<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1996
------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1984
For the transition period from to
------------------ -----------------------------
Commission file number 0-28062
----------
CERION TECHNOLOGIES INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 02-0485458
- - ------------------------ ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
1401 Interstate Drive
Champaign, Illinois 61821-1090
- - ---------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (217) 359-3700
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 28, 1996
- - ---------------------------- ----------------------------
Common Stock, par value $.01 7,016,184 shares
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
CERION TECHNOLOGIES INC.
BALANCE SHEETS
(dollars in thousands)
<CAPTION>
June 28, December 31,
1996 1995
-------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,741 $ 173
Short term investments 3,932
Accounts receivable 9,600 5,930
Inventories 318 312
Deferred income taxes and other assets 529 94
------- -------
Total current assets 18,120 6,509
Property, plant and equipment, net 8,317 5,365
Other assets 85 --
------- -------
$26,522 $11,874
======= =======
LIABILITIES, PARENT COMPANY INVESTMENT
AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 4,798 $ 3,073
Income taxes payable 468 --
------- -------
Total current liabilities 5,266 3,073
Deferred income taxes 343 343
Parent company investment -- 8,458
Shareholders' equity:
Preferred Stock, par value $.01 per share, 100,000
shares authorized, none issued -- --
Common Stock, par value $.01 per share, 20,000,000 70 --
shares authorized; 7,016,184 shares issued and
outstanding
Additional paid in capital 18,639 --
Retained earnings 2,204 --
------- -------
Total shareholders' equity 20,913 --
------- -------
$26,522 $11,874
======= =======
</TABLE>
<PAGE> 3
CERION TECHNOLOGIES INC.
<TABLE>
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
------- ------ ------- -------
<S> <C> <C> <C> <C>
Net sales $13,440 $5,890 $25,214 $10,918
Cost of sales 8,456 4,283 15,554 8,163
------- ------ ------- -------
Gross profit 4,984 1,607 9,660 2,755
Selling, general and administrative expenses 1,392 484 2,868 992
------- ------ ------- -------
Operating income 3,592 1,123 6,792 1,763
Interest income (expense) 81 (80) (39) (164)
------- ------ ------- -------
Income before provision for income taxes 3,673 1,043 6,753 1,599
Provision for income taxes 1,469 407 2,701 625
------- ------ ------- -------
Net income $ 2,204 $ 636 $ 4,052 $ 974
======= ====== ======= =======
Net income per share $ 0.36 $ 0.12 $ 0.71 $ 0.18
======= ====== ======= =======
Average common shares 6,039 5,400 5,723 5,400
</TABLE>
<PAGE> 4
CERION TECHNOLOGIES INC.
<TABLE>
STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Six Months Ended
----------------------
(unaudited)
June 28, June 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 4,052 $ 974
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 880 485
Deferred income taxes -- 30
Changes in operating assets and liabilities:
Accounts receivable (3,670) (984)
Inventories (6) 52
Deferred income taxes and other assets (520) (72)
Accounts payable and accrued expenses 1,725 603
Income taxes payable 468 --
-------- ------
Net cash provided by operating activities 2,929 1,088
-------- ------
Cash flows used in investing activities:
Additions to property, plant and equipment (3,832) (233)
Purchase of short-term investments (3,932) --
-------- ------
Cash flows used in investing activities (7,764) (233)
-------- ------
Cash flows provided by (used in) financing activities:
Payments to parent company -- (637)
Repayment of borrowings (11,142) (315)
Dividends paid -- --
Proceeds from shares issued 19,545 --
-------- ------
Cash flows provided by (used in) financing activities 8,403 (952)
-------- ------
Increase (decrease) in cash 3,568 (97)
Cash at beginning of period 173 99
-------- ------
Cash at end of period $ 3,741 $ 2
======== ======
Supplemental disclosure of cash flow information:
Interest paid $ 39 $ 164
Taxes paid $ 226 $ --
</TABLE>
<PAGE> 5
CERION TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
1. Earnings Per Common and Common Equivalent Share
-----------------------------------------------
Earnings per common and common equivalent share is computed based on the total
of the weighted average number of common shares and, as applicable, the weighted
average number of common equivalent shares outstanding during the period.
<TABLE>
<CAPTION>
Three Months Ended
----------------------
June 28, June 30,
1996 1995
--------- ---------
<S> <C> <C>
Common shares outstanding 6,039,278 5,400,000
Common share equivalents None None
</TABLE>
The increase in the common shares outstanding represents the issuance of
additional shares at the closing of the Company's initial public offering on May
30, 1996.
2. Revolving Credit Facility
-------------------------
On May 30, 1996, the Company entered into a three year, $15.0 million revolving
credit facility ("facility") with LaSalle National Bank. The facility is
collateralized by all the Company's assets and the Company may borrow against
the facility based upon prescribed advance rates applied to the Company's
accounts receivable; inventories, short-term investments and property, plant and
equipment.
The facility bears interest either at the banks prime rate or LIBOR plus 185
basis points. The facility's terms include a fee for the unused credit facility
equal to 1/4% applied to the amount of the facility not outstanding payable
monthly. The facility contains certain covenants including a limitation of
dividends, and the maintenance of certain financial ratios. No amounts were
outstanding under the facility as of June 28, 1996.
In connection with the obtaining of the facility, the Company paid a commitment
fee equal to 25 basis points (1/4%) of the total facility and other costs
totaling approximately $90,000. These costs are amortized over the term of the
facility.
Other
- - -----
The financial statements for the three month and six month periods ended June
28, 1996 and June 30, 1995 are unaudited and reflect all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim periods. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Prospectus dated May 24, 1996.
The results of operations for the three months and six months ended June 28,
1996 are not necessarily indicative of the results for the entire fiscal year
ending December 31, 1996.
The business of Cerion Technologies Inc. (the "Company") has been operated by
Nashua Corporation ("Nashua" or the "Parent") since its acquisition in 1986. As
of December 31, 1995, Nashua converted the Company into a wholly-owned
subsidiary of Nashua and contributed to it the business of the Nashua Precision
Technologies division in return for the Company's stock and its assumption of
the liabilities of the business. The Company was renamed Cerion Technologies
Inc. on March 4, 1996.
On May 30, 1996, the Company closed on the Initial Public Offering of its stock
with the sale of 4,416,000 shares of its Common Stock. Of the 4,416,000 shares
of Common Stock sold, 1,615,000 shares were sold by the Company and 2,801,000
were sold by Nashua Corporation. Nashua Corporation continues to own
approximately 37% of the Company's outstanding Common Stock.
The shares were sold to the public at $13.00 per share. The net proceeds to the
Company after the Underwriting Discount was $19,525,350.
On May 31, 1996, the Company repaid the two outstanding Promissory Notes issued
to Nashua Corporation in March 1996 having a combined principal sum of
$11,142,000. The prepayments were made without penalty. The Company received
the benefit of a prepayment discount of $183,000, representing accrued
interest, by paying the $10 million promissory note on or before March 31,
1996. The prepayment discount is included in Interest Income.
On July 9, 1996, the Company announced that StorMedia Inc., a major customer,
had canceled all of its outstanding purchase orders with the Company, following
a significant loss of orders by StorMedia. The Company has no assurance that it
will receive any future orders from StorMedia. This cancellation could have a
negative impact on the Company's performance in the third quarter of 1996 and
subsequent quarters. StorMedia accounted for approximately 34% of the Company's
revenues for the three months ended June 20, 1996 and 47% of its revenue for
the fiscal year ended December 31, 1995.
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FORWARD -LOOKING STATEMENTS -- SAFE HARBOR
- - ------------------------------------------
This Report contains certain forward-looking statements, including the
statement below regarding the possible impact of cancellation of orders by a
major customer. Moreover, from time to time in both written releases and reports
and oral statements, the company and its senior management may express
expectations regarding future performance of the Company. All of these
"forward-looking statements" are inherently uncertain, and investors must
recognize that events could turn out to be other than what senior management
expected. Key risk factors that could, in particular, have an adverse impact on
current and future performance include the Company's dependence on a small
number of customers, as witnessed by the recent cancellation of orders by
StorMedia Inc. (which has been one of the Company's two largest customers), a
possible trend toward vertical integration among thin-film disk manufacturers
that may reduce demand for the Company's products, dependence on the intensely
competitive and cyclical hard-disk drive industry, absence of long-term purchase
commitments from the Company's customers and risk of excess industry capacity,
particularly in light of an apparent recent softening in demand for thin-film
disks. See "Risk Factors" beginning at Page 6 of the Company's Prospectus dated
May 24, 1996 for a more detailed discussion of factors that could affect the
Company's performance and the value of its common stock.
THREE MONTHS AND SIX MONTHS ENDED JUNE 28, 1996 AND JUNE 30, 1995
Net Sales. Net sales increased $7.5 million, or 128.2%, to $13.4
million in the three months ended June 28, 1996 from $5.9 million in the three
months ended June 30, 1995. Net sales increased $14.3 million, or 130.9%, to
$25.2 million in the six months ended June 28, 1996 from $10.9 million in the
six months ended June 30, 1995. This growth is attributable to growth in the
market for aluminum disk substrates, growth of net sales to its existing
customers and the addition of a new customer in 1996. The increase in net sales
consisted primarily of growth in unit volume, and, to a lesser extent, higher
average selling prices. Improved utilization of existing production capacity,
productivity gains and additional capacity attributable to capital expenditures
contributed to growth in unit production. The Company's growth in net sales in
the second quarter of 1996 reflected a shift away from commodity-level aluminum
disk substrates with lower average selling prices to high-end products requiring
more stringent product tolerances and higher average selling prices.
<PAGE> 7
On July 9, 1996, the Company announced that StorMedia Inc., a major
customer, had canceled all of its outstanding purchase orders with the Company,
following a significant loss of orders by StorMedia. The Company has no
assurance that it will receive any future orders from StorMedia. This
cancellation could have a negative impact on the Company's performance in the
third quarter of 1996 and subsequent quarters. StorMedia accounted for
approximately 34% of the Company's revenues for the three months ended June 20,
1996 and 47% of its revenue for the fiscal year ended December 31, 1995.
Gross Profit. Gross profit increased $3.4 million to $5.0 million in
the three months ended June 28, 1996 from $1.6 million in the three months ended
June 30, 1995. Gross profit as a percentage of net sales increased to 37.1% in
the second quarter of 1996 compared to 27.3% in the second quarter of 1995.
Gross profit increased $6.9 million to $9.7 in the six months ended June 28,
1996 from $2.8 million in the six months ended June 30, 1995. Gross profit as a
percentage of net sales increased to 38.3% in the first six months of 1996
compared to 25.2% in the first six months of 1995. The increase in gross profit
was due to increases in volume, improved utilization of existing manufacturing
capacity and the spreading of fixed costs over a substantially higher sales
volume. Gross profit also increased due to higher average selling prices of the
Company's products in the second quarter of 1996 compared to the second quarter
of 1995.
Selling, General & Administrative Expenses. Selling, general and
administrative expenses increased $908,000, or 188%, to $1.4 million in the
three months ended June 28, 1996 from $484,000 in the three months ended June
30, 1995. Selling, general and administrative expenses increased $1.9 million,
or 189.1%, to $2.9 million in the six months ended June 28, 1996 from $1.0
million in the six months ended June 30, 1995. This increase was primarily due
to the costs of additional personnel to support the Company's growth (including
the addition of two executive officers), the costs associated with the Company
becoming a stand-alone company, and increased profit-sharing and
performance-based bonus expenses. Selling, general and administrative expenses
as a percentage of sales increased to 10.4% in the second quarter of 1996
compared to 8.2% in the second quarter of 1995.
Interest Income. Interest income consists of interest expense
allocation to the Company by Nashua for the period March 30, 1996 through May
23, 1996, offset by interest income from short-term investments and the
forgiveness of accrued interest on the First Nashua Note as the note was prepaid
in full on May 31, 1996.
Provision for Income Taxes. Provision for income taxes increased to
$1.5 million in the three months ended June 28, 1996 from $407,000 in the three
months ended June 30, 1995. The Company's effective tax rate was 40% in the
second quarter of 1996 compared to 39% in the second quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund working capital needs
and capital expenditures in order to support the Company's sales growth. During
the periods presented, these capital requirements have generally been satisfied
by cash flows from operations.
Nashua Corporation (previously owned 100% of Cerion until the initial public
offering which reduced Nashua's ownership to 37%) historically has performed
cash management services for the Company. The Company's cash flow was directed
to Nashua, and Nashua in turn provided cash to the Company to fund operating
expenses and capital expenditures. On May 31, 1996, this arrangement ceased.
Shortly thereafter, the Company and Nashua determined the respective cash flows
from the Company to Nashua,
<PAGE> 8
and from Nashua to the Company, during the period from January 1, 1996 through
May 30, 1996, and settled a net amount due from Cerion to Nashua for
approximately $200,000.
Net cash provided by operating activities was $2.9 million and $1.1 million in
the six months ended June 30, 1995 and June 28, 1996, respectively. The increase
in cash provided by operating activities from the first six months of 1995 to
the first six months of 1996 was primarily due to increases in net income and
accounts payable as the Company experienced strong growth in net sales. The
increase in accounts receivable from December 31, 1995 to June 28, 1996 was
associated with the growth of the Company's net sales. The increase in accounts
payable from December 31, 1995 to June 28, 1996 consisted of increased trade
payables associated with the growth in the business and capital projects
undertaken by the Company in connection with its expansion.
Net cash used in investing activities was $7.8 million and $233,000 in the first
six months of 1996 and 1995, respectively. Cash used in investing activities was
primarily capital expenditures related to modifications that the Company made to
its existing equipment and purchases of new equipment to increase manufacturing
and efficiency and the purchase of short-term investments with the Company's
available cash. The Company's short-term investments are comprised of investment
grade commercial paper.
Net cash provided by financing activities increased in the first six months of
1996 due to the proceeds from the initial public offering partially offset by
the repayment of the Company's indebtedness. Net cash provided by financing
activities was $9.0 million in the first six months of 1996. In the first six
months of 1995, net cash used by financing activities was $233,000.
On May 30, 1996, the Company closed on the Initial Public Offering of its stock
with the sale of 4,416,000 shares of its Common Stock. Of the 4,416,000 shares
of Common Stock sold, 1,615,000 shares were sold by the Company and 2,801,000
were sold by Nashua Corporation. Nashua Corporation continues to own
approximately 37% of the Company's outstanding Common Stock.
The shares were sold to the public at $13.00 per share. The net proceeds to
the Company after the Underwriting Discount was $19,525,350.
On May 31, 1996, the Company repaid the two outstanding Promissory Notes
issued to Nashua Corporation in March 1996 having a combined principal sum of
$11,142,000. The prepayments were made without penalty. The Company received
the benefit of a prepayment discount of $183,000, representing accrued interest,
by paying the $10 million promissory note on or before May 31, 1996. The
prepayment discount is included in Interest Income.
INFLATION
In the opinion of management, inflation has not had a material effect on the
operations of the Company.
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 8, 1996, an individual plaintiff, Joshua Teitelbaum,
initiated a lawsuit against the Company, Nashua Corporation, William
Blair & Co., David A. Peterson, Paul A. Harter, Richard A. Clark and
Gerald G. Garbacz in the Circuit Court of Cook County, Illinois. The
action purports to be on behalf of a class consisting of all persons
(other than the defendants) who purchased the common stock of the
Company between May 24, 1996 and July 9, 1996. The complaint alleges
that, in connection with its initial public offering, the Company
issued certain materially false and misleading statements and omitted
the disclosure of material facts regarding, in particular, certain
significant customer relationships. The complaint seeks rescissory
damages and other relief under certain provisions of federal and
Illinois securities laws. The Company believes these allegations to be
without merit and intends to defend against this action vigorously.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.1. Credit Agreement, dated as of May 31, 1996 between Cerion
Technologies Inc., and LaSalle National Bank.
10.2. Security Agreement by and between Cerion Technologies Inc. and
Lasalle National Bank.
10.3. Stock Pledge Agreement, dated as of May 31, 1996 made by and
between Cerion Technologies Inc., and LaSalle National Bank.
11.1 Computation of Per Share Earnings
27 Financial Data Schedule
B. Reports on Form 8-K
None.
<PAGE> 10
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
.
CERION TECHNOLOGIES INC.
-------------------------------------------
(Registrant)
Date: August 9, 1996 By: /s/ Richard A. Clark
-------------- -------------------------------------------
Richard A. Clark
Vice President-Finance,
Chief Financial Officer and Treasurer
(principal financial and duly authorized
officer)
9
<PAGE> 1
EXHIBIT 10.1
CREDIT AGREEMENT,
dated as of May 31, 1996,
between
CERION TECHNOLOGIES INC.,
as the Borrower,
and
LASALLE NATIONAL BANK,
as the Lender.
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
<S> <C> <C> <C>
I DEFINITIONS AND ACCOUNTING TERMS.........................................................................1
1.1. Defined Terms.................................................................................1
1.2. Use of Defined Terms.........................................................................21
1.3. Cross-References.............................................................................21
1.4. Accounting and Financial Determinations......................................................21
II REVOLVING LOAN COMMITMENT, BORROWING AND LETTER OF CREDIT PROCEDURES AND NOTE...........................21
2.1. Commitment...................................................................................21
2.1.1. Revolving Loan Commitment....................................................................22
2.1.2. Lender Not Required To Make Excess Revolving Loans...........................................22
2.1.3. Lender's Optional Advance....................................................................22
2.2. Borrowing Procedure..........................................................................22
2.3. Continuation and Conversion Elections........................................................22
2.4. Letters of Credit............................................................................23
2.5. Funding......................................................................................23
2.6. Note.........................................................................................24
III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES..............................................................24
3.1. Repayments and Prepayments...................................................................24
3.2. Interest Provisions..........................................................................25
3.2.1. Rates........................................................................................25
3.2.2. Post-Maturity Rates..........................................................................25
3.2.3. Payment Dates................................................................................25
3.3. Fees.........................................................................................26
3.3.1. Commitment Fee...............................................................................26
3.3.2. Facility Fee.................................................................................26
3.3.3. Letter of Credit Fees........................................................................26
IV CERTAIN LIBOR RATE AND OTHER PROVISIONS.................................................................27
4.1. LIBOR Rate Lending Unlawful..................................................................27
4.2. Deposits Unavailable.........................................................................27
4.3. Increased LIBOR Loan Costs, etc..............................................................27
4.4. Funding Losses...............................................................................27
4.5. Increased Capital Costs......................................................................28
4.6. Taxes........................................................................................28
4.7. Payments, Computations, etc..................................................................29
4.8. Collections; Lock Boxes......................................................................29
4.9. Set off......................................................................................30
4.10. Use of Proceeds..............................................................................30
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
V CONDITIONS TO EXTENSIONS OF CREDIT......................................................................31
5.1. Initial Extension of Credit..................................................................31
5.1.1. Certificate as to Organizational Documents, Resolutions, etc.................................31
5.1.2. Certificates of Good Standing, etc...........................................................31
5.1.3. Delivery of Note.............................................................................31
5.1.4. Payment of Outstanding Indebtedness, etc.....................................................32
5.1.5. Pledge Agreement.............................................................................32
5.1.6. Security Agreement...........................................................................32
5.1.7. Mortgage.....................................................................................33
5.1.8. Opinion of Counsel...........................................................................33
5.1.9. Closing Fees, Expenses, etc..................................................................33
5.1.10. Due Diligence, etc...........................................................................33
5.1.11. Completion of Initial Public Offering........................................................34
5.2. All Extensions of Credit.....................................................................34
5.2.1. Compliance with Warranties, No Default.......................................................34
5.2.2. Borrowing Request and Letter of Credit Application...........................................34
5.2.3. Borrowing Base Compliance....................................................................34
5.2.4. Satisfactory Legal Form......................................................................34
VI REPRESENTATIONS AND WARRANTIES..........................................................................35
6.1. Organization, etc............................................................................35
6.2. Due Authorization, Non-Contravention, etc....................................................35
6.3. Government Approval, Regulation, etc.........................................................35
6.4. Validity, etc................................................................................35
6.5. Financial Information........................................................................35
6.6. No Material Adverse Change...................................................................36
6.7. Litigation, Labor Controversies, Compliance with Laws, etc...................................36
6.8. Subsidiaries.................................................................................36
6.9. Ownership of Properties......................................................................36
6.10. Taxes........................................................................................36
6.11. Pension and Welfare Plans....................................................................37
6.12. Environmental Warranties.....................................................................37
6.13. Regulations G, U and X.......................................................................38
6.14. Accounts; Inventory; Borrowing Base..........................................................38
6.15. Accuracy of Information......................................................................39
VII COVENANTS...............................................................................................39
7.1. Affirmative Covenants........................................................................39
7.1.1. Financial Information, Reports, Notices, etc.................................................39
7.1.2. Compliance with Laws, etc....................................................................41
7.1.3. Maintenance of Properties....................................................................42
7.1.4. Insurance....................................................................................42
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
7.1.5. Books and Records............................................................................42
7.1.6. Environmental Covenant.......................................................................42
7.1.7. Lender's Lien................................................................................43
7.1.8. Maintenance of Accounts......................................................................43
7.1.9. Further Assurances...........................................................................43
7.2. Negative Covenants...........................................................................43
7.2.1. Business Activities..........................................................................43
7.2.2. Indebtedness.................................................................................44
7.2.3. Liens........................................................................................44
7.2.4. Financial Condition..........................................................................45
7.2.5. Investments..................................................................................46
7.2.6. Restricted Payments, etc.....................................................................46
7.2.7. Consolidation, Merger, etc...................................................................47
7.2.8. Asset Dispositions, etc......................................................................48
7.2.9. Subsidiaries.................................................................................48
7.2.10. Modification of Certain Agreements...........................................................48
7.2.11. Transactions with Affiliates.................................................................48
7.2.12. Negative Pledges, etc........................................................................49
7.3. Borrowing Base Compliance....................................................................49
VIII EVENTS OF DEFAULT.......................................................................................50
8.1. Listing of Events of Default.................................................................50
8.1.1. Non-Payment of Obligations...................................................................50
8.1.2. Breach of Warranty...........................................................................50
8.1.3. Non-Performance of Certain Covenants and Obligations.........................................50
8.1.4. Non-Performance of Other Covenants and Obligations...........................................51
8.1.5. Default on Other Indebtedness................................................................51
8.1.6. Judgments....................................................................................51
8.1.7. Plans........................................................................................51
8.1.8. Control of the Borrower......................................................................51
8.1.9. Bankruptcy, Insolvency, etc..................................................................51
8.1.10. Impairment of Security, etc..................................................................52
8.2. Action if Bankruptcy.........................................................................52
8.3. Action if Other Event of Default.............................................................52
IX MISCELLANEOUS PROVISIONS................................................................................53
9.1. Waivers, Amendments, etc.....................................................................53
9.2. Notices......................................................................................53
9.3. Payment of Costs and Expenses................................................................54
9.4. Indemnification..............................................................................55
9.5. Survival.....................................................................................56
9.6. Severability.................................................................................56
9.7. Headings.....................................................................................56
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
9.8. Execution in Counterparts, Effectiveness, etc................................................56
9.9. Governing Law; Entire Agreement..............................................................56
9.10. Successors and Assigns.......................................................................56
9.11. Participations...............................................................................56
9.12. Other Transactions...........................................................................57
9.13. Forum Selection and Consent to Jurisdiction..................................................57
9.14. Waiver of Jury Trial.........................................................................58
</TABLE>
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 31, 1996, is made by and between
CERION TECHNOLOGIES INC., a Delaware corporation (the "BORROWER"), and LASALLE
NATIONAL BANK (the "LENDER").
WITNESSETH:
WHEREAS, the Borrower is engaged in the business of (i) manufacturing
precision-machined, aluminum disk substrates, which are the metallic platforms
of magnetic thin film disks used in the hard disk drives of portable and desktop
computers, network servers, add-on storage devices, and storage upgrades, (ii)
producing aluminum organic photoconductor ("OPC") drum substrates for laser
printer cartridges, and (iii) performing any related high volume manufacturing
process;
WHEREAS, the Borrower desires to obtain a Revolving Loan Commitment of
up to $15,000,000 from the Lender pursuant to which Revolving Loans may be made
to the Borrower (and Letters of Credit may be issued) from time to time prior to
the Revolving Loan Commitment Termination Date;
WHEREAS, the Lender is willing, on the terms and subject to the
conditions hereinafter set forth (including ARTICLE V), to extend the Revolving
Loan Commitment and make Extensions of Credit; and
WHEREAS, the Revolving Loans and Letters of Credit will be used (a) to
make payment in full, concurrently with the initial Extension of Credit
hereunder, of all Indebtedness identified in ITEM 7.2.2(b) ("Indebtedness to be
Paid") of the Disclosure Schedule; and (b) for general corporate purposes,
working capital purposes, capital expenditures and Permitted Acquisitions;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ACCOUNT" shall mean any right to payment for goods sold or leased or
for services rendered.
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"ACCOUNT DEBTOR" shall mean any Person who is or who may become
obligated to the Borrower under, with respect to, or on account of an Account.
"ACCOUNTS PAYABLE REPORT" shall mean a report delivered to the Lender
by the Borrower, as required by SECTION 7.3 of this Agreement, consisting of an
aged trial balance of all of the Borrower's accounts payable existing as of the
date of such Accounts Payable Report, specifying for each account payable, the
party to whom payment is owing and outstanding balance and the aging of such
outstanding balance, and such other information as the Lender may request.
"ACCOUNTS REPORT" shall mean a report delivered to the Lender by the
Borrower, as required by SECTION 7.3 of this Agreement, consisting of an aged
trial balance of all of the Borrower's Accounts existing as of the date of such
Accounts Report, specifying for each Account Debtor obligated on the Accounts,
such Account Debtor's name and outstanding balance and the aging of such
outstanding balance, and such other information as the Lender may request.
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (a)
to vote 10% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managing general partners or other
managers, or (b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"AGREEMENT" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"ASSIGNMENT OF RENTS AND LEASES" means an assignment of rents and
leases executed and delivered in connection with the Mortgage pursuant to
SECTION 5.1.7, in form and substance satisfactory to the Lender, as amended,
supplemented, restated or otherwise modified from time to time.
"AUTHORIZED OFFICER" means those officers of the Borrower whose
signatures and incumbency shall have been certified to the Lender pursuant to
SECTION 5.1.1.
"BORROWER" is defined in the preamble to this Agreement.
"BORROWING" means the Revolving Loans of the same type and, in the case
of LIBOR Loans, having the same Interest Period made by the Lender on the same
Business Day and pursuant to the same Borrowing Request in accordance with
SECTION 2.1.
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<PAGE> 8
"BORROWING BASE" means and, at any particular time and from time to
time, shall be equal to the sum of:
(a) 80% of the amount of Eligible Accounts (net of any
returns, rebates, discounts, credits, allowances or excise taxes
applicable thereto); plus
(b) the lesser of (i) $3,000,000, or (ii) the sum of (x)
40% of the net amount of Eligible Raw Materials Inventory, plus (y)
40% of the net amount of Eligible Finished Goods Inventory (in each
case, net of any reserves required to be maintained, in the discretion
of the Lender, for obsolete or slow moving Inventory); plus
(c) the Margin Value of Eligible Pledged Securities; plus
(d) the lesser of (i) $5,000,000, or (ii) the sum of (x)
40% of the net book value of Eligible Equipment, plus (y) 40% of the
net book value of Eligible Real Estate;
provided, that, at no time shall the amount in CLAUSE (d) above exceed 33% of
the total amount of the Borrowing Base. The Borrowing Base at any time shall be
determined by reference to the most recent Borrowing Base Certificate delivered
to the Lender, absent error in such Borrowing Base Certificate.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form of
EXHIBIT A hereto or such other form as the Lender may from time to time require,
duly completed and executed by an Authorized Officer of the Borrower.
"BORROWING REQUEST" means a loan request made in writing (or
telephonically and promptly confirmed in writing) by a certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of EXHIBIT B
hereto.
"BUSINESS DAY" means (a) any day which is neither a Saturday or Sunday
nor a legal holiday on which banks are authorized or required to be closed in
Chicago, Illinois; and (b) relative to the making, continuing, prepaying or
repaying of any LIBOR Loans, any day on which dealings in Dollars are carried on
in the interbank market.
"CAPITAL EXPENDITURES" means, for any period, the sum of:
(a) the aggregate amount of all expenditures of the
Borrower and its Subsidiaries for fixed or capital assets made during
such period which, in accordance with GAAP, would be classified as
capital expenditures; and
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(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period.
"CAPITALIZED LEASE LIABILITIES" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as capitalized leases, and,
for purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than
one year after such time, issued or guaranteed by the United States
Government;
(b) commercial paper, maturing not more than nine months
from the date of issue, which is issued by:
(i) a corporation (other than an Affiliate of the
Borrower) organized under the laws of any state of the United
States or of the District of Columbia and rated A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors
Service, Inc.; or
(ii) the Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance,
maturing not more than one year after such time, which is issued by
either:
(i) a commercial banking institution that is a
member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than
$500,000,000; or
(ii) the Lender; or
(d) any repurchase agreement entered into with the Lender
(or other commercial banking institution of the stature referred to in
CLAUSE (c)(i)) which:
(i) is secured by a fully perfected security
interest in any obligation of the type described in any of
CLAUSES (a) through (c); and
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(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the
repurchase obligation of the Lender (or other commercial
banking institution) thereunder.
"CASH FLOW" means, with respect to any period, the sum of (a) the Net
Income of the Borrower and its Subsidiaries for such period, plus (b) to the
extent deducted in determining such Net Income, the sum of the (i) Interest
Expense, plus (ii) franchise and income tax expense, of the Borrower and its
Subsidiaries for such period, in each case on a consolidated basis.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CHANGE IN CONTROL" means the acquisition by any Person, or two or more
Persons acting in concert (other than Nashua Corporation or any group of Persons
controlled by Nashua Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) of 20% or more of the outstanding shares of
voting stock of the Borrower.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time (and any successor statute).
"COLLATERAL ACCOUNT" is defined in SECTION 4.8.
"COMMITMENT TERMINATION EVENT" means:
(a) the occurrence of any Default described in clauses (a)
through (d) of SECTION 8.1.9; or
(b) the occurrence and continuance of any other Event of
Default and either:
(i) the declaration of the Revolving Loans to be due
and payable pursuant to SECTION 8.3; or
(ii) in the absence of such declaration, the giving
of notice by the Lender to the Borrower that the Revolving
Loan Commitment has been terminated.
"CONTINGENT LIABILITY" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or
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otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions
upon the shares of any other Person. The amount of any Person's obligation
under any Contingent Liability shall (subject to any limitation set forth
therein) be deemed to be the outstanding principal amount (or maximum principal
amount, if larger) of the debt, obligation or other liability guaranteed
thereby.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of EXHIBIT C hereto.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under section 414(b) or 414(c) of the
Code or section 4001 of ERISA.
"DEFAULT" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto, as
it may be amended, supplemented or otherwise modified from time to time by the
Borrower with the written consent of the Lender.
"DOLLAR" and the sign "$" mean lawful money of the United States of
America.
"EFFECTIVE DATE" means the date this Agreement becomes effective
pursuant to SECTION 9.8.
"ELIGIBLE ACCOUNTS" shall mean each Account which, as of the date of
determination, (i) does not violate the negative covenants or any other
provisions of this Agreement or any other Loan Document, (ii) satisfies the
affirmative covenants and other provisions of this Agreement and each other Loan
Document, and (iii) satisfies the following additional requirements:
(a) The Account is genuine and in all respects what it
purports to be and arises from either (i) the performance of services
by the Borrower, which services have been fully performed and, if
applicable, acknowledged and/or accepted by the Account Debtor with
respect thereto or (ii) the sale or lease of goods by the Borrower; and
if it arises from the sale or lease of goods, (x) such goods comply
with such Account Debtor's specifications (if any) and have been
shipped to, or delivered to and accepted by, such Account Debtor and
(y) the Borrower has possession of, or if requested by the Lender has
delivered to the Lender, shipping and delivery receipts evidencing such
shipment, delivery and acceptance, and (z) such goods have been shipped
or delivered on open account and on an absolute sale basis and not on
consignment, on approval or on a sale-or-return basis or subject to any
other
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repurchase or return agreement and no material part of such goods has
been returned, repossessed, rejected, lost or damaged;
(b) The Account is not evidenced by chattel paper or an
instrument (as defined in the Uniform Commercial Code) of any kind;
(c) The Account Debtor obligated on such Account is not
insolvent or the subject of any bankruptcy or insolvency proceeding
of any kind;
(d) If the Account is owing from an Account Debtor located
outside the United States, either: (i) such Account Debtor has
furnished the Borrower with an irrevocable letter of credit which has
been issued or confirmed by a financial institution acceptable to the
Lender, is in form and substance acceptable to the Lender, has been
pledged to the Lender, and is payable in Dollars in an amount not less
than the face value of the Account; (ii) such account is insured on
terms acceptable to the Lender by Foreign Credit Insurance Corporation,
the Export-Import Bank or another insurer acceptable to the Lender; or
(iii) the Lender is satisfied with the creditworthiness of such foreign
Account Debtor;
(e) The Account is a valid, legally enforceable obligation
of the relevant Account Debtor owing to the Borrower and such Account
Debtor has not asserted, nor is the Account subject to, any offset,
counterclaim, deduction, contra account or defense denying liability
thereunder; provided, however, that if such offset, counterclaim,
deduction, contra account or defense exists or has been asserted, such
Account shall be ineligible only to the extent of the greater of the
actual or asserted amount of such offset, counterclaim, deduction,
contra account or defense;
(f) The Account is subject to and covered by the Lender's
perfected security interest and is not subject to any other Lien or
claim;
(g) The Account is evidenced by an invoice or other
documentation in form acceptable to the Lender;
(h) The Account has not remained unpaid for a period
exceeding 90 days after the invoice date and not more than 25% of the
balance of all Accounts owing from the Account Debtor obligated under
such Account has remained unpaid for more than 90 days after the
invoice date;
(i) If the Account Debtor is located in the State of
Minnesota, the Borrower has filed a Notice of Business Activities
Report with the Minnesota Commissioner of Revenue (or other relevant
governmental authority) for the then current year;
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(j) If the Account Debtor is located in the State of New
Jersey, the Borrower has filed a Notice of Business Activities Report
with the New Jersey Division of Taxation (or other relevant
governmental authority) for the then current year;
(k) If the Account Debtor is located in a jurisdiction (in
addition to those specified in CLAUSES (i) and (j) above) with which it
is required or advisable for the Borrower to file a business activities
report or other similar filing, the Borrower has made such a filing;
(l) The Account is not owing from an employee, officer or
Affiliate of the Borrower;
(m) The Account does not arise out of a contract, order or
other arrangement which, by its terms, or by applicable law, forbids,
restricts or makes void or unenforceable the assignment by the Borrower
to the Lender of the Account arising with respect thereto;
(n) The Account arises in the ordinary course of the
Borrower's business and does not arise in connection with a
container or carrier deposit or charge;
(o) The Account Debtor is not the United States of America
or any department, agency or instrumentality thereof; and
(p) Each of the warranties and representations set forth in
SECTION 6.14 of this Agreement has been reaffirmed with respect to such
Account at the times the most recent Accounts Report and Borrowing Base
Certificate were delivered to the Lender.
At any time, the Lender may expressly elect in writing, in its sole discretion,
to treat any Account as an Eligible Account notwithstanding its failure to meet
any of the foregoing requirements. An Account which is at any time an Eligible
Account, but which subsequently fails to meet any of the foregoing requirements,
shall forthwith cease to be an Eligible Account. Further, with respect to any
Account, if the Lender at any time or times hereafter shall determine in its
discretion that the prospect of payment or performance by the Account Debtor
with respect thereto is or will be impaired for any reason whatsoever, then
notwithstanding anything to the contrary contained above, such Account shall
forthwith cease to be an Eligible Account.
"ELIGIBLE EQUIPMENT" shall mean each item of equipment (as defined in
section 9-109 of the Uniform Commercial Code of the State of Illinois) of the
Borrower which, as of the date of determination, (i) does not violate the
negative covenants or any other provisions of this Agreement or any other Loan
Document, (ii) satisfies the affirmative covenants and other provisions of this
Agreement and each other Loan Document, and (iii) satisfies the following
additional requirements:
(a) Borrower has good and marketable title to such
equipment;
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(b) such equipment is subject to and covered by the Lender's
perfected security interest and is not subject to any other Lien or
claim;
(c) except as permitted under CLAUSE (d) below, such
equipment is in the possession and control of Borrower; provided,
however, that if it is stored on premises leased by Borrower, the
Lender is in possession of a landlord's consent in form acceptable to
the Lender duly executed by the owner of such premises;
(d) if it is in the possession or control of a bailee or
other Person other than Borrower, the Lender is in possession of such
agreements, instruments and documents as the Lender may require (each
in form and content acceptable to the Lender and duly executed, as
appropriate, by the bailee or other Person in possession or control of
such equipment, as applicable), in the Lender's name covering such
equipment and a bailee's consent or other consent, as applicable;
(e) it is not Inventory;
(f) it is not equipment which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement or any Loan Document relating directly or indirectly to
Borrower's equipment; and
(g) the Lender has not determined in its sole and absolute
discretion that it is unacceptable due to age, type, category, value,
quality and/or quantity.
At any time, the Lender may expressly elect in writing, in its sole discretion,
to treat any equipment as Eligible Equipment notwithstanding its failure to meet
any of the foregoing requirements. Equipment which is at any time Eligible
Equipment, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be Eligible Equipment.
"ELIGIBLE FINISHED GOODS INVENTORY" means Eligible Inventory which has
been fully processed by or on behalf of Borrower (less reserves for slow-moving,
obsolete or damaged Inventory).
"ELIGIBLE INVENTORY" means Inventory which, as of the date of
determination, (i) does not violate the negative covenants or any other
provisions of this Agreement or any other Loan Document, (ii) satisfies the
affirmative covenants and other provisions of this Agreement and each other Loan
Document, and (iii) satisfies the following requirements:
(a) it is owned by the Borrower, is subject to and covered
by the Lender's perfected security interest and is not subject to any
other assignment, claim or Lien (other than those consented to in
writing by the Lender, in its sole and absolute discretion);
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(b) it is new, unused and saleable, and has not been and
is not being reworked or refurbished;
(c) except as permitted under CLAUSE (d) below, it is in the
possession and control of Borrower; provided, however, that if it is
stored on premises leased by Borrower, the Lender is in possession of a
landlord's consent in form acceptable to the Lender duly executed by
the owner of such premises;
(d) if it is in the possession or control of a bailee,
warehouseman, processor or other Person other than Borrower the Lender
is in possession of such agreements, instruments and documents as the
Lender may require (each in form and content acceptable to the Lender
and duly executed, as appropriate, by the bailee, warehouseman,
processor or other Person in possession or control of such Inventory,
as applicable), including warehouse receipts in the Lender's name
covering such Inventory and a bailee's consent, processor's consent or
landlord's consent, as applicable;
(e) it is not Inventory which is dedicated to, identifiable
with, or is otherwise specifically to be used in the manufacture of,
goods which are to be sold or leased to the United States of America or
any department, agency or instrumentality thereof and in respect of
which Inventory, the Borrower shall have received any progress or other
advance payment;
(f) it is not Inventory produced in violation of the Fair
Labor Standards Act and subject to the "hot goods" provisions
contained in Title 29 U.S.C. [Section]215 or any successor statute or
section;
(g) it is not "private label" Inventory, or Inventory
bearing a servicemark, trademark or name of any Person other than the
Borrower, or with respect to which the use by the Borrower is subject
to any licensing, patent, royalty, trademark, trade name or copyright
agreement with any other Person;
(h) it is not (i) packaging or shipping materials, (ii)
goods used in connection with maintenance or repair of the Borrower's
business, properties or assets or (iii) general supplies;
(i) it is not Inventory which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement or any Loan Document relating directly or indirectly to
Borrower's Inventory; and
(j) the Lender has not determined in its sole and absolute
discretion that it is unacceptable due to age, type, value, category,
quality and/or quantity.
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At any time, the Lender may expressly elect in writing, in its sole discretion,
to treat any Inventory as Eligible Inventory notwithstanding its failure to meet
any of the foregoing requirements. Inventory of Borrower which is at any time
Eligible Inventory but which subsequently fails to meet any of the foregoing
requirements shall forthwith cease to be Eligible Inventory.
"ELIGIBLE PLEDGED SECURITIES" shall mean each security (as defined in
section 8-102 of the Uniform Commercial Code of the State of Illinois) which, as
of the date of determination, (i) does not violate the negative covenants or any
other provisions of this Agreement or any other Loan Document, (ii) satisfies
the affirmative covenants and other provisions of this Agreement and each other
Loan Document, and (iii) satisfies the following additional requirements:
(a) Borrower has good and marketable title to such security;
(b) such security is pledged to the Lender in accordance
with SECTION 5.1.5, is subject to and covered by the Lender's
perfected lien and security interest, and is not subject to any other
Lien or claim;
(c) such security is readily marketable;
(d) it does not in any way fails to meet or violates any
warranty, representation or covenant contained in this Agreement or any
Loan Document relating directly or indirectly to securities owned by
the Borrower; and
(e) the Lender has determined in its sole and absolute
discretion that it is not unacceptable due to type, category,
marketability, value, tenor, quality and/or other factors.
At any time, the Lender may expressly elect in writing, in its sole discretion,
to treat any security as an Eligible Pledged Security notwithstanding its
failure to meet any of the foregoing requirements. A security which is at any
time an Eligible Pledged Security, but which subsequently fails to meet any of
the foregoing requirements, shall forthwith cease to be an Eligible Pledged
Security.
"ELIGIBLE RAW MATERIALS INVENTORY" means Eligible Inventory consisting
of aluminum blanks and aluminum substrates which have not been processed by or
on behalf of the Borrower.
"ELIGIBLE REAL ESTATE" shall mean the real property (including
improvements) located at 1401 Interstate Drive, Champaign, Illinois 61821, in so
far as it, as of the date of determination, (i) does not violate the negative
covenants or any other provisions of this Agreement or any other Loan Document,
(ii) satisfies the affirmative covenants and other provisions of this Agreement
and each other Loan Document, and (iii) satisfies the following requirements:
(a) Borrower has good and marketable fee simple title to
such real property;
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(b) such real property is mortgaged to the Lender in
accordance with SECTION 5.1.7, is subject to and covered by the
Lender's perfected security interest, and is not subject to any other
Lien or claim;
(c) it does not in any way fails to meet or violates any
warranty, representation or covenant contained in this Agreement or any
Loan Document relating directly or indirectly to real property owned by
the Borrower;
(d) the Lender has determined in its sole and absolute
discretion that it is not unacceptable due to type, category, value,
quality and/or other factors; and
(e) such real property does not include construction in
progress. At any time, the Lender may expressly elect in writing, in its sole
discretion, to treat any real property as Eligible Real Property notwithstanding
its failure to meet any of the foregoing requirements. A security which is at
any time Eligible Real Property, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be Eligible Real Property.
"ENVIRONMENTAL LAWS" means all applicable federal, state or local
statutes, laws, ordinances codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"EVENT OF DEFAULT" is defined in SECTION 8.1.
"EXTENSION OF CREDIT" means the funding of a Borrowing or issuance of
a Letter of Credit, as the case may be.
"FISCAL QUARTER" means any quarter of a Fiscal Year.
"FISCAL YEAR" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (E.G. the 1995 Fiscal Year") refer to the Fiscal Year
ending on the December 31 occurring during such calendar year.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in SECTION 1.4.
"HAZARDOUS MATERIAL" means:
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(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"HEDGING OBLIGATIONS" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
SECTION, paragraph or provision of this Agreement or such other Loan Document.
"INCLUDING" means (whether or not so specified) including without
limiting the generality of any description preceding such term, and, for
purposes of this Agreement and each other Loan Document, the parties hereto
agree that the rule of EJUSDEM QENERIS shall not be applicable to limit a
general statement, is followed by or referable to an enumeration of specific
matters, to matters similar to the matters specifically mentioned.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and
all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
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(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse; and
(g) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer.
"INDEMNIFIED LIABILITIES" is defined in SECTION 9.4.
"INDEMNIFIED PARTIES" is defined in SECTION 9.4.
"INTEREST COVERAGE RATIO" means, with respect to any period, the ratio
of (i) the Cash Flow to (ii) Interest Expense for such period.
"INTEREST EXPENSE" means, with respect to any period, the consolidated
interest expense of the Borrower and its Subsidiaries for such period, and all
commissions, discounts, fees and charges incurred in connection with
Indebtedness, net Hedging Obligations of such Person and that portion of
Capitalized Lease Liabilities of such Person allocable to interest in accordance
with GAAP.
"INTEREST PERIOD" means, relative to any LIBOR Loans, the period
beginning on (and including) the date on which such LIBOR Loan is made or
continued as, or converted into, a LIBOR Loan pursuant to SECTION 2.2 or 2.3 and
shall end on (but exclude) the day which numerically corresponds to such date
one, two, three or six) months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in either case as
the Borrower may select in its relevant notice pursuant to SECTION 2.2 or 2.3;
provided, however, that:
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than five different dates;
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(b) Interest Periods commencing on the same date for
Revolving Loans comprising part of the same Borrowing shall be of the
same duration;
(c) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next following Business Day (unless, if such Interest Period applies
to LIBOR Loans, such next following Business Day is the first Business
Day of a calendar month, in which case such Interest Period shall end
on the Business Day next preceding such numerically corresponding day);
and
(d) no Interest Period may end later than the date set forth
in clause (a) of the definition of "Revolving Loan Commitment
Termination Date".
"INVENTORY" shall mean any and all goods, merchandise and other
personal property, including goods in transit, wheresoever located and whether
now owned or hereafter acquired by the Borrower which is or may at any time be
held for sale or lease, furnished under any contract of service or held as raw
materials, work in process, supplies or materials used or consumed in the
Borrower's business, and all such property the sale or other disposition of
which has given rise to Accounts and which has been returned to or repossessed
or stopped in transit by the Borrower.
"INVENTORY REPORT" means a report delivered to the Lender by the
Borrower, as required by SECTION 7.3 of this Agreement, in form and substance
satisfactory to the Lender, giving detailed information regarding Inventory and
Eligible Inventory by categories.
"INVESTMENT" means, relative to any Person:
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person
in any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"LENDER" is defined in the preamble.
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"LETTER OF CREDIT" is defined in SECTION 2.4.
"LETTER OF CREDIT APPLICATION" is defined in SECTION 2.4.
"LETTER OF CREDIT OBLIGATIONS" means, as of the date of any
determination, the maximum aggregate amount then available to be drawn under all
Letters of Credit outstanding with respect to which the Borrower has a
reimbursement obligation.
"LIBOR LOAN" means a Revolving Loan bearing interest, at all times
during an Interest Period applicable to such Revolving Loan, at a fixed rate of
interest determined by reference to the LIBOR Rate (Reserve Adjusted).
"LIBOR RATE" means, relative to any Interest Period for LIBOR Loans,
the rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Lender in the interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the beginning
of such Interest Period for delivery on the first day of such Interest Period,
and in an amount approximately equal to the amount of the Lender's LIBOR Loan
and for a period approximately equal to such Interest Period.
"LIBOR RATE (RESERVE ADJUSTED)" means, relative to any Revolving Loan
to be made, continued or maintained as, or converted into, a LIBOR Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) determined pursuant to the following formula:
LIBOR Rate = LIBOR Rate
(Reserve Adjusted) -----------------
1.00 - LIBOR Reserve Percentage
The LIBOR Rate (Reserve Adjusted) for any Interest Period for LIBOR
Loans will be determined by the Lender on the basis of the LIBOR Reserve
Percentage in effect two Business Days before the first day of such Interest
Period.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for
LIBOR Loans, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as defined in Regulation D (or any successor
regulation) of the F.R.S. Board, having a term approximately equal or comparable
to such Interest Period. All LIBOR Loans shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed subject to such reserve
requirements. LIBOR Reserve Percentages shall be adjusted automatically on and
as of the effective date of any change in such reserve requirements.
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"LIEN" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, claim, encumbrance, lien (statutory or
otherwise), charge against or interest in property to secure payment of a debt
or performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"LOAN DOCUMENT" means this Agreement, the Note, the other Security
Documents, and any and all other documents and instruments delivered from time
to time in connection with any of the foregoing, including any Letters of Credit
and applications therefor.
"MARGIN VALUE" means the percentage of the fair market value of each
security (as defined in section 8-102 of the Uniform Commercial Code of the
State of Illinois), as of any date, which the Lender takes into account based
upon the type and tenor of such security, for purposes of calculating the
Borrowing Base, all as determined by the Lender in its sole and absolute
discretion.
"MONTHLY PAYMENT DATE" means the last day of each calendar month or, if
any such day is not a Business Day, the next succeeding Business Day.
"MORTGAGE" means the mortgage executed and delivered pursuant to
SECTION 5.1.7, substantially in the form of EXHIBIT E hereto, as amended,
supplemented, restated or otherwise modified from time to time.
"NET INCOME" means, with respect any period, all amounts which would be
included as net earnings on the consolidated statements of earnings of the
Borrower and its Subsidiaries for such period; provided, however, that in any
event (a) no such amounts shall include any gain or loss arising from the sale
or disposition of any assets, other than (i) Inventory sold in the ordinary
course of business or (ii) any gain or loss arising from the sale or disposition
of obsolete non-current assets in the ordinary course of business not to exceed
in the aggregate $100,000 in any Fiscal Year, or gain from the write-up of
assets or any other extraordinary gains, and (b) no such amounts determined with
respect to any such Subsidiary shall be included for any such period during
which it was not at all times a Subsidiary of the Borrower, except that amounts
actually received by the Borrower from any such Subsidiary may be included for
the period during which such amount is actually received.
"NOTE" means a promissory note of the Borrower payable to the Lender,
in the form of EXHIBIT F hereto (as such promissory note may be amended,
supplemented or otherwise modified from time to time), evidencing the aggregate
Indebtedness of the Borrower to the Lender resulting from outstanding Revolving
Loans, and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"OBLIGATIONS" means all Indebtedness, liabilities and obligations
(monetary or otherwise) of the Borrower to the Lender, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing or due or to become due, including the Borrower's obligations
and liabilities to the Lender under the Loan Documents.
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"OBLIGOR" means the Borrower or any other Person (other than the
Lender) now or hereafter obligated under any Loan Document.
"PARTICIPANT" is defined in SECTION 9.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under section 4069 of ERISA.
"PERMITTED ACQUISITION" means the acquisition by the Borrower or any of
its Subsidiaries, upon at least thirty (30) days' prior written notice to the
Lender, of all or substantially all of the assets of any other Person (or any
division(s) thereof) or the capital stock of other equity securities of any
other Person in any transaction or series of related transactions, provided,
that:
(a) both immediately before and after giving effect to the
consummation of such acquisition no Default shall have occurred and
be continuing;
(b) (i) such assets shall be located in the continental
United States, or (ii) in the case of an acquisition of securities,
the Person to be acquired (and its Subsidiaries, if any) shall be
located in, and organized under the laws of, any of the States in the
continental United States;
(c) such assets or securities, as the case may be, shall be
acquired and owned solely by the Borrower (unless the Lender shall
otherwise consent, in its sole discretion);
(d) if such acquisition is financed in whole or in part,
directly or indirectly, with any Revolving Loans or Letters of Credit,
the sum of (i) the aggregate principal amount of such Revolving Loans
plus (ii) the aggregate amount of Letter of Credit Obligations
attributable to such Letters of Credit shall not exceed 50% of the
total amount then otherwise available hereunder for Borrowing under the
Revolving Loan Commitment at any time;
(e) upon the consummation of such acquisition, such assets
or securities (and, in the discretion of the Lender, the assets
underlying such securities), as the case may be, shall be subject to
and covered by the Lender's perfected lien and
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security interest (on terms acceptable to the Lender) and shall not
be subject to any other Lien or claim, except as otherwise permitted
under SECTION 7.2.3; and
(f) the Borrower shall have provided to the Lender all
information and documentation concerning such acquisition, the parties
thereto and their respective businesses and assets as the Lender shall
request, including financial statements and information, at least 30
days prior to the closing of such acquisition.
"PERSON" means any natural person, corporation, partnership, limited
liability company, firm, association, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PLEDGE AGREEMENT" means the Pledge Agreement executed and delivered
pursuant to SECTION 5.1.5 substantially in the form of EXHIBIT G hereto, as
amended, supplemented, restated or otherwise modified from time to time.
"PRIME RATE" means, on any date and with respect to all Prime Rate
Loans, a fluctuating rate of interest per annum equal to the rate of interest
most recently established by the Lender as its prime rate in Chicago, Illinois.
The Prime Rate is not necessarily intended to be the lowest rate of interest
determined by the Lender in connection with extensions of credit. Changes in the
rate of interest on that portion of any Revolving Loans maintained as Prime Rate
Loans shall take effect simultaneously with each change in the Prime Rate.
"PRIME RATE LOAN" means a Revolving Loan bearing interest at a
fluctuating rate equal to the Prime Rate.
"QUARTERLY PAYMENT DATE" means the last day of each March, June,
September, and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"RELEASE" means a "release", as such term is defined in CERCLA.
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource
Conservation and Recovery Act, 42 U.S.C. SECTION 690, ET SEQ., as in effect from
time to time.
"REVOLVING LOAN" is defined in SECTION 2.1.
"REVOLVING LOAN COMMITMENT" means the Lender's obligation to make
Revolving Loans pursuant to SECTION 2.1.1.
"REVOLVING LOAN COMMITMENT AMOUNT" means, on any date, the lesser of
(i) $15,000,000 or (ii) the Borrowing Base on such date.
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"REVOLVING LOAN COMMITMENT TERMINATION DATE" means the earliest of:
(a) the third anniversary of the date of this Agreement (or
any extension thereof to which the Lender may at its sole option
agree in writing, it being recited and acknowledged for the avoidance
of doubt that the Lender has no commitment or obligation to so agree);
and
(b) the date on which any Commitment Termination Event
occurs.
On the Revolving Loan Commitment Termination Date, the Revolving Loan Commitment
shall terminate automatically and without any notice or action.
"SECURITY AGREEMENT" means the Security Agreement executed and
delivered pursuant to SECTION 5.1.6, substantially in the form of EXHIBIT H
hereto, as amended, supplemented, restated or otherwise modified from time to
time.
"SECURITY DOCUMENTS" means the Security Agreement, the Pledge
Agreement, the Mortgage, the Assignment of Rents and Leases, all financing
statements and other instruments filed or recorded in connection with any of the
foregoing, and any other agreements or instruments securing the payment and
satisfaction of the Obligations or any of them.
"STATED MATURITY DATE" means the third anniversary of the date of this
Agreement.
"SUBORDINATED DEBT" means all unsecured Indebtedness of the Borrower
for money borrowed which is subordinated, upon terms satisfactory to the Lender,
in right of payment to the payment in full of all Obligations.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which more than 50% of the outstanding capital stock or other
securities having ordinary voting power to elect a majority of the board of
directors or other governing body of such entity (irrespective of whether at the
time securities of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency) is at the time
directly or indirectly owned by such Person, by such Person and one or more
other Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person.
"TANGIBLE NET WORTH" means the total stockholders' equity of the
Borrower and its Subsidiaries on a consolidated basis (including preferred
stock, but excluding treasury stock), after subtracting therefrom the aggregate
amount of any intangible assets of the Borrower and its Subsidiaries, including
goodwill, deposits, prepaid expenses, franchises, licenses, patents, trademarks,
trade names, copyrights, service marks and brand names, and Accounts, notes,
obligations and other receivables owing from Affiliates, officers or employees
of the Borrower or its Subsidiaries.
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"TAXES" is defined in SECTION 4.6.
"TOTAL LIABILITIES" means the outstanding amount of all Indebtedness of
the Borrower and its Subsidiaries of the nature required to be included as
liabilities on a balance sheet in accordance with GAAP.
"TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO" means the ratio of (a)
Total Liabilities (exclusive of Subordinated Debt) to (b) Tangible Net Worth.
"TYPE" means, relative to any Loan, the portion thereof, if any, being
maintained as a Prime Rate Loan or a LIBOR Loan.
"UNITED STATES" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"WELFARE PLAN" means a "welfare plan", as such term is defined in
section 3(l) of ERISA.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
the Note, each Borrowing Request, Continuation/Conversion Notice, Loan Document,
notice and other communication delivered from time to time in connection with
this Agreement or any other Loan Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 7.2.4) shall be made, and all
financial statements required to be delivered hereunder or thereunder shall be
prepared in accordance with, those generally accepted accounting principles
("GAAP") applied in the preparation of the financial statements referred to in
SECTION 6.5.
ARTICLE II
REVOLVING LOAN COMMITMENT, BORROWING AND
LETTER OF CREDIT PROCEDURES AND NOTE
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SECTION 2.1. COMMITMENT. On the terms and subject to the conditions
of this Agreement (including Article V), the Lender agrees to make revolving
loans to the Borrower ("REVOLVING LOANS") in accordance with this SECTION 2.1.
SECTION 2.1.1. REVOLVING LOAN COMMITMENT. From time to time on any
Business Day occurring prior to the Revolving Loan Commitment Termination Date,
the Lender will make Revolving Loans to the Borrower equal to the aggregate
amount of the Borrowing requested by the Borrower to be made on such day. On
the terms and subject to the conditions hereof, the Borrower may from time to
time borrow, prepay and reborrow Revolving Loans.
SECTION 2.1.2. LENDER NOT REQUIRED TO MAKE EXCESS REVOLVING LOANS.
The Lender shall not be required to make any Extension of Credit if,
immediately before or after giving effect thereto, the sum of (i) the aggregate
outstanding principal amount of all Revolving Loans plus (ii) the aggregate
outstanding amount of all Letter of Credit Obligations exceeds, or would
exceed, the Revolving Loan Commitment Amount.
SECTION 2.1.3. LENDER'S OPTIONAL ADVANCE. The Lender shall be
permitted, in its sole discretion, at any time and from time to time to pay on
behalf of the Borrower any Obligations then due and such amount paid shall be
deemed to be a Revolving Loan made to the Borrower on the date of such payment.
SECTION 2.2. BORROWING PROCEDURE. By delivering a Borrowing Request
to the Lender on or before 12:00 noon, Chicago time, on a Business Day, the
Borrower may from time to time irrevocably request that a Borrowing be made in
a minimum amount of $50,000 and an integral multiple of $50,000, or in the
unused amount of the Revolving Loan Commitment. On the terms and subject to the
conditions of this Agreement, each Borrowing shall be comprised of the type of
Revolving Loans, and shall be made on the Business Day (not less than three nor
more than five Business Days' prior to funding, in the case of LIBOR Loans),
specified in such Borrowing Request (or such later Business Day as the Lender
shall determine to be practicable), and the Lender shall make funds in an
amount equal to such requested Borrowing available to the Borrower by direct
deposit to the account(s) of the Borrower maintained with the Lender specified
in its Borrowing Request.
SECTION 2.3. CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Lender on or before 12:00 noon, Chicago
time, on a Business Day, the Borrower may from time to time irrevocably elect,
on not less than three nor more than five Business Days' notice that all, or
any portion in an aggregate minimum amount of $50,000 and an integral multiple
of $50,000 of any Revolving Loans be, in the case of Prime Rate Loans,
converted into LIBOR Loans or, in the case of LIBOR Loans, be converted into a
Prime Rate Loan or continued as a LIBOR Loan (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBOR Loan at least three
Business Days before the last day of the then current Interest Period with
respect thereto, such LIBOR Loan shall, on such last day automatically convert
to a Prime Rate Loan); provided, however, that no portion of the outstanding
principal amount of
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any Revolving Loans may be continued as, or be converted into, LIBOR Loans
when any Default or Event of Default has occurred and is continuing. Absent an
effective election of the Borrower to the contrary, each Revolving Loan shall
be deemed to constitute a Prime Rate Loan. The Borrower shall not have more
than three LIBOR Loans outstanding at any time.
SECTION 2.4. Letters of Credit.
-----------------
(a) Subject to the terms and conditions hereof, the Revolving
Loan Commitment may be availed of in the form of standby and commercial
letters of credit issued by the Lender for the account of the Borrower
("LETTERS OF CREDIT"), provided that the Lender shall not be required
to issue any Letter of Credit if, immediately before or after giving
effect thereto, the sum of (i) the aggregate outstanding principal
amount of all Revolving Loans plus (ii) the outstanding amount of all
Letter of Credit Obligations exceeds, or would exceed, the Revolving
Loan Commitment Amount, and the aggregate outstanding amount of all
Letter of Credit Obligations shall in no event exceed $3,000,000 at any
time.
(b) Each Letter of Credit issued hereunder shall expire by its
terms not later than the Stated Maturity Date.
(c) Each Letter of Credit shall be payable in Dollars, shall
conform to the general terms and requirements of the Lender for the
issuance of commercial or standby letters of credit (as appropriate) as
to form and substance and shall be a letter of credit which the Lender
may lawfully issue.
(d) At the time the Borrower requests each Letter of Credit to
be issued (or prior to the first issuance of a Letter of Credit, in the
case of a continuing application), the Borrower shall execute and
deliver to the Lender an application for such Letter of Credit in the
form prescribed by the Lender for a letter of credit of the type
requested, together with such related documentation as the Lender shall
require (such request, application and related documentation,
collectively, a "LETTER OF CREDIT APPLICATION"). The amount that the
Borrower is obligated to reimburse the Lender for each drawing accepted
and paid by the Lender under any Letter of Credit shall be deemed to be
a Revolving Loan for all purposes made on the date of such drawing in a
principal amount equal to the amount of such reimbursement obligation,
shall accrue interest from the date of such drawing as if it were a
Revolving Loan and, for purposes of interest rate elections hereunder,
shall constitute a single Borrowing.
SECTION 2.5. FUNDING. The Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBOR Loans hereunder by causing one of
its foreign branches or Affiliates (or an international banking facility created
by the Lender) to make or maintain such LIBOR Loan; provided, however, that such
LIBOR Loan shall nonetheless be deemed to have been made and to be held by the
Lender, and the obligation of the Borrower to repay such LIBOR Loan shall
nevertheless be to the Lender for the account of such foreign branch, Affiliate
or international
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banking facility. In addition, the Borrower hereby consents and
agrees that, for purposes of any determination to be made for purposes of
SECTIONS 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that the Lender
elected to fund all LIBOR Loans by purchasing, as the case may be, Dollar
deposits in the interbank Eurodollar market.
SECTION 2.6. NOTE. The Lender's Revolving Loans under the Revolving
Loan Commitment shall be evidenced by the Note payable to the order of the
Lender in a maximum principal amount equal to the original Revolving Loan
Commitment Amount. The Borrower hereby irrevocably authorizes the Lender to make
(or cause to be made) appropriate notations on its books and records, which
notations, if made, shall evidence, INTER ALIA, the date of, the outstanding
principal of, and the interest rate and Interest Period applicable to the
Revolving Loans evidenced thereby. Such notations shall be conclusive and
binding on the Borrower absent manifest error; provided, however, that the
failure of the Lender to make any such notations shall not limit or otherwise
affect any obligations of the Borrower.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. REPAYMENTS AND PREPAYMENTS. The Borrower shall repay
in full the unpaid principal amount of the Revolving Loans upon the Stated
Maturity Date. Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Revolving Loans; provided, however, that:
(i) no such prepayment of any LIBOR Loan may be made on any
day other than the last day of the Interest Period for such Revolving
Loan;
(ii) all such voluntary prepayments shall be made with at
least three but no more than five Business Days' prior written notice
to the Lender; and
(iii) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $50,000 and an integral multiple of
$50,000;
(b) shall, on any date when the sum of (i) aggregate outstanding
principal amount of the Revolving Loans plus (ii) the outstanding amount of all
Letter of Credit Obligations exceeds the Revolving Loan Commitment Amount on
such date, make a mandatory payment to the Lender equal to such excess (which
payment shall be applied first as a prepayment of all Revolving Loans and second
to Letter of Credit Obligations); and
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(c) shall, immediately upon any acceleration of the Stated Maturity
Date pursuant to SECTION 8.2 or SECTION 8.3, repay all Revolving Loans and pay
to the Lender an amount equal to all Letter of Credit Obligations then
outstanding, unless, pursuant to SECTION 8.3, only a portion of all Revolving
Loans and/or Letter of Credit Obligations is so accelerated, in which case the
Borrower shall immediately pay to the Lender an amount equal to such portion.
Without limitation to the provisions of SECTION 3.2.2, each prepayment of any
Revolving Loans and Letter of Credit Obligations made pursuant to this SECTION
shall be without premium or penalty, except as may be required by SECTION 4.4.
No voluntary prepayment of principal of any Revolving Loans shall cause a
reduction in the Revolving Loan Commitment Amount.
SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding
principal amount of Revolving Loans shall accrue and be payable in accordance
with this SECTION 3.2.
SECTION 3.2.1. RATES. All Revolving Loans shall constitute, and accrue
interest as, either Prime Rate Loans or LIBOR Loans. Pursuant to an
appropriately delivered Borrowing Request or Continuation/Conversion Notice, the
Borrower may elect that Revolving Loans comprising a Borrowing accrue interest
at a rate per annum:
(a) on that portion maintained from time to time as a Prime
Rate Loan, equal to the sum of the Prime Rate from time to time in
effect; and
(b) on that portion maintained as a LIBOR Loan, during each
Interest Period applicable thereto, equal to the sum of the LIBOR Rate
(Reserve Adjusted) for such Interest Period plus a margin of 1.85%.
All LIBOR Loans shall bear interest from and including the first day of
the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBOR
Loan. Absent an effective election of the Borrower to the contrary, each
Revolving Loan shall be deemed to constitute a Prime Rate Loan.
SECTION 3.2.2. POST-MATURITY RATES. After the date any principal
amount of any Prime Rate Loan or LIBOR Loan is due and payable (whether on the
Stated Maturity Date, upon acceleration or otherwise), or after any other
monetary Obligation of the Borrower shall have become due and payable, the
Borrower shall pay, but only to the extent permitted by applicable law,
interest (after as well as before judgment) on such amounts at a rate per annum
equal to the Prime Rate plus a margin of 3%.
SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Revolving Loan
shall be payable, without duplication:
(a) on the Stated Maturity Date therefor;
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(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Revolving Loan;
(c) with respect to Prime Rate Loans, on each Quarterly
Payment Date occurring after the date of the initial Borrowing
hereunder;
(d) with respect to LIBOR Loans, the last day of each
applicable Interest Period (and, in the case of Interest Periods of 6
months, on the 90th day of such Interest Period);
(e) with respect to any Prime Rate Loans converted into LIBOR
Loans on a day when interest would not otherwise have been payable
pursuant to CLAUSE (C), on the date of such conversion; and
(f) on that portion of any Revolving Loans the Stated Maturity
Date of which is accelerated pursuant to SECTION 8.2 or SECTION 8.3,
immediately upon such acceleration.
Interest accrued on Revolving Loans or other monetary Obligations arising under
this Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.3. FEES. The Borrower agrees to pay the fees set forth
in this SECTION 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. COMMITMENT FEE. The Borrower agrees to pay to the
Lender, for the period (including any portion thereof when the Revolving Loan
Commitment is suspended by reason of the Borrower's inability to satisfy any
condition of ARTICLE V) commencing on the Effective Date and continuing through
the Revolving Loan Commitment Termination Date, a commitment fee at a rate per
annum equal to .25% of the sum of the average daily unused portion of the
Revolving Loan Commitment Amount (as it may be permanently reduced at any time
and from time to time by the Lender for any reason). Such commitment fees shall
be payable by the Borrower in arrears on each Quarterly Payment Date, commencing
with the first such day following the Effective Date, and on the Revolving Loan
Commitment Termination Date.
SECTION 3.3.2. FACILITY FEE. The Borrower agrees to pay to the Lender
a facility fee in an amount equal to .25% of the Revolving Loan Commitment
Amount (without regard to any reduction thereto), payable on the Effective Date.
SECTION 3.3.3. LETTER OF CREDIT FEES. The Borrower agrees to pay to
the Lender a letter of credit fee with respect to each standby Letter of Credit
issued and outstanding at a rate per annum equal to 1% of the face amount
thereof (as the face amount may be reduced from time to time under the terms
thereof), payable in full by the Borrower at the time of issuance of such Letter
of Credit, plus such other fees and charges with respect to standby Letters of
Credit issued as are published by the Lender from time to time. The Borrower
further agrees to pay to the Lender such
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fees and charges with respect to import and commercial Letters of Credit issued
as are published by the Lender from time to time.
ARTICLE IV
CERTAIN LIBOR RATE AND OTHER PROVISIONS
SECTION 4.1. LIBOR RATE LENDING UNLAWFUL. If the Lender shall
determine (which determination shall, upon notice thereof to the Borrower, be
conclusive and binding on the Borrower) that the introduction of or any change
in or in the interpretation of any law makes it unlawful, or any central bank or
other governmental authority asserts that it is unlawful, for the Lender to
make, continue or maintain any Revolving Loan as, or to convert any Revolving
Loan into, a LIBOR Loan of a certain type, the obligations of the Lender to
make, continue, maintain or convert any such Revolving Loans shall, upon such
determination, forthwith be suspended until the Lender shall notify the Borrower
that the circumstances causing such suspension no longer exist, and all LIBOR
Loans of such type shall automatically convert into Prime Rate Loans at the end
of the then current Interest Periods with respect thereto or sooner, if required
by such law or assertion.
SECTION 4.2. DEPOSITS UNAVAILABLE. If the Lender shall have
determined that:
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Lender in its relevant market;
or
(b) by reason of circumstances affecting the Lender's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBOR Loans;
then, upon notice from the Lender to the Borrower, the obligations of the Lender
under Article II to make or continue any Revolving Loans as, or to convert any
Revolving Loans into, LIBOR Loans shall forthwith be suspended until the Lender
shall notify the Borrower that the circumstances causing such suspension no
longer exist.
SECTION 4.3. INCREASED LIBOR LOAN COSTS, ETC. The Borrower agrees to
reimburse the Lender for any increase in the cost to the Lender of, or any
reduction in the amount of any sum receivable by the Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Revolving Loans as, or of converting (or of its obligation to
convert) any Revolving Loans into, LIBOR Loans. The Lender shall promptly notify
the Borrower in writing of the occurrence of any such event, such notice to
state, in reasonable detail, the reasons therefor and the additional amount
required fully to compensate the Lender for such increased cost or reduced
amount. Such additional amounts shall be payable by the Borrower to the Lender
within five days of its receipt of such notice, and such notice shall, in the
absence of manifest error, be conclusive and binding on the Borrower.
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SECTION 4.4. FUNDING LOSSES. In the event the Lender shall incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Lender
to make, continue or maintain any portion of the principal amount of any
Revolving Loan as, or to convert any portion of the principal amount of any
Revolving Loan into, a LIBOR Loan) as a result of:
(a) any conversion, repayment or prepayment of the principal
amount of any LIBOR Loans on a date other than the scheduled last day
of the Interest Period applicable thereto, whether pursuant to SECTION
3.1 or otherwise;
(b) any Revolving Loans not being made as LIBOR Loans in
accordance with the Borrowing Request therefor; or
(c) any Revolving Loans not being continued as, or converted
into, LIBOR Loans in accordance with the Continuation/Conversion
Notice therefor;
then, upon the written notice of the Lender to the Borrower, the Borrower shall,
within five days of its receipt thereof, pay to the Lender such amount as will
(in the reasonable determination of the Lender) reimburse the Lender for such
loss or expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 4.5. INCREASED CAPITAL COSTS. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by the Lender or any Person controlling
the Lender, and the Lender determines (in its sole and absolute discretion) that
the rate of return on its or such controlling Person's capital as a consequence
of the Revolving Loan Commitment or the Revolving Loans made by the Lender is
reduced to a level below that which such Lender or such controlling Person could
have achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by the Lender to the Borrower, the Borrower
shall immediately pay directly to the Lender additional amounts sufficient to
compensate the Lender or such controlling Person for such reduction in rate of
return; provided, however, that if the Borrower voluntarily prepays the
Revolving Loans in full in accordance with SECTION 3.1 following the aforesaid
notice of the Lender, then the Borrower shall only be obligated under this
SECTION 4.5 to pay the Lender an amount sufficient to compensate the Lender or
such controlling Person for such reduction in rate of return through the date of
such voluntary prepayment. A statement of the Lender as to any such additional
amount or amounts (including calculations thereof in reasonable detail) shall,
in the absence of manifest error, be conclusive and binding on the Borrower. In
determining such amount, the Lender may use any method of averaging and
attribution that it (in its sole and absolute discretion) shall deem applicable.
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SECTION 4.6. TAXES. All payments by the Borrower of principal of,
and interest on, the Revolving Loans and all other amounts payable hereunder
shall be made free and clear of and without deduction for any present or future
income, excise, stamp or other taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, other than
franchise taxes and taxes imposed on or measured by the Lender's net income or
receipts (such non-excluded items being called "Taxes"). In the event that any
withholding or deduction from any payment to be made by the Borrower hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Borrower shall:
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment to
such authority; and
(c) pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the Lender
will equal the full amount the Lender would have received had no such
withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower shall promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes, interest or penalties that may become payable by the Lender
as a result of any such failure.
SECTION 4.7. PAYMENTS, COMPUTATIONS, ETC. All payments by the
Borrower pursuant to this Agreement, the Note or any other Loan Document shall
be made by the Borrower to the Lender, without set off, deduction or
counterclaim, not later than 12:00 noon, Chicago time, on the date due, in same
day or immediately available funds, to such account as the Lender shall specify
from time to time by notice to the Borrower. Funds received after that time
shall be deemed to have been received by the Lender on the next succeeding
Business Day. All interest and fees shall be computed on the basis of the
actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest or fee is payable over a
year comprised of 360 days. Whenever any payment to be made shall otherwise be
due on a day which is not a Business Day, such payment shall (except as
otherwise required by CLAUSE (C) of the definition of the term "Interest
Period" with respect to LIBOR Loans) be made on the next succeeding Business
Day
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and such extension of time shall be included in computing interest and fees,
if any, in connection with such payment.
SECTION 4.8. COLLECTIONS; LOCK BOXES. (a) The Borrower shall, upon
demand of the Lender in its sole discretion at any time following a Default,
forthwith, upon receipt, transmit and deliver to the Lender, in the form
received, all cash, checks, drafts, chattel paper and other instruments or
writings for the payment of money (properly endorsed, where required, so that
such items may be collected by the Lender) which may be received by the
Borrower at any time in full or partial payment or otherwise as proceeds of any
of the Collateral. The Borrower shall not commingle any such items which may be
received with any other of its funds or property, but shall hold such items
separate and apart from its own funds or property and in express trust for the
benefit of the Lender until delivery is made to the Lender. The Borrower shall
comply with the terms and conditions of any consent given by the Lender
pursuant to the provisions of this SUBSECTION (a).
(b) At the option of the Lender, exercised in its sole discretion at
any time after the occurrence of a Default, the Borrower shall direct all
Account Debtors to make all payments with respect to Accounts to one or more
lock boxes established and maintained by, and subject to the exclusive control
of, the Lender, on terms acceptable to the Lender. The Borrower shall cause any
such payments made to any other Person or source (including the Borrower)
promptly to be remitted to such lock boxes, and the Borrower shall not commingle
any such payments received by it, and shall hold them separate and apart from
all other property all such payments received by it in express trust for the
benefit of the Lender until delivery thereof is made to such lock boxes. The
Lender shall deposit (after providing for a clearing hold of two Business Days
after its receipt) all such payments from lock boxes and all payments with
respect to any Collateral into an account (the "COLLATERAL ACCOUNT") maintained
with the Lender over which the Lender shall have the exclusive power to control
(including the power to make withdrawals).
(c) The Borrower hereby authorizes the Lender, subject to the
provisions of this SUBSECTION (C), at any time after the occurrence of a Default
to apply the whole or any part of any amounts received by the Lender pursuant to
SUBSECTION (A) or (B) of this SECTION 4.8 or otherwise against the principal
and/or interest of any Revolving Loans made hereunder and/or any other
Obligations, whether absolute or contingent and whether or not then due, in such
order of application as Lender may determine, unless such payments or proceeds
are, in the Lender's sole discretion, released to the Borrower; provided,
however, that no checks, drafts or other instruments received by the Lender
shall constitute final payment to the Lender unless and until such item of
payment has actually been collected.
SECTION 4.9. SET OFF. The Lender shall, upon the occurrence of any
Default described in SECTION 8.1.9 with respect to the Borrower or any
Subsidiary or upon the occurrence of any other Event of Default, have the right
to appropriate and apply to the payment of the Obligations owing to it (whether
or not then due), and (as security for such Obligations) the Borrower hereby
grants to the Lender a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter
maintained with the Lender. The Lender agrees
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promptly to notify the Borrower after any such set off and application made by
the Lender; provided, however, that the failure to give such notice shall not
affect the validity of such set off and application. The rights of the Lender
under this SECTION are in addition to other rights and remedies (including
other rights of set off under applicable law or otherwise) which the Lender may
have.
SECTION 4.10. USE OF PROCEEDS. The Borrower shall apply the proceeds
of each Borrowing (and shall cause the issuance of Letters of Credit) solely for
the purposes set forth in the recitals hereof; without limiting the foregoing,
no proceeds of any Revolving Loan shall be used to acquire any equity security
of a class which is registered pursuant to section 12 of the Securities Exchange
Act of 1934 or any "margin stock", as defined in F.R.S. Board Regulation U.
ARTICLE V
CONDITIONS TO EXTENSIONS OF CREDIT
SECTION 5.1. INITIAL EXTENSION OF CREDIT. The obligation of the
Lender to make the initial Extension of Credit shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth in this
SECTION 5.1.
SECTION 5.1.1. CERTIFICATE AS TO ORGANIZATIONAL DOCUMENTS,
RESOLUTIONS, ETC. The Lender shall have received from the Borrower a
certificate, dated the date of the initial Extension of Credit of its Secretary
or Assistant Secretary (with appropriate exhibits attached) as to:
(a) the Certificate of Incorporation of the Borrower, including
all amendments, as then in effect;
(b) the Bylaws of the Borrower, including all amendments, as
then in effect;
(c) resolutions of its Board of Directors, then in full force
and effect, authorizing the execution, delivery and performance of
this Agreement, the Note and each other Loan Document to be executed
by it, and authorizing it to make the borrowings and enter into the
other transactions contemplated hereunder; and
(d) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement, the Note and each
other Loan Document executed by it;
upon which certificate the Lender may conclusively rely until it shall have
received a further certificate of the Secretary of the Borrower canceling or
amending such prior certificate.
SECTION 5.1.2. CERTIFICATES OF GOOD STANDING, ETC. The Lender shall
have received from the Borrower (i) certificates of good standing, dated as of a
date within ten (10) days prior to the initial Extension of Credit, issued by
the Secretary of State (or other appropriate governmental
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authority) in each of the States of Delaware and Illinois and all other
jurisdictions in which the Borrower is required to be duly qualified to
transact business and in good standing under applicable law, and (ii) a copy
the Certificate of Incorporation of the Borrower, including all amendments,
certified by the Secretary of State of Delaware as of a date within ten (10)
days prior to the initial Extension of Credit.
SECTION 5.1.3. DELIVERY OF NOTE. The Lender shall have received
the Note duly executed and delivered by the Borrower.
SECTION 5.1.4. PAYMENT OF OUTSTANDING INDEBTEDNESS, ETC. All
Indebtedness identified in ITEM 7.2.2(B) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, shall have been paid in full
(including, to the extent necessary, from proceeds of an initial Borrowing); and
all Liens securing payment of any such Indebtedness have been released and the
Lender shall have received all Uniform Commercial Code Form UCC-3 termination
statements or other instruments as may be suitable or appropriate in connection
therewith.
SECTION 5.1.5. PLEDGE AGREEMENT. The Lender shall have received
executed counterparts of the Pledge Agreement, dated as of the date hereof, duly
executed by the Borrower, together with the certificates and instruments
evidencing all of the issued and outstanding shares of capital stock or other
securities pledged pursuant to the Pledge Agreement, which certificates and
instruments shall in each case be accompanied by undated stock powers or other
appropriate instruments of transfer duly executed in blank, or, if any
securities pledged pursuant to the Pledge Agreement are uncertificated
securities, confirmation and evidence satisfactory to the Lender that the
security interest in such uncertificated securities has been transferred to and
perfected by the Lender in accordance with the Uniform Commercial Code, as in
effect in the State of Illinois and other applicable law.
SECTION 5.1.6. SECURITY AGREEMENT. The Lender shall have received
executed counterparts of the Security Agreement, dated as of the date hereof,
duly executed by the Borrower, together with:
(a) acknowledgment copies of properly filed Uniform
Commercial Code financing statements (Form UCC-1), dated a date
reasonably near to the date of the initial Extension of Credit, or
such other evidence of filing as may be acceptable to the Lender,
naming the Borrower as the debtor and the Lender as the secured party,
and/or other instruments or documents, filed under the Uniform
Commercial Code or other applicable law of all jurisdictions
(including filings with respect to patents, trademarks and
servicemarks) as may be necessary or, in the opinion of the Lender,
desirable to perfect the security interest of the Lender pursuant to
the Security Agreement;
(b) executed copies of proper Uniform Commercial Code Form
UCC-3 termination statements, if any, necessary to release all Liens
and other rights of any Person
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(i) in any collateral described in the Security Agreement previously
granted by any Person, and (ii) securing any of the Indebtedness
identified in ITEM 7.2.2(B) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with such termination statements or
other evidence of release as the Lender may reasonably request from
such Persons;
(c) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report
certified by a party acceptable to the Lender, dated as of a date
reasonably near to the date of the initial Extension of Credit, listing
all effective financing statements which name the Borrower (under its
present name and any previous names) as the debtor and which are filed
in the jurisdictions in which filings were made pursuant to CLAUSE (A)
above, together with copies of such financing statements (none of which
(other than those described in CLAUSE (A), if such Form UCC-11 or
search report, as the case may be, is current enough to list such
financing statements described in CLAUSE (A) shall cover any
collateral described in the Security Agreement); and
(d) certified copies of such other UCC, tax lien, judgment
and other searches as the lender may reasonably require, dated as of
a date reasonably near to the date of the initial Extension of Credit.
SECTION 5.1.7. MORTGAGE. The Lender shall have received counterparts
of the Mortgage, dated as of the date hereof, duly executed by the Borrower,
together with:
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of the Mortgage as
may be necessary or, in the reasonable opinion of the Lender, desirable
effectively to create a valid, perfected first priority Lien against
the properties purported to be covered thereby;
(b) mortgagee's title insurance policies in favor of the
Lender in amounts and in form and substance and issued by insurers,
reasonably satisfactory to the Lender, with respect to the property
purported to be covered by the Mortgage, insuring that title to such
property is marketable and that the interests created by the Mortgage
constitute valid first Liens thereon free and clear of all defects and
encumbrances other than as approved by the Lender, and such policies
shall also include a revolving credit endorsement and such other
endorsements as the Lender shall request and shall be accompanied by
evidence of the payment in full of all premiums thereon; and
(c) the Assignment of Rents and Leases and such other
approvals, opinions or documents as the Lender may reasonably request.
SECTION 5.1.8. OPINION OF COUNSEL. The Lender shall have received an
opinion, dated the date of the initial Extension of Credit and addressed to the
Lender, from Erwin, Martinkus, Cole & Ansel, counsel to the Borrower,
substantially in the form of EXHIBIT I hereto.
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SECTION 5.1.9. CLOSING FEES, EXPENSES, ETC. The Lender shall have
received all fees, costs and expenses due and payable pursuant to SECTION 3.3
and, if then invoiced, SECTION 9.3.
SECTION 5.1.10. DUE DILIGENCE, ETC. The Lender shall have completed,
and shall be satisfied with the results of, its due diligence investigation
with respect to the discharge permit matter described in the Phase I
environmental report submitted to the Lender in connection with the real
property which is subject to the Mortgage.
SECTION 5.1.11. COMPLETION OF INITIAL PUBLIC OFFERING. The Borrower
shall have completed an initial public offering of its common stock pursuant to
which the Borrower shall have received net proceeds of not less than
$13,000,000.
SECTION 5.2. ALL EXTENSIONS OF CREDIT. The obligation of the
Lender to make any Extension of Credit (including the initial Extension of
Credit), shall be subject to the satisfaction of each of the conditions
precedent set forth in this SECTION 5.2.
SECTION 5.2.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT. Both before
and after giving effect to any Extension of Credit (but, if any Default of the
nature referred to in SECTION 8.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds thereof) the following statements shall be true and
correct:
(a) the representations and warranties of the Borrower set
forth herein (including ARTICLE VI) and in each other Loan Document
shall be true and correct in all respects with the same effect as if
then made (unless stated to relate solely to an earlier date, in which
case such representations and warranties shall be true and correct as
of such earlier date); and
(b) no Default shall have then occurred and be continuing.
SECTION 5.2.2. BORROWING REQUEST AND LETTER OF CREDIT APPLICATION.
The Lender shall have received a Borrowing Request for each Borrowing or a
Letter of Credit Application for each Letter of Credit, in each case in form
and substance satisfactory to the Lender. Each of the delivery of a Borrowing
Request or Letter of Credit Application and the acceptance by the Borrower of
the proceeds of such Borrowing or the issuance of a Letter of Credit shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing or Letter of Credit issuance (both immediately before and after
giving effect to such Borrowing or Letter of Credit issuance, and the
application of the proceeds thereof) the statements made in SECTION 5.2.1 are
true and correct.
SECTION 5.2.3. BORROWING BASE COMPLIANCE. The Borrower shall be in
strict compliance with the Borrowing Base compliance requirements of SECTION
7.3.
SECTION 5.2.4. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant to or in connection with this Agreement and each other Loan
Document by or on behalf of the Borrower or any of its Subsidiaries shall be
satisfactory in form and substance to the Lender and
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its counsel; the Lender and its counsel shall have received all information,
approvals, opinions, documents and instruments as the Lender or its counsel may
reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
Extensions of Credit hereunder, the Borrower represents and warrants to the
Lender as set forth in this Article VI:
SECTION 6.1. ORGANIZATION, ETC. The Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the State of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification, and
has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under this
Agreement, the Note and each other Loan Document and to own and hold under lease
its property and to conduct its business substantially as currently conducted by
it.
SECTION 6.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The
execution, delivery and performance by the Borrower of this Agreement, the
Note and each other Loan Document executed or to be executed by it are within
the Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not (a) contravene the Borrower's certificate of
incorporation or bylaws; (b) violate or contravene any contract, agreement,
instrument, law, regulation or rule or any decree or order of any court,
governmental authority or arbitrator, binding upon or affecting the Borrower
or any of its assets or properties; or (c) result in, or require the creation
or imposition of, any Lien on any of the Borrower's assets or properties.
SECTION 6.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other Person is required for the
due execution, delivery or performance by the Borrower of this Agreement, the
Notes or any other Loan Document, except for the approval of its Board of
Directors, which approval has been duly obtained and is in full force and
effect. Neither the Borrower nor any of its Subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or a "holding company", or a "subsidiary company" of a "holding company", or
an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 6.4. VALIDITY, ETC. This Agreement constitutes, and the Notes
and each other Loan Document, upon the execution and delivery thereof by the
Borrower, will constitute, the legal, valid and binding obligations of the
Borrower enforceable in accordance with their respective terms.
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SECTION 6.5. FINANCIAL INFORMATION. The audited balance sheets of
the Borrower as at December 31, 1995, and the related audited statements of
earnings and cash flow of the Borrower, and the unaudited balance sheets of the
Borrower as at March 31, 1996, and the related unaudited statements of earnings
and cash flow of the Borrower for the Fiscal Quarter then ended, copies of which
have been furnished to the Lender, have been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition
of the corporation(s) covered thereby as at the dates thereof and the results
of their operations for the periods then ended.
SECTION 6.6. NO MATERIAL ADVERSE CHANGE. Since the date of the
financial statements described in SECTION 6.5, there has been no material
adverse change in the financial condition, operations, assets, business,
properties or prospects of the Borrower and its Subsidiaries.
SECTION 6.7. LITIGATION, LABOR CONTROVERSIES, COMPLIANCE WITH LAWS,
ETC. (a) There is no litigation, action, proceeding or labor controversy pending
or, to the best knowledge of the Borrower, threatened against or affecting the
Borrower or any of its Subsidiaries, or any of their respective properties,
businesses, assets or revenues, except as disclosed in ITEM 6.7 ("Litigation")
of the Disclosure Schedule, none of which, individually or in the aggregate,
will materially adversely affect the financial condition, operations, assets,
business, properties or prospects of the Borrower or any Subsidiary and none of
which purports to affect the legality, validity or enforceability of this
Agreement, the Notes or any other Loan Document.
(b) Neither the Borrower nor any of its Subsidiaries is in violation
in any material respect of any law, order, writ, injunction, award or decree of
any court, arbitrator, administrative agency or other governmental authority
binding upon it or its assets or any contract, agreement or other undertaking
or instrument to which it is a party or by which any of its properties may be
bound, and nothing has occurred which would materially and adversely affect the
ability of the Borrower or any of its Subsidiaries to own its properties, carry
on its business or perform its obligations under any such order, writ,
injunction, award or decree or any such contract, agreement or other
undertaking or instrument.
SECTION 6.8. SUBSIDIARIES. The Borrower has no Subsidiaries, except
those Subsidiaries which are (a) identified in ITEM 6.8 ("Existing
Subsidiaries") of the Disclosure Schedule or (b) permitted to have been created
or acquired in accordance with SECTION 7.2.9.
SECTION 6.9. OWNERSHIP OF PROPERTIES. The Borrower and each of its
Subsidiaries owns good and marketable fee simple title to all of its real
properties and good and marketable title to all of its other assets and
properties, tangible and intangible, of any nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights), free and clear
of all Liens, charges or claims (including infringement claims with respect to
patents, trademarks, copyrights and the like) except as permitted pursuant to
SECTION 7.2.3.
SECTION 6.10. TAXES. The Borrower and each of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental
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charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on
its books.
SECTION 6.11. PENSION AND WELFARE PLANS. The Borrower and each of
its Subsidiaries is in compliance in all material respects with all applicable
provisions of ERISA and the regulations and public interpretations thereunder.
No reportable event (as defined in section 4043(b) of ERISA) has occurred with
respect to any Plan as to which such Person was required to file a report with
the Pension Benefit Guaranty Corporation, and no material liabilities exist
under any Plan except as disclosed in ITEM 6.11 ("Employee Benefit Plans") of
the Disclosure Schedule. During the twelve- consecutive-month period prior to
the date of the execution and delivery of this Agreement and prior to the date
of any Extension of Credit hereunder, no steps have been taken to terminate any
Plan, and no contribution failure has occurred with respect to any Plan, whether
or not sufficient to give rise to a Lien under section 302(f) of ERISA. No
condition exists or event or transaction has occurred with respect to any Plan
(including any "prohibited transaction,"as defined in section 406 of ERISA or
section 4975 of the Code) which has resulted or might result in the incurrence
by the Borrower or any member of the Controlled Group of any liability, fine or
penalty. Except as disclosed in ITEM 6.11 ("Employee Benefit Plans") of the
Disclosure Schedule, neither the Borrower nor any member of the Controlled Group
has any contingent liability with respect to any post-retirement benefit under a
Welfare Plan, other than liability for continuation coverage described in Part 6
of Title I of ERISA.
SECTION 6.12. ENVIRONMENTAL WARRANTIES. Except as set forth in
Item 6.12 ("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its Subsidiaries
have been, and continue to be, owned or leased by the Borrower and its
Subsidiaries in compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or
threatened:
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law; or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential
liability under any Environmental Law;
(c) there have been no Releases of Hazardous Materials at,
on or under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a material adverse
effect on the financial condition, operations, assets, business,
properties or prospects of the Borrower and its Subsidiaries;
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(d) the Borrower and its Subsidiaries have been issued and
are in material compliance with all permits, certificates, approvals,
licenses and other authorizations relating to environmental matters and
necessary or desirable for their businesses;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing
(with respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably
be expected to have, a material adverse effect on the financial
condition, operations, assets, business, properties or prospects of the
Borrower and its Subsidiaries;
(g) neither Borrower nor any Subsidiary of the Borrower has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural resources
or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower or any Subsidiary of the Borrower that, singly or in the
aggregate, have, or may reasonably be expected to have, a material
adverse effect on the financial condition, operations, assets,
business, properties or prospects of the Borrower and its Subsidiaries;
and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower which, with the passage of
time, or the giving of notice or both, would give rise to liability
under any Environmental Law.
SECTION 6.13. REGULATIONS G, U AND X. The Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Revolving Loans will be used for a purpose
which violates, or would be inconsistent with, F.R.S. Board Regulation G, U or
X. Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this SECTION with such meanings.
SECTION 6.14. ACCOUNTS; INVENTORY; BORROWING BASE. (a) Each Accounts
Report is, or when delivered to the Lender will be, true, accurate and complete
in all respects as of the date thereof. The amounts shown on the Accounts
Reports, and all invoices and statements delivered to
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the Lender with respect to any Account, are actually and absolutely owing to
the Borrower and are not contingent for any reason; except as may be disclosed
on such Accounts Reports, there are no setoffs, counterclaims or disputes
existing or asserted with respect to any Accounts included on an Accounts
Report and the Borrower has not made any agreement with any Account Debtor for
any deduction from such Account, except for discounts or allowances allowed by
such Person in the ordinary course of its business for prompt payment, all of
which discounts or allowances are reflected in the calculation of the invoice
related to such Account; and there are no facts, events or occurrences which
in any way impair the validity or enforcement of any of the Accounts or tend to
reduce the amount payable thereunder from the amount of the invoice shown on
any Accounts Report, and on all contracts, invoices and statements delivered
to the Lender with respect thereto.
(b) Each Inventory Report is, or when delivered to the Lender will
be, true, accurate and complete in all respects as of the date thereof. The
Inventory shown on the Inventory Reports is properly and correctly classified
in accordance with the categories therein.
(c) Each Account, each security and each item of Inventory, equipment
or real property which the Borrower shall, expressly or by implication (by
inclusion on a Borrowing Base Certificate or otherwise), request the Lender to
classify as an Eligible Account, Eligible Pledged Security, Eligible Equipment,
Eligible Real Estate or Eligible Inventory, as the case may be, will, as of the
time when such request is made, conform in all respects to the requirements of
such classification set forth in the applicable definitions in this Agreement.
SECTION 6.15. ACCURACY OF INFORMATION. Without limitation to any
other provision of any Loan document, all information heretofore or
contemporaneously furnished by or on behalf of the Borrower in writing to the
Lender for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all other such information hereafter furnished by
or on behalf of the Borrower to the Lender will be, true and accurate in every
material respect on the date as of which such information is dated or certified
and as of the date of execution and delivery of this Agreement by the Lender,
and such information does not, or will not, as the case may be, omit to state
any material fact necessary to make such information not misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. AFFIRMATIVE COVENANTS. The Borrower agrees with the
Lender that, until the Revolving Loan Commitment has terminated and all
Obligations have been fully and finally paid and performed, the Borrower shall
perform the obligations set forth in this SECTION 7.1.
SECTION 7.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower shall furnish, or shall cause to be furnished, to the Lender copies of
the following financial statements, reports, notices and information:
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(a) the Accounts Reports, Accounts Payable Reports and
Inventory Reports and Borrowing Base Certificates as and when provided
in SECTION 7.3;
(b) as soon as available and in any event within 45 days
after the end of each of the first three Fiscal Quarters of each Fiscal
Year of the Borrower, consolidated and consolidating balance sheets of
the Borrower and its Subsidiaries (if any) as of the end of such Fiscal
Quarter and consolidated statements of earnings and cash flow of the
Borrower and its Subsidiaries (if any) for such Fiscal Quarter,
certified by the chief financial Authorized officer of the Borrower;
provided, however, that, in lieu of the foregoing, the Borrower shall
be deemed to have complied with the requirements of this subsection (b)
for any Fiscal Quarter by delivering to the Lender a true and correct
copy, certified by the chief financial Authorized officer of the
Borrower, of the Borrower's Form 10Q (including the financial
statements included therein) filed with the Securities and Exchange
Commission for such Fiscal Quarter, within 45 days after the end of
such Fiscal Quarter or such later date as the Securities and Exchange
Commission permits such filing to be made;
(c) as soon as available and in any event within 90 days
after the end of each Fiscal Year of the Borrower, a copy of the
annual audit report for such Fiscal Year for the Borrower and its
Subsidiaries (if any), including therein consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as
of the end of such Fiscal Year and consolidated statements of earnings
and cash flow of the Borrower and its Subsidiaries for such Fiscal
Year, in each case certified (without any qualification) in a manner
acceptable to the Lender by a firm of independent certified public
accountants acceptable to the Lender, together with a certificate from
such accountants containing a computation of, and showing compliance
with, each of the financial ratios and restrictions contained in
SECTION 7.2.4 and to the effect that, in making the examination
necessary for the signing of such annual report by such accountants,
they have not become aware of any Default or Event of Default that has
occurred and is continuing, or, if they have become aware of such
Default or Event of Default, describing such Default or Event of
Default and the steps, if any, being taken to cure it; provided,
however, that, in lieu of the foregoing, the Borrower shall be deemed
to have complied with the requirements of this SUBSECTION (c) for any
Fiscal Year by delivering to the Lender a true and correct copy,
certified by the chief financial Authorized officer of the Borrower,
of the Borrower's Form 10K (including the financial statements
included therein) filed with the Securities and Exchange Commission
for such Fiscal Quarter, within 90 days after the end of such Fiscal
Year or such later date as the Securities and Exchange Commission
permits such filing to be made;
(d) as soon as available and in any event within 45 days
after the end of each Fiscal Quarter, a certificate, executed by the
chief financial Authorized Officer of the Borrower, showing (in
reasonable detail and with appropriate calculations and computations
in all respects satisfactory to the Lender) compliance with the
financial covenants set forth in SECTION 7.2.4.;
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(e) as soon as possible and in any event within three days
after the occurrence of each Default, a statement of the chief
financial Authorized Officer of the Borrower setting forth the details
of such Default and the action which the Borrower has taken and
proposes to take with respect thereto;
(f) as soon as possible and in any event within three days
after (x) the occurrence of any adverse development with respect to any
litigation, action, proceeding or labor controversy described in
SECTION 6.7 or (y) the commencement of any labor controversy,
litigation, action or proceeding of the type described in SECTION 6.7,
notice thereof and copies of all documentation relating thereto;
(g) promptly (and in any case, within 5 days) after the
sending, filing or availability thereof, as the case may be, copies of
all proxy statements, financial statements and reports which the
Borrower sends or makes available to any of its security holders, and
all reports and registration statements which the Borrower or any of
its Subsidiaries files (electronically or otherwise) with the
Securities and Exchange Commission or any national securities exchange,
including Forms 10Q and 10K filed with the Securities and Exchange
Commission;
(h) immediately upon becoming aware of the institution of
any steps by the Borrower or any other Person to terminate any Plan,
or the failure to make a required contribution to any Plan if such
failure is sufficient to give rise to a Lien under section 302(f) of
ERISA, or the taking of any action with respect to a Plan which could
result in the requirement that the Borrower furnish a bond or other
security to the PBGC or such Plan, or the occurrence of any event with
respect to any Plan which could result in the incurrence by the
Borrower or any Subsidiary of any material liability, fine or penalty,
or any material increase in the contingent liability of the Borrower
or any Subsidiary with respect to any post-retirement Welfare Plan
benefit, notice thereof and copies of all documentation relating
thereto; and
(i) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as the Lender may from time to time reasonably request.
SECTION 7.1.2. COMPLIANCE WITH LAWS, ETC. The Borrower shall, and
shall cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation in all applicable
jurisdictions; and
(b) the payment, before the same shall become delinquent, of
all taxes, assessments and governmental charges imposed upon it or upon
its property, except to the
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extent being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books (but only if failure to make
such payment on a timely basis does not materially adversely affect
the assets or business of the Borrower or adversely affect the rights
or interests of the Lender).
SECTION 7.1.3. MAINTENANCE OF PROPERTIES. The Borrower shall, and
shall cause each of its Subsidiaries to, maintain, preserve, protect and keep
its properties in good repair, working order and condition, and make necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times, unless, with
respect to any nonmaterial properties, the Borrower reasonably determines that
the continued maintenance of such properties is no longer economically desirable
and prudent.
SECTION 7.1.4. INSURANCE. The Borrower shall, and shall cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its assets, properties and
business against casualties, hazards, risks and contingencies of such type
(including product liability, business interruption, public liability and
larceny, theft, embezzlement or other criminal misappropriation) and in such
amounts as are customary in the case of similar businesses, and, in each case,
as are satisfactory to the Lender. The Borrower shall cause such policies to
include lender's loss payable endorsements satisfactory to the Lender naming the
Lender as loss payee. Each policy or endorsement shall contain a clause
requiring the insurer to give not less than thirty (30) days' prior written
notice to the Lender in the event of a change in coverage or cancellation for
any reason and a clause that the interest of the Lender shall not be impaired by
any act or neglect of the Borrower or the owner of the relevant property nor by
the occupation of the premises for purposes more hazardous than are permitted by
said policy. The Borrower shall, upon request of the Lender from time to time,
furnish to the Lender originals, certified copies or certificates of insurance
with respect to all insurance policies maintained by the Borrower and its
Subsidiaries in accordance with this Section. The requirements of this Section
are in addition to, and not in limitation of, any other insurance requirements
under the Loan Documents.
SECTION 7.1.5. BOOKS AND RECORDS. The Borrower shall, and shall cause
each of its Subsidiaries to, keep books and records which accurately reflect all
of its business affairs and transactions and permit the Lender or any of its
representatives, at reasonable times and intervals, to visit all of its offices,
to discuss its financial matters with its officers and independent public
accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with the Lender or its
representatives whether or not any representative of the Borrower is present)
and to examine (and, at the expense of the Borrower, photocopy extracts from)
any of its books or other corporate records. The Borrower shall pay any fees of
such independent public accountant incurred in connection with the Lender's
exercise of its rights pursuant to this Section.
SECTION 7.1.6. ENVIRONMENTAL COVENANT. The Borrower shall, and shall
cause each of its Subsidiaries to:
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(a) use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) promptly notify the Lender and provide copies upon
receipt of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or
compliance with Environmental Laws, and shall promptly cure and have
dismissed with prejudice to the satisfaction of the Lender any actions
and proceedings relating to compliance with Environmental Laws; and
(c) provide such information and certifications which the
Lender may reasonably request from time to time to evidence compliance
with this SECTION 7.1.6.
SECTION 7.1.7. LENDER'S LIEN. The Borrower shall, and shall cause each
of its Subsidiaries to, take all such actions as are required to ensure that all
of its assets and properties, whether now or hereafter owned, leased, licensed
or acquired, to be at all times subject to and covered by the Lender's first
priority perfected lien and security interest, except to the extent otherwise
permitted under SECTION 7.2.3.
SECTION 7.1.8. MAINTENANCE OF ACCOUNTS. The Borrower agrees to
maintain all of its deposit and disbursement accounts (and to cause its
Subsidiaries to maintain all of their respective accounts) with the Lender;
except that the Borrower (and its Subsidiaries) may maintain one or more
payroll or operating accounts with a financial institution in Champaign,
Illinois for use in the ordinary course of the Borrower's business, provided
that funds in an amount at least sufficient to cover the amount of checks,
instruments and other obligations from time to time outstanding under all
accounts maintained with the Lender shall be swept by the Borrower from such
accounts with a financial institution in Champaign, Illinois into such accounts
maintained with the Lender as and when required. All checks (and other
instruments) other than payroll checks will be drawn from accounts maintained
with Lender
SECTION 7.1.9. FURTHER ASSURANCES. The Borrower shall execute any and
all further documents, agreements and instruments, and take any and all further
actions which may be required under applicable law, or which the Lender may
reasonably request, in order to effectuate the transactions contemplated by the
Loan Documents and in order to grant, preserve, protect and perfect the validity
and priority of the security interests intended to be created by the Security
Documents.
SECTION 7.2. NEGATIVE COVENANTS. The Borrower agrees with the Lender
that, until the Revolving Loan Commitment has terminated and all obligations
have been fully and finally paid and performed, the Borrower shall perform the
obligations set forth in this SECTION 7.2.
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SECTION 7.2.1. BUSINESS ACTIVITIES. The Borrower shall not, and shall
not permit any of its Subsidiaries to, engage in any business activity, except
those described in the first recital to this Agreement and such activities as
may be incidental or related thereto, and any new business which utilizes in a
substantial manner the Borrower's expertise in process technology in its
current business and is reasonably complementary to its current business.
SECTION 7.2.2. Indebtedness. The Borrower shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than the
following:
(a) Indebtedness in respect of the Revolving Loans and other
Obligations;
(b) until the date of the initial Extension of Credit,
Indebtedness, if any, identified in ITEM 7.2.2 (b) ("Indebtedness to
be Paid") of the Disclosure Schedule;
(c) Indebtedness, if any, existing as of the Effective Date
which is identified in ITEM 7.2.2(c) ("Ongoing Indebtedness") of the
Disclosure Schedule;
(d) unsecured Indebtedness incurred in the ordinary course of
business consistent with past practices (including open accounts
extended by suppliers on normal trade terms in connection with
purchases of goods and services, but excluding Indebtedness incurred
through the borrowing of money or Contingent Liabilities);
(e) other Indebtedness, including Indebtedness for money
borrowed from governmental agencies;
provided, however, that (i) the aggregate outstanding amount of Indebtedness
otherwise permitted by CLAUSES (c) and (e) shall not exceed $1,500,000 at any
time, and (ii) no such Indebtedness shall be permitted if, immediately before or
after giving effect to the incurrence thereof, any Default shall have occurred
and be continuing.
SECTION 7.2.3. LIENS. The Borrower shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens securing payment of the Obligations, granted
pursuant to any Loan Document;
(b) Liens securing payment of Indebtedness of the type
permitted and described in CLAUSE (b) of SECTION 7.2.2;
(c) Liens granted prior to the Effective Date to secure
payment of Indebtedness of the type permitted and described in CLAUSE
(c) of SECTION 7.2.2;
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(d) Liens granted to secure payment of Indebtedness of the
type permitted and described in CLAUSE (e) of SECTION 7.2.2 and
covering only those assets acquired with the proceeds of such
Indebtedness, provided that the aggregate principal amount of such
Indebtedness outstanding at any time shall not exceed $1,000,000;
(e) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books (but only if such
Liens do not, individually or in the aggregate, materially adversely
affect the assets or business of the Borrower or adversely affect the
rights or interests of the Lender);
(f) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books (but only if such Liens do not,
individually or in the aggregate, materially adversely affect the
assets or business of the Borrower or adversely affect the rights or
interests of the Lender);
(g) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance
of statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds; and
(h) judgment Liens in existence less than 15 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible)
by insurance maintained with responsible insurance companies.
SECTION 7.2.4. FINANCIAL CONDITION. The Borrower shall not cause or
permit at any time:
(a) Its Tangible Net Worth to be less than:
(i) $12,000,000, at all times during the period from
the completion of the Borrower's initial public offering as
described in SECTION 5.1.11 through the last day of the month
in which such initial public offering is so completed; and
(ii) at all times thereafter, (x) the greater of
$12,000,000 or the actual Tangible Net Worth as of the last
day of the month in which such initial public offering is so
completed, in either case, increased from time to time on a
going-
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forward basis by (y) an amount equal to 75% of the
aggregate Net Income (exclusive of losses, but including,
for such purpose, any gains otherwise excludable under
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CLAUSES (a) or (b) of the definition of Net Income) for all
periods from and after the date such initial public offering
is so completed.
(b) Its Total Liabilities to Tangible Net Worth Ratio to be
greater than 1.0 to 1.0.
(c) Its Interest Coverage Ratio to be less than 3.0 to 1.0 as
of the last day of any Fiscal Quarter for the portion of the Fiscal
Year then elapsed.
SECTION 7.2.5. INVESTMENTS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Effective Date and
identified in ITEM 7.2.5(a) ("Ongoing Investments") of the Disclosure
Schedule;
(b) Cash Equivalent Investments, provided, however, that any
Investment which, when made, complies with the requirements of the
definition of the term Cash Equivalent Investment may continue to be
held notwithstanding that such Investment if made thereafter would not
comply with such requirements;
(c) without duplication, Investments permitted as
Indebtedness pursuant to SECTION 7.2.2; and
(d) Investments which constitute Permitted Acquisitions.
SECTION 7.2.6. RESTRICTED PAYMENTS, ETC. On and at all times after
the Effective Date:
(a) the Borrower shall not declare, pay or make, or set aside
funds or property to make, any dividend or distribution (in cash,
property or obligations) on any shares of any class of capital stock
(now or hereafter outstanding) of the Borrower or on any warrants,
options or other rights with respect to any shares of any class of
capital stock (now or hereafter outstanding) of the Borrower (other
than dividends or distributions payable solely in shares of its common
stock or warrants to purchase its common stock or splitups or
reclassifications of its stock into additional or other shares of its
common stock) or apply, or permit any of its Subsidiaries to apply, any
of its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of, or agree or permit any of its Subsidiaries
to purchase or redeem, any shares of any class of capital stock (now or
hereafter outstanding) of the Borrower, or warrants, options or other
rights with respect to any shares of any class of capital stock (now or
hereafter outstanding) of the Borrower, other than dividends and
distributions in cash which do not in the aggregate exceed 25% of its
Net Income in any twelve month period;
(b) the Borrower shall not, and shall not permit any of its
Subsidiaries, to:
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(i) make any payment or prepayment of principal of,
or make any payment of interest on, any Subordinated Debt, on
any day other than the stated, scheduled date for such payment
or prepayment set forth in the documents and instruments
memorializing such Subordinated Debt, or in violation the
subordination provisions agreed upon by the Lender with
respect to such Subordinated Debt; or
(ii) redeem, retire, purchase, make any payment on
or defease, any Subordinated Debt, except to the extent
permitted under CLAUSE (i) above; and
(c) the Borrower shall not, and shall not permit any
Subsidiary to, make any deposit for any of the foregoing purposes.
SECTION 7.2.7. CONSOLIDATION, MERGER, ETC. The Borrower shall not, and
shall not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other Person, or purchase or otherwise acquire
all or substantially all of the assets or stock or other equity securities of
any Person (or of any division thereof) except:
(a) any such Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Borrower or any other
Subsidiary, and the assets or stock of any Subsidiary may be purchased
or otherwise acquired by the Borrower or any other Subsidiary; and
(b) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower may purchase all
or substantially all of the assets of any Person, or acquire such
Person by merger, if permitted (without duplication) by SECTION 7.2.5
to be made as a Permitted Acquisition.
SECTION 7.2.8. ASSET DISPOSITIONS, ETC. The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, transfer, lease, contribute
or otherwise convey, or grant options, warrants or other rights with respect to,
all or any substantial part of its assets (including accounts receivable and
capital stock of Subsidiaries) to any Person, unless such sale, transfer, lease,
contribution or conveyance is in the ordinary course of its business.
SECTION 7.2.9. SUBSIDIARIES. The Borrower shall not, and shall not
permit any Subsidiary to, create or acquire an equity interest in any
Subsidiary, except for any Subsidiary identified in ITEM 6.8 ("Existing
Subsidiaries") of the Disclosure Schedule, unless (a) such creation or
acquisition, as the case may be, is in compliance with SECTIONS 7.2.5 and 7.2.8
and (b) the stock or other securities and assets of such Subsidiary are subject
to and covered by the Lender's perfected security interest and are not subject
to any other Lien.
SECTION 7.2.10. MODIFICATION OF CERTAIN AGREEMENTS. The Borrower shall
at all times be and remain a corporation organized, existing and in good
standing, and not dissolved, under the laws of the State of Delaware; and shall
not cause or permit any amendment, supplement or other
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modification of any of the terms or provisions of (i) its certificate
of incorporation or bylaws, unless the Lender gives its prior written consent
(which consent shall not be unreasonably withheld), or (ii) any document or
instrument evidencing or applicable to any Subordinated Debt, other than any
amendment, supplement or other modification which extends the date or reduces
the amount of any required repayment or redemption.
SECTION 7.2.11. TRANSACTIONS WITH AFFILIATES. The Borrower shall not,
and shall not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is fair and equitable to the Borrower or
such Subsidiary and is an arrangement or contract of the kind which would be
entered into by a prudent Person in the position of the Borrower or such
Subsidiary with a Person which is not one of its Affiliates.
SECTION 7.2.12. NEGATIVE PLEDGES, ETC. THE Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any agreement (excluding
this Agreement, any other Loan Document and any agreement governing any
Indebtedness permitted either by clause (b) of SECTION 7.2.2 as in effect on the
Effective Date or by clause (d) of SECTION 7.2.2 as to the assets financed with
the proceeds of such Indebtedness) prohibiting:
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired, or the ability of the Borrower to amend or otherwise modify
this Agreement or any other Loan Document; or
(b) the ability of any Person to make any payments, directly
or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.
SECTION 7.3. BORROWING BASE COMPLIANCE. The Borrower shall:
(a) keep true, accurate and complete records of its Accounts
and accounts payable and permit any of the Lender's officers, employees
or agents, at any time, in the Lender's name or in the name of a firm
of independent certified public accountants acceptable to the Lender,
to verify the validity, amount or any other matter relating to any
Accounts or account payable either in person, by mail, telephone or
facsimile, or otherwise;
(b) keep true, accurate and complete records of its Inventory
in accordance with GAAP consistent with past practices, itemizing and
describing the kind, type, quality and quantity of Inventory, the
Borrower's cost therefor and selling price thereof, and the withdrawals
therefrom and additions thereto and Inventory then on consignment and,
perform physical inventory counts on a monthly basis, and upon request
of the Lender, furnish to the Lender copies of the working papers
related thereto; and
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(c) not later than 20 days after the end of each calendar
month (and, if a Default shall have occurred, at any other time the
Lender shall require), during any part of which Revolving Loans or
Letter of Credit Obligations were outstanding, deliver to the Lender an
Accounts Report, an Accounts Payable Report and an Inventory Report as
of the end of such month (and if as a result of a Default, Lender shall
require additional reports, as of such other date(s) as the Lender
shall specify) together with a list of all disputed Accounts as to
which more than $25,000 is receivable and disclose to the Lender with
respect thereto, in reasonable detail, the reason for the dispute, all
claims related thereto and the amount in controversy, and upon demand
deliver to the Lender such other information relating to the status of
Accounts and Inventory as the Lender shall reasonably request in
writing, all of which Accounts Reports, Accounts Payable Reports and
Inventory Reports and other information shall be true, correct and
complete in all respects as of the respective dates thereof;
(d) (i) not later than 20 days after the end of each calendar
month (and, if a Default shall have occurred, at any other time the
Lender shall require), during any part of which Revolving Loans or
Letter of Credit Obligations were outstanding, deliver to the Lender a
Borrowing Base Certificate as of the last day of such month; and (ii)
at such time as any Extension of Credit is requested by the Borrower in
any month following a month for which no Borrowing Base Certificate was
otherwise required under CLAUSE (i) of this SUBSECTION (d), deliver to
the Lender a Borrowing Base Certificate as of last day of such
preceding month; and (ii) at such other times after the occurrence and
during the continuance of a Default as the Lender shall request,
deliver to the Lender a Borrowing Base Certificate as of the date
specified by the Lender in such request(s), which Borrowing Base
Certificates shall be true, correct and complete in all respects as of
the respective dates thereof; and
(e) conduct a physical count of the Inventory no less often
than annually and, upon request of the Lender, furnish a report based
on such amount of Inventory promptly to the Lender together with such
supporting information including invoices relating to the Borrower's
purchase of goods listed in said report, as the Lender shall, in its
sole and absolute discretion, request.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. LISTING OF EVENTS OF DEFAULT. Each of the following
events or occurrences described in this SECTION 8.1 shall constitute an "EVENT
OF DEFAULT":
SECTION 8.1.1. NON-PAYMENT OF OBLIGATIONS. The Borrower shall default
in the payment or prepayment when due of any principal of or interest on any
Revolving Loan, or the
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Borrower shall default (and such default shall continue unremedied for a
period of five days) in the payment when due of any other Obligation.
SECTION 8.1.2. BREACH OF WARRANTY. Any representation or warranty of
the Borrower made or deemed to be made hereunder or in any other Loan Document
or any other writing or certificate furnished by or on behalf of the Borrower to
the Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to ARTICLE V)
is or shall be incorrect when made in any material respect.
SECTION 8.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS.
The Borrower shall default in the due performance and observance of any of its
obligations under SECTION 7.1, 7.2 or 7.3 of this Agreement or, subject to any
applicable grace or cure period therein, under any other Loan Document.
SECTION 8.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS.
The Borrower shall default in the performance and observance of any obligation
or agreement contained herein other than any specified in SECTION 8.1.3 , and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Lender.
SECTION 8.1.5. DEFAULT ON OTHER INDEBTEDNESS. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in SECTION 8.1.1) of the Borrower or any of its Subsidiaries having a
principal amount, individually or in the aggregate, in excess of $100,000, or a
default shall occur in the performance or observance of any obligation or
condition with respect to such Indebtedness if the effect of such default is to
accelerate the maturity of any such Indebtedness or such default shall continue
unremedied for any applicable period of time sufficient to permit the holder or
holders of such Indebtedness, or any trustee or agent for such holders, to
accelerate the maturity of such Indebtedness, whether or not such holder in fact
accelerates such maturity.
SECTION 8.1.6. JUDGMENTS. Any judgment or order for the payment of
money in excess of $100,000 shall be rendered against the Borrower or any of its
Subsidiaries and either:
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 10 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION 8.1.7. PLANS. Any of the following events shall occur with
respect to any Plan:
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(a) the institution of any steps by the Borrower, any member
of its Controlled Group or any other Person to terminate a Plan if, as
a result of such termination, the Borrower or any such member could be
required to make a contribution to such Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in
excess of $100,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. CONTROL OF THE BORROWER. Any Change in Control shall
occur.
SECTION 8.1.9. BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any of
its Subsidiaries shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the
Borrower or any of its Subsidiaries or any property of any thereof,
or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries or for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days, provided that the Borrower,
each Subsidiary hereby expressly authorizes the Lender to appear in any
court conducting any relevant proceeding during such 60-day period to
preserve, protect and defend its rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or any
of its Subsidiaries, and, if any such case or proceeding is not
commenced by the Borrower or such Subsidiary, such case or proceeding
shall be consented to or acquiesced in by the Borrower or such
Subsidiary or shall result in the entry of an order for relief or shall
remain for 60 days undismissed, provided that the Borrower, each
Subsidiary hereby expressly authorizes the Lender to appear in any
court conducting any such case or proceeding during such 60-day period
to preserve, protect and defend its rights under the Loan Documents; or
(e) take any action authorizing, or in furtherance of, any
of the foregoing.
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SECTION 8.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of the Borrower or any other Obligor a party
thereto; the Borrower, any other Obligor or any other party shall, directly or
indirectly, contest in any manner such effectiveness, validity, binding nature
or enforceability; or any Lien securing any Obligation shall, in whole or in
part, cease to be a perfected first priority Lien, subject only to those
exceptions expressly permitted by such Loan Document.
SECTION 8.2. ACTION IF BANKRUPTCY. If any Event of Default
described in CLAUSES (a) through (d) of SECTION 8.1.9 shall occur, the
Revolving Loan Commitment (if not theretofore terminated) shall automatically
terminate and the outstanding principal amount of all outstanding Revolving
Loans and all other Obligations shall automatically be and become immediately
due and payable, without notice or demand.
SECTION 8.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of
Default (other than any Event of Default Described in CLAUSES (a) through (d )
of SECTION 8.1.9) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Lender may by notice to the Borrower declare all or any
portion of the outstanding principal amount of the Revolving Loans and other
Obligations to be due and payable and/or the Revolving Loan Commitment (if not
theretofore terminated) to be terminated, whereupon the full unpaid amount of
such Revolving Loans and other Obligations which shall be so declared due and
payable shall be and become immediately due and payable, without further
notice, demand or presentment, and/or, as the case may be, the Revolving Loan
Commitment shall terminate.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. WAIVERS, AMENDMENTS, ETC. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Lender. No failure or delay on the part of
the Lender or the holder of the Note in exercising any power or right under
this Agreement or any other Loan-Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. No notice to or demand on the Borrower in any case shall entitle it to
any notice or demand in similar or other circumstances. No waiver or approval
by the Lender or the holder of any Note under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval,
be applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
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SECTION 9.2. NOTICES. All notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing and addressed, delivered or transmitted to such party at
its address or facsimile number, as the case may be, set forth below or at such
other address or facsimile number as may be designated by such party in a
notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by prepaid courier service,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when received. A communication, demand or notice given
pursuant to this SECTION 9.2 shall be addressed:
If to the Borrower, at: Cerion Technologies Inc.
1401 Interstate Drive
Champaign, Illinois 61821-1090
Attn: David A. Peterson, Chief
Executive Officer and
President
Facsimile No.: (217) 359-3702
with a copy to: Erwin, Martinkus, Cole & Ansel
411 West University Avenue
Campaign, Illinois 61820
Attn: Sam Erwin, Esq.
Facsimile No.: (217) 351-4314
If to the Lender, at: LaSalle National Bank
120 S. LaSalle Street
Chicago, Illinois 60603
Attn: Kent Hammerstrom
First Vice President
Facsimile No.: (312) 606-8423
with a copy to: D'Ancona & Pflaum
30 N. LaSalle Street
Suite 2900
Chicago, IL 60602
Attn: Marc S. Joseph, Esq.
Facsimile No.: (312) 580-0923
SECTION 9.3. PAYMENT OF COSTS AND EXPENSES. The Borrower agrees to
pay on demand all expenses or the Lender (including the reasonable fees and
expenses of inhouse and outside legal counsel to the Lender) in connection
with:
(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document
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as may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of the
Mortgage, the Pledge Agreement and the Security Agreement and/or any
Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any and
all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of
the Mortgage, the Pledge Agreement or the Security Agreement;
(c) conducting or obtaining such audits, surveys and field
examinations of the Borrower or the Collateral as the Lender may
require from time to time, but not more than semiannually so long as no
Event of Default has occurred and is continuing, and at any time while
any Event of Default exists;
(d) obtaining such appraisals of all or any part of the
Collateral as the Lender may require from time to time, but not more
frequently than once each calendar year, prior to an Event of Default,
and at any times, after an Event of Default has occurred and while it
is continuing; and
(e) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document. The
Borrower further agrees to pay, and to save the Lender harmless from
all liability for, any stamp or other taxes which may be payable in
connection with the execution or delivery of this Agreement, any
Extension of Credit, or the issuance of the Notes or any other Loan
Documents. The Borrower also agrees to reimburse the Lender upon demand
for all reasonable out-of-pocket expenses (including attorneys' fees
and legal expenses) incurred by the Lender in connection with (i) the
negotiation of any restructuring or "work-out", whether or not
consummated, of any Obligations and (ii) the enforcement or collection
of any Obligations.
SECTION 9.4. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by the Lender and the extension of the Revolving Loan
Commitment, the Borrower hereby indemnifies, exonerates and holds the Lender and
each of its officers, directors, employees, attorneys and agents (collectively,
the "INDEMNIFIED PARTIES") free and harmless from and against any and all
actions, causes of action, suits, losses, costs, liabilities and damages, and
expenses incurred in connection therewith (irrespective of whether any such
Indemnified Party is a party to the action for which indemnification hereunder
is sought), including reasonable attorneys' fees and disbursements
(collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of any Revolving
Loan;
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(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including
any action brought by or on behalf of the Borrower as the result of any
determination by the Lender pursuant to ARTICLE V not to make any
Extension of Credit);
(c) any investigation, litigation or proceeding related to
any acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the Lender is party thereto;
(d) any past, present or future investigation, litigation or
proceeding related to any environmental cleanup, remediation audit,
compliance or other matter relating to the protection of the
environment, compliance with any Environmental Law or the Release by
the Borrower or any of its Subsidiaries of any Hazardous Material; or
(e) the past, present or future presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission, discharging or
releases from, any real property owned or operated by the Borrower or
any Subsidiary thereof of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by,
or within the control of, the Borrower or such Subsidiary;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the 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.
SECTION 9.5. SURVIVAL. The obligations of the Borrower under
SECTIONS 3.3, 4.3, 4.4, 4.5, 4.6, 9.3 and 9.4 shall in each case survive any
termination of this Agreement, the payment in full of all Obligations and the
termination of the Revolving Loan Commitment. The representations and
warranties made by the Borrower in this Agreement and in each other Loan
Document shall survive the execution and delivery of this Agreement and each
such other Loan Document.
SECTION 9.6. SEVERABILITY. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 9.7. HEADINGS. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
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SECTION 9.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Borrower and the Lender (or
notice thereof satisfactory to the Lender) shall have been received by the
Lender and notice thereof shall have been given by the Lender to the Borrower.
SECTION 9.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES. This Agreement, the Notes and the other Loan
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto.
SECTION 9.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of the Lender.
SECTION 9.11. PARTICIPATIONS. The Lender may at any time sell to one
or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "PARTICIPANT") participating interests in
any of the Revolving Loans, the Revolving Loan Commitment, and/or other
interests of the Lender hereunder; provided, however, that:
(a) no participation contemplated in this SECTION 9.11 shall
relieve the Lender from the Revolving Loan Commitment or its other
obligations hereunder or under any other Loan Document;
(b) the Lender shall remain solely responsible for the
performance of the Revolving Loan Commitment and such other
obligations;
(c) the Borrower shall continue to deal solely and directly
with the Lender in connection with the Lender's rights and obligations
under this Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate
of the Lender, shall be entitled to require the Lender to take or
refrain from taking any action hereunder or under any other Loan
Document, except that the Lender may agree with any Participant that
the Lender will not, without such Participant's consent, take any of
the following actions: (i) increase the Revolving Loan Commitment
Amount, reduce any fees described in ARTICLE III, or extend the
Revolving Loan Commitment Termination Date, or (ii) extend the due
date for, or reduce the amount of, any scheduled repayment or
prepayment of principal of or interest on any
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Revolving Loan (or reduce the principal amount of or rate of interest
on any Revolving Loan); and
(e) the Borrower shall not be required to pay any amount
under SECTION 4.6 that is greater than the amount which it would have
been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for
purposes of SECTIONS 3.3, 4.3, 4.4, 4.5, 4.6, 4.8, 9.3 and 9.4, shall
be considered a Lender.
SECTION 9.12. OTHER TRANSACTIONS. Nothing contained herein shall
preclude the Lender from engaging in any transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Affiliates in which the Borrower or such Affiliate is not restricted
hereby from engaging with any other Person.
SECTION 9.13. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE
BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF ILLINOIS, SITTING IN COOK COUNTY, ILLINOIS OR IN THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
THE LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURT OF THE STATE OF ILLINOIS, SITTING IN
COOK COUNTY, ILLINOIS AND THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION
OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE
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BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 9.14. WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS
A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER
ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CERION TECHNOLOGIES INC.
By: SSA Richard A. Clark
----------------------------------
Title: Vice President - Finance
----------------------------
LASALLE NATIONAL BANK
By: SSA Kent A. Hammerstorm
----------------------------------
Title: First Vice President
----------------------------
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1
DISCLOSURE SCHEDULE
-------------------
ITEM 6.7 Litigation.
----------
Description of Proceeding Action or Claim Sought
------------------------- ----------------------
ITEM 6.8 Existing Subsidiaries.
---------------------
State of Ownership Business
Name Incorporation % Description
- - ---- ------------- --------- -----------
ITEM 6.11 Employee Benefit Plans.
----------------------
ITEM 6.12 Environmental Matters.
---------------------
ITEM 7.2.2(b) Indebtedness to be Paid.
-----------------------
2
Creditor Relevant Debt Documents Outstanding Amount
-------- ----------------------- ------------------
ITEM 7.2.2(c) Ongoing Indebtedness.
--------------------
3
Creditor Relevant Debt Documents Outstanding Amount
-------- ----------------------- ------------------
ITEM 7.2.5(a) Ongoing Investments.
-------------------
- - -------------------------
1 Item numbers are keyed to refer to Sections where the item is
principally referred.
2 Specify principal, interest and other amounts to be paid.
3 Specify principal, accrued interest and other amounts outstanding
as of the date hereof.
60
<PAGE> 66
EXHIBIT B
BORROWING REQUEST
-----------------
LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Kent Hammerstrom
Vice President
CERION TECHNOLOGIES INC.
------------------------
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to SECTION 2.2 of
the Credit Agreement, dated as of May 31, 1996 (together with all amendments, if
any, from time to time made thereto, the "CREDIT AGREEMENT"), between Cerion
Technologies Inc., a Delaware corporation (the "BORROWER"), and you. Unless
otherwise defined herein, terms used herein have the meanings provided in the
Credit Agreement.
The Borrower hereby requests that a Revolving Loan be made in the
aggregate principal amount of $________ on _________, 19___ as a [LIBOR Loan
having an Interest Period of ______ months] [Prime Rate Loan].
The Borrower hereby acknowledges that, pursuant to SECTION 5.2.2 of the
Credit Agreement, each of the delivery of this Borrowing Request and the
acceptance by the Borrower of the proceeds of the Revolving Loans requested
hereby constitute a representation and warranty by the Borrower that, on the
date of such Revolving Loans, and before and after giving effect thereto and to
the application of the proceeds therefrom, all statements set forth in SECTION
5.2.1 are true and correct. The Borrower further agrees that if prior to the
funding of the Borrowing requested hereby, any matter certified to herein will
not be true and correct at such time as if then made, the Borrower will
immediately so notify you.
Please transfer the proceeds of the Borrowing requested hereby to the
following account(s) of the Borrower maintained with you:
Amount to be
Transferred Account No.
- - ------------ -----------
$
----------- -----------
$
----------- -----------
61
<PAGE> 67
The Borrower has caused this Borrowing Request to be executed and
delivered, and the certification, representations and warranties contained
herein to be made, by its duly Authorized Officer this ___ day of __________,
19____.
CERION TECHNOLOGIES INC.
By
----------------------------
Title:
-------------------------
62
<PAGE> 68
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
------------------------------
LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Kent Hammerstrom
Vice President
CERION TECHNOLOGIES INC.
------------------------
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant to
SECTION 2.3 of the Credit Agreement, dated as of May 31, 1996 (together with all
amendments, if any, from time to time made thereto, the "CREDIT AGREEMENT"),
between Cerion Technologies Inc., a Delaware corporation (the "BORROWER"), and
you. Unless otherwise defined herein, terms used herein have the meanings
provided in the Credit Agreement.
The Borrower hereby requests that on ___________, 19___,
(1) $__________ of the presently outstanding principal amount
of the Revolving Loans originally made on _________, 19___ [and
$___________ of the presently outstanding principal amount of the
Revolving Loans] originally made on ________, 19___,
(2) and all presently being maintained as 1[Prime Rate
Loans] [LIBOR Loans],
(3) be [converted into] [continued as],
(4) 2 [LIBOR Loans having an Interest period of ___
months] [Prime Rate Loans].
The Borrower hereby:
(a) certifies, represents and warrants that no Default
has occurred and is continuing; and
- - -------------------------
1 Select appropriate interest rate option.
2 Insert appropriate interest rate option.
63
<PAGE> 69
(b) agrees that if prior to the conversion or
continuation requested hereby, any matter certified to herein will not
be true and correct at such time as if then made, the Borrower will
immediately so notify you.
The Borrower has caused this Continuation/Conversion Notice to be
executed and delivered, and the certification, representations and warranties
contained herein to be made, by its duly Authorized Officer this ___ day of
__________, 19____.
CERION TECHNOLOGIES INC.
By
----------------------------
Title:
--------------------------
64
<PAGE> 1
EXHIBIT 10.2
SECURITY AGREEMENT
by and between
CERION TECHNOLOGIES INC.
as Borrower
and
LASALLE NATIONAL BANK
as Lender
<PAGE> 2
THIS SECURITY AGREEMENT, dated as of May 31, 1996 (herein, as the same
may at any time be amended or modified and in effect, referred to as this
"AGREEMENT"), is entered into by and between CERION TECHNOLOGY INC., a Delaware
corporation (the "BORROWER"), and LASALLE NATIONAL BANK (the "LENDER").
RECITALS
--------
WHEREAS, the Borrower has entered into that certain Credit Agreement,
dated as of the date hereof (as the same may be amended, modified, restated,
supplemented, extended, refinanced or renewed from time to time, herein referred
to as the "CREDIT AGREEMENT"), with the Lender; and
WHEREAS, pursuant to the Credit Agreement, upon the terms and subject
to the conditions therein set forth, the Lender has agreed to make Revolving
Loans to the Borrower; and
WHEREAS, the Borrower desires to secure the Borrower's obligations to
the Lender under or with respect to the Credit Agreement or otherwise with the
Collateral provided pursuant to this Agreement;
WHEREAS, it is a condition precedent to the making of the Revolving
Loans and the other financial accommodations under or with respect to the Credit
Agreement that the Borrower enter into certain Security Documents, including
this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration (receipt
of which is hereby acknowledged), the parties hereto, intending to be legally
bound, agree as follows:
SECTION 1. DEFINITIONS. (a) When used herein, unless the context shall
otherwise require, the following terms, shall have the following meanings:
ACCOUNTS shall mean any and all rights to payment for goods sold or
leased or for services rendered.
BORROWER - see Preamble.
CERTIFICATED SECURITY shall have the meaning assigned to such term in
the Uniform Commercial Code.
CHATTEL PAPER shall have the meaning assigned to such term in the
Uniform Commercial Code.
COLLATERAL shall have the meaning assigned to such term in SECTION 2
hereof.
1
<PAGE> 3
COMPUTER HARDWARE AND SOFTWARE shall mean (i) all computer and other
electronic data processing hardware, integrated computer systems, central
processing units, memory units, display terminals, printers, features, computer
elements, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and other
related computer hardware, whether now or hereafter owned, licensed, leased or
acquired by the Borrower; (ii) all software programs, whether now or hereafter
owned, licensed, leased or acquired by the Borrower, designed for use on the
computers and electronic data processing hardware described in CLAUSE (i) above,
including, without limitation, operating system software, utilities and
application programs in whatsoever form (source code and object code in magnetic
tape, disk or hard copy format or any other listings whatsoever); (iii) all
firmware associated therewith, whether now owned or hereafter acquired by the
Borrower; and (iv) all documentation for such hardware, software and firmware
described in the preceding CLAUSES (i), (ii) and (iii), whether now owned,
licensed or leased or hereafter acquired by the Borrower, including, without
limitation, flow charts, logic diagrams, manuals, specifications, training
materials, charts and pseudo codes.
CONTRACT RIGHTS shall mean any and all rights, interests and remedies
of the Borrower under or with respect to contracts, now or hereafter arising.
COPYRIGHTS shall have the meaning assigned to such term in SECTION 2
hereof.
CREDIT AGREEMENT - see recitals.
DEFAULT shall mean any Event of Default or any condition, occurrence or
event which after notice or lapse of time or both, would constitute an Event of
Default.
DOCUMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
EQUIPMENT shall mean all furniture, fixtures, machinery and equipment
of the Borrower of every description used or useful in the conduct of the
Borrower's business, and all accessories, accessions, additions, attachments,
substitutions, replacements, improvements, parts and other property now or
hereafter affixed thereto or used in connection therewith.
FIXTURE shall have the meaning assigned to such term in the Uniform
Commercial Code.
GENERAL INTANGIBLES shall have the meaning assigned to such term in the
Uniform Commercial Code.
GOODS shall have the meaning assigned to such term in the Uniform
Commercial Code.
INSTRUMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
INTANGIBLE COLLATERAL shall mean all Collateral other than Inventory,
Equipment, Fixtures and the Collateral described in CLAUSE (i) of the definition
of Computer Hardware and Software.
2
<PAGE> 4
INTELLECTUAL PROPERTY COLLATERAL shall mean, collectively, all Patents,
Trademarks, Trade Secrets and Computer Hardware and Software.
INVENTORY shall mean any and all goods, merchandise and other personal
property, including, without limitation, goods in transit, wheresoever located
and whether now owned or hereafter acquired by the Borrower which are or may at
any time be held for sale or lease, furnished under any contract of service or
held as raw materials, work in process, supplies or materials used or consumed
in the Borrower's business, and all such property the sale or other disposition
of which has given rise to Accounts and which has been returned to or
repossessed or stopped in transit by the Borrower.
LENDER - see Preamble.
OBLIGATIONS means all indebtedness, liabilities and obligations
(monetary or otherwise) of the Borrower and/or any other Obligors to the Lender,
its successors and assigns, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, including, under or in connection with this Agreement, the Credit
Agreement, the Notes, the other Loan Documents or any other note or agreement.
PATENTS shall have the meaning assigned to such term in SECTION 2
hereof.
PERMITTED LIEN shall mean all Liens permitted by the terms of SECTION
7.2.3 of the Credit Agreement.
PERSON shall mean any natural person, corporation, partnership, limited
liability company, firm, association, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
SECURITY shall have the meaning assigned to such term in the Uniform
Commercial Code.
SECURITY INTEREST shall mean any interest in any personal property,
fixture, asset or other right owned or being purchased or acquired by any Person
which secures payment or performance of any obligation and shall include any
mortgage, lien, pledge, hypothecation, encumbrance, charge or other security
interest of any kind, whether arising under a security agreement, mortgage, deed
of trust, chattel mortgage, assignment, pledge, financing or similar statement
or notice or as a matter of law, judicial process or otherwise.
TRADE SECRETS shall have the meaning assigned to such term in SECTION 2
hereof.
TRADEMARKS shall have the meaning assigned to such term in SECTION 2
hereof.
UNCERTIFICATED SECURITY shall have the meaning assigned to such term in
the Uniform Commercial Code.
3
<PAGE> 5
UNIFORM COMMERCIAL CODE shall mean the Uniform Commercial Code as in
effect in the State of Illinois on the date of this Agreement, unless otherwise
specified.
(b) Unless otherwise defined herein, terms defined in the Credit
Agreement shall have the same meaning when used herein notwithstanding any
termination thereof. Terms not otherwise defined herein or in the Credit
Agreement shall have the meanings, if any, ascribed to them under the Uniform
Commercial Code.
SECTION 2. GRANT OF SECURITY INTERESTS. As security for the payment of
all Revolving Loans now or hereafter made by the Lender to the Borrower and for
the full payment and performance of all other Obligations, the Borrower hereby
assigns and pledges to the Lender, and hereby grants to the Lender a continuing
security interest in, all of the Borrower's right, title and interest in and to
the Collateral. As used herein with respect to the Borrower, the term
"COLLATERAL" shall mean all personal property and fixtures of the Borrower
wherever located, whether now or hereafter existing, owned, licensed, leased,
consigned, arising or acquired, including, without limitation, all of the
Borrower's:
(i) Accounts;
(ii) Goods (including, without limitation, all of the Borrower's
Equipment, Fixtures and Inventory);
(iii) General Intangibles, including, without limitation:
(A) All tax refunds;
(B) All trademarks, trade names, corporate names,
fictitious business names, service marks, trade
styles and logos, all licenses thereof, all
registrations and recordings thereof and all
applications pending and in preparation in connection
therewith, now or hereafter existing anywhere in the
world, including, without limitation, those listed on
SCHEDULE I hereto, and all of the goodwill of the
business connected with the use of, or symbolized by,
any of the foregoing, and all continuations,
reissues, renewals and extensions thereof, the right
to sue for past, present, and future infringements,
dilutions, breaches or enforcements thereof or for
injury to the goodwill associated therewith, all
rights corresponding thereto throughout the world,
and all proceeds of the foregoing (including, without
limitation, licenses, royalties and proceeds of
suits) (all of the foregoing being collectively
hereinafter referred to as the "TRADEMARKS");
(C) All copyrights and all semiconductor chip product
mask works, whether statutory or common law,
registered or unregistered, now or hereafter in force
anywhere in the world, all licenses thereof, all
registrations and recordings
4
<PAGE> 6
thereof and all applications pending and in
preparation in connection therewith, now or hereafter
existing anywhere in the world, including, without
limitation, those listed on SCHEDULE II hereto, and
all of the goodwill of the business connected with
the use of, or symbolized by, any of the foregoing,
and all continuations, reissues, renewals and
extensions thereof, the right to sue for past,
present, and future infringements, breaches or
enforcements thereof or for injury to the goodwill
associated therewith, all rights corresponding
thereto throughout the world, and all proceeds of the
foregoing (including, without limitation, licenses,
royalties and proceeds of suits) (all of the
foregoing being collectively hereinafter referred to
as the "COPYRIGHTS");
(D) All patents, applications pending and in preparation
for patents, and patent licenses, anywhere in the
world, including, without limitation, those listed on
SCHEDULE III hereto, and all of the goodwill of the
business connected with the use of, or symbolized by,
any of the foregoing, and any and all reissues,
divisions, continuations, renewals, extensions,
continuations-in-part and reexaminatons thereof, the
right to sue for past, present and future
infringements, breaches or enforcements thereof, all
rights corresponding thereto throughout the world,
and all proceeds of the foregoing (including, without
limitation, license royalties and proceeds of suits)
(all of the foregoing being collectively hereinafter
referred to as the "PATENTS");
(E) All common law and statutory trade secrets and all
other confidential, proprietary or useful information
and all know-how obtained by or used in or
contemplated at any time for use in the business of
the Borrower (all of the foregoing being collectively
hereinafter referred to as the "TRADE SECRETS"),
whether or not reduced to writing or other tangible
form, including all documents and things embodying,
incorporating or referring in any way to the Trade
Secrets, including, without limitation, each Trade
Secret license listed on SCHEDULE IV hereto, and all
of the goodwill of the business connected with the
use of, or symbolized by, any of the foregoing, and
the right to sue for past, present and future
misappropriations, breaches or enforcements of any
Trade Secrets or licenses thereof, all rights
corresponding thereto throughout the world, and all
proceeds of the foregoing (including, without
limitation, license royalties and proceeds of suits);
and
(D) All rights arising from time to time to receive
payment under a billing to a Person representing such
Person's obligation to reimburse the Borrower for
indebtedness paid or to be paid by the Borrower for
such Person's account;
(iv) Contract Rights, Chattel Paper, Documents, Instruments,
Certificated Securities and Uncertificated Securities,
including, without limitation, any and all of the property
5
<PAGE> 7
at any time delivered, pledged, assigned or transferred by the
Borrower to the Lender, and any other property of every kind
or description of the Borrower, now or hereafter, for any
reason or purpose whatsoever, in the possession or control of,
or in transit to the Lender, any bailee or custodian for the
Lender or in which the Lender now or hereafter has a Security
Interest securing performance and payment of any of the
Obligations pursuant to the provisions of any written
agreement or instrument other than this Agreement or any other
Loan Document;
(v) Money and property now or at any time in the possession or
under the control of, or in transit to, the Lender, the
Borrower or any bailee, agent or custodian of the Lender or
the Borrower;
(vi) Right, title and interest (if any) in and to depositary
accounts of the Borrower, all funds on deposit therein, all
investments arising out of such funds, all claims thereunder
or in connection therewith, and all cash, securities, rights
and other property at any time and from time to time received,
receivable or otherwise distributed in respect of such
accounts, such funds or such investments;
(vii) Computer Hardware and Software and all rights with respect
thereto, including, without limitation, to the extent
assignable to the Lender for collateral purposes any and all
licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights,
improvement rights, renewal rights and indemnifications and
any substitutions, replacements, additions or model
conversions of any of the foregoing; and
(viii) Insurance policies, including claims or rights to payment
thereunder;
together with: (x) all books, ledgers, books of account, records, writings, data
bases, information and other property relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to, any of the
foregoing; and (y) all proceeds, products, rents, issues, profits and returns of
and from any of the foregoing.
SECTION 3. THE BORROWER TO REMAIN LIABLE. The Borrower hereby expressly
agrees that, anything herein to the contrary notwithstanding, it shall remain
liable under each contract, agreement, interest or obligation assigned to the
Lender hereunder to observe and perform all of the conditions and obligations to
be observed and performed by the Borrower thereunder, all in accordance with and
pursuant to the terms and provisions thereof. The exercise by the Lender of any
of the rights assigned hereunder shall not release the Borrower from any of its
duties or obligations under any such contract, agreement, interest or
obligation. The Lender shall not have any duty, responsibility, obligation or
liability under any such contract, agreement, interest or obligation by reason
of or arising out of the assignment thereof to the Lender or the granting to the
Lender of a Security Interest therein or the receipt by the Lender of any
payment relating to any such contract, agreement, interest or obligation
pursuant hereto, nor shall the Lender be required or obligated in
6
<PAGE> 8
any manner to perform or fulfill any of the obligations of the Borrower
thereunder or pursuant thereto, or to make any payment, or to make any inquiry
as to the nature or sufficiency of any payment received by it or the sufficiency
of any performance of any party under any such contract, agreement, interest or
obligation, or to present or file any claim, or to take any action to collect or
enforce any performance or the payment of any amounts which may have been
assigned to it, in which it may have been granted a Security Interest or to
which it may be entitled at any time or times.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Borrower
represents and warrants to and covenants with the Lender that:
(a) no Uniform Commercial Code financing statement or other evidence of
a Security Interest (other than any which may be filed on behalf of the Lender
or in connection with a Permitted Lien) covering any of the Collateral is or
will be on file in any public office;
(b) except for Inventory disposed of in the ordinary course of business
(and as otherwise permitted under the terms of this Agreement and the Credit
Agreement), the Borrower has and will continue to have a valid leasehold
interest in all Collateral it leases, and good and marketable title to all its
other Collateral, of any nature whatsoever (which, with respect to licenses,
means that the Borrower is the lawful owner of its rights under the licenses),
free and clear of all Security Interests whatsoever, other than the Security
Interests created hereby and the Permitted Liens;
(c) all of the Borrower's books and records are now located at one or
more of the premises shown on SCHEDULE V hereto, and all of the Borrower's Goods
are located either at one or more of the premises shown on SCHEDULE V hereto or
at one or more of the premises shown on SCHEDULE VI hereto;
(d) all information with respect to the Collateral set forth in any
schedule, certificate, or other writing at any time heretofore,
contemporaneously or hereafter furnished by the Borrower to the Lender, and all
other information heretofore, contemporaneously or hereafter furnished by the
Borrower to the Lender (under or in connection with this Agreement or
otherwise), is and will be true and correct in all material respects as of the
date furnished and does not and will not omit any material fact necessary to
make the statements therein not misleading;
(e) the Borrower shall not maintain its chief executive office in a
location other than the location of its chief executive office identified in
SCHEDULE V except after thirty (30) days' advance written notice to the Lender,
and, in furtherance of the foregoing, the Borrower shall: (i) manage the main
part of the Borrower's business operations from the Borrower's chief executive
office; (ii) maintain all credit information in which an investor, creditor or
other Person having business relations with the Borrower would reasonably have
an interest at its chief executive office; (iii) prepare Federal, State and
local (if any) tax returns and all financial statements and reports at such
chief executive office; (iv) designate such chief executive office as such on
all tax returns, financial statements and reports, reports to credit bureaus and
rating agencies and other similar returns,
7
<PAGE> 9
statements and reports; (v) maintain its bookkeeping and accounting departments
at its chief executive office; (vi) cause its chief executive officer, chief
operating officer, treasurer and other senior day-to-day supervisory management
to maintain their offices at the chief executive office; (vii) maintain its
corporate minute books and records (including stock transfer records) at its
chief executive office; and (viii) take such other action from time to time as
is required so that a creditor of the Borrower would reasonably expect the chief
executive office identified on SCHEDULE V to be its chief executive office for
purposes of Article 9 of the Uniform Commercial Code;
(f) With respect to any Intellectual Property Collateral the
partial or complete loss, impairment, infringement, breach or dilution of which,
individually or in the aggregate, might have a materially adverse effect on the
financial condition, operation, assets, business, properties or prospects of the
Borrower or its ability to perform its Obligations:
(i) such Intellectual Property Collateral is subsisting
and has not been adjudged invalid or unenforceable, in whole or in
part;
(ii) such Intellectual Property Collateral is valid and
enforceable and, in the case of Patents, the Borrower has notified the
Lender in writing of all prior uses (including public uses and sales)
of which it is aware;
(iii) the Borrower has duly made all necessary filings and
recordations to protect its interest in such Intellectual Property
Collateral, including, without limitation, recordation of all of its
interests in the Patent Collateral and Trademark Collateral in the
United States Patent and Trademark Office and in corresponding offices
throughout the world and its claims to the Copyright Collateral in the
United States Copyright Office and in corresponding offices throughout
the world;
(iv) the Borrower is the sole and exclusive owner of the
entire and unencumbered right, title and interest in and to such
Intellectual Property Collateral, free and clear of any Security
Interest, charges and encumbrances, including, without limitation,
licenses, shop rights and covenants by the Borrower not to sue third
Persons, and no claim has been made that the use of such Intellectual
Property Collateral does or may violate the rights of any third party;
and
(v) the Borrower has performed and will continue to
perform all acts and has paid and will continue to pay all required
fees and taxes to maintain each and every item of such Intellectual
Property Collateral in full force and effect throughout the world, as
applicable.
(vi) No litigation or proceeding is pending or, to the
best knowledge of the Borrower, threatened which contains allegations
respecting the validity of any Intellectual Property Collateral;
8
<PAGE> 10
(g) The Borrower owns directly or is entitled to use by license or
otherwise, all Patents, Trademarks, Trade Secrets and Copyrights, and rights
with respect to any of the foregoing, used in, necessary for or material to the
conduct of the Borrower's business as now conducted or presently proposed to be
conducted.
(h) none of the Collateral (other than Collateral acquired in the
ordinary course of business within the four (4) months preceding the date of
this Agreement or Intangible Collateral) has, within the four (4) months
preceding the date of this Agreement, been located at any place other than the
Borrower's own premises at the address shown on the signature page hereto or at
one or more of the premises listed on SCHEDULES V or VI hereto; and
(i) the Borrower's legal name is that set forth on the signature page
of this Agreement and SCHEDULE VII hereto lists all trade names by which the
Borrower is now known or was previously known.
Each representation and warranty made herein by the Borrower shall be
deemed remade as of and at the date of each Borrowing (and the Borrower shall
deliver a certificate to that effect with, as necessary, updated schedules
attached thereto, as and when requested by the Lender), which remade
representations and warranties shall have the same effect as if made
contemporaneously with such Borrowing.
SECTION 5. PROCESSING, SALE, COLLECTIONS, ETC.
(a) Until notice from the Lender to the contrary, given at any time
after the occurrence and during the continuance of any Default, the Borrower (i)
may, in the ordinary course of its business, at its own expense, sell, lease or
furnish under contracts of service any of the Inventory normally held by the
Borrower for such purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials normally held by the
Borrower for such purpose (but no such sale or use shall limit or impair the
Lender's Security Interest in any proceeds thereof, including, without
limitation, any Account), (ii) will, at its own expense, endeavor to collect, as
and when due, all amounts due with respect to any of the Intangible Collateral,
and (iii) may grant, in the ordinary course of business, to any Person obligated
on any of the Intangible Collateral, any rebate, refund or allowance to which
such Person may be lawfully entitled, and may accept, in connection therewith,
the return of goods, the sale or lease of which shall have given rise to such
Intangible Collateral. The Lender, however, may at any time, whether before or
after the maturity of any of the Obligations, so long as a Default shall have
occurred and be continuing, (1) notify any Person obligated on any of the
Intangible Collateral to make payment to the Lender of any amounts due or to
become due thereunder; (2) enforce collection of any of the Intangible
Collateral by suit or otherwise; (3) surrender, release or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder or evidenced
thereby; and (4) notify the Borrower (and upon receipt of such notice the
Borrower agrees to notify, at its sole expense, any parties obligated on any of
the Collateral) to make payment to the Lender of any amount due or to become due
under the Collateral.
9
<PAGE> 11
(b) If and to the extent that a perfected Security Interest hereunder
in any Collateral shall cease to be perfected for any reason whatsoever
(including, without limitation, sale of Inventory, Equipment or other personal
property as provided herein or release of all or any balance in any other
account of the Borrower or use or disposition by the Borrower of any proceeds of
Collateral), then such Collateral (referred to in this paragraph as "RELEASED
COLLATERAL") shall be deemed thereby released from the Security Interest
hereunder in exchange, as of the time of such release, for any other Collateral
of equivalent value in which a perfected Security Interest is being obtained
contemporaneously or has been most recently obtained hereunder, but only to the
extent such other Collateral does not represent either (x) Collateral in
exchange for which any previously Released Collateral shall have been deemed
released, or (y) Collateral of equivalent value to any loan or financial
accommodation (otherwise than by renewal or extension) from the Lender or to the
Borrower in which Collateral a perfected Security Interest hereunder shall have
been obtained contemporaneously with or most recently prior to such loan or
financial accommodation.
(c) In accordance with SECTION 4.5 of the Credit Agreement, the
Borrower will, forthwith upon receipt, transmit and deliver to the Lender in the
form received, all cash, checks, drafts and other instruments or writings for
the payment of money (properly endorsed, where required, so that such items may
be collected by the Lender) which may be received by the Borrower at any time in
full or partial payment or other proceeds of any Collateral.
(d) Subject only to restrictions of applicable law, the Lender is
authorized to endorse, in the name of the Borrower, any item, howsoever received
by the Lender representing any Collateral or any payment on or other proceeds of
any of the Collateral.
SECTION 6. AGREEMENTS OF THE BORROWER. The Borrower shall:
(a) keep all its Inventory and other Goods, unless the Lender shall
otherwise consent in writing, at one or more of its own premises (as shown on
SCHEDULE V hereto) or at one or more of the premises listed on SCHEDULE VI
hereto; PROVIDED, HOWEVER, that (i) so long as no Default shall have occurred
and be continuing, the Borrower may designate additional premises for inclusion
on SCHEDULE V or VI hereto upon thirty (30) days' advance written notice to the
Lender and (ii) in the case of the premises listed on SCHEDULE VI hereto from
time to time, the Borrower's Inventory and other Goods shall be kept separate
from the Inventory and other Goods of other Persons using such premises and
shall be clearly and conspicuously designated as being the Borrower's sole
property (for example, by posting signs or by affixing the Borrower's name on
its Inventory and other Goods);
(b) immediately notify the Lender of (i) the occurrence of any event or
events causing loss or depreciation in value of the Borrower's Goods in excess,
in the aggregate during any fiscal year, of $100,000, and (ii) the amount of
such loss or depreciation.
(c) furnish the Lender such information concerning the Borrower, the
Collateral and the Persons obligated on the Accounts as the Lender may from time
to time reasonably request in writing;
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(d) defend the Borrower's title to the Collateral against all Persons
(other than the Lender) and against all claims and demands whatsoever, except
those claims or demands which constitute Permitted Liens (and those of the
Lender);
(e) do all acts reasonably necessary to maintain, preserve and protect
all Collateral, keep all Collateral in good condition and repair, and prevent
any waste or unusual or unreasonable depreciation thereof;
(f) comply in all material respects with all laws (including, without
limitation, the provisions of the Fair Labor Standards Act), rules and
regulations relating to, and promptly pay when due all license fees,
registration fees, taxes, assessments and other charges which may be levied upon
or assessed against, the ownership, operation, possession, maintenance or use of
the Collateral; PROVIDED, HOWEVER, that the Borrower shall not be required to
pay any such fee, tax, assessment or other charge, the validity of which is
being contested by the Borrower in good faith by appropriate proceedings so long
as forfeiture of any part of the Collateral will not result from the failure of
the Borrower to pay any such fee, tax, assessment or other charge during the
period of such contest and the Borrower maintains adequate reserves in
accordance with GAAP in connection with such contest;
(g) permit the Lender and designees of the Lender, from time to time,
to inspect at reasonable times the Inventory, Equipment and other Collateral,
and to, at reasonable times, inspect, audit and make copies of and extracts from
all books, records and all other papers of the Borrower and will, upon request
of the Lender, deliver to the Lender all of such books, records and papers which
pertain to the Collateral and all Persons obligated with respect thereto;
(h) upon request of the Lender stamp on its records concerning the
Collateral (and/or enter into its computer records concerning the Collateral), a
notation, in form and substance satisfactory to the Lender, of the Security
Interests created hereby;
(i) except for the sale of Inventory in the ordinary course of business
and as may otherwise be permitted by this Agreement or by the Credit Agreement,
not sell, lease, assign, license, sublicense, abandon or otherwise dispose of,
or create or permit to exist any Security Interest (other than any Permitted
Lien) in, any Collateral to or in favor of anyone other than the Lender;
(j) at all times keep all Inventory, Equipment and other Collateral
insured against loss, damage, theft and other risks in the manner required by
SECTION 7.1.4 of the Credit Agreement (whether or not the Credit Agreement shall
be in effect) and, if the Lender so requests, deposit with the Lender originals
or certified copies of the relevant policies and certificates of insurance;
(k) furnish to the Lender notice in writing as soon as possible and in
any event not later than thirty (30) days prior to the occurrence from time to
time of (i) any change in or addition to the locations of any part of the
Collateral from the locations shown in SCHEDULES V and VI hereto, (ii) any
change in the location of the Borrower's chief executive office and (iii) any
change in the name
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of the Borrower or the name under or by which it conducts its business, each of
such notices also to contain evidence that the Borrower has taken all action
required or reasonably desirable to maintain and preserve the Security Interest
in favor of the Lender on the Collateral, free and clear of any other Security
Interest or encumbrance whatsoever except for Permitted Liens;
(l) after the occurrence of an Event of Default, reimburse the Lender
on demand for all expenses, including attorneys' fees and legal expenses and
expenses of any repairs to realty or other property to which any Collateral may
be affixed, incurred by the Lender in seeking to collect or enforce any rights
under or with respect to the Collateral, in seeking to collect the Obligations,
and in enforcing its rights hereunder, together with interest thereon from the
date due until reimbursed by the Borrower at a rate per annum equal to the
post-maturity rate provided in Section 3.2.2 of the Credit Agreement;
(m) *** either itself or through licensees, unless the Borrower shall
reasonably determine that a Trademark is of negligible economic value to the
Borrower, (i) continue to use each Trademark on each and every trademark class
of goods with which it is associated (as reflected in its catalogs, brochures
and price lists) in order to maintain each Trademark in full force free from any
claim of abandonment for non-use, (ii) maintain the quality of products and
services offered under each Trademark, (iii) employ each Trademark with the
appropriate notice of application or registration, (iv) not adopt or use any
mark which is confusingly similar or a colorable imitation of any Trademark, (v)
not use any Trademark except for the uses for which registration or application
for registration of such Trademark has been made, and (vi) not (and not permit
any licensee or sublicensee thereto to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated;
(n) at its sole expense, without any request by the Lender, (i)
immediately deliver or cause to be delivered to the Lender, in due form for
transfer (i.e., endorsed in blank or accompanied by duly executed undated, blank
stock or bond powers in form and substance satisfactory to the Lender), Chattel
Paper, Instruments and Documents, if any, at any time representing or
constituting any of the Collateral, (ii) cause the Lender's Security Interest
hereunder and under any other documents securing the Obligations to be at all
times duly noted on any certificate of title issuable with respect to any of the
Collateral and forthwith deliver or cause to be delivered to the Lender each
such certificate of title, and (iii) forthwith, execute and deliver or cause to
be executed and delivered to the Lender, in due form for filing or recording
(and pay the cost of filing or recording the same in all public offices deemed
necessary or advisable by the Lender) such assignments, security agreements,
pledge agreements, consents, waivers, financing statements and other documents,
and do such other acts and things, all as may from time to time be necessary or
desirable to establish and maintain to the satisfaction of the Lender a valid
perfected Security Interest in all assets of the Borrower now or hereafter
existing or acquired (free of all other Security Interests, claims and rights of
third parties whatsoever other than Permitted Liens) to secure payment and
performance of the Obligations;
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(o) at the Lender's request after the occurrence and during the
continuance of a Default transfer all or any part of the Collateral into the
name of the Lender or its nominee;
(p) to the extent that any of the Collateral is located on Premises (as
defined in EXHIBIT A hereto) belonging to any Person other than the Borrower
and/or subject to a lien or mortgage in favor of any Person other than the
Lender, provide the Lender with a waiver agreement substantially in the form of
EXHIBIT A hereto executed by the owner and/or mortgagee or lienholder of the
Premises concerned; and
(q) not take any action or omit to take any action which action or
omission would in any manner impair the enforceability of the Lender's Security
Interest in any of the Collateral.
SECTION 7. RENEWALS, AMENDMENTS AND OTHER SECURITIES; PARTIAL RELEASES.
(a) If at any time, whether before or after any of the Obligations
shall be due and payable, the Lender takes any or all of the Permitted Actions
(as hereinafter defined), such actions shall not affect the enforceability of
this Agreement, the Credit Agreement, or any of the other Loan Documents or the
Obligations. The Lender shall have taken a "PERMITTED ACTION" if it shall: (i)
retain or obtain a Security Interest in any property to secure payment and
performance of any of the Obligations, (ii) retain or obtain the primary or
secondary obligation of any obligor or obligors, in addition to the Borrower's,
with respect to any of the Obligations, (iii) extend or renew any of the
Obligations for one or more periods (whether or not longer than the original
period), alter or exchange any of the Obligations, or release or compromise any
obligation of any nature of any obligor with respect to any of the
Obligations,(iv) release or fail to perfect its Security Interest in, or impair,
surrender, release or permit any substitution or exchange for, all or any part
of any property securing payment and performance of any of the Obligations, or
extend or renew for one or more periods (whether or not longer than the original
period) or release, compromise, alter or exchange any obligations of any nature
of any obligor with respect to any such property, and (v) resort to the
Collateral (or any thereof) for payment of any of the Obligations when due,
whether or not the Lender shall have resorted to any property securing any of
the Obligations or shall have proceeded against the Borrower or against any
other obligor primarily or secondarily obligated with respect to any of the
Obligations. The Lender shall have no obligation to take any Permitted Action.
(b) No release from the Security Interest created by this Agreement of
any part of the Collateral by the Lender shall in any way alter, vary or
diminish the force or effect of any Security Interest created by this Agreement
against the balance or remainder of the Collateral.
SECTION 8. GRANT OF LICENSE TO USE GENERAL INTANGIBLES. Solely for the
purpose of enabling the Lender to exercise any of its rights and remedies
hereunder at such time as the Lender, without regard to this SECTION 8, shall be
lawfully entitled to exercise such rights and remedies, and provided that the
Lender may do so only after the occurrence of an Event of Default, the Borrower
hereby grants to the Lender an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to the Borrower) to use,
assign, license or sublicense any of the
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Borrower's General Intangibles (to the extent the Lender may lawfully be
entitled to do so), now or hereafter owned, licensed, leased or acquired by the
Borrower, and wherever the same may be located, 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 programs used for the compilation or
printout thereof. Except with respect to items of Collateral not owned by the
Borrower, no agreements hereafter acquired or agreed to or entered into by the
Borrower shall prohibit, restrict or impair the Security Interest granted
hereunder.
SECTION 9. INFORMATION. After the occurrence and during the
continuation of an Event of Default, the Lender and any of the officers,
employees, agents or auditors of the Lender shall have the right to make
inquiries by mail, telephone, facsimile or otherwise to any Person with respect
to validity and amount or any other matter (including, without limitation, the
assertion by any Person of claims, offsets and counterclaims) concerning any of
the Collateral.
SECTION 10. EVENTS OF DEFAULT.
(a) (i) Whenever an Event of Default shall occur and be continuing
the Lender may exercise from time to time any and all rights and remedies
available to it under this Agreement, the other Loan Documents and/or the
Uniform Commercial Code and other applicable law, as in effect from time to
time. The Borrower agrees, upon the occurrence and continuance of an Event of
Default and upon the request of the Lender, to assemble, at the Borrower's
expense, all Inventory and Equipment at a convenient place acceptable to the
Lender.
(ii) The Borrower hereby expressly waives, to the fullest extent
permitted by applicable law, any and all notices, advertisements, hearings or
process of law in connection with the Lender's exercise of any of its rights or
remedies after the occurrence and during the continuation of an Event of
Default. If any notification of intended disposition of any of the Collateral is
required by law, such notification shall be deemed reasonably and properly given
if sent, at least ten (10) days before such intended disposition, in the manner,
and at the address of the Borrower, specified for notices in the Credit
Agreement (or at any other address of the Borrower which appears on the Lender's
records). The Lender may apply any proceeds of any of the Collateral to the
payment of expenses which the Lender incurs in connection with the enforcement
of this Agreement and the other Loan Documents and in exercising its rights and
remedies, including, without limitation, reasonable attorneys' fees and legal
expenses. The Lender shall apply any balance of such proceeds toward the payment
of the Obligations, in such order of application as the Lender may, in its sole
discretion, elect from time to time.
(b) Without limiting any other provision of this Agreement:
whenever an Event of Default shall have occurred and be continuing, the Lender
may enter upon any premises where the Collateral or any part thereof may be, and
take possession of all or any part thereof with or without process of law; and
the Lender may, without being responsible for loss or damage, hold, store, keep
idle, use, lease, operate or otherwise use or permit the use of the same or any
part thereof or render all or part thereof unusable for such time and upon such
terms as the Lender may deem to be
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commercially reasonable, and may demand, collect and retain all earnings and all
other sums due and to become due in respect of the same from any Person
whomsoever, accounting only for net earnings, if any, arising from such use
after charging against all receipts from the use of the same or from the sale
thereof, by court proceedings or pursuant to SECTION 10(C) hereof or otherwise,
all reasonable costs and expenses of, and damages or losses by reason of, such
use or sale.
(c) The Borrower hereby agrees to reimburse the Lender for any and all
costs and expenses, including reasonable attorneys' fees and legal expenses,
incurred by the Lender in seeking to collect or enforce any rights or remedies
under or with respect to the Collateral, in seeking to collect the Obligations,
and in enforcing its rights hereunder, together with interest thereon from the
date incurred until reimbursed by the Borrower at a rate per annum equal to the
post-maturity rate provided in Section 3.2.2 of the Credit Agreement.
(d) The Borrower agrees that in any sale of any of the Collateral, the
Lender is authorized to comply with any limitation or restriction in connection
with such sale as is in accordance with the Uniform Commercial Code. The
Borrower further agrees that such compliance shall not result in such sale being
deemed not to have been made in a commercially reasonable manner.
(e) If sufficient sums are not realized upon any disposition of the
Collateral to pay all the Obligations and any expenses of such disposition,
including, without limitation, attorneys' fees, the Borrower hereby promises to
pay immediately any resulting deficiency.
(f) No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, but every such right or remedy shall be cumulative
and shall be in addition to every other right or remedy herein conferred, or
conferred upon the Lender by any other agreement or instrument or security, or
now or hereafter existing at law or in equity or by statute.
SECTION 11. AUTHORITY OF THE LENDER. (a) The Lender shall have, and be
entitled to exercise, all such powers hereunder as are specifically delegated to
the Lender by the terms hereof, together with such powers as are incidental
thereto. The Lender may execute any of its duties hereunder by or through agents
or employees and shall be entitled to retain counsel and to act in reliance upon
the advice of such counsel concerning all matters pertaining to its duties
hereunder. The Lender will give the Borrower notice ten (10) days in advance of
any action taken pursuant to SECTIONS 8, 9 or 10(b) hereof as long as the Lender
determines, in its sole and absolute discretion, that such notice is
commercially feasible, PROVIDED that failure by the Lender to give the Borrower
such notice shall not affect the legality of the actions taken. Neither the
Lender, nor any director, officer, employee or agent of the Lender, shall be
liable for any action taken or omitted to be taken by it hereunder or in
connection herewith, except for its own gross negligence or wilful misconduct.
The Borrower agrees to reimburse the Lender, on demand, for all reasonable costs
and expenses incurred by the Lender in connection with the enforcement of this
Agreement (including costs and expenses incurred by any agent of the Lender) and
agrees to indemnify (which indemnification shall survive any termination of this
Agreement) and hold harmless the Lender and any such agent from and against any
and all liability incurred by the Lender or such agent hereunder or in
connection
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herewith, unless such liability shall be due to gross negligence or wilful
misconduct on the part of such indemnified Person.
(b) The Lender may from time to time, at its option, perform any
obligation to be performed by the Borrower hereunder, under the Credit Agreement
or under any other Loan Document which shall not have been performed and take
any other action which the Lender deems necessary for the maintenance or
preservation of any of the Collateral or its Security Interest in the
Collateral. If an Event of Default has occurred and is continuing, all moneys
advanced by the Lender in connection with the foregoing shall, whether or not
there are then outstanding any credit extensions made under the Credit Agreement
or the Credit Agreement is in effect, bear interest at the post-maturity rate
provided in Section 3.2.2 of the Credit Agreement (or such lower maximum rate as
shall be legal under applicable law), and shall be repaid together with such
interest by the Borrower to the Lender, upon the latter's demand, and shall be
secured hereby prior to any other indebtedness or obligation secured hereby, but
the making of any such advance by the Lender shall not relieve the Borrower of
any default hereunder or thereunder.
(c) The Lender, in its sole discretion, may apply any amounts which it
receives from whatever source on account of the Obligations toward the payment
of the Obligations in such order of application as the Lender, in its sole
discretion, may from time to time elect, subject to the terms and provisions of
the Credit Agreement.
SECTION 12. TERMINATION. This Agreement shall terminate when all of the
Revolving Loan Commitment shall be terminated and all the Obligations have been
fully and finally paid and performed, at which time the Lender shall reassign
and redeliver (or cause to be reassigned and redelivered) to the Borrower or to
such Person as the Borrower shall designate, against receipt, such of the
Collateral (if any) assigned by the Borrower to the Lender as shall not have
been sold or otherwise applied by the Lender pursuant to the terms hereof and
shall still be held by it hereunder, together with appropriate instruments of
reassignment and release. Any such reassignment shall be without recourse upon
or representation or warranty by the Lender, except a warranty that the Lender
has not encumbered or otherwise reassigned such Collateral, and shall be at the
sole cost and expense of the Borrower.
SECTION 13. PROTECTION OF INTELLECTUAL PROPERTY COLLATERAL.
(a) The Borrower shall not, unless the Borrower shall either (i)
reasonably and in good faith determine (and notice of such determination shall
have been delivered to the Lender) that any of the Patents is of negligible
economic value to the Borrower, or (ii) have a reasonable and valid business
purpose to do otherwise, do any act, or omit to do any act, whereby any of the
Patents may lapse or become abandoned or dedicated to the public or
unenforceable.
(b) The Borrower shall not, and the Borrower shall not permit any of
its licensees to, unless the Borrower shall either, (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered to
the Lender) that any of the Trademarks is of negligible
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economic value to the Borrower, or (ii) have a reasonable and valid business
purpose to do otherwise:
(i) fail to continue to use any of the Trademarks
in order to maintain all of the Trademarks in full force free
from any claim of abandonment for non-use;
(ii) fail to maintain as in the past the quality of
products and services offered under all of the Trademarks;
(iii) fail to employ all of the Trademarks
registered with any Federal or state or foreign authority
with an appropriate notice of such registration;
(iv) adopt or use any other Trademark which is
confusingly similar or a colorable imitation of any of the
Trademarks;
(v) use any of the Trademarks registered with any
Federal or state or foreign authority except for the uses for
which registration or application for registration of all of
the Trademarks has been made; or
(vi) do or permit any act or knowingly omit or
permit any omission to do any act whereby any of the
Trademarks may lapse or become invalid or unenforceable.
(c) The Borrower shall not, unless the Borrower shall either (i)
reasonably and in good faith determine (and notice of such determination shall
have been delivered to the Lender) that any of the Copyrights or any of the
Trade Secrets is of negligible economic value to the Borrower, or (ii) have a
reasonable and valid business purpose to do otherwise, do or permit any act or
knowingly omit or permit any omission to do any act whereby any of the
Copyrights or any of the Trade Secrets may lapse or become invalid or
unenforceable or placed in the public domain except upon expiration of the end
of an unrenewable term of a registration thereof.
(d) The Borrower shall notify the Lender immediately if it knows,
or has reason to know, that any application or registration relating to any
material item of the Intellectual Property Collateral may become abandoned or
dedicated to the public or placed in the public domain or invalid or
unenforceable, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any foreign counterpart thereof or any court or other tribunal)
regarding the Borrower's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and enforce
the same.
(e) Without limitation to the foregoing, the Borrower shall have
the duty to protect, preserve and maintain all of its rights in, to and under
the Intellectual Property Collateral, including, without limitation, the duty to
prosecute and/or defend against any and all suits contesting infringement or
dilution of the Intellectual Property Collateral, any other suits containing
allegations
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respecting the validity of or breaches with respect to the Intellectual Property
Collateral, and any suits claiming injury to the goodwill associated with any of
the Trademarks. Any expenses incurred in protecting, preserving and maintaining
the Intellectual Property Collateral shall be borne by the Borrower. After the
occurrence of an Event of Default and during the continuation thereof to the
maximum extent permitted by law, the Lender shall have the right, without taking
title to any Intellectual Property Collateral, to prosecute and/or defend any
such suits or claims or to enforce any or all Intellectual Property Collateral,
or any rights or obligations thereunder or its Security Interest in any or all
of the Intellectual Property Collateral, in which event the Borrower shall, at
the request of the Lender, do any and all lawful acts and execute any and all
proper documents required by the Lender in aid of such enforcement. All costs
and expenses incurred by the Lender after the occurrence of an Event of Default
in connection with the foregoing, shall, whether or not there are then
outstanding any Revolving Loans under the Credit Agreement or whether or not the
Credit Agreement is in effect, bear interest at the post-maturity rate provided
in Section 3.2.2 of the Credit Agreement and shall be repaid together with such
interest by the Borrower to the Lender, upon the latter's demand, and shall be
secured hereby, but the making of any such advance by the Lender shall not
relieve the Borrower of any default hereunder. In addition, the Borrower hereby
indemnifies (which indemnification shall survive any termination of this
Agreement) and holds harmless the Lender from any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (including reasonable attorneys' fees) of any kind
whatsoever which may be imposed on, incurred by or asserted against the Lender
in connection with or in any way arising out of such suits, proceedings or other
actions except with respect to gross negligence or willful misconduct on the
part of the Lender. Notwithstanding the foregoing, the Lender shall have no
obligations or liabilities regarding the Intellectual Property Collateral or any
of them by reason of, or arising out of, this Agreement.
(f) If an Event of Default shall have occurred and be continuing, upon
demand of the Lender, the Borrower shall execute and deliver to the Lender an
assignment or assignments of any or all of the Intellectual Property Collateral,
and such other Collateral which will prevent such an assignment from
constituting an assignment in gross and execute and deliver such other documents
as are necessary or appropriate to carry out the intent and purposes of this
Agreement; PROVIDED that the failure of the Borrower to comply with such demand
will not impair or affect the validity of SECTION 2 hereof. The Borrower agrees
that such an assignment shall be applied to reduce the Obligations then due only
to the extent that the Lender receives net cash proceeds in respect of the sale
of, or other realization upon, the Intellectual Property Collateral and such
other Collateral; such cash proceeds to be applied to the payment of expenses
incurred in connection with the Intellectual Property Collateral and such other
Collateral, including reasonable attorneys' fees and legal expenses, and any
balance of such proceeds shall be applied by the Lender as provided in SECTION
10(a)(II).
SECTION 14. SUBMISSION TO JURISDICTION; GOVERNING LAW.
(a) THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT SITTING IN CHICAGO, ILLINOIS
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OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH STATE OR FEDERAL COURT. THE 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. THE BORROWER IRREVOCABLY CONSENTS
TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES OF SUCH PROCESS TO THE BORROWER AT ITS ADDRESS SPECIFIED FOR
NOTICES IN THE CREDIT AGREEMENT. THE BORROWER AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
(b) THE BORROWER AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST THE LENDER OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY
THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, IN ANY COURT OTHER THAN THE ONE HEREINABOVE SPECIFIED IN THIS SECTION
14. NOTHING IN THIS SECTION 14 SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTIONS.
(c) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO ITS PRINCIPLES
OF CONFLICTS OF LAW. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. All obligations of the Borrower
or any related Person and rights of the Lender and any other holder of a note or
liability expressed in this Agreement shall be in addition to and not in
limitation of those provided in applicable law or in any other written
instrument or agreement relating to any of the Obligations.
SECTION 15. MISCELLANEOUS PROVISIONS.
(a) The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral if it takes such action for
that purpose as the Borrower requests in writing, but failure of the Lender to
comply with any such request shall not of itself be deemed a failure to exercise
reasonable care, and no failure of the Lender to preserve or protect any rights
with respect to Collateral against prior parties, or to do any act with respect
to the preservation of
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Collateral not so requested by the Borrower, shall be deemed a failure to
exercise reasonable care in the custody or preservation of such Collateral.
(b) After occurrence of an Event of Default and during the continuation
thereof the Borrower hereby appoints the Lender, with full power of
substitution, as such Borrower s attorney-in-fact for the purpose of carrying
out the provisions of this Agreement and taking any action and executing any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Borrower agrees that the
Lender shall have the right and authority to make claim for, and receive and
give acquittances for payment on account of, loss under any insurance policy
covering the Collateral, or any part thereof, and to receive, endorse and
collect all checks, drafts and other orders for the payment of money
representing the proceeds of such insurance.
(c) No delay on the part of the Lender in exercising any right, power
or remedy shall operate as a waiver thereof, nor shall the single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or any consent with respect to, any
provision of this Agreement shall in any event be effective unless the same
shall be in writing, and signed and delivered by the party to be bound thereby,
and then such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the purpose for which given.
(d) All of the Borrower's obligations and all of the Lender's rights,
powers and remedies specified herein are in addition to all other obligations,
rights, powers and remedies required of or possessed by them, including, without
limitation, those provided by applicable law or in any other written instrument
or agreement relating to any of the Obligations or any security therefor. The
Borrower agrees that if at any time all or any part of any payment theretofore
applied by the Lender to any of the Obligations is or must be rescinded or
returned by the Lender for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization of the Borrower), such Obligations
shall, for the purposes of this Agreement, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Lender, and this Agreement shall
continue to be effective or be reinstated, as the case may be, as to such
Obligations, all as though the Lender had not made such application.
(e) The powers conferred on the Lender hereunder are solely to protect
its interest (on behalf of the holders of the Obligations) in the Collateral and
shall not impose any duty on it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Lender shall have no duty as to any
Collateral or responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Collateral, whether or not the Lender has or is deemed to have knowledge
of such matters, or (ii) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to the Collateral.
20
<PAGE> 22
(f) All notices or other communications hereunder shall be given in the
manner specified under Section 9.2 of the Credit Agreement.
(g) The rights and privileges of the Lender hereunder shall inure to
the benefit of its successors and assigns. This Agreement shall be binding upon
the Borrower and its legal representatives, successors and assigns.
(h) At the option of the Lender, this Agreement, or a carbon,
photographic or other reproduction of this Agreement or of any Uniform
Commercial Code financing statement covering the Collateral or any portion
thereof, shall be sufficient as a Uniform Commercial Code financing statement
and may be filed as such.
(i) The section headings in this Agreement are inserted for convenience
of reference and shall not be considered a part of this Agreement or used in its
interpretation.
(j) This Agreement may be executed in any number of counterparts and by
the different parties on separate counterparts and each such counterpart shall
for all purposes be deemed an original, but all such counterparts shall together
constitute but one and the same Agreement. The Borrower hereby acknowledges
receipt of a true, correct and complete counterpart of this Agreement.
(k) TO THE EXTENT ENFORCEABLE UNDER APPLICABLE LAW, THE BORROWER HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATED TO THIS AGREEMENT, ANY COLLATERAL
OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING OR ARISING FROM ANY
CREDIT RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A
JURY.
(l) The Borrower hereby expressly waives: (i) notice of the acceptance
by the Lender of this Agreement, (ii) notice of the existence or creation or
non-payment of all or any of the Obligations, (iii) to the fullest extent
permitted by law, presentment, demand, notice of dishonor, protest, and all
other notices whatsoever, and (iv) all diligence in collection or protection of
or realization upon the Obligations or any thereof, any obligation hereunder, or
any security for or guaranty of any of the foregoing.
(m) The Lender may, from time to time, whether before or after any of
the Obligations shall be due, in its sole discretion and without notice to the
Borrower (but subject to the terms and provisions of the Credit Agreement),
assign or transfer any or all of its interest in the Obligations; and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Obligations shall be and remain Obligations for purposes
of this Agreement, and each
21
<PAGE> 23
and every immediate and successive assignee or transferee of any of the
Obligations or of any interest therein shall, to the extent of the interest of
such assignee or transferee in the Obligations, be entitled to the benefits of
this Agreement to the same extent as if such assignee or transferee were the
Lender.
(n) The Borrower shall not be subrogated to any rights of the Lender
hereunder by reason of any amounts received hereunder or in connection with the
Collateral until all Obligations have been fully paid and performed and all
Commitments have been terminated.
(o) The Lender acts herein as agent for itself and any and all present
and future holders of the Obligations.
(p) The Borrower hereby acknowledges that there are no conditions to
the effectiveness of this Agreement.
(q) If any item of Collateral hereunder also constitutes collateral
granted to the Lender under any other mortgage, agreement or instrument, in the
event of any conflict between the provisions under this Agreement and those
under such other mortgage, agreement or instrument relating to such Collateral,
the provision or provisions selected by the Lender shall control with respect to
such Collateral.
(r) All rights of the Lender and the Security Interest granted to the
Lender hereunder, and all obligations of the Borrower hereunder, shall be
absolute and unconditional, irrespective of (i) any lack of validity or
enforceability of the Credit Agreement, the Note, or any other Loan Document or
any instrument relating thereto, or (ii) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, a guarantor or a
third party grantor of a Security Interest.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
CERION TECHNOLOGIES INC.,
as Borrower
By:
-------------------------------------
Title:
----------------------------------
LASALLE NATIONAL BANK, as Lender
22
<PAGE> 24
By:
-------------------------------------
Title:
-------------------------------------
23
<PAGE> 25
SCHEDULE I
----------
TRADEMARKS
----------
Registered Trademarks
---------------------
Certificate of
Date of Registration
Trademark Registration Jurisdiction Number
- - --------- ------------ ------------ ------
None.
Pending Trademark Applications
------------------------------
Date of Serial
Trademark Application Jurisdiction Number
- - --------- ----------- ------------ ------
None.
Trademark Applications in Preparation
-------------------------------------
Expected Products/
Trademark Docket No. Jurisdiction Filing Date Services
- - --------- ---------- ------------ ----------- --------
None.
Trademark Licenses
------------------
Licensor Licensee Effective Date Expiration Date Trademark
- - -------- -------- -------------- --------------- ---------
None.
<PAGE> 26
SCHEDULE II
-----------
COPYRIGHTS
----------
Registered Copyrights
---------------------
Certificate of
Date of Registration
Title Author(s) Registration Jurisdiction Number
- - ----- --------- ------------ ------------ ------
None.
Pending Copyright Applications
------------------------------
Date of Serial
Title Author(s) Application Jurisdiction Number
- - ----- --------- ----------- ------------ ------
None.
Copyright Applications in Preparation
-------------------------------------
Expected
Title Author(s) Docket No. Jurisdiction Filing Date
- - ----- --------- ---------- ------------ -----------
None.
Copyright Licenses
Licensor Licensee Effective Date Expiration Date Subject
- - -------- -------- -------------- --------------- -------
Matter
- - ------
None.
<PAGE> 27
SCHEDULE III
------------
PATENTS
-------
Issued Patents
--------------
Date of Patent
Title Inventor(s) Issue Jurisdiction Number
- - ----- ----------- ----- ------------ ------
None.
<TABLE>
Pending Patent Applications
---------------------------
<CAPTION>
Date of Serial
Title Inventor(s) Filing Jurisdiction Number
- - ----- ----------- ------ ------------ ------
<S> <C> <C> <C> <C>
Variable Speed Berbaum 10/18/95 USA 08/544,720
Directional Greenlaw
Planetary Grinding Hickman
or Polishing Hughes
Apparatus Marchand
</TABLE>
Patent Applications in Preparation
----------------------------------
Expected
Title Inventor(s) Docket No. Jurisdiction Filing Date
- - ----- ----------- ---------- ------------ -----------
None.
Patent Licenses
- - ---------------
Licensor Licensee Effective Date Expiration Date Subject
- - -------- -------- -------------- --------------- -------
Matter
- - ------
None.
<PAGE> 28
SCHEDULE IV
-----------
TRADE SECRET LICENSES
---------------------
Licensor Licensee Effective Date Expiration Date Subject
- - -------- -------- -------------- --------------- -------
Matter
- - ------
None.
<PAGE> 29
SCHEDULE V
----------
LOCATIONS OF COLLATERAL
- - -----------------------
1401 Interstate Drive
Champaign, Illinois 61821
LOCATION OF CHIEF EXECUTIVE OFFICE
- - ----------------------------------
Same as above.
<PAGE> 30
SCHEDULE VI
-----------
THIRD PARTY LOCATIONS OF THE BORROWER'S GOODS
---------------------------------------------
None.
<PAGE> 31
SCHEDULE VII
------------
TRADE NAMES
-----------
Current Trade Names
- - -------------------
Cerion Technologies Inc.
Prior Trade Names
- - -----------------
NPT Inc.
<PAGE> 32
EXHIBIT A
---------
Form of Waiver Agreement
(Landlord's or Mortgagee's Waiver)
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
DECLARATION AND AGREEMENT
-------------------------
In order to induce LaSalle National Bank, as the Lender, to extend
credit to Cerion Technologies Inc., as the Borrower, pursuant to that certain
Credit Agreement dated as of May 31, 1996 (the "CREDIT AGREEMENT"), secured
pursuant to that certain Security Agreement, dated as of the same date, by and
between the Lender and the Borrower (as the same may be amended, modified or
supplemented from time to time hereafter, the "SECURITY AGREEMENT"), by certain
property described more particularly on Annex A attached hereto (the
"PROPERTY"), some or all of which Property may be located upon that certain real
property located at ______________________, a legal description of which is
attached hereto as Annex B (the "PREMISES"), and, in consideration thereof, the
undersigned declares and agrees as follows:
(i) The undersigned has an interest in the Premises as (as indicated):
______ Owner;
______ Mortgagee or Beneficiary under a Mortgage or a Deed of
Trust; or
______ Other (describe): ____________________________________
(ii) The Property shall at all times be and remain personal property, and
shall not be an accession or addition to or fixture on the Premises, regardless
of the fact that it may be installed thereon or in any manner attached thereto,
and the undersigned shall acquire no title to or interest in the Property by
virtue of any installation or attachment.
<PAGE> 33
(iii) Any and all liens, claims, demands, rights or interests which the
undersigned now has or hereafter acquires in, on or to the Property and all
additions thereto and replacements and substitutions therefor, including,
without limitation, the right to levy, distrain, take possession of or sell for
unpaid rent, shall be and are hereby made subordinate and inferior to any now
existing or hereafter arising lien or security interest of the Lender in the
Property.
(iv) The Lender may, at no expense to the undersigned, in accordance with
the terms of agreements between the Lender and the Borrower, enter onto the
Premises at any time or times and take possession of, sever or remove the
Property or any part thereof and said Property upon such possession, severance
and/or removal may be sold, transferred or otherwise disposed of free and
discharged of all liens, claims, demands, rights or interests of the
undersigned.
(v) The undersigned agrees not to take any action to terminate the
Borrower's right to occupy the Premises or to have the Property located on the
Premises removed therefrom without thirty (30) days prior written notice to the
Lender at its address shown below. Prior to the undersigned taking any of the
actions described in the preceding sentence, the Lender shall have the right
(but not the obligation) to cure or cause to be cured any default by the
Borrower giving rise to such action within the following time periods from and
after receipt by the Lender of notice of such contemplated action from the
undersigned: ten (10) days more (with respect to monetary defaults) and
twenty-five (25) days more (with respect to nonmonetary defaults) than the
period of time granted to the Borrower to cure such defaults; PROVIDED, HOWEVER,
that if the nature of any non-monetary default is such that the same cannot be
cured within said 25 day period, the Lender shall be given such additional
period of time as may be necessary to cure the default provided that the Lender
commences the cure within said 25 day period and proceeds diligently thereafter
to complete such cure.
(vi) All terms and conditions of this Declaration and Agreement shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns or encumbrancers of the undersigned.
(vii) This Declaration and Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without regard to
its principles of conflict of laws.
(viii) This Declaration and Agreement may be recorded or filed in the
jurisdiction where the Premises are located.
<PAGE> 34
Executed this _____ day of ________________, 1996.
_________________________________
By_______________________________
Name:____________________________
Title:___________________________
Acknowledged and Agreed to this
__ day of __________, 1996:
CERION TECHNOLOGIES INC.,
as Borrower
By:______________________________ Attest:__________________________
Title:___________________________ Title:___________________________
LASALLE NATIONAL BANK
By:______________________________
Title:___________________________
<PAGE> 35
ANNEX A
PROPERTY
All of Borrower's right, title and interest in all personal property
and fixtures of the Borrower wherever located, whether now or hereafter
existing, owned, licensed, leased, consigned, arising or acquired (the
"Collateral"), including, without limitation, the Borrower's:
(i) Goods (including, without limitation, all of
the Borrower's Equipment, Fixtures and
Inventory) (as such Goods, Equipment,
Fixtures and Inventory are defined below);
(ii) Computer Hardware and Software (as defined
below) and all rights with respect thereto,
including, without limitation, any and all
licenses, options, warranties, service
contracts, program services, test rights,
maintenance rights, support rights,
improvement rights, renewal rights and
indemnifications and any substitutions,
replacements, additions or model conversions
of any of the foregoing;
together with: (x) all books, ledgers, books of account, records, writings, data
bases, information and other property relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to, any of the
foregoing; and (y) all proceeds, products, rents, issues, profits and returns of
and from any of the foregoing.
For purposes of this ANNEX A, terms shall have the following meanings
(which definitions shall be applicable to the singular and plural forms of such
terms):
"Computer Hardware and Software" shall mean
(i) all computer and other electronic data processing
hardware, integrated computer systems, central
processing units, memory units, display terminals,
printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power
equalizers, accessories and all peripheral devices
and other related computer hardware, whether now
owned, licensed or leased or hereafter acquired by
the Borrower; (ii) all software programs, whether now
owned, licensed or leased or hereafter acquired by
the Borrower, designed for use on the computers and
electronic data processing hardware described in
CLAUSE (i) above, including, without limitation,
operating system software, utilities and application
programs in whatsoever form (source code and object
code in magnetic tape, disk or hard copy format or
any other listings whatsoever); (iii) all firmware
associated therewith, whether now owned, licensed or
leased or hereafter acquired by the Borrower; and
(iv) all documentation
<PAGE> 36
for such hardware, software and firmware described in
the preceding CLAUSES (i), (ii) and (iii), whether
now owned, licensed or leased or hereafter acquired
by the Borrower, including, without limitation, flow
charts, logic diagrams, manuals, specifications,
training materials, charts and pseudo codes.
"Equipment" shall mean all furniture,
furnishings, fixtures, machinery and equipment of the
Borrower of every description used or useful in the
conduct of the Borrower's business, and all
accessories, accessions, additions, attachments,
substitutions, replacements, improvements, parts and
other property now or hereafter affixed thereto or
used in connection therewith.
"Fixture" shall have the meaning assigned to
such term in the Uniform Commercial Code.
"Goods" shall have the meaning assigned to
such term in the Uniform Commercial Code.
"Inventory" shall mean any and all goods,
merchandise and other personal property, including,
without limitation, goods in transit, wheresoever
located and whether now owned or hereafter acquired
by the Borrower which are or may at any time be held
for sale or lease, furnished under any contract of
service or held as raw materials, work in process,
supplies or materials used or consumed in the
Borrower's business, and all such property the sale
or other disposition of which has given rise to
Accounts and which has been returned to or
repossessed or stopped in transit by the Borrower.
"Person" shall mean any natural person,
corporation, partnership, limited liability company,
firm, association, government, governmental agency or
any other entity, whether acting in an individual,
fiduciary or other capacity.
"Uniform Commercial Code" shall mean the
Uniform Commercial Code as in effect in the State of
Illinois on the date of the Security Agreement.
2
<PAGE> 37
ANNEX B
LEGAL DESCRIPTION OF PREMISES
<PAGE> 38
STATE OF _________ )
) SS.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this ____ day of
__________, 19___, by ____________________, the __________ of
________________________, a ____________________.
WITNESS my hand and official seal.
_________________________________
Notary Public
My commission expires ___________
My address is
________________________________
________________________________
<PAGE> 39
STATE OF _________ )
) SS.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this ____ day of
__________, 19___, by ____________________, a ____________ of
____________________________, a __________________ corporation.
WITNESS my hand and official seal.
_________________________________
Notary Public
My commission expires ___________
________________________________
________________________________
<PAGE> 1
Exhibit 10.3
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of May 31, 1996,
is made by and between Cerion Technologies Inc., an Illinois corporation, as
pledgor and debtor (the "Borrower"), and LASALLE NATIONAL BANK, as pledgee and
secured party (the "Lender").
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower is the record and beneficial owner of certain shares
of stock and/or other securities set forth on Schedule I attached hereto (the
"Pledged Securities");
WHEREAS, Lender is requiring that the Borrower enter into this Agreement,
in order to induce the Lender to enter into, and to extend credit to the
Borrower pursuant to, the Credit Agreement, of even date herewith, between the
Borrower and the Lender (as the same may amended, modified, supplemented,
renewed or replaced from time to time, the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the parties agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, terms used herein
shall have the respective meanings ascribed to them in the Credit Agreement.
2. PLEDGE. The Borrower hereby pledges to the Lender, and grants to
the Lender a continuing, first priority security interest in, all of the
following (the "Pledged Collateral"):
(a) the Pledged Securities and the certificates representing the
Pledged Securities, and all dividends, earnings, interest, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or all of the
Pledged Securities;
(b) all additional shares of stock or other securities of Borrower from
time to time acquired by the Borrower in any manner (which shares shall be
deemed to be part of the Pledged Securities) and the certificates or other
instruments representing such securities, and all dividends, earnings, interest,
cash, instruments and other property or proceeds from time to time received,
receivable or otherwise distributed or distributable in respect of or in
exchange for any or all of such securities; and
<PAGE> 2
(c) all proceeds, products, rents, issues, profits and returns of and
from any of the foregoing.
3. SECURITY FOR OBLIGATIONS. This Agreement and the Pledged Collateral
are security for the prompt payment in full when due, whether at stated
maturity, by acceleration or otherwise, and the timely performance and
satisfaction of all Obligations, whether for principal, premium, interest, fees,
costs, expenses, or otherwise.
4. DELIVERY OF PLEDGED COLLATERAL. All certificates and instruments
representing or evidencing any Pledged Securities shall be promptly delivered by
the Borrower to the Lender and shall be accompanied by stock powers or other
instruments of transfer or assignment duly executed in blank, all in form and
substance satisfactory to the Lender. The Lender shall have the right, at any
time in its discretion and without notice to the the Borrower, to transfer to or
to register in the name of the Lender or its nominee, any or all of the Pledged
Securities. In addition, the Lender shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Securities for
certificates or instruments of smaller or larger denominations.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS. the Borrower represents
and warrants to, and covenants with, the Lender that:
(a) the Borrower is, and at the time of delivery of the Pledged
Securities to the Lender pursuant hereto will be, the sole holder of record and
the sole legal and beneficial owner of the Pledged Collateral, free and clear of
any Lien or third party claim of any kind thereon or affecting the title
thereto, except for the lien of the Lender created by this Agreement.
(b) All of the Pledged Securities have been duly authorized, validly
issued and are fully paid and non-assessable.
(c) the Borrower has the right and requisite power and authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral
to the Lender as provided herein.
(d) None of the Pledged Securities has been or will be issued or
transferred in violation of the securities registration, securities disclosure
or other securities or "blue sky" laws of any jurisdiction to which such
issuance or transfer may be subject.
(e) No consent, approval, authorization or other order of any person or
entity and no consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for (i) the pledge by the Borrower of the Pledged Collateral pursuant
to this Agreement, (ii) the execution, delivery or performance of this Agreement
by the Borrower, or (iii) the exercise by the Lender of the voting or other
rights provided for in this Agreement or the remedies in respect of the
disposition of Pledged Collateral pursuant to this Agreement, except as may be
required in connection with such disposition by laws affecting the offering and
sale of securities generally.
2
<PAGE> 3
(f) The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement will create in favor of the Lender a valid, perfected
first-priority lien security interest in the Pledged Collateral, securing the
payment of the Obligations.
The representations, warranties and covenants set forth in this Section 5
and Section 6 shall survive the execution and delivery of this Agreement, until
termination of the Revolving Loan Commitment and the full and final payment and
satisfaction of all Obligations.
6. ADDITIONAL COVENANTS. the Borrower further covenants and agrees
that:
(a) Without the prior written consent of the Lender, the Borrower shall
not sell, assign, transfer, pledge, or otherwise encumber or dispose of any of
the Pledged Collateral or any right or interest therein, including, without
limitation, any unpaid dividends or other distributions or payments with respect
thereto.
(b) the Borrower shall, at its own expense, promptly execute,
acknowledge and deliver all such instruments and take all such action as the
Lender from time to time may reasonably request in order to preserve, protect,
maintain and perfect the Lender's security interest in the Pledged Collateral
and other rights of the Lender intended to be created by this Agreement.
(c) the Borrower shall defend its title to the Pledged Collateral and
the lien of the Lender thereon against the claims of any other Person so long as
any of the Obligations (or the Revolving Loan Commitment) remain outstanding and
this Agreement remains in effect.
(d) the Borrower shall, upon obtaining any additional shares of capital
stock or other securities for any reason, promptly (and in any event within
three Business Days) deliver to the Lender the certificates or other instruments
representing such securities (including appropriate stock powers or other
assignments separate from certificate duly executed in blank), and take such
other actions as are requested by the Lender to subject such securities to the
lien of the Lender hereunder, and agrees that all such securities shall for all
purposes hereunder be considered Pledged Securities.
7. THE BORROWER'S RIGHTS. Notwithstanding anything to the contrary
herein, so long as no Default shall have occurred and be continuing, the
Borrower shall have the right, from time to time, to receive all dividends and
distributions payable in cash with respect to the Pledged Securities, and to
vote and give consents with respect to any voting securities constituting part
of the Pledged Collateral for all purposes not inconsistent with the provisions
of this Agreement, the Credit Agreement or any other Loan Document; provided,
however, that no vote shall be cast, and no consent shall be given or action
taken, which would adversely affect the position, rights or interest of the
Lender in respect of any Pledged Collateral or give rise to a Default.
8. DEFAULTS AND REMEDIES. (a) Upon the occurrence of an Event of
Default, the Lender may exercise in addition to all other rights and remedies
granted herein, the rights and remedies of
3
<PAGE> 4
a creditor and a secured party under the Uniform Commercial Code of the State of
Illinois and other applicable law. Without limiting the foregoing, upon the
occurrence of an Event of Default, the Lender (personally or through an agent)
is hereby authorized and empowered, to transfer and register in its name or in
the name of its nominee, the whole or any part of the Pledged Collateral, to
exercise any voting rights with respect thereto, to collect and receive all cash
dividends and other distributions made thereon, to sell in one or more sales
after ten (10) days's notice of the time and place of any public sale or of the
time after which a private sale is to take place (which notice the Borrower
agrees is commercially reasonable), but without any previous notice or
advertisement, the whole or any part of the Pledged Collateral, and to otherwise
act with respect to the Pledged Collateral as though the Lender were the
outright owner thereof, the Borrower hereby irrevocably constituting and
appointing the Lender as the proxy and attorney-in-fact of the Borrower, with
full power of substitution to do so; provided, however, the Lender shall not
have any duty to exercise any such right or to preserve the same and shall not
be liable for any failure to do so or for any delay in doing so. Any sale shall
be made at a public or private sale, either for cash or upon credit or for
future delivery at such price as the Lender may deem fair, and the Lender may be
the purchaser of the whole or any part of the Pledged Collateral so sold, free
from any claim of the Borrower or any right of redemption. Each sale at auction
shall be made to the highest bidder, but the Lender reserves the right to reject
any and all bids at such sale which, in its discretion, shall be deemed
inadequate. Demands of performance, except as otherwise herein specifically
provided for, notices of sale, advertisements and the presence of property at
sale are hereby waived and any sale hereunder may be conducted by an auctioneer
or any officer or agent of the Lender.
(b) If, at any time when the Lender shall determine to exercise its
rights to sell the whole or any part of the Pledged Collateral hereunder, such
Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as
amended, or similar statute then in effect (the "Act"), the Lender may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as the Lender may deem necessary or advisable, and shall not be
required to effect such registration or to cause the same to be effected.
(c) The Borrower acknowledges that notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above, the Lender may, in its discretion, elect to register any or all the
Pledged Collateral under the Act (or any applicable state securities law) in
accordance with its rights hereunder, and the costs and expenses of such
registration shall constitute Obligations payable on demand of the Lender. The
Borrower, however, recognizes that the Lender may be unable to effect a public
sale of any or all the Pledged Collateral and may be compelled to resort to one
or more private sales thereof. The Borrower also acknowledges any such private
sale (conducted in a commercially reasonable manner for private sales) may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially
reasonable manner. The Lender shall be under no obligation to delay a sale of
any of the Pledged Collateral for the period of time necessary to permit the
registrant to register such securities for public sale under the Act, or under
applicable state securities laws.
4
<PAGE> 5
(d) The Borrower agrees that following the occurrence of an Event of
Default, it will not at any time plead, claim or take the benefit of any
appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder, and
the Borrower waives the benefit of all such laws to the extent it lawfully may
do so. The Borrower agrees that it will not interfere with any right, power and
remedy of the Lender provided for in this Agreement or now or hereafter existing
at law or in equity or by statute or otherwise, or the exercise or beginning of
the exercise by the Lender of any one or more of such rights, powers or
remedies. No failure or delay on the part of the Lender to exercise any such
right, power or remedy and no notice or demand which may be given to or made
upon the Borrower by the Lender with respect to any such remedies shall operate
as a waiver thereof, or limit or impair the Lender's right to take any action or
to exercise any power or remedy hereunder, without notice or demand, or
prejudice its rights as against the Borrower in any respect.
9. APPLICATION OF PROCEEDS. Any and all cash proceeds received by the
Lender in respect of any sale or liquidation of, or other realization upon, all
or any part of the Pledged Collateral shall be applied by the Lender as follows:
(a) First, to the payment of the costs and expenses of the Lender in
connection with the care, safekeeping, collection, sale, disposition, delivery,
or otherwise in connection with the enforcement of its rights and remedies,
including reasonable compensation to the Lender and its agents and counsel, and
all expenses, liabilities and advances made or incurred by the Lender in
connection therewith;
(b) Second, to the payment in whole or in part of the Obligations, in
amounts and in such order of application as the Lender, in its sole discretion,
shall determine; and
(c) Third, after payment in full of all Obligations, to the payment to
the Borrower or to whomsoever may be lawfully entitled to receive the same, or
as a court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
10. ASSIGNMENT. the Lender may assign, indorse or transfer any
instrument evidencing all or any part of the Obligations as provided in, and in
accordance with the Credit Agreement, and the holder of such instrument shall be
entitled to the benefits of this Agreement.
11. LIEN ABSOLUTE. All rights of the Lender hereunder, and all
obligations of the Borrower hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of any Loan Document or
other agreement or instrument governing or evidencing or relating to the
Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any part of the Obligations, or any other amendment or
waiver of or any consent to any departure
5
<PAGE> 6
from any Loan Document or other agreement or instrument governing, evidencing or
relating to the Obligations;
(c) any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Borrower.
12. WAIVER. the Borrower consents and agrees that the Lender may at any
time, or from time to time, in its discretion (a) renew, extend or change the
time of payment, and/or the manner, place or terms of payment of all or any part
of the Obligations and (b) exchange, release and/or surrender all or any of the
Pledged Collateral, or any part thereof, by whomsoever deposited all in such
manner and upon such terms as the Lender may deem proper, and without notice to
or further assent from the Borrower, it being hereby agreed that the Borrower
shall be and remain bound by this Agreement, irrespective of the existence,
value or condition of any of the Pledged Collateral, and notwithstanding any
such change, exchange, settlement, compromise, surrender, release, renewal or
extension, and notwithstanding also that the Obligations may at any time exceed
the aggregate principal amount thereof set forth in any agreement governing any
Obligations. The Borrower hereby waives notice of acceptance of this Agreement,
and also presentment, demand, protest and notice of dishonor of any and all of
the Obligations, and promptness in commencing suit against any party hereto or
liable hereon, and in giving any notice to or of making any claim or demand
hereunder upon such the Borrower. No act or omission of any kind on any the
Lender's part shall in any event affect or impair this Agreement. No delay on
the Lender's part in exercising any power of sale, option or other right
hereunder, and no notice or demand which may be given to or made upon the
Borrower by the Lender with respect to any power of sale, option or other right
hereunder, shall constitute a waiver thereof, or limit or impair any of the
Lender's rights to take any action or to exercise any power of sale, option, or
any other right hereunder, without notice or demand, or prejudice the Lender's
rights as against the Borrower in any respect.
13. INDEMNIFICATION. The Borrower agrees to indemnify and hold the
Lender harmless from and against any taxes, liabilities, claims and damages,
including reasonable attorney's fees and disbursements, and other expenses
incurred or arising by reason of the taking or the failure to take any action by
the Lender, in respect of any transaction effected under this Agreement or in
connection with the lien provided for herein, including, without limitation, any
taxes payable in connection with the delivery or registration of any of the
Pledged Collateral as provided herein, other than claims and damages arising as
the result of the gross negligence or willful misconduct of the Lender. The
obligations of the Borrower under this Section 13 shall survive the termination
of this Agreement.
6
<PAGE> 7
14. TERMINATION. Subject to the terms hereof (including Section 15),
the pledge hereunder shall be deemed released when all of the Obligations have
been fully and finally paid and performed and the Revolving Loan Commitment
shall have terminated.
15. EFFECTIVENESS. This Agreement and the pledge hereunder shall remain
in full force and effect and continue to be effective should any petition be
filed by or against the Borrower for liquidation or reorganization, should the
Borrower become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of the
Borrower's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned, and in any such case, the Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
16. MISCELLANEOUS.(a) the Lender may execute any of its duties
hereunder by or through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties hereunder.
(b) the Borrower agrees to promptly reimburse the Lender for actual
out-of-pocket expenses, including, without limitation, reasonable counsel fees,
incurred by such the Lender in connection with the administration and
enforcement of this Agreement.
(c) Neither the Lender nor any of its officers, directors, employees,
agents or counsel shall be liable for any action lawfully taken or omitted to be
taken by it or them hereunder, under the Guaranty, under the Credit Agreement or
otherwise in connection herewith, except for its or their own gross negligence
or willful misconduct.
(d) This Agreement shall be binding upon the Borrower and its legal
representatives, successors and assigns, and shall inure to the benefit of, and
be enforceable by, the Lender and its successors, assigns and legal
representatives, and shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois without giving effect to
principles of choice of law, and none of the terms or provisions of this
Agreement may be waived, altered, modified or amended except in writing duly
signed for and on behalf of the Borrower and the Lender.
17. SEVERABILITY. If for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or effect those portions of this
Agreement which are valid.
18. NOTICES. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be delivered in
accordance
7
<PAGE> 8
with the provisions of the Credit Agreement, if to the Lender at its
address for notices set forth in the Credit Agreement, and if to the Borrower,
at its address set forth in the Credit Agreement.
19. SECTION TITLES. The Section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be duly executed as of the date first written above.
CERION TECHNOLOGIES INC.
By: SSA Richard A. Clark
----------------------------------
Title: Vice President - Finance
----------------------------
LASALLE NATIONAL BANK
By: SSA Kent A. Hammerstorm
----------------------------------
Title: First Vice President
----------------------------
9
<PAGE> 1
-10-
EXHIBIT 11.1
<TABLE>
CERION TECHNOLOGIES INC.
COMPUTATION OF NET INCOME
PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
For the Three Months Ended
--------------------------
June 28, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Net income $2,204 $ 974
====== ======
Shares:
Weighted average common shares outstanding during the period 6,039 5,400
------ ------
Common equivalent shares -- --
------ ------
Net income per common share: 6,039 5,400
====== ======
$ 0.36 $ 0.18
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-28-1996
<EXCHANGE-RATE> 1
<CASH> 3,741
<SECURITIES> 3,932
<RECEIVABLES> 9,739
<ALLOWANCES> 139
<INVENTORY> 318
<CURRENT-ASSETS> 18,120
<PP&E> 11,976
<DEPRECIATION> 3,659
<TOTAL-ASSETS> 26,522
<CURRENT-LIABILITIES> 5,266
<BONDS> 0
<COMMON> 70
0
0
<OTHER-SE> 20,843
<TOTAL-LIABILITY-AND-EQUITY> 26,522
<SALES> 25,214
<TOTAL-REVENUES> 25,214
<CGS> 15,554
<TOTAL-COSTS> 15,554
<OTHER-EXPENSES> 2,868
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 6,753
<INCOME-TAX> 2,701
<INCOME-CONTINUING> 4,052
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,052
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
