EXHIBIT 10.04
LOANS AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the undersigned Lender
concerning loans and other credit accommodations to be made by Lender to
Borrower.
SECTION 1. PARTIES
1.1 The "Borrower" is the person, firm, corporation or other entity,
identified as the Borrower in Section 10.6(c) and its successors and assigns.
If more than one Borrower is specified in Section 10.6(c), all references to
Borrower shall mean each of them, jointly and severally, individually and
collectively, and the successors and assigns of each.
1.2 The "Lender" is The CIT Group/Credit Finance, Inc. and its
successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to Borrower ("Revolving Loans") in
amounts requested by Borrower from time to time, but not in excess of the Net
Availability existing immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding Obligations to
exceed the Maximum Credit.
(a) The "Maximum Credit" is set forth in Section 10.1(a) hereof.
(b) The "Gross Availability" shall be calculated at any time as (i) the
product obtained by multiplying the outstanding amount of Eligible Accounts, net
of all taxes, discounts, allowances and credits given or claimed, by the
Eligible Accounts Percentage set fort h in Section 10.1(b),
plus: (ii) the product(s) obtained by multiplying the applicable
Eligible Inventory Percentage(s), if any, set forth in Section 10.1
(b) by the values (as determined by Lender based on the lower of
cost or market) of Eligible Inventory, but the amount so added shall
not exceed any sublimits set forth in Section 10.1(c),
(c) The "Net Availability" shall be calculated at any time as an amount
equal to the Gross Availability minus the aggregate amount of all then-
outstanding Obligations to Lender other than the then outstanding principal
balance of the Term Loan, if any.
(d) "Eligible Accounts" are accounts created by Borrower in the ordinary
course of its business which are and remain acceptable to Lender for lending
purposes. General criteria for Eligible Accounts are set forth below but may be
revised from time to time by Lender, in its sole judgment, on fifteen (15) days'
prior written notice to Borrower. Lender shall, in general, deem
accounts to be Eligible Accounts if: (1) such accounts arise from bona fide
completed transactions and have not remained unpaid for more than the number of
days after the invoice date set forth in Section 10.1(d); (2) the amounts of
the accounts reported to Lender are absolutely owing to Borrower and do not
arise from sales on consignment, guaranteed sale or other terms under which
payment by the account debtors may be conditional or continent; (3) the account
debtor's chief executive office or principal place of business is located in the
United States; (4) such accounts do not arise from progress xxxxxxxx retainers
or xxxx and hold sales; (5) there are no contra relationships, setoffs,
counterclaims or disputes existing with respect thereto and there are no other
facts existing or threatened which would impair or delay the collectibility of
all or any portion thereof, (6) the goods giving rise thereto were not at the
time of the sale subject to any liens except those permitted in this Agreement;
(7) such accounts are not accounts with respect to which the account debtor or
any officer or employee thereof is an officer, employee or agent of or is
affiliated with Borrower, directly or indirectly, whether by virtue of family
membership, ownership, control, management or otherwise; (8) such accounts are
not accounts with respect to which the account debtor is the United States or
any State or political subdivision thereof or any department, agency or
instrumentality of the United States, any State or political subdivision,
unless there has been compliance with the Assignment of Claims Act or any
similar State or local law, if applicable; (9) Borrower has delivered to Lender
or Lender's representative such documents as Lender may have requested pursuant
to Section 5. 8 hereof in connection with such accounts and Lender shall have
received a verification of such account, satisfactory to it, if sent to the
account debtor or any other obligor or any bailee pursuant to Section 5.4
hereof, (10) there are no facts existing or threatened which might result in any
adverse change in the account debtor's financial condition; (11) except for
accounts owed by General Motors Corporation and Chrysler Corporation, which
accounts are not limited by this clause (11), such accounts owed by a single
account debtor or its affiliates do not represent more than twenty (20%) percent
of all otherwise Eligible Accounts (accounts excluded from Eligible Accounts
solely by reason of this subsection (11) shall nevertheless be considered
Eligible Accounts to the extent of the amount of such accounts which does not
exceed twenty (20%) percent of all otherwise Eligible Accounts); (12) such
accounts are not owed by an account debtor who is or whose affiliates are past
due upon other accounts owed to Borrower comprising more than fifty (50%)
percent of the accounts of such account debtor or its affiliates owed to
Borrower; (13) such accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the amount of any customer credit
limits as established, and changed, from time to time by Lender on notice to
Borrower (accounts excluded from Eligible Accounts solely by reason of this
subsection (13) shall nevertheless be considered Eligible Accounts to the extent
the amount of such accounts does not exceed such customer credit limit); (14)
such accounts are owed by account debtors deemed creditworthy at all times by
Lender; and (15) such accounts arise from the sale of tooling provided the
account debtor thereof has accepted the tooling by written acceptance in form
acceptable to Lender and provided further that all outstanding advances against
Borrower's accounts representing the sale of tooling may not exceed $100,000 at
any time.
(e) "Eligible Inventory" is inventory owned by Borrower which is and
remains acceptable to Lender for lending purposes and is located at one of the
addresses set forth in Section 10.6
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or processor or located at a location leased by Borrower, unless such bailee,
consignee, processor or landlord, as applicable, delivers to Lender an agreement
in form and substance satisfactory to Lender, together with such Uniform
Commercial Code financing statements as Lender shall require or (ii) inventory
located at a location owned by Borrower which is subject to a mortgage in favor
of any person other than Lender, unless such person delivers to Lender an
agreement in form and substance satisfactory to Lender.
(f) Lender shall have a continuing right to deduct reserves in determining
the Gross Availability ("Reserves"), and to increase and decrease such Reserves
from time to time, if and to the extent that, in Lender's sole judgment, such
Reserves are necessary to protect Lender against any state of facts which does,
or would, with notice or passage of time or both, constitute an Event of Default
or have an adverse effect on any Collateral. Lender may, at its option,
implement Reserves by designating as ineligible a sufficient amount of accounts
or inventory which would otherwise be Eligible Accounts or Eligible Inventory so
as to reduce Gross Availability by the amount of the intended Reserve.
(g) Subject to the terms and conditions hereof, including but not limited
to the existence of sufficient Gross and Net Availability, Borrower agrees to
borrow sufficient amounts from time to time so that the outstanding Revolving
Loan or the Term Loan, shall at all times equal or exceed the principal amount
set forth in Section 10.1(e) as the Minimum Borrowing. Borrower will maintain
Gross Availability or Net Availability at all times in amounts sufficient to
permit Borrower to comply with the Minimum Borrowing requirement. In the event
Borrower does not borrow sufficient amounts to continuously meet or exceed the
Minimum Borrowing requirement, or in the event Borrower fails to maintain Gross
and Net Availability at all times at amounts sufficient to permit Borrower to
comply with the Minimum Borrowing requirement, then, in either of such event(s),
Borrower shall be deemed to have borrowed from Lender such additional sums from
time to time as may be necessary in order for Borrower to continuously meet the
Minimum Borrowing requirement. Such sums shall be added to the principal amount
of the outstanding Revolving Loans for the purpose of computing interest due
under this Agreement. Notwithstanding the provisions of the immediately
preceding sentence, Lender shall have no obligation to disburse to Borrower any
amounts deemed to have been borrowed for purposes of meeting the Minimum
Borrowing requirement unless Borrower has actually requested such disbursement
from Lender and unless the Gross and Net Availability for Borrower is
sufficient to support such disbursement.
2.2 Term Loan. Lender shall, subject to the terms and conditions contained
herein, make a "Term Loan' to Borrower in the amount set forth in Section 10.2.
(a) Borrower shall repay the principal of the Term Loan in Sixty (60)
consecutive equal monthly installments of principal commencing on the first day
of the month after the date of this Agreement, provided that the sixtieth (60)
installment shall be in an amount that will result in the full repayment of the
Term Loan.
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(b) In the event the Revolving Loans are terminated or not renewed
prior to the full repayment of the Term Loan, then any outstanding principal
balance of the Term Loan together with any accrued interest thereon shall become
due and payable at Lender's option at the time of such termination or non-
renewal.
(c) Interest on the Term Loan shall be billed and paid monthly at the
rate set forth in Section 10.4(a).
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be issued, from
time to time at Borrower's request and on terms and conditions and for purposes
satisfactory to Lender, credit accommodations consisting of letters of credit,
bankers' acceptances, merchandise purchase guaranties or other guaranties or
indemnities for Borrower's account ("Accommodations"). Borrower shall execute
and perform additional agreements relating to the Accommodations in form and
substance acceptable to Lender and the issuer of any Accommodations, all of
which shall supplement the rights and remedies granted herein. Any payments made
by Lender or any affiliate of Lender in connection with the Accommodations shall
constitute additional Revolving Loans to Borrower.
(b) In addition to the fees and costs of any issuer in connection with
issuing or administering Accommodations, Borrower shall pay monthly to Lender,
on the first day of each month, a charge on open Accommodations at the rate per
annum set forth in Section 10.3(a) (the "Accommodation Charges").
(c) No Accommodation will be issued unless the full amount of the
Accommodation requested, plus fees and costs for issuance, is less than the Net
Availability existing immediately prior to the issuance of the requested
Accommodation, or if the requested Accommodation would cause the outstanding
Obligations to exceed the Maximum Credit, or cause the open amount of
Accommodations to exceed, at any time, the Accommodation sublimit set forth in
Section 10.3(b).
(d) All indebtedness, liabilities and obligations of any sort whatsoever,
however arising, whether present or future, fixed or contingent, secured or
unsecured, due or to become due, paid or incurred, arising or incurred in
connection with any Accommodation shall be included in the term "Obligations",
as defined herein, and shall include, without limitations (i) all amounts due or
which may become due under any Accommodation; (ii) all amounts charged or
chargeable to Borrower or to Lender by any bank, ot her financial institution or
correspondent bank which opens, issues or is involved with such Accommodations;
(iii) Lender's Accommodation Charges and all fees, costs and other charges of
any issuer of any Accomodation; and (iv) all duties, freight, taxes, costs,
insurance and all such other charges and expenses which may pertain directly or
indirectly to any Obligations or Accommodations or to the goods or documents
relating thereto.
(e) Borrower unconditionally agrees to indemnify and hold Under harmless
from any and all loss, claim or liability (including reasonable attorneys' fees)
arising from any transactions
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or occurrences relating to any Accommodation established or opened for
Borrower's account, the Collateral relating thereto and any drafts or
acceptances thereunder, including any such loss or claim due to any action taken
by an issuer of any Accommodation. Borrower further agrees to indemnify and hold
Lender harmless for any errors or omissions in connection with the
Accommodations, whether caused by Lender, by the issuer of any Accommodation or
otherwise. Borrower's unconditional obligation to indemnify and hold Lender
harmless under this provision shall not be modified or diminished for any reason
or in any manner whatsoever, except for Lender's wilfull misconduct. Borrower
agrees that any charges made to Lender by any issuer of any Accomodation shall
be conclusive on Borrower and may be charged to Borrower's account.
(f) Lender shall not be responsible for: the conformity of any goods to
the documents presented; the validity or genuineness of any documents; delay,
default, or fraud by the Borrower or shipper and/or anyone else in connection
with the Accommodations or any underlying transaction.
(g) Borrower agrees that any action taken by Lender, if taken in good
faith, or any action taken by an issuer of any Accomodation, under or in
connection with any Accomodation, shall be binding on Borrower and shall not
create any resulting liability to Lender. In furtherance thereof, Lender shall
have the full right and authority to clear and resolve any questions of non-
compliance of documents; to give any instructions as to acceptance or rejection
of any documents or goods; to execute for Borrower's account any and all
applications for steamship or airway guarantees, indemnities or delivery orders;
to grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications or Accommodations. All of
the foregoing actions may be taken in Lender's sole name, and the issuer thereof
shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Lender, all without any notice
to or any consent from Borrower. None of the foregoing actions described in this
subsection (g) may be taken by Borrower without Lender's express written
consent.
2.4 Certain Amounts Due Without Demand. Lender may, in its sole
discretion, make or permit Revolving Loans, Accommodations or other Obligations
in excess of the Maximum Credit, Gross or Net Availability or applicable
formulas or sublimits. All or any portion of such excess(es) shall be
immediately due and payable without Lender's demand.
SECTION 3. INTEREST AND FEES
3.1 Interest. (a) Interest on the Revolving Loans and Term Loans shall be
payable by Borrower on the first day of each month, calculated upon the closing
daily balances in the loan account of Borrower for each day during the
immediately preceding month, at the per annum rate set forth as the Interest
Rate in Section 10.4(a). The Interest Rate shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the Prime Rate (as
defined below),
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effective as of the date of each such change. On and after any Event of Default
or termination or non-renewal hereof, interest on all unpaid Obligations shall
accrue at a rate equal to two percent (2%) per annum in excess of the Interest
Rate otherwise payable until such time as all Obligations are indefeasibly paid
in full (notwithstanding entry of any judgment against Borrower or the exercise
of any other right or remedy by Lender), and all such interest shall be payable
on demand. In no event shall charges constituting interest exceed the rate
permitted under any applicable law or regulation, and if any provision of this
Agreement is in contravention of any such law or regulation, such provision
shall be deemed amended to conform thereto.
(b) The "Prime Rate" is the rate of interest publicly announced by Chase
Manhattan Bank in New York, New York, or its successors, and assigns from time
to time as its prime rate (the Prime Rate is not intended to be the lowest rate
of interest charged Chase Manhattan Bank to its borrowers).
3.2 Facility Fee. Borrower shall pay Lender on the date hereof, and on
each anniversary of the date hereof, a Facility Fee in the amount set forth in
Section 10.4(b), which fee for the initial term of this Agreement is fully
earned as of the date hereof.
3.3 Account Servicing Collateral Handling Fee. Borrower shall pay Lender
monthly, on the first day of each month during the initial and each renewal Term
an Account Servicing Fee for the immediately preceding month (or part thereof)
in the amount set forth in Section 10.4(c).
3.4 Unused Line Fee. Borrower shall pay Lender monthly, on the first day
of each month, in arrears, an Unused Line Fee for each month during the initial
and each renewal Term at the rate per annum set forth in Section 10.4(d),
calculated upon the amount, if any, by which the Maximum Credit exceeds the
average outstanding daily principal balance during the preceding month of all
Revolving Loans, Accommodations and any Term Loan.
3.5 Charges to Loan Account. At Lender's option, all payments of
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement, or in any other agreement now or hereafter existing between
Lender and Borrower, may be charged on the date when due, as principal to any
loan account of Borrower maintained by Lender. Interest, fees for
Accommodations, the Unused Line Fee and any other amounts payable by Borrower to
Lender based on a per annum rate shall be calculated on the basi s of actual
days elapsed over a 360-day year.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. To secure the payment and performance in
full of all Obligations, Borrower hereby grants to Lender a continuing security
interest in and lien upon, and a right of setoff against, and Borrower hereby
assigns and pledges to Lender, all of the Collateral, including any Collateral
not deemed eligible for lending purposes.
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Ret: 2259/4
4.2 "Obigations" shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and obligations of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether
arising under this Agreement or otherwise, whether now existing or hereafter
arising, whether arising, before, during or after the initial or any renewal
Term or after the commencement of any case with respect to Borrower under the
United States Bankruptcy Code or any similar statute, whether direct or
indirect, absolute or,contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, original, renewed
or extended and whether arising directly or howsoever acquired by Lender
including from any other entity outright, conditionally or as collateral
security, by assignment, merger with any other entity, participations or
interests of Lender in the obligations of Borrower to others, assumption,
operation of law, subrogation or otherwise and shall also include all amounts
chargeable to Borrower under this Agreement or in connection with any of the
foregoing.
4.3 "Collateral" shall mean all of the following property of Borrower:
All now owned and hereafter acquired right, title and interest of Borrower
in, to and in respect of all: accounts, interests in goods represented by
accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; chattel paper; general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, chosen in
action and other claims, and existing and future leasehold interests in
equipment and fixtures); documents; instruments; letters of credit, bankers'
acceptances or guaranties; cash monies, deposits, securities, bank accounts,
deposit accounts, credits and other property now or hereafter held in any
capacity by Lender, its affiliates or any entity which, at any time,
participates in Lender's financing of Borrower or at any other depository or
other institution; agreements or property securing or relating to any of the
items referred to above;
All now owned and hereafter acquired right, title and interest of Borrower
in, to and in respect of goods, including, but not limited to:
All inventory, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description, including all raw
materials, work-in-process, finished goods, and materials to be used or
consumed in Borrower's business; and all names or marks affixed to or to be
affixed thereto for purposes of selling same by the seller, manufacturer,
lessor or licensor thereof;
All equipment and fixtures, wherever located, whether now owned or
hereafter acquired, including, without limitations all machinery,
equipment, motor vehicles, furniture and fixtures, and any and all
additions, substitutions, replacements (including spare parts), and
accessions thereof and thereto;
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All consumer goods, farm products, crops, timber, minerals or the
like (including oil and gas), wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description;
All now owned and hereafter acquired right, title and interests of Borrower
in, to and in respect of any personal property in or upon which Lender has or
may hereafter have a security interest, lien or right of setoff;
All present and future books and records relating to any of the above
including, without limitation, all computer programs, printed output and
computer readable data in the possession or control of the Borrower, any
computer service bureau or other third party;
All products and proceeds of the foregoing in whatever form and wherever
located, including, without limitation, all insurance proceeds and all claims
against third parties for loss or destruction of or damage to any of the
foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Collections. Borrower shall, at Borrower's expense and in the manner
requested by Lender from time to time, direct that remittances and all other
proceeds of accounts and other Collateral shall be sent to a lock box designated
by and/or maintained in the name of Lender, and deposited into a bank account
now or hereafter selected by Lender and maintained in the name of Lender under
arrangements with the depository bank under which all funds deposited to such
bank account are required to be transferred solely to Lender. Borrower shall
bear all risk of loss of any funds deposited into such account. In connection
therewith, Borrower shall execute such lock box and bank account agreements as
Lender shall specify. Any collections or other proceeds received by Borrower
shall be held in trust for Lender and immediately remitted to Lender in kind.
5.2 Payments. All Obligations shall be payable at Lender's office set forth
below or at Lender's bank designated in Section 10.6(b) or at such other bank
or place as Lender may expressly designate from time to time for purposes of
this Section. Lender shall apply all proceeds of accounts or other Collateral
received by Lender and all other payments in respect of the Obligations to the
Revolving Loans whether or not then due or to any other Obligations then due, in
whatever order or manner Lender shall de termine. For purposes of determining
Gross and Net Availability and for the calculation of Minimum Borrowings,
remittances and other payments with respect to the Collateral and Obligations
will be treated as credited to the loan account of Borrower maintained by Lender
and Collateral balances to which they relate, upon the date of Lender's receipt
of advice from Lender's bank that such remittances or other payments have been
credited to Lender's account or in the case of remittances or other payments
received directly in kind by Lender, upon the date of Lender's deposit thereof
at Lender's bank, subject to final payment and collection. In computing interest
charges, the loan account of Borrower maintained by Lender will be credited with
remittances and other payments four (4) Business Days after the day Lender has
received advice of receipt of remittances in Lender's account at Lender's Bank.
For purposes of
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this Agreement, "Business Day" shall mean any day other than a Saturday, Sunday
or any Other day on which banks located in states where Lender has its offices,
are authorized to close.
5.3 Loan Account Statements. Lender shall render to Borrower monthly a loan
account statement. Each statement shall be considered correct and binding, upon
Borrower as an account stated, except to the extent that Lender receives,
within sixty (60) days after the mailing of such statement, written notice from
Borrower of any specific exceptions by Borrower to that statement.
5.4 Direct Collections. Lender may, at any time, whether or not an Event of
Default has occurred, without notice to or assent of Borrower, (a) notify any
account debtor that the accounts and other Collateral which includes a monetary
obligation have been assigned to Leader by Borrower and that payment thereof is
to be made to the order of and directly to Lender, (b) send, or cause to be sent
by its designee, requests (which may identify the sender by a pseudonym) for
verification of accounts and other Collateral directly to any account debtor or
any other obligor or any bailee with respect thereto, and (c) demand, collect or
enforce payment of any accounts or such other Collateral, but without any duty
to do so, and Lender shall not be liable for any failure to collect or enforce
payment thereof. At Lender's request, all invoices and statements sent to any
account debtor, other obligor or bailee, shall state that the accounts and such
other Collateral have been assigned to Lender and are payable directly and only
to Lender.
5.5 Attorney-in-Fact. Borrower hereby appoints Lender and any designee of
Lender as Borrower's attorney-in-fact and authorizes Lender or such designee, at
Borrower's sole expense, to exercise at any times in Lender's or such designee's
discretion all or any of the following powers, which powers of attorney, being
coupled with an interest, shall be irrevocable until all Obligations have been
paid in full: (a) receive, take, endorse, assign, deliver, accept and deposit,
in the name of Under or Borrower, any and all cash, checks, commercial paper,
drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) transmit to account debtors, other
obligors or any bailees notice of the interest of Lender in the Collateral or
request from account debtors or such other obligors or bailees at any time, in
the name of Borrower or Lender or any designee of Lender, information concerning
the Collateral and any amounts owing with respect thereto, (c) notify account
debtors or other obligors to make payment directly to Lender, or notify bailees
as to the disposition of Collateral, (d) take or bring, in the name of Lender or
Borrower, all steps, actions, suits or proceedings deemed by Lender necessary or
desirable to effect collection of or other realization upon the accounts and
other Collateral, (e) after an Event of Default, change the address for delivery
of mail to Borrower and to receive and open mail addressed to Borrower, (after
an Event of Default, extend the time of payment of, compromise or settle for
cash, credit, return of merchandise, and upon any terms or conditions, any and
all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, and (g) execute in the name of Borrower and file against
Borrower in favor of Lender financing statements or amendments with respect to
the Collateral.
5.6 Liability. Borrower hereby releases and exculpates Lender, its
officers, employees and designees, from any liability arising from any acts
under this Agreement or in furtherance
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thereof, whether as attorney-in-fact or otherwise, whether of omission or
commission, and whether based upon any error of judgment or mistake of law or
fact, except for willful misconduct. In no event will Lender have any liability
to Borrower for lost profits or other special or consequential damages.
5.7 Administration of Accounts. After written notice by Lender to
Borrower and automatically, without notice, after an Event of Default, Borrower
shall not, without the prior written consent of Lender in each instance, (a)
grant any extension of time of payment of any of the accounts or any other
Collateral which includes a monetary obligation, (b) compromise or settle any of
the accounts or any such other Collateral for less than the full amount thereof,
(c) release in whole or in part any account debt or or other person liable for
the payment of any of the accounts or any such other Collateral, or (d) grant
any credits, discounts, allowances, deductions, return authorizations or the
like with respect to any of the accounts or any such other Collateral.
5.8 Documents. At such times as Lender may request and in the manner
specified by Lender, Borrower shall deliver to Lender or Lender's
representative, as Lender shall designate, copies or original invoices,
agreements, proofs of rendition of services and delivery of goods and other
documents evidencing-or relating to the transactions which gave rise to accounts
or other Collateral, together with customer statements, schedules describing the
accounts or other Collateral and/or statements of account and confirmatory
assignments to Lender of the accounts or other Collateral, in form and substance
satisfactory to Lender and duly executed by Borrower. Without limiting the
provisions of Section 5.7, Borrower's granting of credits, discounts,
allowances, deductions, return authorizations or the like will be promptly
reported to Lender in writing. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any of the
accounts or other Collateral therefrom) limit or in any way be construed as a
waiver, limitation or modification of the security interests or rights of Lender
or the warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to Lender
by Borrower may be destroyed or otherwise disposed of by Lender six (6) months
after receipt by Lender, unless Borrower requests their return in writing in
advance and makes prior arrangements for their return at Borrower's expense.
5.9 Access. From time to time as requested by Lender, at the sole
expense of Borrower, Lender or its designee shall have access, prior to an Event
of Default during reasonable business hours and on or after an Event of Default
at any time, to all of the premises where Collateral is located for the purposes
of inspecting the Collateral, and all Borrower's books and records, and Borrower
shall permit Lender or its designee to make such copies of such books and
records or extracts therefrom as Lender may request. Without expense to Lender,
Lender may use such of Borrower's personnel, equipment, including computer
equipment, programs, printed output and computer readable media, supplies and
premises for the collection of accounts and realization on other Collateral as
Lender, in its sole discretion, deems appropriate. Borrower hereby irrevocably
authorizes all accountants and third parties to disclose and deliver to Lender
at Borrower's expense all financial information, books and records, work papers,
mana gement reports and other information in their possession regarding
Borrower.
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5.10 Environmental Audits. From time to time, as requested by Lender, at
the sole expense of Borrower, Borrower shall provide Lender, or its designee,
complete access to all of Borrower's facilities for the purpose of conducting an
environmental audit of such facilities as Lender or its designees may deem
necessary. Borrower agrees to cooperate with Lender with respect to any
environmental audit conducted by Lender or its designee pursuant to this Section
5.10.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the following,
the truth and accuracy of which, and compliance with which, shall be continuing
conditions of the making of loans or other credit accommodations by Lender to
Borrower:
6.1 Financial an Other Reports. Borrower shall keep and maintain its
books and records in accordance with generally accepted accounting principles,
consistently applied. Borrower shall, at its sole expense, on or before the
fifteenth (15th) day of each month, deliver to Lender: (a) true and complete
monthly agings of its accounts receivable, accounts payable and notes payable;
(b) weekly inventory reports; (c) monthly internally prepared interim financial
statements. Annually, Borrower shall deliver audited financial statements of
Borrower accompanied by the report and opinion thereon of independent certified
public accountants acceptable to Lender, as soon as available, but in no event
later than ninety (90) days after the end of Borrower's fiscal year. All of the
foregoing shall be in such form and together with such information with respect
to the business of Borrower or any guarantor, as Lender may in each case
request.
6.2 Trade Names. Borrower may from time to time render invoices to
account debtors under its trade names set forth in Section 10.6(f) after Lender
has received prior written notice from Borrower of the use of such trade names
and as to which, Borrower agrees that: (a) each trade name does not refer to
another corporation or other legal entity, (b) all accounts and proceeds thereof
(including any returned merchandise) invoiced under any such trade names are
owned exclusively by Borrower and are subject to the security interest of Lender
and the other terms of this Agreement, and (c) all schedules of accounts and
confirmatory assignments including any sales made or services rendered using the
trade name shall show Borrower's name as assignor and Lender is authorized to
receive, endorse and deposit to any loan account of Borrower maintained by
Lender all checks or other remittances made payable to any trade name of
Borrower representing payment with respect to such sales or services.
6.3 Losses. Borrower shall promptly notify Lender in writing of any
loss, damage, investigation, action, suit, proceeding or claim relating to a
material portion of the Collateral or which may result in any material adverse
change in Borrower's business, assets, liabilities or condition, financial or
otherwise.
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6.4 Books and Records. Borrower's books and records concerning accounts
and its chief executive office are and shall be maintained only at the address
set forth in Section 10.6(e). Borrower's only other places of business and the
only other locations of Collateral, if any, are and shall be the addresses set
forth in Section 10.6 hereof, except Borrower may chance such locations or open
a new place of business after thirty (30) days prior written notice to Lender.
Prior to any change in location or opening of any new place of business,
Borrower shall execute and deliver or cause to be executed and delivered to
Lender such financing statements, financing documents and security and other
agreements as Lender may reasonably require, including, without limitation,
those described in Section 6.14.
6.5 Title. Borrower has and at all times will continue to have good and
marketable title to all of the Collateral, free and clear of all liens, security
interests, claims or encumbrances of any kind except in favor of Lender and
except, if any, those set forth on Schedule A hereto.
6.6 Disposition of Assets. Borrower shall not directly or indirectly: (a)
sell, lease, transfer, assign, abandon or otherwise dispose of any part of the
Collateral or any material portion of its other assets other than (i) sales of
inventory to buyers in the ordinary course of business and (ii) the sale of
Borrower's real property located in Fraser, Michigan (the "Fraser Property"),
the proceeds of which will be used to satisfy the mortgage on such Fraser
Property and the balance of the proceeds, if any, to pay certain amounts owed to
V. Xxxxx Xxxx in connection with Borrower's acquisition of the Fraser Property,
or (b) except for the merger of AI-KO Enterprises, Inc. with and into Borrower,
consolidate with or merge with or into any other entity, or permit any other
entity to consolidate with or merge with or into Borrower or (c) form or acquire
any interest in any firm, corporation or other entity.
6.7 Insurance. Borrower shall at all times maintain, with financially
sound and reputable insurers, insurance (including, without limitation, at the
option of Lender, earthquake insurance) with respect to the Collateral and other
assets. All such insurance policies shall be in such form, substance, amounts
and coverage as may be satisfactory to Lender and shall provide for thirty (30)
days' prior written notice to Lender of cancellation or reduction of coverage.
Borrower hereby irrevocably appoints Lender and any designee of Lender as
attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so and, after an Event of Default, to
adjust or settle any claim or other matter under or arising pursuant to such
insurance or to amend or cancel such insurance. Borrower shall deliver to Lender
evidence of such insurance and a lender's loss payable endorsement satisfactory
to Lender as to all existing and future insurance policies with respect to the
Collateral. Bo rrower shall deliver to Lender, in kind, all instruments
representing proceeds of insurance received by Borrower. Lender may apply any
insurance proceeds received at any time to the cost of repairs to or replacement
of any portion of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations, whether or not due, in any order or manner
as Under determines.
6.8 Compliance With Laws. Borrower is and at all times will continue to be
in compliance with the requirements of all material laws, rules, regulations and
orders of any governmental authority relating to its business (including laws,
rules, regulations and orders
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relating to taxes, payment and withholding of payroll taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety, or environmental matters) and all
material agreements or other instruments binding on Borrower or its property.
All of Borrower's inventory shall be produced in accordance with the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and rations and orders related thereto. Borrower shall pay
and discharge all tax , assessments Governmental charges against Borrower or any
Collateral prior to the date on which penalties are imposed or liens attach
with respect thereto, unless the same are being contested in good faith and, at
Lender's option, Reserves are established for the amount contested and penalties
which may accrue thereon.
6.9 Accounts. With respect to each account deemed an Eligible Account,
except as reported in writing to Lender, Borrower has no knowledge that any of
the criteria for eligibility are not or are no longer satisfied. As to each
account, except as disclosed in writing to Lender at the time such account
arises (a) each is valid and legally enforceable and represents an undisputed
bona fide indebtedness incurred by the account debtor for the sum reported to
Lender, (b) each arises from an absolute and unconditional sale of goods,
without any right of return or consignment, or from a completed rendition of
services, (c) each is not, at the time such account arises, subject to any
defense, offset, dispute, contra relationship, counterclaim, or any given or
claimed credit, allowance or discount, and (d) all statements made and all
unpaid balances and other information appearing in the invoices, agreements,
proofs of rendition of services and delivery of goods and other documentation
relating to the accounts, and all confirmatory assignments, schedules,
statements of account and books and records with respect thereto, are true and
correct and in all respects what they purport to be.
6.10 Equipment. With respect to Borrower's equipment, Borrower shall keep
the equipment in good order and repair, and in running and marketable condition,
ordinary wear and tear excepted.
6.11 Financial Covenants. Borrower shall at all times maintain working
capital and net worth (each as determined in accordance with generally accepted
accounting principles, in effect on the date hereof, consistently applied) in
the amounts set forth in Section 10.5(a) and (b) and Borrower shall not,
directly or indirectly, expend or commit to expend, for fixed or capital assets
(including capital lease obligations) an amount in excess of the capital
expenditure limit set forth in Section 10.5(c) in any fiscal year of Borrower.
6.12 Affiliated Transactions. Borrower will not, directly or indirectly:
(a) lend or advance money or property to, guarantee or assume indebtedness of,
or invest (by capital contribution of otherwise) in any person, firm,
corporation or other entity; or (b) declare, pay or make any dividend,
redemption or other distribution on account of any shares of any class of stock
of Borrower now or hereafter outstanding, except Borrower may redeem its
Redeemable Preferred Stock in such amounts as agreed (without acceleration or
amendment) if Borrower's tangible net worth is at least $400,000 as determined
in accordance with generally accepted accounting principles consistently applied
and based upon Borrower's most recent quarterly financial
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statements, copies of which have been delivered to Lender; or (c) make any
payment of the principal amount of or interest on any indebtedness owing to any
officer, director, shareholder, or affiliate of Borrower; or (d) make any loans
or advances to any officer, director, employee, shareholder or affiliate of
Borrower, (e) enter into any sale, lease or other transaction with any officer,
director, employee, shareholder or affiliate of Borrower on terms that are less
favorable to Borrower than those which might be obtained at the time from
persons who are not an officer, director, employee, shareholder or affiliate of
Borrower. Tangible net worth for the purpose of this Section 6.12 means the
aggregate of Borrower's cash, collectible accounts receivable, inventory (at
lower of cost or market) and fixed assets (at fair market value), as reduced by
the total liabilities of Borrower.
6.13 Fees and Expenses. Borrower shall pay, on Lender's demand, all
costs, expenses, filing fees and taxes payable in connection with the
preparation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in the
Collateral, this Agreement and all other existing and future agreements or
documents contemplated herein or related hereto, including any amendments,
waivers, supplements or consents which may hereafter be made or entered into in
respect hereof, or in any way involving claims or defense asserted by-Lender or
claims or defense against Lender asserted by Borrower, any guarantor or any
third party directly or indirectly arising out of or related to the relationship
between Borrower and Lender or any guarantor and Lender, including, but not
limited to the following, whether incurred before, during or after the initial
or any renewal Term or after the commencement of any case with respect to
Borrower or any guarantor under the United States Bankruptcy Code or any similar
statute: (a) all costs and expenses of filing or recording (including Uniform
Commercial Code financing statement filing taxes and fees, documentary taxes,
intangibles taxes and mortgage recording taxes and fees, if applicable); (b) all
title insurance and other insurance premiums, appraisal fees, fees incurred in
connection with any environmental report, audit or survey and search fees; (c)
all fees as then in effect relating to the wire transfer of loan proceeds and
other funds and fees then in effect for returned checks and credit reports; (d)
all expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per them charge at the rate set forth in Section
10.4(e) for Lender's examiners in the field and office; and (e) the costs,fees
and disbursements of in-house and outside counsel to Lender, including but not
limited to such fees and disbursements incurred as a result of litigation
between the parties hereto, any third party and in any appeals arising
therefrom.
6.14 Further Assurances. At the request of Lender, at any time and from
time to time, at Borrower's sole expense, Borrower shall execute and deliver or
cause to be executed and delivered to Lender, such agreements, documents and
instruments, including waivers, consents and subordination agreements from
mortgagees or other holders of security interests or liens, landlords or
bailees, and do or cause to be done such further acts as Lender, in its
discretion, deems necessary or desirable to create, preserve, perfect or
validate any security interest of Lender or the priority thereof in the
Collateral and otherwise to effectuate the provisions and purposes of this
Agreement. Borrower hereby authorizes Lender to file financing statements or
amendments against Borrower in favor of Lender with respect to the Collateral,
without Borrower's signature and to
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file as financing statements any carbon, photographic or other reproductions Of
this Agreement or any financing statements signed by Borrower.
6.15 Revolving Loan. The Revolving Loan will not at any time exceed the
net availability unless Lender has consented.
6.16 Environmental Condition. None of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute. No
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower. Borrower has not
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state environmental agency any action
or omission by Borrower resulting in the releasing, or otherwise exposing of
hazardous waste or hazardous substances into the environment. Borrower is in
compliance (in all material respects) with all statutes, regulations, ordinances
and other legal requirements pertaining to the production, storage, handling,
treatment, release, transportation or disposal of any hazardous waste or
hazardous substance.
6.17. Sale of Fraser, Michigan Property. All proceeds (after the
satisfaction of the first mortgage indebtedness due Comerica Bank) arising from
the sale of Borrower's real property located in Fraser, Michigan, which Borrower
acquired from AI-KO Enterprises, Inc. d/b/a A.E.P. Technologies, shall be paid
to Borrower and used by Borrower in the ordinary course of its business, whether
such sale occurs before or after the date of this Agreement.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be immediately due and
payable, without notice or demand, and any provisions of this Agreement as to
future loans and credit accommodations by Lender shall terminate automatically,
upon the termination or non-renewal of this Agreement or, at Lender's option,
upon or at any time after the occurrence or existence of any one or more of the
following "Events of Default":
(a) Borrower fails to pay when due any of the Obligations or fails
to perform any of the terms of this Agreement or any other existing or future
financing, security or other agreement between Borrower and Under or any
affiliate of Lender;
(b) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement or any other agreement, schedule,
confirmatory assignment or otherwise, or to any affiliate of Lender, shall
prove inaccurate or misleading;
(c) Any guarantor revokes, terminates or fails to perform any of the
terms of any guaranty, endorsement or other agreement of such party in favor of
Lender or any affiliate of Lender;
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(d) Any judgment or judgments aggregating in excess of $25,000 or any
injunction or attachment is obtained against Borrower or any guarantor which
remains unstayed for a period of ten (10) days or is enforced;
(e) Borrower or any guarantor or a general partner of a guarantor or
Borrower (which is a partnership), being a natural person, dies, or Borrower or
any guarantor which is a partnership or corporation, is dissolved, or Borrower
or any guarantor which is a corporation fails to maintain its corporate
existence in good standing, or the usual business of Borrower or any guarantor
ceases or is suspended ;
(f) Any change in the chief executive officer, chief operating officer,
chief financial officer or controlling ownership of Borrower;
(g) Borrower or any guarantor becomes insolvent, makes an assignment for
the benefit of creditors, makes or sends notice of a bulk transfer or calls a
general meeting of its creditors or principal creditors;
(h) Any petition or application for any relief under the bankruptcy laws
of the United States now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed by or against Borrower or any guarantor;
(i) The indictment or threatened indictment of Borrower or any guarantor
under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against Borrower or any guarantor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such guarantor;
(j) Any default or event of default occurs on the part of Borrower under
any agreement, document or instrument to which Borrower is a party or by which
Borrower or any of its property is bound, creating or relating to any
indebtedness of Borrower to any person or entity other than Lender in an amount
exceeding $25,000, if the effect of such default is to accelerate, or to permit
the acceleration of, the maturity of all or any part of such indebtedness, or
all or any part of any such indebtedness shall be declared to be due and payable
or required to be prepaid or any other reason, in either event prior to the
stated maturity thereof.
(k) Lender in good faith believes that either (i) the prospect of
payment or performance of the Obligations is impaired or (ii) the Collateral is
not sufficient to secure fully the Obligations; or
(1) any material change occurs in the nature or conduct of Borrower's
business.
7.2 Remedies. Upon the occurrence of an Event of Default and at any time
thereafter, Lender shall have all rights and remedies provided in this
Agreement, any other agreements
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between Borrower and Lender, the Uniform Commercial Code or other applicable
law, all of which rights and remedies may be exercised without notice to
Borrower, all such notices being hereby waived, except such notice as is
expressly provided for hereunder or is not waivable under applicable law. All
rights and remedies of Lender are cumulative and not exclusive and are
enforceable, in Lender's discretion, alternatively, successively, or
concurrently on any one or more occasions and in any order Lender may determine.
Without limiting the foregoing, Lender may (a) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender, (b) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (c) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (d) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (e) extend the time
of payment of, compromise or settle for cash, credit, return of merchandise, and
upon any terms or conditions, any and all accounts or other Collateral which
includes a monetary obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations, (f) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including, without limitations entering into contracts with respect thereto, by
public or private sales at any exchange, broker's board, any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash, upon
credit or for future delivery, with the Lender having the right to purchase the
whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of Borrower, which
right or equity of redemption is hereby expressly waived and released by
Borrower. If any of the Collateral is sold or leased by Lender upon credit terms
or for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Under. If notice of disposition
of Collateral is required by law,, seven (7) days prior notice by Lender to
Borrower designating the time and place of any public sale or the time after
which any private sale or other intended disposition of Collateral is to be
made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.
7.3 Application of Proceeds. Lender may apply the cash proceeds of
Collateral actually received by Lender from any sale, lease, foreclosure or
other disposition of the Collateral to payment of any of the Obligations, in
whole or in part (including reasonable attorneys' fees and legal expenses
incurred by Lender with respect thereto or other-wise chargeable to Borrower)
and in such order as Lender may elect, whether or not then due. Borrower shall
remain liable to Lender for the payment of any deficiency together with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including reasonable attorneys' fees and legal
expenses.
7.4 Lender's Cure of Third Party Agreement Default. Lender may, at its
option, cure any default by Borrower under any agreement with a third party or
pay or bond on appeal any judgment entered a against Borrower, discharge taxes,
liens, security interests or other
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encumbrances at any time levied on or existing with respect to the Collateral
and Pay any amount, incur any expense or perform any act which, in Lender's sole
judgment, is necessary or appropriate to preserve, protect, insure, maintain,
or realize upon the Collateral. Lender may charge Borrower's loan account for
any amounts so expended, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure, payment, bonding or
discharge, and shall not, by doing so, be deemed to have assumed any obligation
or liability of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS A CONSENTS
8.1 JURY TRIAL WAIVER. BORROWER AND LENDER EACH WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST
THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE
OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTUOUS CONDUCT BY BORROWER OR LENDER,
OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR
LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims. Borrower waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any kind, nature or description in any
action or proceeding instituted by Lender with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating thereto,
except compulsory counterclaims.
8.3 Jurisdiction . Borrower hereby irrevocably submits and consents to
the nonexclusive jurisdiction of the State and Federal Courts located in the
State in which the office of Lender designated in Section 10.6(a) is located and
any other State where any Collateral is located with respect to any action or
proceeding arising out of this Agreement, the Obligations, the Collateral or any
matter arising therefrom or relating thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other process
and papers therein and agrees that the service thereof may be made by mail
directed to Borrower at its chief executive office set forth herein or other
address thereof of which Lender has received notice as provided herein, service
to be deemed complete five (5) days after mailing, or as permitted under the
rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6(a) is located and Borrower waives any
objection based on forum non conveniens and any objection to venue in connection
therewith.
8.4 No Waiver by Lender. Lender shall not, by any act, delay, omission
or otherwise be deemed to have expressly or impliedly waived any of its rights
or remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. A waiver by Lender of any right
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or remedy on any one occasion shall not be construed as a bar to or waiver of
any such right or remedy which Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon execution and
delivery by Borrower and Lender and shall continue in full force and effect for
a term of three (3) years from the date hereof and shall be deemed automatically
renewed for successive terms of two (2) years thereafter unless terminated as of
the end of the initial or any renewal term (each a "Term") by either party
giving the other written notice at least sixty (60) days' prior to the end of
the then-current Term.
9.2 Early Termination. Borrower may also terminate this Agreement by
giving Lender at least thirty (30) days prior written notice at any time upon
payment in full of all of the Obligations as provided herein, including the
early termination fee provided below. Lender shall also have the right to
terminate this Agreement at any time upon or after the occurrence of an Event of
Default. If Lender terminates this Agreement upon or after the occurrence of an
Event of Default, or if Borrower shall terminate this Agreement as permitted
herein effective prior to the end of the then-current Term, in addition to all
other Obligations, Borrower shall pay to Lender, upon the effective date of
termination, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits, an early termination fee equal
to:
(a) fifty percent (50%) of the average monthly interest and fees payable
by Borrower to Lender for the immediately preceding six (6) months or from the
date of this Agreement, whichever is the shorter period (the "Calculation
Period"), multiplied by
(b) either (i) the number of months (or any part thereof) remaining in
the then-current Term, if Borrower's written notice of termination is received
by Lender or termination by Lender is effective more than sixty (60) days prior
to the end of the then-current Term or (ii) the number of months (or any part
thereof) remaining in the then-current Term plus twenty-four (24) if Borrower's
written notice of termination is received by Lender or termination by Lender is
effective within sixty (60) days prior t o the end of the then-current Term.
For purposes of calculating the early termination fee, in no event will the
average monthly interest be less than the interest which would have been payable
if the Revolving Loans had equaled the Minimum Borrowing on each day during the
Calculation Period.
9.3 Additional Costs Collateral. Upon termination of this Agreement by
Borrower, as permitted herein, in addition to payment of all Obligations which
are not contingent, Borrower shall deposit such amount of cash collateral as
Lender determines is necessary to secure Lender from loss, cost, damage or
expense, including reasonable attorneys' fees, in connection with any
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M; 2259/4
open Accommodations or remittance items or other payments provisionally credited
to the Obligations and/or to which Lender has not yet received final and
indefeasible payment.
9.4 Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be (a) made to Lender at its address set forth in
Section 10.6(a) and to Borrower at its chief executive office set forth in
Section 10.6(d), or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if by hand, immediately upon delivery; if by telex,
telegram or telecopy (fax), immediately upon receipt; if by overnight delivery
service, one day after dispatch; and if, by first class or certified mail,
three (3) days after mailing.
9.5 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect this Agreement as a
whole, but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable.
9.6 Entire Agreement: Amendments; Assignments. This Agreement and the
Promissory Note referred to in Section 2.2, if any, contains the entire
agreement of the parties as to the subject matter hereof, all prior commitments,
proposals and negotiations concerning the subject matter hereof being merged
herein. Neither this Agreement nor any provision hereof shall be amended,
modified or discharged orally or by course of conduct, but only by a written
agreement signed by an authorized officer of Lender. This Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns, except that any obligation of Lender under
this Agreement shall not be assignable nor inure to the successors and assigns
of Borrower.
9.7 Discharge of Borrower. No termination of this Agreement shall
relieve or discharge Borrower of its Obligations, grants of Collateral, duties
and covenants hereunder or otherwise until such time as all Obligations to
Lender have been indefeasibly paid and satisfied in full, including, without
limitation, the continuation and survival in full force and effect of all
security interests and liens of Lender in and upon all then existing and
thereafter-arising or acquired Collateral and all warranties an d waivers of
Borrower.
9.8 Usage. All terms used herein which are defined in the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement and all references to the singular or plural herein shall also
mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State in which the office of Lender set forth in
Section 10.6(a) below is located.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
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10.1 (a) Maximum Credit: $3,000,000.00
(b) Gross Availability Formulas:
Eligible Accounts Percentage: 85 %; provided however, if
dilution in the collection of
accounts, determined by
calculations made by Lender
in accordance with its
customary method of making
such calculation, exceeds
four percent (4%), the
Eligible Account Percentage
may be reduced to a percentage
or amount satisfactory to
Lender.
Eligible Inventory Percentages
Finished Goods 50%
Raw Materials 50%
(c) Inventory Sublimit(s): $ 500,000.00 in the aggregate with respect
to all advances against Eligible Inventory,
but not to exceed at any given time 33% of
all outstanding advances against
Borrower's accounts.
(d) Maximum days after Invoice
Date for Eligible Accounts: 90 days
(e) Minimum Borrowing: $1,750,000.00
10.2 Term Loan:
(a) amount $1,156,000.00
(b) amortization: $19,266.27 per month for 59 months
commencing on the first day of the month
after the date of this Agreement and a
final payment of the full unpaid balance
due on the Term Loan on August 1, 2001.
10.3 Accommodations:
(a) Lender's Charge for Accommodations: N/A
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(b) Sublimit for Accommodations: N/A
10.4 Interest, Fees & Charges:
(a) Interest Rate: Prime Rate plus 3.75 % per annum
(b) Facility Fee: $32,500.00 payable in full out of the initial
advances to be made to Borrower hereunder, and
1.00 % of the then Maximum Credit at the first
anniversary of the date (the "Closing Date") of
this Agreement and 1.00% of the then Maximum Credit
at each anniversary of the Closing Date thereafter,
which Facility Fees for the initial Term of this
Agreement shall be fully earned as of the date of
this Agreement and payment thereof secured by the
Collateral.
(c) Account Servicing Fee: N/A
(d) Unused Line Fee: per annum 0.25%
(f) Field Examination per annum $ 650.00
10.5 Financial Covenants:
(a) Working Capital: N/A
(b) Net Worth: N/A
(c) Capital Expenditures: per fiscal year N/A
10.6 (a) Lender's Office: 00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(b) Lender's Bank: Bank of America Illinois
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(c) Borrower: G-P Plastics, Inc.
(d) Borrower's Chief Executive Office: 0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxx, XX 00000
(e) Locations of Eligible Inventory
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Ref-. =9/4
Collateral: (i) 0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxx, XX 00000
(ii) 00000 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
(f). Borrower's Other Offices and Locations of
Collateral: NONE
(g) Borrower's Trade Names for
Invoicing: A.E.P. Technologies and
AL-KO Enterprises
IN WITNESS WHEREOF, Borrower and Under have duly executed this Agreement
this 28 day of August, 1996.
LENDER: BORROWER:
THE CIT GROUP/CREDIT G-P PLASTICS, INC.
FINANCE, INC.
By: Xxxxxx X. Xxxxxxx Xxxx X. Xxxxxx
_________________ __________________
Xxxxxx X. Xxxxxxx,Vice President By: Xxxx X. Xxxxxx
Title: President
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SCHEDULE A
Permitted Liens
1. G-P Plastics, Inc., as debtor in favor of Cincinnati Milacron,
Cincinnati, OH, as secured party, covering a Cincinnati Milacron CH-
90-R-40mm-12.00, Filing No. 58634B on 7/24/95 with Michigan Secretary
of State.
2. G-P Plastics, Inc., as debtor in favor of General Motors Corporation,
Detroit, MI, as secured party, covering inventory owned by General
Motors Corporation and "tooling", Filing No. 68289B on 3/14/96 with
Michigan Secretary of State.
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