EXHIBIT 10.5
GENERAL CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT, dated as of December 3, 2003, between SPECTRUM Commercial
Services Company, a Minnesota corporation, having its mailing address and
principal place of business at Xxx Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx,
Xxxxxxxxx 00000-0000 (herein called "Lender"), and WCS Acquisition Corp., a/k/a
Westland Control Systems, Inc., a Michigan corporation, having the mailing
address and principal place of business at 00000 Xxxx Xxxxx, Xxxxxxxx, XX 00000
(herein called "Borrower").
1. Agreement. This Agreement states the terms and conditions under which
Borrower may obtain certain loans and/or other credit extensions from Lender.
2. Certain Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
"Acceptable Distributions" - Deleted
"Advance(s)" shall have the meaning provided in the paragraph entitled
"Advances".
"Affiliate" shall include, with respect to any party, any Person which
directly or indirectly controls, is controlled by, or is under common
control with such party and, in addition, in the case of Borrower, each
officer, manager,, director, governor, member or shareholder of Borrower,
and each joint venturer and partner of Borrower.
"Borrower" shall have the meaning provided in the preamble hereto.
"Borrowing Base" shall mean the sum of (i) Eighty percent (80%) of the
net amount of Eligible Receivables or such greater or lesser percentage as
Lender, in its sole discretion, shall deem appropriate, or as provided
otherwise herein.
"Business Day" shall mean any day on which major commercial banks in
Minneapolis, Minnesota are open for the transaction of business of the kind
contemplated by this Agreement.
"Chattel Paper" shall have the meaning ascribed to such term in
Article 9 of the Commercial Code.
"Closing Date" shall mean the day specified by Borrower on which all
of the conditions precedent specified in the paragraph entitled "Conditions
Precedent to Initial Advance" shall have been satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commercial Code" shall mean the Uniform Commercial Code as enacted in
the State of Minnesota, as amended from time to time.
"Consolidated" shall, when used with reference to any financial
information pertaining to (or when used as a part of any defined term or
statement pertaining to the financial condition of) any Person, mean the
accounts of such Person and its subsidiaries, determined on a consolidated
basis, all determined as to principles of consolidation and, except as
otherwise specifically required by the definition of such term or by such
statement as to such accounts, in accordance with GAAP.
"Contingent Obligations" shall mean, with respect to any Person, all
of such Person's liabilities and obligations which are contingent upon and
will not mature unless and until the occurrence of some event or
circumstance and which are not included within the definition of
Liabilities of such Person.
"Customer(s)" shall have the meaning provided in the paragraph
entitled "Reports and Collections".
"Default" shall mean any event which, with the giving of notice or
passage of time, or both, would constitute an Event of Default.
"Eligible Inventory" - None of Borrower's inventory shall be deemed
Eligible Inventory.
"Eligible Receivables" shall mean the dollar value of only such
Receivables of Borrower arising from the sale and actual shipment of
Inventory or the full and complete rendition of services in the ordinary
course of business which has been fully performed by Borrower and in which
only Lender holds a senior security interest and as to which Lender, in its
sole discretion, shall from time to time determine to be Eligible
Receivables. Without limiting the discretion of Lender to consider any
Receivable not to be an Eligible Receivable, and by way of example only of
types of Receivables that Lender will consider not to be Eligible
Receivables, Lender, notwithstanding any earlier classification of
eligibility may consider any Receivable not to be an Eligible Receivable
if: (i) any warranty described under the section entitled "Warranty as to
Collateral" is breached as to the Receivable; (ii) the Receivable is not
paid by the account debtor within 90 days from the date of the invoice
relating to such Receivable; (iii) the account debtor disputes liability or
makes any claim with respect to the Receivable; (iv) a petition in
bankruptcy or other application for relief under any insolvency law is
filed with respect to the account debtor owing the Receivable; (v) the
account debtor on the Receivable makes an assignment for the benefit of
creditors, becomes insolvent, fails, suspends, or goes out of business;
(vi) the Receivable arises from a sale to an account debtor outside the
United States, unless the sale is on terms acceptable to Lender in its sole
discretion; (vii) the Receivable is owed by an account debtor who owes
Receivables of which more than 10% are more than 90 days past the date of
the invoices relating to such Receivables; (viii) the account debtor is an
Affiliate or employee of Borrower; (ix) the account debtor is also a
supplier or creditor of Borrower; (x) the account debtor is the United
States of America, or any department or any agency of any thereof, unless
Borrower has complied with the Assignment of Claims Act to Lender's
satisfaction; (xi) the Receivable (or any portion of the Receivable) is
either a consignment Receivable or a bonded Receivable or a retainage;
(xii) the total Receivables owed by an account debtor exceeds 30% of the
total Receivables outstanding (with the single exception of General Motors
where the 30% is replaced with 40%), but only that portion that exceeds
that percentage would not be considered an Eligible Receivable; (xiii) the
due date of the Receivable is more than 30 days from the date of the
invoice relating to such Receivable; or (xiv) In its reasonable discretion,
Lender shall become dissatisfied with the creditworthiness of an account
debtor owing a Receivable.
"Equipment" shall have the meaning provided in the paragraph entitled
"Security".
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be amended, and the rules and
regulations promulgated thereunder by any governmental agency or authority,
as from time to time in effect.
"ERISA Affiliate" shall mean, with respect to any Person, any trade or
business (whether or not incorporated) which is a member of a group of
which such Person is a member and which is under common control within the
meaning of Section 414 of the Code, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Event" shall mean: (a) a Reportable Event described in Section
4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under such regulations); (b) the withdrawal of Borrower or any ERISA
Affiliate from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA; (c) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment
as a termination under Section 4041 of ERISA; (d) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA; or
(e) any other event or condition that might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan.
"Event of Default" shall have the meaning provided in the paragraph
entitled "Default and Remedies".
"GAAP" shall mean generally accepted accounting principles
consistently applied and maintained throughout the period indicated..
Whenever any accounting term is used herein which is not otherwise defined,
it shall be interpreted in accordance with GAAP.
"General Intangibles" shall have the meaning provided in the paragraph
entitled "Security".
"Guarantor" shall mean Productivity Technologies Corporation and any
other Person who enters into a Guaranty hereof.
"Guaranty(ies)" shall mean those certain Guaranties executed by each
of the Guarantors and any other agreement whereby a Person guarantees the
payment or performance of any of the Obligations.
"Independent Public Accountants" shall mean Xxxxxxx Rudzewicz PLC or
any other firm of independent public accountants which is acceptable to
Lender.
"Inventory" shall have the meaning provided in the paragraph entitled
"Security".
"Liabilities" of any Person shall mean those items which, in
accordance with GAAP, appear as liabilities on a balance sheet.
"Line Maintenance Fee" shall have the meaning provided in the
paragraph entitled "Affirmative Covenants".
"Loan Administration Fee" shall have the meaning provided in the
paragraph entitled "Affirmative Covenants".
"Loan Document(s)" shall mean individually or collectively, as the
case may be, this Agreement, the Note, the Guaranty[ies], and any and all
other documents executed, delivered or referred to herein or therein, as
originally executed and as amended, modified or supplemented from time to
time.
"Material Adverse Occurrence" shall mean any occurrence of whatsoever
nature (including, without limitation, any adverse determination in any
litigation, arbitration or governmental investigation or proceeding) which
Lender shall determine, in its sole discretion, could materially adversely
affect the present or prospective financial condition or operations of
Borrower or a Guarantor or impair the ability of Borrower or a Guarantor to
perform its obligations under this Agreement or any other Loan Document.
"Maturity Date" shall mean December 2, 2005, provided, however, that
the then current Maturity Date shall be extended by succeeding periods of
12 calendar months without notice to or action by either Borrower or
Lender, provided further however, that such extension shall not occur if:
(i) Lender has notified Borrower of an Event of Default that has occurred
and is continuing, or (ii) this Agreement has previously terminated as
provided in the paragraph entitled "Termination", or (iii) Lender has, in
its sole and absolute discretion, demanded payment of amounts owed
hereunder, or (iv) Borrower or Lender have notified the other of the
intention not to renew at least sixty days prior to the then current
Maturity Date and thereafter no extension shall occur.
"Maximum Principal Amount" shall mean, at any date, One Million Two
Hundred Fifty Thousand and No/100ths Dollars ($1,250,000.00).
"Monthly Payment Date" shall mean the first day of each month.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which Borrower is making or accruing an
obligation to make contributions, or has within any of the preceding three
plan years made or accrued an obligation to make contributions.
"Net Profit" or "Net Loss" for any period shall mean net income or
loss from operations for such period, before provision for income tax,
determined in accordance with GAAP excluding, however, (i) extraordinary
gains (including but not limited to the conversion of debt to equity, the
forgiveness of debt and the like), and (ii) gains (whether or not
extraordinary) from sales or other dispositions of assets other than the
sale of Inventory in the ordinary course of Borrower's business.
"Note" shall mean Borrower's revolving or promissory note of even date
payable to the order of Lender to evidence the Advances, including any
replacements, substitutions or amendments thereof.
"Obligations" shall have the meaning provided in the paragraph
entitled "Security".
"Origination Fee" shall have the meaning provided in the paragraph
entitled "Affirmative Covenants".
"Participant" shall mean each Person who purchases a participation
interest from Lender in the obligations.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor board, authority, agency, officer or official of the United
States administering the principal functions assigned on the date hereof to
the Pension Benefit Guaranty Corporation under ERISA.
"Periodic Financial Report" shall mean Borrower's financial reports
for various periods of time which may, from time to time, be delivered by
Borrower to Lender and which: (a) comport with the representations and
warranties contained in the paragraph entitled General Representations and
Warranties, and (b) comprise the complete audited financial report for such
period prepared and certified without qualification or explanatory language
by Independent Public Accountants on a Consolidated and consolidating basis
for Borrower and any Consolidated Subsidiaries of Borrower; together with a
copy of the management letter or memorandum, if any, delivered by such
independent certified public accountant to Borrower and Borrower's response
thereto.
"Person" shall mean any natural person, corporation, limited liability
company, firm, partnership, association, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" shall mean each employee benefit plan or other class of
benefits covered by Title IV of ERISA, in either case whether now in
existence or hereafter instituted, of Borrower or any of its Subsidiaries.
"Prime Rate" shall mean the publicly announced base rate (or other
publicly announced reference rate) charged by Xxxxx Fargo Bank, National
Association. Borrower acknowledges that the Prime Rate may not be the
lowest rate made available by Lender or the bank to their customers and
that Lender or the bank may lend to its customers at rates that are at,
above or below the Prime Rate.
"Receivables" shall have the meaning provided in the paragraph
entitled "Security".
"Reportable Event" shall have the meaning given to that term in Title
IV of ERISA.
"Security Interest" shall mean any lien, pledge, mortgage,
encumbrance, charge or security interest of any kind whatsoever (including,
without limitation, the lien or retained security title of a conditional
vendor) whether arising under a security instrument or as a matter of law,
judicial process or otherwise or the agreement by Borrower to grant any
lien, security interest or pledge, mortgage or encumber any asset.
"Subordinated Debt" shall mean indebtedness of Borrower for borrowed
money which is subordinated to the Obligations on terms satisfactory to
Lender in its sole discretion.
"Subsidiary" of any Person shall mean any other entity of which more
than 50% of the outstanding ownership interests and/or capital stock is
owned directly or indirectly by such Person, by such Person and one or more
Subsidiaries, or by one or more other Subsidiaries.
"Termination Date" shall mean the earliest of (i) the Maturity Date or
(ii) the date upon which Lender's obligation to make Advances is terminated
pursuant to the paragraph entitled "Default and Remedies", or (iii) the
date upon which the obligations are declared to be due and payable (or
automatically become due and payable) upon the occurrence of an Event of
Default as provided in the paragraph entitled "Default and Remedies" or
otherwise, or (iv) the date upon which this Agreement terminates as
provided in the paragraph entitled "Termination", or (v) upon demand by
Lender in its sole and absolute discretion.
"Withdrawal Liability" shall have the meaning given to that term in
Title IV of ERISA.
3. Security. As security for all present and future sums loaned or advanced
by Lender to Borrower and for all other obligations now or hereafter chargeable
to Borrower's loan account hereunder, and all other obligations and liabilities
of any and every kind of Borrower to Lender, due or to become due, direct or
indirect, absolute or contingent, joint or several, howsoever created, arising
or evidenced, now existing or hereafter at any time created, arising or incurred
(herein called "Obligations'), Borrower hereby grants to Lender a security
interest in all of its assets, goods and property, including but not limited to
the following:
(a) All Receivables of Borrower now owned or hereafter acquired or
arising, together with all customer lists, original books and records,
ledger and account cards, computer tapes, discs, printouts and records,
whether now in existence or hereafter created. "Receivables" means all
rights of Borrower to the payment of money, whether or not earned and
howsoever evidenced or arising, including (without limitation) all present
and future "Accounts", accounts receivable, healthcare insurance
receivables, letter of credit rights, "Chattel Paper", "Instruments", and
rights to payment which are "General Intangibles" (as those terms are used
in the Commercial Code), all security therefor and all of Borrower's rights
as an unpaid seller of goods (including rescission, replevin, reclamation
and stopping in transit) and all of Borrower's rights to any goods
represented by any of the foregoing including returned or repossessed
goods;
(b) All Inventory of Borrower, whether now owned or hereafter acquired
and wherever located. "Inventory" includes all Goods (as defined in Article
9 of the Commercial Code) intended for sale or lease or to be furnished
under contracts of service, all raw materials and work in process therefor,
all finished goods thereof, all materials and supplies of every nature used
or usable or consumed or consumable in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of such
Goods, and all accessories thereto and all documents of title therefor
evidencing the same;
(c) All Equipment of Borrower, whether now owned or hereafter acquired
and wherever located. "Equipment" includes all of Borrower's Goods other
than Inventory, all replacements and substitutions therefor and all
accessions thereto, and specifically includes, without limitation, all
present and future machinery, equipment, vehicles, manufacturing equipment,
shop equipment, office and record keeping equipment, furniture, fixtures,
parts, tools and all other Goods (except Inventory) used or acquired for
use by Borrower for any business or enterprise;
(d) All General Intangibles and Deposit Accounts (as defined in
Article 9 of the Commercial Code) of Borrower, whether now owned or
hereafter acquired, including (without limitation) all present and future
domestic and foreign patents, patent applications, trademarks, trademark
applications, copyrights, software, trade names, trade secrets, patent and
trademark licenses (whether Borrower is licensor or licensee), shop
drawings, engineering drawings, blueprints, specifications, parts lists,
manuals, operating instructions, customer and supplier lists, licenses,
permits, franchises, payment intangibles, the right to use Borrower's
corporate or organizational name and the goodwill of Borrower's business;
and
(e) All Investment Property (as defined in the Commercial Code)
including but not limited to stock and other securities evidencing
ownership of any other organization, company or entity as well as all
amendments, extensions, renewals and replacements of the above, together
with all certificates, other instruments, options, rights, interest, and
other distributions issued as an addition to, in substitution or in
exchange for, or on account of, the same, all whether now existing or
hereafter arising and whether now owned or hereafter acquired; and
(f) All products and proceeds of any and all of the foregoing and all
products and proceeds of any other Collateral (as hereinafter defined)
including the proceeds of any insurance covering any of the Collateral, as
well as all Deposit Accounts (as defined in the Commercial Code), money,
cash, and the like.
All such Receivables, Inventory, Equipment, General Intangibles, Investment
Property, Deposit Accounts, products and proceeds, together with all other
assets and properties of Borrower in or on which Lender is now or hereafter
granted a security interest, mortgage, lien or encumbrance pursuant to this
Agreement or otherwise, are hereinafter sometimes referred to as "Collateral".
4. Advances.
(a) At the request of Borrower, and subject to the terms and
conditions hereinafter set forth, Lender may make loans (each such loan
being herein sometimes called individually an "Advance" and collectively
the "Advances") to Borrower from time to time on any Business Day during
the period from the date hereof and ending on the Termination Date;
provided, however, that ------------------ Lender does not intend,
(although has the sole discretion) to make any Advance if, after giving
effect to such Advance, the aggregate unpaid principal amount of Advances
outstanding would exceed the lesser of the Borrowing Base or the Maximum
Principal Amount. The amount of each such Advance shall be charged to
Borrower's loan account. Borrower acknowledges that Lender may, but shall
not be obligated to, make an Advance at any time in an amount equal to any
overdraft in any account of Borrower maintained with Lender or any
Participant even if the aggregate unpaid principal amount of Advances
exceeds or would exceed the Borrowing Base or the Maximum Principal Amount.
Notwithstanding the above, or anything else contained in this agreement,
Lender specifically reserves the absolute right to refuse to make any
particular Advance requested or to refuse to make Advances generally or to
make Advances for amounts less than that otherwise provided herein, all
with or without advance notice, for any reason or no reason whatsoever.
(b) In order to obtain an Advance, Borrower shall give written notice
to Lender, by not later than 11:00 a.m. (Minneapolis time) on either the
business day the requested Advance is to be made. Lender, shall make such
Advance by transferring the amount thereof in immediately available funds
for credit to Borrower's account (other than a payroll account), as
specified in such notice. Lender's customary fees for making such advance
will apply. It is also noted that "next day wires"/ACH transfers will be
posted as a loan Advance on the day initiated by Lender with the
understanding that funds may not be received in Borrower's account until
the next business day. At the request of Lender, Borrower shall confirm in
writing any telephonic notice.
(c) The obligation of Lender to make Advances shall terminate on the
Termination Date.
(d) If at any time the sum of the aggregate outstanding principal
balance of the Advances exceeds the lesser of (i) the Maximum Principal
Amount or (ii) the Borrowing Base, then Borrower agrees to make, on demand,
a principal repayment on the Advances in an amount equal to such excess
together with accrued interest on the amount repaid to the date of
repayment. Borrower agrees that, on the Termination Date (or earlier upon
demand), it will repay the entire outstanding principal balance of the
Advances together with accrued interest thereon and all accrued fees
without presentment or demand for payment, notice of dishonor, protest or
notice of protest, all of which are hereby waived.
(e) The Advances shall be evidenced by the Note made by Borrower
payable to the order of Lender in a principal amount equal to the Maximum
Principal Amount; subject, however, to the provisions of the Note to the
effect that the principal amount payable thereunder at any time shall not
exceed the then unpaid principal amount of all Advances made by Lender.
Borrower hereby irrevocably authorizes Lender to make or cause to be made,
at or about the time of each Advance made by Lender, an appropriate
notation on the records of Lender, reflecting the principal amount of such
Advance, and Lender shall make or cause to be made, on or about the time of
receipt of payment of any principal of the Note, an appropriate notation on
its records reflecting such payment. The aggregate amount of all Advances
set forth on the records of Lender shall be rebuttable presumptive evidence
of the principal amount owing and unpaid on the Note.
5. Demand Facility. All interest, principal, Advances, and any other
amounts owing hereunder are due on demand and Lender specifically reserves the
absolute right to demand payment of all such amounts at any time, with or
without advance notice, for any reason or no reason whatsoever. Lender's right
to make such demand is not exclusive and Lender may coincidentally or separately
from such demand make further demand for payment pursuant to the paragraph
entitled "Default and Remedies" or otherwise hereunder and, further, amounts may
become due hereunder (pursuant to the paragraph entitled "Default and Remedies"
or otherwise) without a demand by Lender, as provided in this agreement.
6. Interest. Borrower agrees to pay interest on the outstanding principal
amount of the Note, at the close of each day at a fluctuating rate per annum
(computed on the basis of actual number of days elapsed and a year of 360 days)
which is at all times equal to Five and One-Quarter Percent (5 1/4%) in excess
of the Prime Rate; each change in such fluctuating rate caused by a change in
the Prime Rate to occur simultaneously with the change in the Prime Rate (the
"Initial Rate"); provided, however, that (i) in no event shall the Initial Rate,
the Adjusted Rate or the Re-adjusted rate in effect hereunder at any time be
less than 8% per annum; and (ii) interest payable hereunder with respect to each
calendar month shall not be less than $5,575.00 regardless of the amount of
loans, Advances or other credit extensions that actually may have been
outstanding during the month. Interest accrued through the last day of each
month will be due and payable to Lender on the next Monthly Payment Date,
commencing November 1, 2003. Interest shall also be payable on the Maturity Date
or on any earlier Termination Date. Interest accrued after the Maturity Date or
earlier Termination Date shall be payable on Demand. Interest may be charged to
Borrower's loan account as an Advance at Lender's option, whether or not
Borrower then has the right to obtain an Advance pursuant to the terms of this
Agreement.
In the event Borrower earns Net Profit for the 12 months ending June 30, 2004 of
at least One Hundred Thousand Dollars ($100,000) and evidences such profit by
delivering to Lender the Periodic Financial Report for that period that reflects
the required Net Profit, and provided no Event of Default exists or has
occurred, then upon Borrower's written request, the Initial Rate shall be
reduced to Four and Three Quarter percent (4 3/4%) in excess of the Prime Rate
(the "Adjusted Rate") commencing with the next scheduled Monthly Payment Date
following Lender's receipt of both Borrower's written request and the Periodic
Financial Report.
Notwithstanding the foregoing, after an Event of Default, the Note shall bear
interest until paid at 5% per annum in excess of the rate otherwise then in
effect, which rate shall continue to vary based on further changes in the Prime
Rate; provided, however, that after an Event of Default, (i) in no event shall
the interest rate in effect under the Note at any time be less than 13% per
annum; and (ii) interest payable under the Note with respect to each calendar
month shall not be less than $8,600.00 regardless of the amount of loans,
Advances or other credit extensions that actually may have been outstanding
during the month. (The Initial Rate, the Adjusted Rate and the Re-adjusted Rate
in effect either before or after an Event of Default is referred to herein
collectively as the "Interest Rate"). The undersigned shall also pay a late fee
equal to 10% of any payment under the Note that is more than 10 days past due.
7. Set-Off; etc. Upon the occurrence of a Default or an Event of Default,
Lender is hereby authorized at any time and from time to time, without notice to
Borrower (any such notice being expressly waived by Borrower), to withdraw
and/or set off any and all deposits (general or special, time or demand,
provisional or final) held by Lender, any Participant, or any other bank,
institution or person for credit on Borrower's obligations hereunder,
irrespective of whether Borrower shall have made any requests under this
Agreement. Lender is expressly authorized to make any such withdrawal by any
reasonable means, including under the Automated Clearing House, ACH, or any
other funds transfer system.
8. Reports and Collections.
(a) Borrower agrees to furnish to Lender, at least weekly (but more
frequently if requested by Lender in writing), schedules describing
Receivables created or acquired by Borrower (including confirmatory written
assignments thereof), identifying those Receivables which are Eligible
Receivables from those which are not, and including, if Lender so requests,
copies or originals of some or all invoices to account debtors and other
obligors (all herein referred to as "Customers") along with original
shipping or delivery receipts for goods sold, but if Borrower fails to do
so the rights of Lender as a secured party will not be impaired. At any
time after the occurrence of an Event of Default, Lender may notify
Customers at any time that Receivables have been assigned to Lender and
collect them directly in Lender's own name but unless and until Lender does
so or gives Borrower other instructions, Borrower shall make collection for
Lender at Borrower's sole cost and expense. Borrower shall advise Lender
promptly of any goods which are returned by Customers or otherwise
recovered involving an amount in excess of $5,000.00 and, unless instructed
to deliver such goods to Lender, Borrower shall resell them for Lender and
assign or deliver to Lender the resulting Receivables or other proceeds.
Borrower shall also advise Lender promptly of all disputes and claims by
Customers involving an amount in excess of $5,000.00 and settle or adjust
them at no expense to Lender. At any time after the occurrence and during
the continuance of an Event of Default, Lender may at all times settle or
adjust such disputes and claims directly with the Customers for amounts and
upon terms which Lender considers advisable. If Lender so directs at any
time after an Event of Default, no discount, credit or allowance shall be
granted by Borrower to any Customer and no return of goods shall be
accepted by Borrower without Lender's written consent.
(b) Borrower agrees to furnish to Lender Inventory certifications in
accordance with the paragraph entitled "Affirmative Covenants" and a
physical listing of all Inventory, wherever located, specifying which
portions are Eligible Inventory and which are not, at least once every
twelve months or, in either case, as more frequently requested by Lender.
(c) All full and partial payments and any other cash collections from
whatever source whatsoever, whether or not arising from the sale,
collection or other disposition of Collateral (whether or not in the
ordinary course of business), including but not limited to the collection
of accounts receivable in the ordinary course of business and the ordinary
sale of inventory or services for cash, shall immediately be delivered by
Borrower to Lender in their original form (except for endorsement where
necessary) and uncashed (in the case of checks or other documents).
Borrower shall direct all customers and other remitters of payments to mail
payments to Lender's post office box or other lockbox. Within 90 days of
the date hereof, at least ninety percent (90%) of the aggregate dollars
paid to or on behalf of Borrower shall be received in Lender's post office
box or lockbox directly from the payor. Until such payments are so
delivered to Lender (or Lender's lockbox), such payments which nonetheless
come into possession of Borrower shall be held in trust by Borrower for and
as Lender's property and shall not be commingled with any funds of Borrower
or otherwise negotiated. All cash collections received by Lender will be
credited to Borrower's loan account (subject to final collection thereof)
after three Business Days, or longer as required by Lender's bank to fully
and finally collect the funds represented by checks or other instruments.
Collections received by Lender after 11:00 am Central Time will be deemed
received on the next Business Day.
9. Warranty as to Collateral. Borrower warrants that:
(a) all Receivables listed in or reported on Borrower's schedules
will, when Borrower delivers the schedules to Lender, be bona fide existing
obligations created by the sale and actual delivery of goods or the
rendition of services to Customers in the ordinary course of business, not
subject to return, evaluation or other condition, and which Borrower then
owns free of any Security Interest except for the Security Interest in
favor of Lender created by this Agreement or Security Interests permitted
under the paragraph entitled "Negative Covenants", and which are then
unconditionally owing to Borrower without defense, offset or counterclaim;
and that all shipping or delivery receipts, invoice copies and other
documents furnished to Lender in connection therewith will be genuine; and
(b) all Inventory and Equipment is and shall be owned by Borrower,
free of any Security Interest except for the Security Interest of Lender
created by this Agreement or Security Interests permitted by the paragraph
entitled "Negative covenants".
Lender's rights to and security interest in the Collateral will not be impaired
by the ineligibility of any such Collateral for Advances and will continue to be
effective until all obligations chargeable to Borrower's loan account have been
fully satisfied.
10. Power of Attorney. Borrower authorizes and appoints Lender, or any of
Lender's officers, employees or agents whom Lender may from time to time
designate, in Borrower's name and as Borrower's attorney with power to: (a) to
endorse Borrower's name on any checks, notes, acceptances, drafts or other forms
of payment or security that may come into Lender's possession; (b) to sign
Borrower's name on any invoice or xxxx of lading relating to any Receivables, on
drafts against Customers, on schedules and confirmatory assignments of
Receivables, on notices of assignment, financing statements and amendments under
the Commercial Code and other public records, on verifications of accounts and
on notices to Customers; (c) to notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Lender; (d)
to receive, open and dispose of all mail addressed to Borrower; (e) to send
requests for verification of accounts to Customers; (f) to obtain information
from any bank, creditor, customer or other Person regarding Borrower's
relationship, account, history etc.; (g) to sign lien waivers and other releases
or satisfactions of claims or rights by Borrower in exchange for payment or
other consideration which Lender in its sole discretion believes is appropriate
under the circumstances; (h) to directly verify and/or confirm the existence,
authenticity, accuracy or terms of any Receivable and/or of any payment on any
Receivable (both in Lender's own name or in Borrower's name) without previously
notifying Borrower of its intention to do so and Borrower grants its consent to
Lender for Lender's employees and agents to represent themselves as employees or
agents of Borrower for these purposes; and (i) to do all things necessary to
carry out this Agreement; provided however, that the powers specified in clauses
(c) and (d) above may be exercised only after the occurrence of an Event of
Default. Borrower ratifies and approves all acts of the attorney. Neither Lender
nor the attorney will be liable for any acts of commission or omission nor for
any error in judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable so long as any Receivable in which Lender has a
security interest or any Obligation remains unpaid. Borrower waives presentment
and protest of all instruments and notice thereof, notice of default and
dishonor and all other notices to which Borrower may otherwise be entitled.
11. Location of Collateral. Borrower warrants that its chief executive
office is at the address stated in the opening paragraph of this Agreement and
that, unless indicated otherwise here, its books and records concerning
Receivables are located at the same address. Unless indicated otherwise here,
Borrower's Inventory, Equipment and other goods are located at the same address:
Borrower shall immediately notify Lender if any additional locations for
Collateral are subsequently established. Borrower shall not change the location
of its chief executive office, the place where it keeps its books and records,
or the location of any Collateral (except for sales of Inventory in the ordinary
course of business) until Borrower has obtained the written consent of Lender
and all necessary filings have been made and other actions taken to continue the
perfection of Lender's Security Interest in such new location. Lender's Security
Interest attaches to all the Collateral wherever located, and the failure of
Borrower to inform Lender of the location of any item or items of Collateral
shall not impair Lender's Security Interest therein.
12. Ownership and Protection of Collateral. Borrower warrants, represents
and covenants to Lender that the Collateral is now and, so long as Borrower is
obligated to Lender, will be owned by Borrower free and clear of all Security
Interests except for the Security Interest in favor of Lender created by this
Agreement and except the Security Interests, if any, permitted by the paragraph
entitled "Negative Covenants", and that said Collateral, including the
Receivables and proceeds resulting from the collection, sale or other
disposition thereof, will remain free and clear of any and all Security
Interests except for the Security Interest in favor of Lender created by this
Agreement and except the Security Interests, if any, permitted under the
paragraph entitled "Negative Covenants". Borrower will not sell, lease or
otherwise dispose of the Collateral, or attempt to do so (except for sales of
Inventory in the ordinary course of business and sales of obsolete and worn
equipment not in excess of $25,000 in the aggregate in any calendar year)
without the prior written consent of Lender, unless the proceeds of any such
sale are promptly paid to Lender uncashed and in its original form for
application on Borrower's Obligations. After the occurrence of a Default or an
Event of Default, Lender will at all times have the right to take physical
possession of any Inventory and Equipment constituting Collateral and to
maintain such possession on Borrower's premises or to remove the same or any
part thereof to such other places as Lender may wish. If Lender exercises
Lender's right to take possession of such Collateral, Borrower shall on Lender's
demand, assemble the same and make it available to Lender at a place reasonably
convenient to Lender. Borrower shall at all times keep the Equipment
constituting Collateral in good condition and repair. All expenses of
protecting, storing, warehousing, insuring, handling and shipping of the
Collateral, all costs of keeping the Collateral free of any Security Interests
prohibited by this Agreement and of removing the same if they should arise, and
any and all excise, property, sales and use taxes imposed by any state, federal
or local authority on any of the Collateral or in respect of the sale thereof,
shall be borne and paid by Borrower and if Borrower fails to promptly pay any
thereof when due, Lender may, at its option, but shall not be required to, pay
the same and charge Borrower's loan account therefor. Borrower agrees to renew
all insurance required by this Paragraph or the paragraph entitled "Insurance"
at least 30 days prior to its expiration. Borrower agrees that, with respect to
any Inventory maintained in a public warehouse, (i) Borrower will ensure that
any warehouse receipts issued are not in a negotiable form, (ii) Borrower will,
upon request from Lender, deliver all warehouse receipts to Lender, and (iii)
Borrower will cause the public warehouseman to execute an agreement similar to
those delivered pursuant to the paragraph entitled "Conditions Precedent to
Initial Advance" in form and substance satisfactory to Lender.
13. Perfection of Security Interest. Borrower agrees to execute such
financing statements together with any and all other instruments or documents
and take such other action, including delivery, as may be required to create,
evidence, perfect and maintain Lender's Security Interest in the Collateral and
Borrower shall not in any manner do any act or omit to do any act which would in
any manner impair or invalidate Lender's Security Interest in the Collateral or
the perfection thereof.
14. Insurance. Borrower shall maintain insurance coverage on any Collateral
other than Receivables with such companies, against such hazards, and in such
amounts as may from time to time be acceptable to Lender and shall deliver such
policies or copies thereof to Lender with satisfactory lender's loss payable
endorsements naming Lender. Each policy of insurance shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to
Lender in the event of any anticipated cancellation of the policy for any reason
and a clause that the interest of Lender shall not be impaired or invalidated by
any act or neglect of Borrower nor by the occupation of the premises wherein
such Collateral is located for purposes more hazardous than are permitted by
said policy. Borrower will maintain, with financially sound and reputable
insurers, insurance with respect to its properties and business against such
casualties and contingencies of such types (which may include, without
limitation, public and product liability, larceny, embezzlement, or other
criminal misappropriation insurance) and in such amounts as may from time to
time be required by Lender.
15. Borrower's Account. Lender may charge to Borrower's loan account at any
time the amounts of all Obligations (and interest, if any, thereon) owing by
Borrower to Lender, including (without limitation) loans, Advances, debts,
liabilities, obligations acquired by purchase, assignment or participation and
all other obligations, whenever arising, whether absolute or contingent and
whether due or to become due; also the amount of all costs and expenses and all
attorneys' fees and legal expenses incurred in connection with efforts made to
enforce payment of such obligations, or to obtain payment of any Receivables, or
the foreclosure of any Collateral or in the prosecution or defense of any
actions or proceedings relating in any way to this Agreement (including but not
limited to bankruptcy or insolvency proceedings) whether or not suit is
commenced, including reasonable attorneys' fees and legal expenses incurred in
connection with any appeal of a lower court's order or judgment; and also the
amounts of all unpaid taxes and the like, owing by Borrower to any governmental
authority or required to be deposited by Borrower, which Lender pays or deposits
for Borrower's account. All of Borrower's borrowings hereunder and (unless
otherwise specified) all other obligations which are chargeable to Borrower's
loan account shall be payable ON DEMAND; recourse to security will not be
required at any time. All sums at any time standing to Borrower's credit on
Lender's books and all of Borrower's property at any time in Lender's possession
or upon or in which Lender has a Security Interest, may be held by Lender as
security for all obligations which are chargeable to Borrower's loan account.
Subject to the foregoing, Lender, at Borrower's request, will remit to Borrower
any net balance standing to Borrower's credit on Lender's books. Lender will
account to Borrower monthly and each monthly accounting will be fully binding on
Borrower, unless, within thirty days thereafter, Borrower gives Lender specific
written notice of exceptions. All debit balances in Borrower's loan account will
bear interest as provided in the paragraph entitled "Interest" of this
Agreement. If Lender so requests at any time, Borrower will immediately execute
and deliver to Lender a promissory note in negotiable form payable on demand to
Lender's order in a principal amount equal to the amount of the debit balance in
Borrower's loan account, with interest as provided in the paragraph entitled
"Interest". In any event, Borrower covenants to pay all Advances, debts,
accounts and interest when due.
16. Participations. If any Person shall acquire a participation in Advances
made to Borrower hereunder, Borrower hereby grants to Lender as well as any such
Person holding a participation, and Lender and such Person shall have and are
hereby given a continuing Security Interest in any money, securities and other
property of Borrower in the custody or possession of such Participant, including
the right of set-off as fully as if such Participant had lent directly to
Borrower the amount of such participation. Borrower hereby grants to Lender its
continuing authority and consent to release any and all financial and other
information related to Borrower's financial condition, performance, its
business, operations or any other matter whatsoever to any of Borrower's
creditors (both secured and unsecured), to any Participant, or to any other
Person for their consideration of a possible participation in Advances by that
Person.
17. General Representations and Warranties. To induce Lender to make
Advances hereunder, Borrower makes the following representations and warranties,
all of which shall survive the initial Advance:
(a) Borrower is a corporation duly organized, existing, and in good
standing under the laws of the State of Michigan, has the power to own its
property and to carry on its business as now conducted, and is duly
qualified to do business in all states in which the nature of its business
requires such qualification. During the past five years, Borrower has done
business solely under its name(s) listed above as "Borrower" as well as the
following names: [Old names, trade names and dba names]
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Borrower does not own any capital stock of any corporation, except for
corporations which may be a joint borrower hereunder or which are providing
a Guaranty or which are listed here: [Corporate stock owned]
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(b) The execution and delivery of this Agreement and the other Loan
Documents and the performance by Borrower of its obligations hereunder and
thereunder do not and will not conflict with any provision of law, or of
the charter or bylaws of Borrower, or of any agreement binding upon
Borrower.
(c) The execution and delivery of this Agreement and the other Loan
Documents have been duly authorized by all necessary action by
directors/governors and shareholders/members of Borrower; and this
Agreement and the other Loan Documents have in fact been duly executed and
delivered by Borrower and constitute its lawful and binding obligations,
legally enforceable against it in accordance with their respective terms.
(d) Unless listed here with a detailed description attached, [Lawsuit
case names]
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there is no action, suit or proceeding at law or equity, or before or by
any federal, state, local or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, pending or,
to the knowledge of Borrower, threatened against Borrower or any Guarantor
or the property of Borrower or any Guarantor which, if determined
adversely, would be a Material Adverse Occurrence, and neither Borrower nor
any Guarantor is in default with respect to any final judgment, writ,
injunction, decree, rule or regulation of any court or federal, state,
local or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, where the effect of such default
would be a Material Adverse Occurrence.
(e) The authorization, execution and delivery of this Agreement, and
the payment of the loans and interest hereon, is not, and will not be,
subject to the jurisdiction, approval or consent of any federal, state or
local regulatory body or administrative agency.
(f) All of the assets of Borrower are free and clear of Security
Interests except for (i) equipment leases on specific equipment (and not in
equipment generally) which are disclosed on a Uniform Commercial Code
search in the states where equipment is located as disclosed above under
"Location of Collateral"; and (ii) those Security Interests permitted by
the paragraph entitled "Negative Covenants."
(g) Borrower has filed all federal, state and local tax returns which,
to the knowledge of Borrower, are required to be filed, and Borrower has
paid all taxes shown on such returns and all assessments which are due.
Borrower has made all required withholding deposits. Federal income tax
returns of Borrower have been examined and approved or adjusted by the
applicable taxing authorities or closed by applicable statutes for all
fiscal years prior to and including the last fiscal year ending. Borrower
does not have knowledge of any objections to or claims for additional taxes
by federal, state or local taxing authorities for subsequent years which
would be a Material Adverse Occurrence.
(h) Borrower has furnished to Lender various personal and
organizational financial statements. All such statements were prepared in
accordance with GAAP and present fairly the financial condition of Borrower
and other person and/or entity for which each statement relates. There has
been no material adverse change in the condition of Borrower and the other
person and/or entity relating to such statements, financial or otherwise,
since the date of the most recent of such financial statements.
(i) The value of the assets and properties of Borrower at a fair
valuation and at their then present fair salable value is and, after giving
effect to any pending Advance and the application of the amount advanced,
will be materially greater than its total liabilities, including Contingent
Obligations, and Borrower has (and has no reason to believe that it will
not have) capital sufficient to pay its liabilities, including Contingent
Obligations, as they become due.
(j) jorrower is in compliance with all requirements of law relating to
pollution control and environmental regulations in the respective
jurisdictions where Borrower is presently doing business or conducting
operations.
(k) All amounts obtained pursuant to Advances will be used for
Borrower's working capital purposes.
(l) Except for the trademarks, patents, copyrights and franchise
rights listed here, Borrower is not the owner of any patent, trademark,
copyright or franchise rights. [Trademarks, patents, copyrights and
franchise rights]
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(m) (i) Each Plan is in compliance in all material respects with all
applicable provisions of ERISA and the Code; (ii) the aggregate present
value of all accrued vested benefits under all Plans (calculated on the
basis of the actuarial assumptions specified in the most recent actuarial
valuation for such Plans) did not exceed as of the date of the most recent
actuarial valuation for such Plans the fair market value of the assets of
such Plans allocable to such benefits; (iii) Borrower is not aware of any
information since the date of such valuations which would materially affect
the information contained therein; (iv) no Plan which is subject to Part 3
of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred
an accumulated funding deficiency, as that term is defined in Section 302
of ERISA or Section 412 of the Code (whether or not waived); (v) no
liability to the PBGC (other than required premiums which have become due
and payable, all of which have been paid) has been incurred with respect to
any Plan, and there has not been any Reportable Event which presents a
material risk of termination of any Plan by the PBGC; and (vi) Borrower has
not engaged in a transaction which would subject it to tax, penalty or
liability for prohibited transactions imposed by ERISA or the Code.
Borrower does not contribute to any Multiemployer Plan.
(n) No part of any Advance shall be used at any time by Borrower to
purchase or carry margin stock (within the meaning of Regulation U
promulgated by the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any
margin stock. Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purposes
of purchasing or carrying any such margin stock. No part of the proceeds of
any Advance will be used by Borrower for any purpose which violates, or
which is inconsistent with, any regulations promulgated by the Board of
Governors of the Federal Reserve System.
(o) Borrower is not an "investment company", or an "affiliated person"
of, or a "promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company Act of 1940,
as amended. The making of the Advances, the application of the proceeds and
repayment thereof by Borrower and the performance of the transactions
contemplated by this Agreement will not violate any provision of said Act,
or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder.
(p) Unless a full description of each class of stock or membership
interest and the names and relative amounts of the owners/members thereof
is attached to this Agreement, Borrower has a single class of stock or
membership interest and the owners/members of at least 5% of such
stock/interest outstanding is as follows (rounded to nearest percent):
[Significant Owners and shares owned]
Name of Shareholders Percent of
outstanding
Shares
Productivity Technology Corp. 100%
------------------------ ---%
------------------------ ---%
------------------------ ---%
------------------------ ---%
------------------------ ---%
Borrower has not: (i) issued any unregistered securities in violation of
the registration requirements of Section 5 of the Securities Act of 1933,
as amended, or any other law; or (ii) violated any rule, regulation or
requirement under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, in either case where the effect of such
violation would be a Material Adverse Occurrence. No proceeds of the
Advances will be used to acquire any security in any transaction which is
subject to Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended.
(q) Except for Contingent Obligations listed here, Borrower does not
have any Contingent Obligations. [Contingent Obligations list - Attach
details to Agreement]
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(r) All factual information heretofore or herewith furnished by or on
behalf of Borrower to Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such
factual information hereafter furnished by or on behalf of Borrower to
Lender will be, true and accurate in every material respect on the date as
of which such information is dated or certified and no such information
contains any material misstatement of fact or omits to state a material
fact or any fact necessary to make the statements contained therein not
misleading.
(s) Each representation and warranty shall be deemed to be restated
and reaffirmed to Lender on and as of the date of each Advance under this
Agreement except that any reference to the financial statements referred to
in the paragraph entitled "General Representations and Warranties" shall be
deemed to refer to the financial statements then most recently delivered to
Lender pursuant to the paragraph entitled "Affirmative Covenants".
18. Affirmative Covenants. Borrower agrees that it will:
(a) Furnish to Lender in form satisfactory to Lender the following,
all of which will conform to GAAP and all of which shall comport with the
representations and warranties contained in the paragraph entitled General
Representations and Warranties:
(i) Within 90 days after the end of each fiscal year of Borrower,
a Periodic Financial Report for such fiscal year. If Borrower shall
fail to supply the report within such time limit, Lender shall have
the right (but not the duty) to employ certified public accountants
acceptable to Lender to prepare such report at Borrower's expense;
(ii) Within 30 days after the end of each month, a balance sheet
with operating figures as to that month, certified as correct by the
chief financial officer or controller of Borrower but subject to
adjustments as to inventories or other items to which an officer of
Borrower directs attention in writing, together with a reconciliation
of any variances between the information provided on such balance
sheet and the information for that day previously delivered to Lender
pursuant to the paragraph entitled "Affirmative Covenants";
(iii) With each of the financial statements described above, a
compliance certificate in form and substance satisfactory to Lender
and certified as true and accurate by the chief financial officer or
controller of Borrower;
(iv) Within 10 days after the end of each month, an aging of
accounts receivable together with a reconciliation in a form
satisfactory to Lender and an aging of accounts payable in form
acceptable to Lender, both certified as true and accurate by an
officer of Borrower;
(v) Within 10 days after the end of each month, an inventory
certification report for all Inventory at all locations and in form
acceptable to Lender and certified as true and accurate by an officer
of Borrower; and
(vi) At least one day prior to its release, all press releases
and/or announcements, whether or not Borrower is a so called "public
company"; and
(vii) From time to time, at Lender's request, any and all other
material, reports, information, tax returns and/or figures reasonably
required by Lender.
(b) Permit Lender and its representatives access to, and the right to
make copies of, the books, records, and properties of Borrower at all
reasonable times; and permit Lender and its representatives to discuss
Borrower's financial matters with officers of Borrower and with its
Independent Public Accountant (and, by this provision, Borrower authorizes
its Independent Public Accountant to participate in such discussions).
(c) Pay when due all taxes, assessments, and other liabilities against
it or its properties except those which are being contested in good faith
and for which an adequate reserve has been established; Borrower shall make
all withholding payments when due; Borrower shall promptly provide Lender
with evidence of payment by Borrower's shareholders/members of estimated
income taxes.
(d) Promptly notify Lender in writing of any substantial change in
present management or present business, of its intention to enter into a
new business or industry, or of its intention to wind down, liquidate or
close substantially all of its business;
(e) Pay when due all amounts necessary to fund in accordance with its
terms any Plan;
(f) Comply in all material respects with all laws, acts, rules,
regulations and orders of any legislative, administrative or judicial body
or official applicable to Borrower's business operation or Collateral or
any part thereof; provided, however, that Borrower may contest any such
law, act, rule, regulation or order in good faith by appropriate
proceedings so long as (i) Borrower first notifies Lender of such contest,
and (ii) such contest does not, in Lender's sole discretion, adversely
affect Lender's right or priority in the Collateral or impair Borrower's
ability to pay the Obligations when due;
(g) Permit Lender and its representatives, at any time, to examine and
inspect any Collateral, and to examine, inspect and copy the Borrower's
records pertaining to the Collateral and the Borrower's financial
condition, business and property.
(h) Loan Administration Fee. Pay Lender for the period commencing on
the date of this Agreement and continuing through the date of full payment
of all Obligations, a reasonable administration fee (herein called the
"Loan Administration Fee"), which shall be equal to the sum of $2,750.00
per calendar quarter (or any partial quarter), commencing as of the date
hereof and pro-rated for the balance of the current calendar quarter, plus
all out-of-pocket expenses incurred by Lender in conducting ----
examinations including travel related expenses. The Loan Administration Fee
shall be non-refundable, shall be deemed earned when paid, and shall be
payable to Lender as of the date hereof (for the balance of the current
calendar quarter), and thereafter on December 31, 2003 and on the last day
of each subsequent 3 month period/quarter. The existence or payment of the
Loan Administration Fee, Line Maintenance Fee or any other fee or charge,
shall in no way alter or diminish the obligation to pay interest, Lender's
costs of collection and attorneys' fees, or any other fees or charges
imposed under this agreement or any other agreement between Lender and
Borrower or any Guarantor;
(i) Line Maintenance Fee. Pay Lender, for the period commencing on the
date of this Agreement and continuing through the Termination Date, a
non-refundable line maintenance fee (the "Line Maintenance Fee") of
$25,000.00 per annum (less the $7,500 survey fee which has already been
paid and which is credited less SPECTRUM expenses against the first year's
Line Maintenance Fee). Such Line Maintenance Fee shall be payable to Lender
in advance on the Closing Date and on the first day of each subsequent
anniversary of the date of this agreement until all amounts owing hereunder
are repaid in full. The Line Maintenance Fee shall be non-refundable and
shall be deemed earned when paid.
(j) Promptly notify Lender in writing of (x) any litigation which (i)
involves an amount in dispute in excess of $10,000.00 (ii) relates to the
matters which are the subject of this Agreement, or (iii) if determined
adversely to Borrower would be a Material Adverse Occurrence; and (y) any
adverse development in any litigation described in clause (x).
(k) Promptly notify Lender of any Default or Event of Default.
(l) As of the calendar quarter ending 12/31/03, and as of the end of
each subsequent calendar quarter, Borrower shall achieve a before income
tax Net Profit of at least $1.00 for the calendar quarter as well as on a
year-to-date basis.
19. Negative Covenants. Borrower agrees that, without Lender's written
consent, it will not:
(a) Expend or contract to expend an aggregate in excess of $100,000
for fixed assets in any fiscal year, whether by way of purchase, lease or
otherwise, and whether payable currently or in the future.
(b) Purchase or redeem any shares of Borrower's capital stock; or
declare or pay any dividends (other than dividends payable in capital
stock); or make any other distribution or payment whatsoever to
stockholders, Affiliates or members of any assets of Borrower, except that
payments to Affiliates may be made for Borrower's proportion share of the
Affiliate's out of pocket expenses actually incurred in maintaining its
status as a public company;
(c) Incur or permit to exist any indebtedness, secured or unsecured,
for money borrowed, except: (i) borrowings under this Agreement; (ii)
indebtedness, not exceeding $50,000.00 at any one time in the aggregate
outstanding, which was incurred to acquire fixed assets, but only to the
extent that such fixed asset acquisition is permitted by this paragraph
entitled "Negative Covenants"; or (iii) borrowings, if any, which are
existing on the date of this Agreement, which exceed $25,000 and which are
listed here (rounded to nearest $1,000): [Debt over $25,000 - Attach
details to Agreement]
Total
Name of Creditor Amount Owed
(rounded to
$1,000s)
Xxxxxx Xxx $____________
Productivity Technology Corp. $____________
Atlas $____________
(d) Create or permit to exist any Security Interest on any assets now
owned or hereafter acquired except: (i) those created in Lender's favor and
held by Lender; (ii) liens of current taxes not delinquent or taxes which
are being contested in good faith for which an adequate reserve has been
established; (iii) purchase money security interests securing indebtedness
permitted by this paragraph entitled "Negative Covenants"; provided,
however, that such Security Interest extends only to the fixed assets
acquired with the proceeds of such indebtedness; and (iv) Security
Interests disclosed above, securing only debt outstanding on the date of
this Agreement and which is described above.
(e) Effect any recapitalization; or be a party to any merger or
consolidation; or sell transfer, convey or lease all or any substantial
part of its property; or sell or assign (except to Lender), with or without
recourse, any Receivables or General Intangibles.
(f) Enter into a new business or purchase or otherwise acquire any
business enterprise or any substantial assets of any person or entity; or
make any loans to any person or entity; or purchase any shares of stock of,
or similar interest in, or make any capital contribution to or investment
in, any entity.
(g) Permit more than $50,000.00 to be owing, in the aggregate, at any
one time to Borrower by all of Borrower's employees, officers, managers,
governors, directors, members, affiliates and/or shareholders, including
members of their families, as a result of any borrowings, purchases, travel
advances or other transactions or events;
(h) Become a guarantor or surety or pledge its credit or its assets on
any undertaking of another, except for the Contingent Obligations shown
above;
(i) In any fiscal year pay excessive or unreasonable salaries,
bonuses, fees, commissions, fringe benefits or other forms of compensation
(such salaries, bonuses, fees, commissions, fringe benefits or other forms
of compensation being "Compensation") to any of its officers or directors
or any Guarantor; or increase the Compensation of any officers or Guarantor
by more than ten percent (10%) or pay any such increases in Compensation of
officers or Guarantors other than from profits earned in the year of such
payment;
(j) Permit any default to occur under the terms of any Loan Document,
note, loan agreement, lease, mortgage, contract for deed, security
agreement, or other contractual obligation binding upon Borrower;
(k) Make any substantial change in present ownership, management or
present business, enter into a new business or industry, or take actions to
wind down, liquidate or close substantially all of its business;
(l) Enter into any agreement providing for the leasing by Borrower of
property which has been or is to be sold or transferred by Borrower to the
lessor thereof, or which is substantially similar in purpose to the
property so sold or transferred;
(m) Change its terms of trade with respect to the due date of any
Receivable;
(n) Change its fiscal year;
(o) (i) Permit or suffer any Plan maintained for employees of Borrower
or any commonly controlled entity to engage in any transaction which
results in a liability of Borrower under Section 409 or 502(i) of ERISA or
Section 4975 of the Code; (ii) permit or suffer any such Plan to incur any
"accumulated funding deficiency" (within the meaning of Section 302 of
ERISA and Section 412 of the Code), whether or not waived; (iii) terminate,
or suffer to be terminated, any Plan covered by Title IV of ERISA
maintained by Borrower or any commonly controlled entity or permit or
suffer to exist a condition under which PBGC may terminate any such Plan;
or (iv) permit to exist the occurrence of any Reportable Event (as defined
in Title IV of ERISA) which represents termination by the PBGC of any Plan;
(p) Enter into any transaction with any Affiliate of Borrower upon
terms and conditions less favorable to Borrower than the terms and
conditions which would apply in a similar transaction with an unrelated
third party;
(q) Enter into any agreement containing any provision which would be
violated or breached by Borrower under any Loan Document or by the
performance by Borrower of its obligations under any Loan Document;
(r) Amend or modify the provisions of any Subordinated Debt; or
(s) Maintain any Inventory at a warehouse which issues negotiable
warehouse receipts with respect to such inventory.
(t) Create or incur a default under the Guarantor Payment Agreement or
any other credit agreement with Bank One, NA
20. Availability of Collateral. Lender may from time to time, for its
convenience, segregate or apportion the Collateral for purposes of determining
the amounts and maximum amounts of Advances which may be made hereunder.
Nevertheless, Lender's security interest in all such Collateral, and any other
collateral rights, interests and properties which may now or hereafter be
available to Lender, shall secure and may be applied to the payment of any and
all loans, Advances and other Obligations secured by Lender's security interest,
in any order or manner of application and without regard to the method by which
Lender determines to make Advances hereunder.
21. Default and Remedies. It shall be an Event of Default under this
Agreement if:
(a) Borrower fails to make any payment required under this Agreement
or any present or future supplements hereto or under any other agreement
between Borrower and Lender when due, or if payable upon demand, upon
demand; or
(b) Borrower fails to perform or observe any covenant, condition or
agreement contained in this Agreement or in any other Loan Document; or
(c) Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Guarantor proves to have been
false, incorrect or misleading in a material respect when made; or
(d) A proceeding seeking an order for relief under the Bankruptcy Code
is commenced by or against Borrower or any Guarantor, provided however,
that if such a proceeding is commenced against Borrower or any Guarantor on
an involuntary basis, then only if such action is not dismissed within 60
days of first being filed; or
(e) Borrower or any Guarantor becomes insolvent or generally fails to
pay, or admit in writing its or his inability to pay, its or his debts as
they become due; or
(f) Borrower or any Guarantor applies for, consents to, or acquiesces
in, the appointment of a trustee, receiver or other custodian for it or him
or for any of its or his property, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for
Borrower or for Guarantor or for a substantial part of Borrower's or any
Guarantor's property; or
(g) Any other reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding is commenced in respect of Borrower or any
Guarantor, provided however, that if such a proceeding is commenced against
any Guarantor on an involuntary basis, then only if such action is not
dismissed within 60 days of first being filed; or
(h) Borrower or any Guarantor takes any action to authorize, or in
furtherance of, any of the events described in the foregoing clauses (d)
through (g); or
(i) All or a substantial part of the assets of Borrower or any
Guarantor are sold, leased, or otherwise disposed of (whether in one
transaction or in a series of transactions) to one or more Persons;
(j) Any judgments, writs or warrants of attachment, executions or
similar process (not covered by insurance) in the aggregate amount that
exceeds $10,000.00 is issued or levied against Borrower, any Guarantor or
any of its or his assets and is not released, vacated or fully bonded prior
to any sale and in any event within five days after its issue or levy; or
(k) The issuance or levy of any garnishment, summons, writ of
attachment, writ, warrant, attachment, tax lien or tax levy, execution or
other process against any property of Borrower or any Guarantor; or
(l) The attachment of any tax lien to any property of Borrower or any
Guarantor which is other than for taxes or assessments not yet due and
payable; or
(m) Any Guarantor dies or attempts to revoke his or its guaranty; or
(n) A Material Adverse Occurrence takes place.
Upon the occurrence of any Event of Default described in subparagraphs (d), (e),
(f), (g) (h) or (i) above, all Obligations shall be and become immediately due
and payable without any declaration, notice, presentment, protest, demand or
dishonor of any kind (all of which are hereby waived by Borrower) and Borrower's
ability to obtain any additional credit extensions or Advances under this
Agreement shall be immediately and automatically terminated. Upon the occurrence
of any other Event of Default, Lender, without notice to Borrower, may terminate
Borrower's ability to obtain any additional credit extensions or Advances under
this Agreement and may declare all or any portion of the Obligations to be due
and payable, without notice, presentment, protest or demand or dishonor of any
kind (all of which are hereby waived), whereupon the full unpaid amount of the
obligations which shall be so declared due and payable shall be and become
immediately due and payable. Upon the occurrence of an Event of Default, Lender
shall have all the rights and remedies of a secured party under the Commercial
Code and may require Borrower to assemble the Collateral and make it available
to Lender at a place designated by Lender, and Lender shall have the right to
take immediate possession of the Collateral and may enter any of the premises of
Borrower or wherever the Collateral is located with or without process of law
and to keep and store the same on said premises until sold (and if said premises
be the property of Borrower, Borrower agrees not to charge Lender or a purchaser
from Lender for storage thereof for a period of at least 90 days). Upon the
occurrence of an Event of Default, Lender, without further demand, at any time
or times, may sell and deliver any or all of the Collateral at public or private
sale, for cash, upon credit or otherwise, at such prices and upon such terms as
Lender deems advisable, at its sole discretion. Any requirement under the
Commercial Code or other applicable law of reasonable notice will be met if such
notice is mailed to Borrower at its address set forth in the opening paragraph
of this Agreement at least ten days before the date of sale. Lender may be the
purchaser at any such sale, if it is public. The proceeds of sale will be
applied first to all expenses of retaking, holding, preparing for sale, selling
and the like, including attorneys' fees and legal expenses (whether or not suit
is commenced) including, without limitation, reasonable attorneys' fees and
legal expenses incurred in connection with any appeal of a lower court's order
or judgment, and second to the payment (in whatever order Lender elects) of all
other obligations chargeable to Borrower's loan account hereunder. Subject to
the provisions of the Commercial Code, Lender will return any excess to Borrower
and Borrower shall remain liable to Lender for any deficiency. Borrower agrees
to give Lender immediate notice of the existence of any Default or Event of
Default.
22. Conditions Precedent to Initial Advance. The obligation of Lender to
make the initial Advance is subject to the condition precedent that Lender shall
have received on or before the date of the initial Advance copies of all of the
following, unless waived by Lender:
(a) A favorable opinion of counsel to Borrower and the Guarantors in
form and substance satisfactory to Lender;
(b) UCC Financing Statements in a form acceptable to Lender
appropriately completed and duly executed by Borrower;
(c) Acceptable recent UCC, tax lien, judgment, and bankruptcy searches
from the filing offices in all states required by Lender;
(d) The Guaranties, in form and substance satisfactory to Lender in
its sole and absolute discretion, appropriately completed and duly executed
by each Guarantor;
(e) Subordination Agreements relating to all notes payable under which
Borrower is obligated;
(f) A certified copy of all documents evidencing any necessary consent
or governmental approvals (if any) with respect to the Loan Documents or
any other documents provided for in this Agreement;
(g) A certificate by the Secretary or any Assistant Secretary of
Borrower certifying as to: (i) attached resolutions of Borrower's Board of
Directors authorizing or ratifying the execution, delivery and performance
of the Loan Documents to which Borrower is a party and any other documents
provided for by this Agreement, (ii) the names of the officers of Borrower
authorized to sign the Loan Documents together with a sample of the true
signature of such officers, and (iii) attached bylaws of Borrower;
(h) Certificates of Good Standing for Borrower issued by its state of
incorporation and by those states requested by Lender;
(i) A copy of the articles of incorporation of each Guarantor that is
a corporation certified by the Secretary of State;
(j) Evidence of insurance for all insurance required by the Loan
Documents;
(k) An officer certificate, in form and substance satisfactory to
Lender, executed by the President of Borrower;
(l) The Note, in form and substance satisfactory to Lender in its sole
and absolute discretion, appropriately completed and duly executed by the
Borrower;
(m) Appropriate collateral account agreements executed by Borrower and
the other parties thereto;
(n) A collateral assignment of life insurance in the amount of One
Million and No/100ths Dollars ($1,000,000.00) on the life of Xxxxxx X.
Xxxxxxx in form and substance satisfactory to Lender; and
(o) Such landlord lien waivers and mortgagee consents as Lender, in
its sole discretion, may require, in form and substance satisfactory to
Lender in its sole discretion, appropriately completed and duly executed;
(p) Such other approvals, opinions or documents as Lender may require.
23. Conditions Precedent to All Advances. The obligation of Lender to make
any Advance (including the initial Advance) shall be subject to the satisfaction
of each of the following conditions, unless waived in writing by Lender:
(a) The representations and warranties of Borrower set forth in this
Agreement are true and correct on the date of the Advance (and after giving
effect to the Advance then being made);
(b) No Default, no Event of Default and no Material Adverse Occurrence
shall then have occurred and be continuing on the date of the Advance or
result from the making of the Advance; and
(c) No litigation, arbitration or governmental investigation or
proceeding shall be pending or, to the knowledge of Borrower or any
Guarantor, threatened against Borrower or any Guarantor or affecting its
business or operations or its ability to perform its obligations hereunder
which, if adversely determined to Borrower or any Guarantor, would
constitute a Material Adverse Occurrence.
24. Termination. Subject to automatic termination of Borrower's
ability to obtain additional Advances or credit extensions under this
Agreement upon the occurrence of any Event of Default specified in the
paragraph entitled "Default and Remedies" above and to Lender's right to
terminate Borrower's ability to obtain additional credit extensions and
Advances under this Agreement upon the occurrence of any other Event of
Default or upon demand, this Agreement shall have a term ending on the
Termination Date provided, however, that Borrower may terminate this
Agreement at any earlier time upon sixty days prior written notice;
provided further, however, that if Borrower terminates this Agreement at
any time prior to the then current Maturity Date, then Borrower shall pay
to Lender a prepayment charge equal to the product arrived at by
multiplying $5,575.00 times the number of calendar months (whole and
fractional) from the Termination Date to and including the then current
Maturity Date. On the Termination Date, all obligations arising under this
Agreement shall become immediately due and payable without further notice
or demand. Lender's rights with respect to outstanding Obligations owing on
or prior to the Termination Date will not be affected by termination and
all of said rights including (without limitation) Lender's Security
Interest in the Collateral existing on such Termination Date or acquired by
Borrower thereafter, and the requirements of this Agreement that Borrower
furnish schedules and confirmatory assignments of Receivables and Inventory
and turn over to Lender all full and partial payments thereof shall
continue to be operative until all such Obligations have been duly
satisfied.
25. Grant of License to Use Patents and Trademarks Collateral. For the
purpose of enabling Lender to exercise rights and remedies under this Agreement,
Borrower hereby grants to Lender an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Borrower) to
use, license or sublicense any patent or trademark now owned or hereafter
acquired by Borrower and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer and automatic machinery software and
programs used for the compilation or printout thereof.
26. Miscellaneous.
(a) The performance or observance of any affirmative or negative
covenant or other provision of this Agreement and any supplement hereto may
be waived by Lender in a writing signed by Lender but not otherwise. No
delay on the part of Lender in the exercise of any remedy, power or right
shall operate as a waiver thereof, nor shall any single or partial exercise
of any remedy, power or right preclude other or further exercise thereof or
the exercise of any other remedy, power or right. Each of the rights and
remedies of Lender under this Agreement will be cumulative and not
exclusive of any other right or remedy which Lender may have hereunder or
as allowed by law.
(b) Any notice, demand or consent authorized by this Agreement to be
given to Borrower shall be deemed to be given when transmitted by telex or
telecopier (provided a confirmation copy thereof is sent by U.S. mail,
first class, within 24 hours of transmission) or personally delivered, or
three days after being deposited in the U.S. mail, postage prepaid, or one
day after delivery to Federal Express or other overnight courier service,
in each case addressed to Borrower at its address shown in the opening
paragraph of this Agreement, or at such other address as Borrower may, by
written notice received by Lender, designate as Borrower's address for
purposes of notice hereunder. Any notice or request authorized by this
Agreement to be given to Lender shall be deemed to be given when personally
delivered, or three business days after being deposited in the U.S. mail,
certified, return receipt requested, postage prepaid, or one business day
after delivery to and receipt by Federal Express or other overnight
courier, in each case addressed to Lender at its address shown in the
opening paragraph of this Agreement, or at such other address as Lender
may, by written notice received by Borrower, designate as Lender's address
for purposes of notice hereunder; provided, however, that any notice to
Lender which contains a request for -------- ------- an Advance as
discussed above shall not be deemed given until actually received.
(c) This Agreement, including exhibits and schedules and other
agreements referred to herein, is the entire agreement between the parties,
supersedes and rescinds all prior agreements relating to the subject matter
herein, cannot be changed, terminated or amended orally, and shall be
deemed effective as of the date it is accepted by Lender.
(d) Borrower agrees to pay and will reimburse Lender on demand for all
expenses incurred by Lender arising out of the origination of, or arising
during the administration of loans contemplated by this Agreement including
without limitation travel expenses, filing, recording, search and due
diligence fees as well as attorneys' fees and legal expenses, including
costs of in-house counsel (whether or not suit is commenced), whether
incurred in the negotiation and preparation of this Agreement, in the
operation of cash management, delivery/courier or other services including
Lender's then current charges for the operation of a lockbox and wire
transfer or advance fees, in the protection and perfection of Lender's
security interest in the Collateral, in the enforcement of any of the
provisions of this Agreement or of Lender's rights and remedies hereunder
and against the Collateral, in the defense of any claim or claims made or
threatened against Lender arising out of this transaction, or otherwise
including, without limitation, in each instance, all reasonable attorneys'
fees and legal expenses incurred in connection with any appeal of a lower
court's order or judgment. Borrower acknowledges that, at Lender's
discretion, certain expenses may be charged to Borrower at Lender's then
current rate for such services to its customers generally or alternatively,
at its actual cost including overhead charges. Lender may also impose other
miscellaneous charges for additional products or services provided to
Borrower based on the cost agreed to by Borrower from time to time. Lender
is authorized to deduct any such expenses from any amount due Borrower
and/or to add such expenses to Borrower's loan account hereunder. Further,
in recognition of Borrower's obligations to pay such fees and expenses,
notwithstanding payment in full of the Obligations, Lender shall not be
required to execute or file any terminations, releases or satisfactions of
any of the liens, security interests, financing statements, mortgages or
other filings or encumbrances unless and until Borrower and all Guarantors
have executed and delivered to Lender a general release of liability of
Lender in a form satisfactory to Lender. Borrower acknowledges that
pursuant to Lender's policies, any liens, security interests, financing
statements, mortgages or other filings or encumbrances may be terminated,
released and/or satisfied only in a clear and unambiguous written document
executed by a principal or executive officer of Lender.
Borrower acknowledges that Lender has certain responsibilities in
connection with the making of Advances and the administration of this
Agreement. Consequently, Borrower hereby indemnifies, exonerates and holds
Lender, and its officers, directors, employees and agents (the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities and damages, and expenses in connection
therewith including, without limitation, reasonable attorneys' fees and
disbursements (the 'Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to:
(i) any transaction financed or to be financed in whole or in
part directly or indirectly with proceeds of any Advance, or
(ii) the execution, delivery, performance or enforcement of this
Agreement or any document executed pursuant hereto by any of the
Indemnified Parties, except for any such Indemnified Liabilities
arising on account of any Indemnified Party's gross negligence or
willful misconduct.
If and to the extent that the foregoing undertaking may be unenforceable
for any reason, Borrower hereby agrees to make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which
is permissible under applicable law. The provisions of this Paragraph shall
survive termination of this Agreement.
(e) This Agreement is made under and shall be governed by and
interpreted in accordance with the internal laws of the state of Minnesota,
except to the extent that the perfection of the Security Interest
hereunder, or the enforcement of any remedies hereunder with respect to any
particular Collateral, shall be governed by the laws of a jurisdiction
other than the State of Minnesota. Captions herein are for convenience only
and shall not be deemed part of this Agreement.
(f) This Agreement shall be binding upon Borrower and Lender and their
respective successors, assigns, heirs, and personal representatives and
shall inure to the benefit of Borrower, Lender and the successors and
assigns of Lender, except that Borrower may not assign or transfer its
rights hereunder without the prior written consent of Lender, and any
assignment or transfer in violation of this provision shall be null and
void. In connection with the actual or prospective sale by Lender of any
interest or participation in the obligations, Borrower authorizes Lender to
furnish any information in its possession, however acquired, concerning
Borrower or any of its Affiliates to any person or entity.
(g) In recognition of Borrower's right to have its attorneys' fees and
other expenses incurred in connection with this Agreement secured by the
Collateral, notwithstanding payment in full of all Obligations by Borrower,
Lender shall not be required to record or authorize the recording of any
terminations or satisfactions of any of Lender's liens on the Collateral
unless and until Borrower and any guarantor hereof have executed and
delivered to Lender a general release of liability in a form reasonably
satisfactory to Lender.
(h) Borrower hereby irrevocably consents and submits to the personal
jurisdiction of any Minnesota state court or federal court over any action
or proceeding arising out of or relating to the Agreement, and Borrower
hereby irrevocably agrees that all claims in respect of such action or
proceeding shall be venued (at the sole option of Lender) in either the
District Court of Dakota or Hennepin County, Minnesota, or the United
States District Court, District of Minnesota. Borrower hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding.
Borrower irrevocably consents to the service of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding by the mailing by United States certified mail, return receipt
requested, of copies of such process to Borrower's address stated in the
preamble hereto. Borrower agrees that judgment final by appeal, or
expiration of time to appeal without an appeal being taken, 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. Nothing in this Paragraph shall affect the right of Lender to serve
legal process in any other manner permitted by law or affect the right of
Lender to bring any action or proceeding against Borrower or its property
in the courts of any other jurisdiction. Borrower agrees that, if it brings
any action or proceeding arising out of or relating to this Agreement, it
shall bring such action or proceeding in the District Court of Hennepin
County, Minnesota.
The provisions of this Agreement are severable, and in any action or
proceeding involving any State corporate law, or any State or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Borrower hereunder would
otherwise be held or determined to be void, invalid, or unenforceable on
account of the grant of a security interest hereunder to secure Borrower's
contingent obligations, then, notwithstanding any other provision of this
Agreement to the contrary, the amount of such liability shall, without any
further action by Borrower, Lender or any other person, be automatically
limited and reduced to the highest amount which is valid and enforceable as
determined in such action or proceeding. In the event a court of competent
jurisdiction determines that any of the figures called the Interest Rate
violates any usury laws or any other law, then, such Interest Rate or other
provision shall be accordingly and retroactively adjusted or modified to
comply with the highest rate allowed under applicable law. Further, if any
provision or application of any provision of this Agreement other than the
Interest Rate (including but not limited to any provision relating to the
calculation of interest) is held unlawful or unenforceable in any respect
(including but not limited to any usury or similar law), such illegality or
unenforceability shall not affect other provisions or applications which
can be given effect, and this Agreement shall be construed as if the
unlawful or unenforceable provision or application had never been contained
herein or prescribed hereby.
(i) Borrower also irrevocably consents to and authorizes all of its
banks and/or financial institutions to provide SPECTRUM with all written,
verbal and other information in its possession that relates to its entire
relationship with Borrower including but not limited to information
relating to accounts, certificates, balances and activity, loans, leases
and the like, including any detail information relating to the above.
(j) A photocopy or other reproduction hereof may be filed as a
financing statement.
(k) The undersigned waives notice of acceptance hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LENDER: SPECTRUM COMMERCIAL SERVICES COMPANY
By
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Its
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BORROWER: WCS ACQUISITION CORP., a/k/a,
WESTLAND CONTROL SYSTEMS, INC.
By
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Its
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Fed. Tax ID #: 00-0000000
