nothing
provided herein shall constitute consent by LENDER to such
Over Advance. Borrower may request advances under the INV Line
of Credit no more often than once each calendar day. Subject
to the terms and conditions set forth in this Agreement and in
the Note evidencing the INV Line of Credit from time to time,
Borrower may borrow, repay and re-borrow under the INV Line of
Credit. The sums advanced under the INV Line of Credit, shall
be used for working capital purposes.
3. PROMISSORY NOTE. Borrower agrees to execute, contemporaneously
herewith, a promissory note payable to the order of LENDER, in form and
substance acceptable to LENDER in LENDER's sole and absolute
discretion, for the Credit Facility provided hereunder to evidence the
indebtedness owing by Borrower to LENDER under such Credit Facility
(whether one or more, together with any renewals, extensions and
increases thereof, the "Notes or Note"). Interest on the Note shall
accrue at the rate set forth therein. The principal of and interest on
the Note shall be due and payable and may be prepaid in accordance with
the terms and conditions set forth in the Note and in this Agreement.
Subject to the terms of the Note and the other Loan Documents, Borrower
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may borrow, repay and reborrow thereunder. Notwithstanding the
foregoing, if Borrower repays any outstanding balance due on the Note
(in full or in part) and/or the available line is reduced at any time
during the term of the Loan, LENDER makes no representations and/or
guarantee to Borrower that funds will be available to Borrower if
Borrower requests additional or future advances on the line subsequent
to any repayment or pay down thereof. Borrower agrees to hold LENDER
harmless in all respects and hereby waives any rights Borrower may have
under the Note or any of the Loan Documents to pursue an action,
lawsuit, claim or the like against LENDER in the event that funds are
unavailable to advance subsequent to a repayment or pay down of any
portion of the Loan.
4. COLLATERAL. Borrower hereby grants to LENDER a continuing security
interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all
Obligations owed by Borrower to LENDER and in order to secure prompt
performance by Borrower of each and all of its covenants and
obligations under this Agreement, the Loan Documents and otherwise
created. LENDER's security interest in the Collateral shall attach to
all Collateral without further act on the part of LENDER or Borrower.
In the event that any Collateral, including proceeds, is evidenced by
or consists of negotiable instruments (the "Negotiable Collateral"),
Borrower shall, immediately upon written request therefore from LENDER,
endorse and assign such Negotiable Collateral over to LENDER and
deliver actual physical possession of the Negotiable Collateral to
LENDER.
Collateral means and includes the following:
Accounts Receivable. All of the Borrower's accounts as defined in the
UCC ("Accounts"); and all of the foregoing, whether or not now owned or
hereafter created or acquired.
Inventory. All inventory, goods, merchandise, and other personal
property now owned or hereafter acquired by the Borrower that are held
for sale or lease, or are furnished to or to be furnished under any
contract of services or are finished goods, raw materials,
work-in-process, supplies, or materials used or consumed in the
Borrower's business, and all products thereof, and all substitutions,
replacements, additions, or accessions therefor or thereto.
Proceeds. All cash and non-cash proceeds of the foregoing, including,
but not limited to, insurance proceeds, cash, checks, monies on deposit
in any bank or banks, accounts receivable, instruments, documents
chattel paper and general intangibles (as such terms are defined in the
UCC) received by the Borrower on the sale, lease, transfer or
assignment of the Accounts Receivable and Inventory; provided that this
provision shall not be construed as a waiver of any restriction
contained in this Agreement against alienating or encumbering the
Collateral.
LENDER may at any time and from time to time, file financing
statements, continuation statements and amendments thereto that
describe the Collateral as all assets of the Borrower or words of
similar effect and which contain any other information required by Part
5 of Revised Article 9 for the sufficiency or filing office acceptance
of any financing statement, continuation statement or amendment,
including whether the Borrower is an organization, the type of
organization and any organization identification number issued to the
Borrower. The Borrower agrees to furnish any such information to LENDER
promptly upon request.
5. GUARANTORS. As a condition precedent to LENDER's obligation to provide
the Credit Facilities to Borrower, Borrower agrees to cause the
Guarantors to each execute and deliver to LENDER contemporaneously
herewith a guaranty agreement, in form and substance acceptable to
LENDER in LENDER's sole and absolute discretion.
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6. FEES.
a) Facility Fee. Borrower shall pay to LENDER, concurrently with
the initial funding, a facility fee in the amount of
$30,000.00. Borrower hereby authorizes LENDER to collect such
fee by deducting such fee from the first advance under the
subject Credit Facilities. Borrower and LENDER acknowledge and
agree that the facility fee is reasonable compensation to
LENDER for making the subject Credit Facilities available to
Borrower and for no other purpose and are fully earned and
non-refundable under any and all circumstances upon initial
funding.
(b) Monitoring Fee. Borrower agrees to pay LENDER a monitoring fee
on the last day of each calendar month during the term of the
INV Line of Credit equal to one-half of one percent (.5%) of
funds advanced. If the first calendar month covers less than a
full month, the monitoring fee shall be prorated for such
month. The monitoring fees will be remitted directly from
Factor. Borrower and LENDER acknowledge and agree that such
fee is reasonable compensation to LENDER for the monitoring
and administration of the Credit Facilities. The monitoring
fee shall be due for every month, or portion thereof, during
the term of this Agreement.
The calculation of the monitoring fee will commence with the
date that funds are advanced and will end on the date that
cleared funds are received including three (3) clearing days
for in-state checks and five (5) days for out-of-state checks.
7. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants, and upon each request for an advance under the Credit
Facilities further represents and warrants, to LENDER as follows:
(a) Existence. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of
its incorporation or organization and is duly licensed,
qualified to do business and is in good standing in all other
states in which such licensing, qualification and good
standing are necessary. Borrower has all requisite power and
authority (i) to own and operate its properties, (ii) to carry
on its business as now conducted and as proposed to be
conducted, and (iii) to execute and deliver this Agreement and
the other Loan Documents to which Borrower is a party.
(b) Binding Obligations. The execution, delivery, and performance
of this Agreement and all of the other Loan Documents by
Borrower have been duly authorized by all necessary action by
Borrower, have been duly executed and delivered by Borrower
and constitute legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency or similar
laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles.
(c) No Consent. The execution, delivery and performance of this
Agreement and the other Loan Documents, and the consummation
of the transactions contemplated hereby and thereby, do not
(i) conflict with, result in a violation of, or constitute a
default under (A) any provision of Borrower's articles or
certificate of incorporation, articles or certificate of
organization, operating agreement, regulations, partnership
agreement or bylaws, as the case may be, (B) any law,
governmental regulation, court decree or order applicable to
Borrower, or (C) any other document or agreement to which
Borrower is a party, or (ii) require the consent, approval or
authorization of any third party, except for Factor.
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(d) Financial Condition. Each financial statement of Borrower
supplied to LENDER is true, correct and complete in all
material respects and fairly presents Borrower's financial
condition in all material respects as of the date of each such
statement. There has been no material adverse change in such
financial condition or results of operations of Borrower
subsequent to the date of the most recent financial statement
supplied to LENDER.
(e) Litigation. Except for those items disclosed by the Borrower
in its public filings with the Securities and Exchange
Commission, there are no actions, suits or proceedings,
pending or, to the knowledge of Borrower, threatened against
or affecting Borrower or the properties of Borrower, before
any court or governmental department, commission or board,
which, if determined adversely to Borrower, would have a
material adverse effect on the business, financial condition,
properties, operations or prospects of Borrower.
(f) Taxes: Governmental Charges. Borrower has filed all federal,
state and local tax reports and returns required by any law or
regulation to be filed by it and has either duly paid all
taxes, duties and charges indicated due on the basis of such
returns and reports, or made adequate provision for the
payment thereof, and the assessment of any material amount of
additional taxes in excess of those paid and reported is not
reasonably expected. There is no tax Lien notice against
Borrower or its properties presently on file.
(g) ERISA Compliance. Borrower is in compliance with ERISA
concerning Borrower's ERISA Plan, if any, or is not required
to contribute to any "multi-employer plan" as defined in
Section 401 of ERISA.
(h) Compliance with Laws. Borrower is conducting its business in
material compliance with all statutes, rules, regulations
and/or ordinances imposed by any governmental unit upon
Borrower or upon its businesses, 'operations and property
(including, without limitation, all Environmental Laws).
Borrower has all permits and licenses necessary for the
operations of its business as presently conducted and as
proposed to be conducted.
(l) Ownership of Collateral; UCC-1 Financing Statements. Except as
held by Factor or otherwise expressly permitted by LENDER,
Borrower is the sole owner of the Collateral, free and clear
of any and all liens or encumbrances, and will defend the same
against all claims and demands of all persons whomsoever. No
dispute, right of setoff, counterclaim or defense exists with
respect to all or any part of the Collateral. Borrower
covenants and agrees that other than those held by Factor
there are no UCC-1 Financing Statements filed with the State
of Delaware that are or will be superior in lien priority to
the UCC-1 Financing Statement(s) LENDER is filing in
connection with the Loan.
(m) Security Interest. Borrower has and will have at all times
full right, power and authority to grant a security interest
in the Collateral to LENDER in the manner provided herein,
free and clear of any lien, security interest or other charge
or encumbrance (other than those in favor of Factor, LENDER or
otherwise expressly permitted by LENDER in the other Loan
Documents or herein). This Agreement creates a legal, valid
and binding security interest in favor of LENDER in the
Collateral securing the Obligations.
(n) Location. Borrower's residence or chief executive office, as
the case may be, and the office where the records concerning
the Collateral are kept is located at its address set forth on
the signature page hereof. Except as specified elsewhere
herein, all Collateral shall be kept at such address and such
other addresses as may be approved by LENDER in writing.
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(o) Preferred Stock. There are at least three thousand seven
hundred and fifty (3750) shares of the Borrower's Series C
Preferred Stock (the "Preferred Stock") outstanding, and the
majority of the holders of such Preferred Stock have not
approved providing collateral to the LENDER other than the
Collateral. The Borrower shall not request any such approval
for any creditor other than the LENDER without the LENDER's
prior written consent. The entering into this Loan Agreement
and the Loan Documents is authorized under the terms of the
Preferred Stock
(p) Use of Collateral. The Borrower shall keep the Collateral in
good order and repair and shall protect the Collateral from
waste, loss, or damage. The Borrower shall not cause or permit
the Collateral to be attached or affixed to real estate in
such manner that it will become a fixture. Borrower shall not
use or permit the use of the Collateral in violation of any
applicable law, statute, ordinance, or regulation. Except for
the sale of Inventory in the ordinary course of the Borrower's
business, the Borrower shall not remove any collateral from
the address set forth below for the giving of notices to the
Borrower. Additionally, Borrower shall not be permitted to
sell, convey or transfer any of its Inventory to any
individual or third party purchaser for cash unless Borrower
first obtains LENDER's express written consent and
authorization.
(q) Liens, Encumbrances, and Taxes. The Borrower shall keep the
Collateral free and clear of any and all liens and
encumbrances, excepting only the liens in favor of Factor, the
lien created by this Agreement and the UCC-1 Financing
Statements filed by LENDER herewith or those expressly
permitted by LENDER in connection with any other financing
relationship acknowledged and approved by LENDER. The Borrower
shall pay when due all taxes, fees, or assessments imposed
upon or with respect to the Collateral.
Borrower (i) will timely pay all property and other taxes,
assessments and governmental charges or levies imposed upon
the Collateral or any part thereof: (ii) will timely pay all
lawful claims which, if unpaid, might become a lien or charge
upon the Collateral or any part thereof, and (iii) will
maintain appropriate accruals and reserves for all such
liabilities in a timely fashion in accordance with generally
accepted accounting principles. Borrower may, however, delay
paying or discharging any such taxes, assessments, charges,
claims or liabilities so long as the validity thereof is
contested in good faith by proper proceedings and provided
Borrower has set aside on Borrower's books adequate reserves
therefor; provided, however, Borrower understands and agrees
that in the event of any such delay in payment or discharge
and upon LENDER's written request, Borrower will establish
with LENDER an escrow acceptable to LENDER adequate to cover
the payment of such taxes, assessments and governmental
charges with interest, costs and penalties and a reasonable
additional sum to cover possible costs, interest and penalties
(which escrow shall be returned to Borrower upon payment of
such taxes, assessments, governmental charges, interests,
costs and penalties or disbursed in accordance with the
resolution of the contest to the claimant) or furnish LENDER
with an indemnity bond secured by a deposit in cash or other
security acceptable to LENDER.
(r) Insurance. The Borrower shall keep the Collateral insured at
Borrower's sole cost and expense against fire or other
casualty in an amount equal to its full insurable value.
Borrower shall name LENDER as a loss payee and additional
insured as its interests may appear on all such policies, with
priority in payment to the LENDER. Such insurance shall be
obtained under policies that are acceptable to LENDER in all
respects and that are not subject to cancellation or
modification by the insurer without at least 10 days' prior
written notice to the LENDER. The Borrower shall furnish the
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LENDER with such evidence of the Borrower's compliance with
this Section as the LENDER may, from time to time, reasonably
require. Borrower will also, at the request of LENDER, duly
execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to
acknowledge notice of such assignment. All insurance payments
in respect of loss of or damage to any Collateral shall be
paid to LENDER and applied as LENDER in its sole discretion
deems appropriate. Notwithstanding the foregoing, all proceeds
payable under the insurance policy to LENDER may, upon receipt
by LENDER and absent and Event of Default, be applied to
repair or replace the damaged and/or affected Collateral. If
an Event of Default shall have occurred and is continuing, all
such proceeds shall be applied on account of the Obligations
owing to LENDER.
(s) Possession of Collateral. Until there is a default under the
terms of this Agreement, the Borrower may retain possession of
the Collateral and may use the Collateral in a manner not
inconsistent with this Agreement.
(t) Landlords' Agreements, Mortgagee Agreements, Bailee Letters
and Real Estate Purchases. If applicable, Borrower shall use
commercially reasonable efforts to obtain a landlord's
agreement, mortgagee agreement or bailee letter, as
applicable, from the lessor of each leased property, mortgagee
of owned property or bailee with respect to any warehouse,
processor or converter facility or other location where
Collateral is stored or located, which agreement or letter
shall contain a waiver or subordination of all liens or claims
that the landlord, mortgagee or bailee may assert against the
Collateral at that location, and shall otherwise be reasonably
satisfactory in form and substance to LENDER. After the
closing date, no real property or warehouse space shall be
leased by Borrower and no Inventory shall be shipped to a
processor or converter under arrangements established after
the closing date unless a satisfactory landlord agreement or
bailee letter, as appropriate, shall first have been obtained
with respect to such location. Borrower shall timely and fully
pay and perform its obligations under all leases and other
agreements with respect to each leased location or public
warehouse where any Collateral is or may be located.
(u) Further Assurances. Borrower will from time to time at its
expense promptly execute and deliver all further instruments
and documents and take all further action necessary or
appropriate or that LENDER may request in order (i) to perfect
and protect the security interest created or purported to be
created hereby and the first priority of such security
interest, (ii) to enable LENDER to exercise and enforce its
rights and remedies hereunder in respect of the Collateral,
and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing such
financing or continuation statements, or amendments thereto;
and (B) furnishing to LENDER from time to time statements and
schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral, all
in reasonable detail satisfactory to LENDER.
8. CONDITIONS PRECEDENT TO ADVANCES. LENDER's obligation to make
any advance under this Agreement and the other Loan Documents
shall be subject to the conditions precedent that, as of the
date of such advance and after giving effect thereto (i) all
representations and warranties made to LENDER in this
Agreement and the other Loan Documents shall be true and
correct, as of and as if made on such date, (ii) no material
adverse change in the financial condition of Borrower or its
business since the effective date of the most recent financial
statements furnished to LENDER by Borrower shall have
Page 9 of 20
occurred, (iii) no Event of Default shall have occurred and no
event has occurred and is continuing, or would result from the
requested advance, which with notice or lapse of time, or
both, would constitute an Event of Default (as hereinafter
defined), (iv) LENDER shall have received all Loan Documents
appropriately executed by Borrower and all other proper
parties and all such Loan Documents are in full force and
effect, and (v) LENDER shall have received all fees and
expenses owing to LENDER under this Agreement and the other
Loan Documents.
9. AFFIRMATIVE COVENANTS. Until the later to occur of: (i) the Notes and
all other obligations and liabilities of Borrower under this Agreement
and the other Loan Documents are fully paid and satisfied, and (ii)
LENDER has no further commitment to lend hereunder, Borrower agrees and
covenants that it will, unless LENDER shall otherwise consent in
writing (which consent may be withheld by LENDER in LENDER's sole and
absolute discretion):
(a) Accounts and Records. Maintain its books and records in
accordance with GAAP.
(b) Right of Inspection. Permit LENDER to visit its properties and
installations and to examine and make and take away copies or
reproductions of Borrower's books and records, at all
reasonable times. Borrower agrees to pay all costs associated
with any such examinations, at a rate equal to $750 per day,
per person, plus out-of- pocket expenses.
(c) Right to Additional Information. Furnish LENDER with such
additional information and statements, lists of assets and
liabilities, tax returns, and other reports with respect to
Borrower's financial condition and business operations as
LENDER may request from time to time.
(d) Compliance with Laws. Conduct its business in an orderly and
efficient manner consistent with good business practices, and
perform and comply with all statutes, rules, regulations
and/or ordinances imposed by any governmental unit upon
Borrower, its businesses, operations and properties (including
without limitation, all Environmental Laws).
(e) Taxes. Pay and discharge when due all assessments, taxes,
governmental charges and levies, of every kind and nature,
imposed upon Borrower or its properties, income or profits,
prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a Lien upon any of
Borrower's property, income or profits; provided, however,
Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy or claim so long as (i) same
shall be contested in good faith by appropriate judicial,
administrative or other legal proceedings timely instituted,
(ii) Borrower shall have established adequate reserves with
respect to such contested assessment, tax, charge, levy or
claim in accordance with GAAP, and deposit such reserves with
LENDER, and (iii) the perfection and priority of LENDER's
security interest in the Collateral, or the value of the
Collateral, is not impaired.
(f) Insurance. Maintain, with financially sound and reputable
insurers, such insurance as deemed necessary or otherwise
required by LENDER, including but not limited to, fire
insurance, comprehensive property damage, public liability,
worker's compensation and business interruption insurance, in
such amounts, with such deductibles and with such carriers as
LENDER shall approve. In addition Borrower shall at all times
maintain public liability insurance, in such amounts, with
such deductibles and with such carriers as LENDER shall
approve, naming LENDER as additional insured. Borrower shall
also maintain worker's compensation insurance and will
provided ELNDER with proof of such coverages. Borrower shall
maintain business interruption insurance naming LENDER as loss
payee, in such amounts, with such deductibles and with such
carriers as LENDER shall approve.
Page 10 of 20
(g) Notice of Material Change/Litigation. Borrower shall promptly
notify LENDER in writing (i) of any material adverse change in
Borrower's financial condition or its businesses, and (ii) of
any litigation or claims against Borrower, which could
materially affect Borrower or its business operations,
financial condition or prospects.
(h) Organizational Existence. Maintain its organizational
existence and good standing in the state of its incorporation
or organization and its qualification and good standing in all
other states where required by applicable law.
(i) ERISA. Borrower shall promptly notify LENDER in writing of the
adoption or amendment of any plan that results in the
representations in Subsection 7(g) no longer being true and
correct.
(j) Additional Documentation. Execute and deliver, or cause to be
executed and delivered, any and all other agreements,
instruments or documents which LENDER may reasonably request
in order to give effect to the transactions contemplated under
this Agreement and the other Loan Documents.
(k) Factoring Relationship. Borrower shall be obligated to
maintain its factoring relationship with Factor at all times
during the term of the Loan and this Agreement. At all times
Borrower shall have not less than ninety percent (90%) in
dollar volume of its Accounts Receivable collected by the
Factor. Borrower's failure to do so shall be deemed an Event
of Default wherein LENDER shall have the right to exercise all
rights and remedies available to it under this Agreement and
the Loan Documents.
(l) Consignment Inventory. Borrower has taken all steps necessary,
including filing of all necessary UCC-1 financing statements,
in order to perfect its ownership of and all other rights in
Inventory consigned to third parties, and to protect LENDER's
first priority security interest in such consigned Inventory.
10. NEGATIVE COVENANTS. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) LENDER has no further
commitment to lend hereunder, Borrower will not, without the prior
written consent of LENDER (which consent may be withheld in LENDER's
sole and absolute discretion):
(a) Nature of Business. Make any material change in the nature of
its business as carried on as of the date hereof.
(b) Liquidations; Mergers; Consolidations; Acquisitions; Name
Change. Liquidate, merge or consolidate with or into any other
Person, convert from one type of legal entity to another type
of legal entity, form or acquire any new subsidiary or acquire
by purchase or otherwise all or substantially all of the
assets of any other Person, or change its name or operate
under any new trade or assumed names.
(c) Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange
of property or the rendering of any service, with any
Affiliate of Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's
business, upon fair and reasonable terms no less favorable to
Borrower than would be obtained in a comparable arm's-length
transaction with a person or entity not an Affiliate of
Borrower and in accordance with the terms and provisions of
the Loan Documents.
Page 11 of 20
(d) Sale of Assets. Sell, lease, transfer or otherwise dispose of
all or substantially all of its assets or properties, other
than inventory sold in the ordinary course of business and as
necessary to replace obsolete equipment.
(e) Transfer of Ownership. Permit the sale, pledge or other
transfer of any of the ownership interest in Borrower, other
than in connection with the conversion, sale, or transfer of
the Preferred Stock.
(f) Change in Management. Permit a change in the senior management
of Borrower.
(g) No Disposition of Collateral; Ownership and Liens; Defense.
Except for its Inventory, which the Borrower may sell, lease,
or otherwise transfer in the ordinary course of the Borrower's
business, and except for Borrower's Equipment (including
vehicles utilized by Borrower in operating Borrower's
business) that is replaced in the ordinary and usual course of
Borrower's business with equipment (and vehicles, as
applicable) of equal or greater value, Borrower shall not
sell, transfer, lease, or otherwise dispose of the Collateral.
Borrower will not permit any dispute, right of setoff,
counterclaim or defense to exist with respect to all or any
part of the Collateral. Borrower will defend, at Borrower's
sole cost and expense, LENDER's right, title and security
interest in and to the Collateral against the claims of any
third party.
(h) Goods. Borrower will not permit any Collateral which
constitutes goods to at any time (i) be covered by any
document except documents in the possession of the LENDER,
(ii) become so-related to, attached to or used in connection
with any particular real property so as to become a fixture
upon such real property, or (ii) be installed in or affixed to
other goods so as to become an accession to such other goods
unless such other goods are subject to a perfected first
priority security interest under this Agreement.
(i) Compromise of Collateral. Borrower will not adjust, settle,
compromise, amend or modify any Collateral, except an
adjustment, settlement, compromise, amendment or modification
in good faith and in the ordinary course of business;
provided, however, this exception shall automatically
terminate upon the occurrence of an Event of Default or upon
LENDER's written request Borrower shall provide to LENDER such
information concerning (i) any adjustment, settlement,
compromise, amendment or modification of any Collateral, and
(ii) any claim asserted by any account Borrower for credit,
allowance, adjustment, dispute, setoff or counterclaim, as
LENDER may request from time to time.
11. REPORTING REQUIREMENTS. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) LENDER has no further
commitment to lend hereunder, Borrower will, unless LENDER shall
otherwise consent in writing, furnish to LENDER:
(a) Financial Statements. The following unaudited financial
statements: (i) within 75 days after the last day of each
fiscal year of Borrower a consolidated statement of income and
a consolidated statement of cash flows of Borrower for such
fiscal year, and a consolidated balance sheet of Borrower as
of the last day of such fiscal year; (ii) within 30 days after
the last day of each fiscal month of Borrower, an unaudited
Page 12 of 20
consolidated statement of income and statement of cash flows
of Borrower for such fiscal month, and an unaudited
consolidated balance sheet of Borrower as of the last day of
such fiscal month (which need not be prepared in accordance
with GAAP); and (ii) within 40 days after the last day of each
fiscal quarter of Borrower, an unaudited consolidated
statement of income and statement of cash flows of Borrower
for such fiscal quarter, and an unaudited consolidated balance
sheet of Borrower as of the last day of such fiscal quarter.
Borrower represents and warrants that each such statement of
income and statement of cash flows will fairly present, in all
material respects, the results of operations and cash flows of
Borrower for the period set forth therein, and that each such
balance sheet will fairly present, in all material respects,
the financial condition of Borrower as of the date set forth
therein, all in accordance with GAAP (other than as provided
above), (and subject to year-end review adjustments).
(b) Borrowing Base Report. An Advance Request/Borrowing Base
Certificate, in the form attached hereto as Schedule A,
contemporaneously with each advance requested under the INV
Line of Credit and within 3 Business Days after the end of
each week, and within 5 Business Days after the end of each
month.
(c) Inventory Listing. A list of Borrower's inventory by location
and type (to include the following: raw materials, work in
process and finished goods) within 3 Business Days after the
end of each week, and 5 Business Days after the end of each
month, in form and detail satisfactory to LENDER.
(d) Additional Reporting Requirements. Borrower shall furnish
LENDER with the following information:
(i) Monthly Business Financial Statements by the 30th day
of the following month.
(ii) Monthly Accounts Payable Aging Reports by the 10th
day of the following month.
(iii) Quarterly Payroll Tax Deposit Reports by the 20th day
of the following month.
(iv) Annual Business Tax Returns within twenty (20) days
after such returns are filed.
(v) Weekly Inventory Summary Reports delivered every
Monday during the Term of the Loan containing a
detail synopsis and description of the Inventory
warehoused by Borrower at the time the report is
generated.
(vi) Copies of all filings with state and federal
regulatory authorities, upon the filing of such
filings.
12. EVENTS OF DEFAULT. Each of the following shall constitute an "Event of
Default" under this Agreement and the other Loan Documents:
(a) Failure to Pay Indebtedness. Borrower shall fail to pay as and
when due any part of the principal of, or interest on, the
Notes or any other indebtedness or obligations now or
hereafter owing to LENDER by Borrower.
(b) Non-Performance of Covenants. Any of the Obligors shall breach
any covenant or agreement made herein, in any of the other
Loan Documents, or in any other agreement now or hereafter
entered into between any of the Obligors and LENDER.
(c) False Representation. Any warranty or representation made
herein, or in any of the other Loan Documents shall be false
or misleading in any material respect when made.
(d) Default Under Other Loan Documents. The occurrence of an event
of default under any of the other Loan Documents, or any other
agreement now or hereafter entered into between any of the
Obligors and LENDER.
Page 13 of 20
(e) Untrue Financial Report. Any report, certificate, schedule,
financial statement, profit and loss statement or other
statement furnished by any Obligor, or by any other person on
behalf of any Obligor, to LENDER is not true and correct in
any material respect.
(f) Default to Third Party. The occurrence of any event which
permits the acceleration of the maturity of any indebtedness
owing by any of the Obligors to any third party under any
agreement or undertaking, including FACTOR.
(g) Bankruptcy. The filing of a voluntary or involuntary case by
or against any of the Obligors under the United States
Bankruptcy Code or other present or future federal or state
insolvency, bankruptcy or similar laws, or the appointment of
a receiver, trustee, conservator or custodian for a
substantial portion of the assets of any of the Obligors.
(h) Insolvency. Any of the Obligors shall become insolvent, make a
transfer in fraud of creditors or make an assignment for the
benefit of creditors.
(i) Involuntary Lien. The filing or commencement of any
involuntary Lien, garnishment, attachment or the like shall be
issued against or with respect to the Collateral.
(j) Material Adverse Change. A material adverse change shall have
occurred in the financial condition, business prospects or
operations of any of the Obligors.
(k) Tax Lien. Any of the Obligors shall have a federal or state
tax Lien filed against any of its properties.
(l) Execution on Collateral. The Collateral or any portion thereof
is taken on execution or other process of law.
(m) ERISA Plan. Either (i) any "accumulated funding deficiency"
(as defined in Section 412(a) of the Internal Revenue Code of
1986, as amended) in excess of $25,000 exists with respect to
any ERISA Plan of Borrower or its ERISA Affiliate, or (ii) any
Termination Event occurs with respect to any ERISA Plan of
Borrower or its ERISA Affiliate and the then current value of
such ERISA Plan's benefit liabilities exceeds the then current
value of such ERISA Plan's assets available for the payment of
such benefit liabilities by more than $25,000.
(n) Guarantor's Obligations. If any of the obligations of any
Guarantor is limited or terminated by operation of law or by
such Guarantor, or any such Guarantor becomes the subject of
an insolvency proceeding.
(o) Judgment. The entry against any of the Obligors of a final and
nonappealable judgment for the payment of money in excess of
$25,000 (not covered by insurance satisfactory to LENDER in
LENDER's sole discretion).
(p) Failure to Maintain Factoring Relationship. Borrower failure
to maintain its factoring relationship with Factor at all
times during the term of the Loan and this Agreement.
(q) Loss of or Damage to Collateral. Collateral with a book value
of $25,000.00 or more, as determined from the Borrower's
books, is lost, destroyed, stolen, or substantially damaged,
and such loss, destruction, theft, or damage is not covered by
insurance, or the Collateral, or any portion thereof, is
voluntarily or involuntarily taken on execution or other
process of law.
Page 14 of 20
(r) Foreclosure Suit. Commencement of a foreclosure action or
proceeding by any third party against the Collateral if the
LENDER reasonably determines that such action or proceeding
would jeopardize the security interest created by this
Agreement.
(s) Entry of Judgment; Involuntary Lien. The entry of a final
judgment, order or decree against Borrower for the payment of
money in excess of $25,000 that is not covered by insurance
satisfactory to LENDER in LENDER's sole and absolute
discretion, or the filing or commencement of any involuntary
lien, garnishment, attachment or the like shall be issued
against or with respect to any of the Collateral.
(t) Loss of or Damage to Collateral. Collateral with a book value
of $25,000.00 or more, as determined from the Borrower's
books, is lost, destroyed, stolen, or substantially damaged,
and such loss, destruction, theft, or damage is not covered by
insurance, or the Collateral, or any portion thereof, is
voluntarily or involuntarily taken on execution or other
process of law.
Nothing contained in this Loan Agreement shall be construed to limit
the events of default enumerated in any of the other Loan Documents and
all such events of default shall be cumulative.
13. REMEDIES.
Upon the occurrence of an Event of Default by Borrower under this
Agreement, LENDER may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:
A. Declare all Obligations, whether arising pursuant to this Agreement
or otherwise, immediately due and payable;
B. Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
LENDER;
C. Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of LENDER, but without affecting LENDER's
rights and security interest in the Collateral and without affecting the
Obligations owing by Borrower to LENDER;
D. LENDER or LENDER's designee may notify customers, account debtors or
lessees of Borrower that the Accounts have been assigned to LENDER and that
LENDER has a security interest therein, collect them directly, and charge the
reasonable collection costs and expenses to Borrower's loan account;
Page 15 of 20
E. Without notice to or demand upon Borrower or any Guarantor, make
such payments and do such acts as LENDER considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if LENDER so requires, and to make the Collateral available to LENDER
as LENDER may designate. Borrower authorizes LENDER to enter the premises where
the Collateral is located, take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest or compromise any encumbrance,
charge or lien which in the opinion of LENDER appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith;
F. LENDER is hereby 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 completing production of,
advertising for sale and selling any Collateral and Borrower's rights under all
licenses, and all franchise agreements shall insure to LENDER's benefit;
G. Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale and sell (in the manner provided for herein) the
Collateral;
H. Sell the Collateral at either a public or private sale, or both, by
way of one or more contracts or transactions, for cash or on terms. It is not
necessary that the Collateral be present at any such sale;
I. In connection with any such sale, the standard of commercial
reasonableness will be deemed satisfied if LENDER does the following:
(i) Location of Sale(s). The sale(s) may be conducted at
Borrower's premises, LENDER's premises, the premises of any
third party located in or adjacent to any county in which any
of the collateral is located, or any other location which
LENDER believes is reasonably convenient to potential
purchasers. The selection of any such location(s) shall be in
the sole and absolute discretion of LENDER.
Page 16 of 20
(ii) Notice of Sale. LENDER shall give notice of the disposition of
the Collateral as follows:
(a) LENDER shall give Borrower and each holder of a
security interest in the Collateral who has filed
with LENDER a written request for notice, a notice in
writing of the time and place of public sale, or, if
the sale is a private sale or some other disposition
other than a public sale is to be made of the
Collateral, the time on or after which the private
sale or other disposition is to be made;
(b) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section
17, at least ten (10) calendar days before the date
fixed for the sale, or at least ten (10) calendar
days before the date on or after which the private
sale or other disposition is to be made, unless the
Collateral is perishable or threatens to decline
speedily in value. Notice to persons other than
Borrower claiming an interest in the Collateral shall
be sent to such addresses as they have furnished to
LENDER;
(c) If the sale is to be a public sale, LENDER shall also
give notice of the time and place by publishing a
notice one time at least ten (10) calendar days
before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be
held;
J. LENDER may credit bid and purchase at any public sale;
K. If LENDER sells any of the Collateral upon Credit, Borrower will be
credited only with payments actually made by the purchaser, received by LENDER
and applied to the indebtedness of the purchaser. In the event the purchaser
fails to pay for the Collateral, LENDER may resell the Collateral and Borrower
shall be credited with the net proceeds of sale.
L. Borrower shall pay all reasonable LENDER Expenses incurred in
connection with LENDER's enforcement and exercise of any of its rights and
remedies as herein provided, whether or not suit is commenced by LENDER;
M. Any deficiency which exists after disposition of the Collateral as
provided above will be paid immediately by Borrower. Any excess will be
returned, without interest and subject to the rights of third parties, to
Borrower by LENDER.
Page 17 of 20
LENDER's rights and remedies under this Agreement and all other
agreements shall be cumulative. LENDER shall have all other rights and
remedies not inconsistent herewith as provided under the UCC, by law,
or in equity. No exercise by LENDER of one right or remedy shall be
deemed an election, and no waiver by LENDER of any default on
Borrower's part shall be deemed a continuing waiver. No delay by LENDER
shall constitute a waiver, election or acquiescence by it.
14. INDEMNIFICATION. Borrower hereby indemnifies and agrees to hold
harmless and defend all Indemnified Persons from and against any and
all Indemnified Claims. THE FOREGOING INDEMNIFICATION SHALL APPLY
WHETHER OR NOT SUCH INDEMNIFIED CLAIMS ARE IN ANY WAY OR TO ANY EXTENT
OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT
LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY INDEMNIFIED PERSON, but shall exclude any of the
foregoing resulting from such Indemnified Person's gross negligence or
willful misconduct. If Borrower or any third party ever alleges any
gross negligence or willful misconduct by any Indemnified Person, the
indemnification provided for in this Section shall nonetheless be paid
upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment as to
the extent and affect of the alleged gross negligence or willful
misconduct. Upon notification and demand, Borrower agrees to provide
defense of any Indemnified Claim and to pay all costs and expenses of
counsel selected by any Indemnified Person in respect thereof. Any
Indemnified Person against whom any Indemnified Claim may be asserted
reserves the right to settle or compromise any such Indemnified Claim
as such Indemnified Person may determine in its sole discretion, and
the obligations of such Indemnified Person, if any, pursuant to any
such settlement or compromise shall be deemed included within the
Indemnified Claims. Except as specifically provided in this Section,
Borrower waives all notices from any Indemnified Person. The provisions
of this Section shall survive the termination of this Agreement.
15. RIGHTS CUMULATIVE. All rights of LENDER under the terms of this
Agreement shall be cumulative of, and in addition to, the rights of
LENDER under any and all other agreements between Borrower and LENDER
(including, but not limited to, the other Loan Documents), and not in
substitution or diminution of any rights now or hereafter held by
LENDER under the terms of any other agreement.
16. WAIVER AND AGREEMENT. Neither the failure nor any delay on the part of
LENDER to exercise any right, power or privilege herein or under any of
the other Loan Documents shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or privilege
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. No waiver of any provision in this
Loan Agreement or in any of the other Loan Documents and no departure
by Borrower therefrom shall be effective unless the same shall be in
writing and signed by LENDER, and then shall be effective only in the
specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan
Agreement or to any of the other Loan Documents shall be valid or
effective unless the same is signed by the party against whom it is
sought to be enforced.
17. BENEFITS AND TERM. This Agreement shall be binding upon and inure to
the benefit of LENDER and Borrower, and their respective successors and
assigns; provided, however, that Borrower may not, without the prior
written consent of LENDER, assign any rights, powers, duties or
obligations under this Agreement or any of the other Loan Documents.
18. NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be
in writing and given by (i) personal delivery, (ii) expedited delivery
service with proof of delivery, (iii) United States mail, postage
prepaid, registered or certified mail, return receipt requested, or
Page 18 of 20
(iv) telecopy (with receipt thereof confirmed by telecopier) sent to
the intended addressee at the address set forth on the signature page
hereof and shall be deemed to have been received either, in the case of
personal delivery, as of the time of personal delivery, in the case of
expedited delivery service, as of the date of first attempted delivery
at the address and in the manner provided herein, in the case of mail,
three (3) days after deposit in a depository receptacle under the care
and custody of the United States Postal Service, or in the case of
telecopy, upon receipt. Either party shall have the right to change its
address for notice hereunder to any other location within the
continental United States by notice to the other party of such new
address at least thirty (30) days prior to the effective date of such
new address.
19. GOVERNING LAW, VENUE, SUBMISSION TO JURISDICTION. THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, EXCEPT TO THE EXTENT
PERFECTION AND THE EFFECT OF PERFECTION OR NON- PERFECTION OF THE
SECURITY INTEREST GRANTED HEREUNDER OR THEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF FLORIDA. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
ARE PERFORMABLE BY THE PARTIES IN PALM BEACH COUNTY, FLORIDA. BORROWER
AND LENDER EACH AGREE THAT PALM BEACH COUNTY, FLORIDA, SHALL BE THE
EXCLUSIVE VENUE FOR LITIGATION OF ANY DISPUTE OR CLAIM ARISING UNDER OR
RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND THAT SUCH
COUNTY IS A CONVENIENT FORUM IN WHICH TO DECIDE ANY SUCH DISPUTE OR
CLAIM. BORROWER AND LENDER EACH CONSENT TO THE PERSONAL JURISDICTION OF
THE STATE AND FEDERAL COURTS LOCATED IN PALM BEACH COUNTY, FLORIDA FOR
THE LITIGATION OF ANY SUCH DISPUTE OR CLAIM. BORROWER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
20. WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH.
21. INVALID PROVISIONS. If any provision of this Agreement or any of the
other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable
and the remaining provisions of this Agreement or any of the other Loan
Documents shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance.
22. EXPENSES. Borrower shall pay all costs and expenses (including, without
limitation, reasonable attorneys' fees) in connection with (i) the
preparation of the Loan Documents, (ii) any action required in the
course of administration of the indebtedness and obligations evidenced
by the Loan Documents, (iii) any action in the enforcement of LENDER's
rights upon the occurrence of Event of Default and (iv) all expenses
incurred or paid by LENDER for purposes of conserving and protecting
the Collateral, including, but not limited to, reasonable attorney's
fees and other legal expenses incurred in connection with retaking,
holding, preparing for sale, and selling the Collateral.
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23. PARTICIPATION OF THE CREDIT FACILITIES. Borrower agrees that LENDER
may, at its option, sell interests in any of the Credit Facilities and
its rights under this Agreement and the other Loan Documents and, in
connection with each such sale, LENDER may disclose any financial and
other information available to LENDER concerning Borrower to each
prospective purchaser and assignee.
24. CONFLICTS. In the event any term or provision hereof is inconsistent
with or conflicts with any provision of the other Loan Documents
between Borrower and LENDER, LENDER shall determine, in LENDER'S sole
and absolute discretion, the terms and provisions that it wishes to
govern the relationship of the parties.
25. COUNTERPARTS. This Agreement may be separately executed in any number
of counterparts, each of which shall be an original, but all of which,
taken together, shall be deemed to constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by
telecopy shall be equally as effective as delivery of a manually
executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telecopy also shall deliver a
manually executed counterpart of this Agreement but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
26. COMPLIANCE. Borrower agrees, if requested by LENDER or its counsel, to
fully cooperate and adjust for clerical errors (including the payment
of any amounts due) in any or all loan closing documentation if deemed
necessary or desirable in the reasonable discretion of LENDER for any
reason or purpose whatsoever in order to ensure LENDER has a complete
and accurately documented loan file. Further, Borrower does hereby so
agree and covenant in order to assure that the loan documentation
executed this date will conform and be acceptable in the marketplace in
the instance of transfer, sale or conveyance by LENDER of its interest
in and to said loan documentation or to otherwise reasonably comply
with LENDER's loan requirements. The provisions of this Section shall
survive termination of this Agreement.
27. ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. THIS AGREEMENT ALSO AMENDS AND SUPERSEDES ANY OF THE TERMS OF
ANY PRIOR WRITTEN AGREEMENTS WITH RESPECT TO THE MATTERS SET FORTH IN
THIS AGREEMENT.
EXECUTED as of the date first above written.
LENDER: BORROWER:
Capital Growth Asset Based Bridge Loan Fund SLS International, Inc., a
II, LLC, a Florida limited liability company Delaware corporation
By: Crossroads Collateral Management
Fund, LLC, its managing member
By: By:
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Name:
Name: Title:
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Title:
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