GENERAL CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT, dated as of October 24, 1997, between SPECTRUM
Commercial Services, a division of Lyon Financial Services, Inc., a Minnesota
corporation, having its mailing address and principal place of business at 0000
Xxxxxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000 (herein called
"Lender"), and Infinite Graphics Incorporated, a Minnesota corporation, having
the mailing address and principal place of business at 0000 Xxxx Xxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000 (herein called "Borrower").
I. Agreement. This Agreement states the terms and conditions under
which Borrower may obtain certain loans and/or other credit extensions from
Lender.
II. Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"Acceptable Distributions" shall mean, with respect to Borrower, cash
distributions made to Borrower's shareholders during any period in which
Borrower has made an effective S Corporation election, in an amount equal to the
combined federal and state income tax liability of such shareholders arising
from their respective allocable share of the earnings and profit of Borrower,
with each shareholder's federal and state income tax liability, including any
minimum tax liability, to be computed on the basis of the applicable marginal
tax rate for individuals under the Code and relevant state law as such
applicable marginal tax rates are reduced by deductions for state income taxes
with respect to the Code and for federal income taxes with respect to the
relevant state law; provided, however, that no such distribution(s) shall be
made if and to the extent that, after giving effect thereto, the aggregate
amount distributed to all shareholders pursuant to this provision in any given
period exceeds an amount equal to the amount of regular state and federal income
tax that would be assessed against Borrower for such period if Borrower were
subject to the tax provisions applicable to a C Corporation but not including
any penalty tax provisions such as provisions for accumulated earnings taxes or
personal holding company taxes.
"Advance(s)" shall have the meaning provided in Paragraph 4(a).
"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,
director 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) Seventy five percent (75%) of
the net amount of Eligible Service Receivables or such greater or lesser
percentage as Lender, in its sole discretion, shall deem appropriate, plus (ii)
a certain percentage of the net amount of Eligible Software Receivables due
wholly (but not partially) in 90 days or less or the first month of software
maintenance xxxxxxxx, as described here:
----------------- ---------------------------- ---------------
Net Income For Period Advance Rate
----------------- ---------------------------- ---------------
$50,000+ 2 Qtrs ending 1/31/98 70%
----------------- ---------------------------- ---------------
$75,000+ 2 Qtrs ending 4/30/98 70%
----------------- ---------------------------- ---------------
$100,000+ 2 Qtrs ending 7/31/98 and 70%
beyond in rolling 6 month
periods
----------------- ---------------------------- ---------------
Some Net Income 2 Qtrs ending 1/31/98, 50%
but less than 4/30/98 or beyond in
that listed rolling 6 month periods
above
----------------- ---------------------------- ---------------
Net Loss 2 Qtrs ending 1/31/98, 25%
4/30/98 or beyond in
rolling 6 month periods
----------------- ---------------------------- ---------------
Net Loss 2 Qtrs ending 1/31/98, 0%
4/30/98 or beyond in
rolling 6 month periods
----------------- ---------------------------- ---------------
or such greater or lesser percentage(s) as Lender, in its sole discretion, shall
deem appropriate ("Qtrs" are fiscal quarters and rolling 6 month periods). (New
Income or Net Loss is determined from the Net Income or Net Loss figures
reflected by the interim financial statements delivered to Lender or the audited
financial statements delivered to Lender pursuant to Paragraph 16(h) for fiscal
year ending financial statements and take effect immediately upon receipt. If
such financial statements are not received within the time periods required by
this agreement, then the advance rate will be deemed 0% thereafter.) The total
of all Eligible Software Receivables outstanding at any one time shall not
exceed Five Hundred
Thousand and No/100ths Dollars ($500,000.00) or such greater or lesser amount
as, in its sole discretion, shall deem appropriate.
"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 Paragraph 21 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.
"Current Assets" shall have the meaning given to that term in accordance
with GAAP.
"Current Liabilities" shall have the meaning given to that term in
accordance with GAAP, except that the outstanding principal amount of the
Advance shall, in any event, be excluded.
"Customer(s)" shall have the meaning provided in Paragraph 7(a).
"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.
"Eligible Receivables" shall mean the dollar value of only such Receivables
of Borrower arising from the sale of Inventory or the 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 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; (except for sales to an account debtor located in Canada which do
not exceed $10,000 outstanding in the aggregate); (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 is either a consignment Receivable or a bonded
Receivable or a retainage; (xii) In its reasonable discretion, Lender shall
become dissatisfied with the creditworthiness of an account debtor owing a
Receivable ; or (xiii) the portion by which the aggregate amount owing by an
account debtor exceeds $125,000.
"Eligible Service Receivables" shall mean those Eligible Receivables which
result from the sale of goods or services other than Software Receivables.
"Eligible Software Receivables": shall mean those Eligible Receivables
which result from the sale and delivery of computer software and programs along
with related training, documentation, service, support and other incidental or
related products and service, and also includes the sale of maintenance, service
or support of previously provided software programs.
"Equipment" shall have the meaning provided in Paragraph 3.
"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 Paragraph 20.
"GAAP" shall mean generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with the
audited financial statements delivered to Lender pursuant to Paragraph 16(h).
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 Paragraph 3.
"Guarantor" shall mean Xxxxxxxx Xxxxxxx, Xx. and any other Person who
enters into a Guaranty hereof.
"Guaranty(ies)" shall mean those certain Guaranties dated as of August 12,
1998, from Xxxxxxxx Xxxxxxx, Xx. and any other agreement whereby a Person
guarantees the payment or performance of any of the Obligations.
"Independent Public Accountants" shall mean Deloitte & Touche, LLP or any
other firm of independent public accountants which is acceptable to Lender.
"Inventory" shall have the meaning provided in Paragraph 3.
"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 Paragraph 17.
"Loan Administration Fee" shall have the meaning provided in Paragraph 17.
"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 October 12, 1999, provided, however, that
Borrower shall have the option to extend the Maturity Date for subsequent six
month periods, unless Lender (in its sole and absolute discretion) notifies
Borrower at least sixty days prior to the then current Maturity Date that the
extension shall not be available and in that event, no extension shall occur. In
any event, the extension option shall not be available if, as of the then
current Maturity Date (i) an Event of Default has occurred and is continuing
(whether or not Lender has notified Borrower of such default), or (ii) this
Agreement has previously terminated as provided in Paragraph 23, or (iii) Lender
has, in its sole and absolute discretion, demanded payment of amounts owed
hereunder. Should Borrower have the option to extend the Maturity Date and
choose to do so, than Borrower shall notify Lender of its request for an
extension at least 15 days before the then current Maturity Date and, prior to
the then current Maturity Date, shall have executed a new promissory note
reflecting the extended Maturity Date and which contains substantially the same
terms as the Note then in effect.
"Maximum Principal Amount" shall mean, at any date, Seven Hundred Fifty
Thousand and No/100ths Dollars ($750,000.00).
"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 Income" or "Net Loss" for any period shall mean net income or loss for
such period, 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 Paragraph 3.
"Origination Fee" shall have the meaning provided in Paragraph 17.
"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.
"Person" shall mean any natural person, corporation, 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 Norwest Bank Minnesota, National
Association; Borrower acknowledges that the Prime Rate may not be the lowest
rate made available by Lender to its customers and that Lender may lend to its
customers at rates that are at, above or below the Prime Rate.
"Receivables" shall have the meaning provided in Paragraph 3(a).
"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 corporation of which more
than 50% of the outstanding shares of capital stock having ordinary voting power
for the election of directors 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 Paragraph 20, 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 Paragraph 20 or otherwise, or (iv) the date
upon which this Agreement terminates as provided in Paragraph 23, 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.
"Working Capital" at any date shall mean Current Assets at such date minus
Current Liabilities at such date.
I. 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 and to the following property:
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, "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;
A. 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;
A. 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;
A. 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, 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, the right to use Borrower's corporate name and the goodwill of
Borrower's business; and
A. 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
A. 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, 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".
I. Advances.
A. At the request of Borrower, Lender agrees, subject to the terms and
conditions hereinafter set forth, to 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 shall not be required 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.
A. In order to obtain an Advance, Borrower shall give written or
telephonic notice to Lender, by not later than 11:00 a.m. (Minneapolis
time) on the day before 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. At the request
of Lender, Borrower shall confirm in writing any telephonic notice.
A. The obligation of Lender to make Advances shall terminate on the
Termination Date.
A. 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.
A. 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.
4A. 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 Paragraph 20 or otherwise
hereunder and, further, amounts may become due hereunder (pursuant to Paragraph
20 or otherwise) without a demand by Lender, as provided in this agreement.
I. 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 Four and One-Half Percent (4 1/2%) 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 10% per annum; and (ii) interest payable hereunder with
respect to each calendar month shall not be less than $2,500.00 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, 1997. 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 Income" (as defined below) for the 6
months ended October 31, 1997 of at least Two Hundred Fifty Thousand Dollars
($250,000.00), and provided no Event of Default exists or has occurred, then the
Initial Rate shall be reduced to four and one quarter percent (4.25%) in excess
of the Prime Rate (the "Adjusted Rate") commencing with the next scheduled
Monthly Payment Date following Lender's receipt of Borrower's financial
statements for that period. Provided that Borrower obtains the Adjusted Rate
reduction described above, then in the further event Borrower earns Net Income
for the fiscal year ending April 30, 1998 of at least Five Hundred Thousand
Dollars ($500,000.00), and provided no Event of Default exists or has occurred,
then the Adjusted Rate shall be reduced to three and three-quarters percent
(3.75%) in excess of the Prime Rate (the "Re-adjusted Rate") commencing with the
next scheduled Monthly Payment Date following Lender's receipt of the audited
financial statements delivered to Lender pursuant to Paragraph 16(h) for fiscal
year ending April 30, 1998. (The Initial Rate, the Adjusted Rate and the
Re-adjusted Rate are sometimes hereinafter collectively referred to as the
"Interest Rate").
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 15% per
annum; and (ii) interest payable under the Note with respect to each calendar
month shall not be less than $2,900 regardless of the amount of loans, Advances
or other credit extensions that actually may have been outstanding during the
month.. 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.
I. 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 set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Lender or any Participant to or for the credit or the account of Borrower,
including specifically any amounts held in any account maintained at Lender or
any Participant, against any and all amounts which may be owed to Lender or any
Participant by Borrower whether in connection with this Agreement or otherwise
and irrespective of whether Borrower shall have made any requests under this
Agreement.
I. Reports and Collections.
(a) Borrower agrees to furnish to Lender, at least weekly, schedules
describing Receivables created or acquired by Borrower (including
confirmatory written assignments thereof), including, copies of all
invoices to account debtors and other obligors (all herein referred to as
"Customers") and original shipping or delivery receipts for all 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) Upon Lender's request, Borrower agrees to furnish to Lender Inventory
certifications in accordance with Paragraph 17(a)(v) and a physical listing
of all Inventory, wherever located, at least once every twelve months or,
in either case, as more frequently requested by Lender.
(c) All full and partial payments 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). Until such
payments are so delivered to Lender, such payments shall be held in trust
by Borrower for and as Lender's property and shall not be commingled with
any funds of Borrower. The net amount received by Lender as proceeds
arising from the sale or other disposition of Collateral will be credited
by Lender to Borrower's loan account (subject to final collection thereof)
after allowing the number of days required by the applicable bank for
collection of checks and other instruments
I. 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 Paragraph 18(d), 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 Paragraph 18(d).
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.
I. Power of Attorney. Borrower appoints Lender, or any of Lender's
officers, employees or agents whom Lender may from time to time designate, 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 (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.
I. Location of Collateral. Borrower warrants that its chief executive
office is at the address stated in the opening paragraph of this Agreement and
that its books and records concerning Receivables are located there. Borrower's
Inventory, Equipment and other goods are at the location or locations as
designated on Schedule A annexed hereto. 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.
I. 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
Paragraph 18(d), 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 Paragraph 18(d). Borrower will not sell,
lease or otherwise dispose of the Collateral, or attempt so to do (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 and unless the proceeds of any such
sale are paid to Lender 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 11 or Paragraph 13 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 Paragraph 21 and in form and substance satisfactory
to Lender.
I. 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.
I. 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.
I. 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 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 Paragraph 5 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 Paragraph 5 of this Agreement. In any
event, Borrower covenants to pay all Advances, debts, accounts and interest when
due.
I. 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.
I. 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 Minnesota, has corporate 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 the names listed on Schedule B attached hereto.
Borrower does not own any capital stock of any corporation, except as set
forth on Schedule C attached hereto.
A. 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.
A. The execution and delivery of this Agreement and the other Loan
Documents have been duly authorized by all necessary corporate action by
directors and shareholders 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.
A. Except as disclosed to Lender on Schedule D attached hereto, 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.
A. 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.
A. All of the assets of Borrower are free and clear of Security
Interests except those listed on Schedule E attached hereto.
A. 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 fiscal year ended on April 30,
1997. 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.
A. Borrower has furnished to Lender the financial statements listed on
Schedule G attached hereto. These statements were prepared in accordance
with GAAP and present fairly the financial condition of Borrower and its
Consolidated Subsidiaries. There has been no material adverse change in the
condition of Borrower and its Consolidated Subsidiaries, financial or
otherwise, since the date of the most recent of such financial statements.
A. 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.
A. Borrower 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.
A. All amounts obtained pursuant to Advances will be used for
Borrower's working capital purposes.
A. Except for the trademarks, patents, copyrights and franchise rights
listed on Schedule F attached hereto, Borrower is not the owner of any
patent, trademark, copyright or franchise rights.
A. (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.
A. 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.
A. 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.
A. The number of shares and classes of the capital stock of Borrower
and the ownership thereof are accurately set forth on Schedule H attached
hereto. 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.
A. Except for Contingent Obligations shown on Schedule I attached
hereto, Borrower does not have any Contingent Obligations.
A. 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.
A. 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 Paragraph 16(h) shall be deemed to refer to the financial statements
then most recently delivered to Lender pursuant to Paragraphs 17(a)(i) and
(ii).
I. Affirmative Covenants. Borrower agrees that it will:
A. Furnish to Lender in form satisfactory to Lender:
1. Within 90 days after the end of each fiscal year of Borrower,
a complete audited financial report 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. 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;
1. Within 45 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 treasurer 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 Paragraph 17(a)(v);
1. With the financial statements described in Paragraph 17(a)(i)
and (ii), a compliance certificate in the form attached as Exhibit A
certified as true and accurate by the chief financial officer or
treasurer of Borrower;
1. 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;
1. Upon Lender's request, within 10 days after the end of each
month, an inventory certification report for all Inventory locations
in form acceptable to Lender and certified as true and accurate by an
officer of Borrower; and
1. From time to time, at Lender's request, any and all other
material, reports, information, or figures reasonably required by
Lender.
A. 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).
A. 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; during any period for which Borrower has
made an effective S Corporation election, Borrower shall promptly provide
Lender with evidence of payment by Borrower's shareholders of estimated
income taxes.
A. 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;
A. Pay when due all amounts necessary to fund in accordance with its
terms any Plan;
A. 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;
A. Permit Lender and its representatives, at any time, to examine and
inspect any Collateral, and to examine, inspect and copy the Debtor's
records pertaining to the Collateral and the Debtor's financial condition,
business and property.
A. 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 $1,500.00
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. 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
January 1, 1998 and on the first 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;
A. Origination Fee. Pay to Lender an origination fee (the "Origination
Fee") in the amount of Seven Thousand Five Hundred and No/100ths Dollars
($7,500.00). The entire amount of
the Origination Fee shall be nonrefundable and shall be deemed to have been
earned upon execution of this Agreement. Lender acknowledges that Borrower
has previously a $5,000 survey fee which will be applied against the
Origination Fee.
A. Promptly notify Lender in writing of (x) any litigation which (i)
involves an amount in dispute in excess of $25,000.00 (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).
A. Promptly notify Lender of any Default or Event of Default.
A. Beginning January 31, 1998 and for each succeeding 6 calendar month
period (as determined monthly), Borrower shall achieve a positive Net
Income before income tax or a Net Loss of no more than $100,000.
I. Negative Covenants. Borrower agrees that it will not:
A. From October 1, 1997 to September 30, 1998, expend or contract to
expend an aggregate in excess of $1,000,000 for fixed assets whether by way
of purchase, lease or otherwise, and whether payable currently or in the
future as well as no more than $1.1 million for a Gerber Mask Write 800
direct write laser imager.
A. From October 1, 1998 to September 30, 1999 and in each subsequent
12 month period, expend or contract to expend an aggregate in excess of
$250,000 for fixed assets whether by way of purchase, lease or otherwise,
and whether payable currently or in the future.
A. 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 distribution to stockholders of any assets of Borrower;
(provided, however, that so long as no Default or Event of Default exists
or would result from such distributions, Borrower may make Acceptable
Distributions to be used by Borrower's shareholders solely to make required
income tax payments.
A. Incur or permit to exist any indebtedness, secured or unsecured,
for money borrowed, except: (i) borrowings under this Agreement; (ii)
borrowings, if any, which are existing on the date of this Agreement and
which are disclosed on Schedule J attached hereto; or (iii)
indebtedness,incurred to acquire fixed assets but only to the extent that
such fixed asset acquisition is permitted by Paragraph 18(a) and in
aggregate amounts no greater than the limits described in Paragraph 18(a).
A. 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 Paragraph 18(c)(iii); provided, however, that such Security
Interest extends only to the fixed assets acquired with the proceeds of
such indebtedness; and (iv) Security Interests disclosed on Schedule E
attached hereto, securing only debt outstanding on the date of this
Agreement and disclosed on Schedule X.
X. Effect any recapitalization; or be a party to any merger or
consolidation; or, except in the normal course of business, 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.
A. 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.
A. Permit more than $50,000.00 to be owing at any one time to Borrower
by all of Borrower's employees, officers, directors, or shareholders, or
members of their families, as a result of any borrowings, purchases, travel
advances or other transactions or events;
A. Become a guarantor or surety or pledge its credit or its assets on
any undertaking of another, except for the Contingent Obligations shown on
Schedule I attached hereto;
A. 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;
A. 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;
A. 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;
A. 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;
A. Change its fiscal year without Lender's prior written consent;
A. (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;
A. 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;
A. 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;
A. Amend or modify the provisions of any Subordinated Debt; or B.
Maintain any Inventory at a warehouse which issues negotiable warehouse
receipts with respect to such inventory.
I. 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.
I. 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
A. Borrower fails to perform or observe any covenant, condition or
agreement contained in this Agreement or in any other Loan Document; or
A. 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
A. 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
A. 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
A. 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
A. 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
A. 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
A. 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;
A. 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
A. 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
A. 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
A. Any Guarantor dies or attempts to revoke his or its guaranty; or
A. A Material Adverse Occurrence takes place.
Upon the occurrence of any Event of Default described in Paragraphs 20(d), (e),
(f), (g) or (h), 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.
I. 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. UCC-1 Financing Statements in a form acceptable to Lender
appropriately completed and duly executed by Borrower;
A. Acceptable recent UCC, tax lien, judgment, and bankruptcy searches
from the filing offices in all states required by Lender;
A. The Guaranties, in form and substance satisfactory to Lender in its
sole and absolute discretion, appropriately completed and duly executed by
each Guarantor;
A. Subordination Agreements relating to all notes payable under which
Borrower is obligated;
A. 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;
A. 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;
A. Certificates of Good Standing for Borrower issued by its state of
incorporation and by those states requested by Lender;
A. A copy of the articles of incorporation of each Guarantor that is a
corporation certified by the Secretary of State;
A. Evidence of insurance for all insurance required by the Loan
Documents;
A. An officer certificate, in form and substance satisfactory to
Lender, executed by the President of Borrower;
A. The Note, in form and substance satisfactory to Lender in its sole
and absolute discretion, appropriately completed and duly executed by the
Borrower;
A. Appropriate collateral account agreements executed by Borrower and
the other parties thereto;
A. A collateral assignment of life insurance in the amount of Seven
Hundred Fifty Thousand and No/100ths Dollars ($750,000.00) on the life of
Xxxxxxxx X. Xxxxxxx, Xx. in form and substance satisfactory to Lender; and
A. 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;
A. Such other approvals, opinions or documents as Lender may require.
I. 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);
A. 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
B. 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 Advance Occurrence.
I. 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 Paragraphs 20(d), (e), (f), (g)
or (h) 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
$2,500.00 times the number of calendar months (whole and fractional) from the
Termination Date to and including the then current Maturity Date; provided
further, that if Borrower terminates this Agreement prior to the then current
Maturity Date and repays all amounts owing to Lender hereunder completely from
funds borrowed from Riverside Bank (and not from any other source of funds),
then no
prepayment charge shall be due. 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.
X. Xxxxx 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.
I. 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 given pursuant to Paragraph 4(b) shall not be deemed given until
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
out-of-pocket expenses incurred by Lender arising out of the origination or
duration of this transaction including without limitation filing and
recording fees and 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 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. 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.
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:
1. any transaction financed or to be financed in whole or in part
directly or indirectly with proceeds of any Advance, or
1. 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) 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.
(h) 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.
(i) A photocopy or other reproduction hereof may be filed as a financing
statement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LENDER: SPECTRUM COMMERCIAL SERVICES
By _______________________________________
Its ________________________________
BORROWER: INFINITE GRAPHICS, INC.
By _______________________________________
Its ________________________________
Fed. Tax ID #: 00-0000000
List of Exhibits
Exhibit A Compliance Certificate
Exhibit B Borrower's Financial Projections
List of Schedules
Schedule A Locations of Inventory and Equipment
(Paragraph 10)
Schedule B Names Under Which Borrower Has Done Business (Paragraph 16(a))
Schedule C Capital Stock of Corporations Owned by Borrower (Paragraph 16(a))
Schedule D Litigation (Paragraph 16(d))
Schedule E Security Interests (Paragraphs 16(f) and 18(d))
Schedule F Patents, Trademarks, Copyrights and Franchise Rights
(Paragraph 16(l))
Schedule G Financial Statements (Paragraph 16(h))
Schedule H Stock and Stock Ownership of Borrower (Paragraph 16(p))
Schedule I Contingent Obligations (Paragraph 16(q))
Schedule J Permitted Existing Indebtedness (Paragraphs 18(c) and (d))
