<PAGE> 1
FOR INFORMATION ONLY
This registration statement has been filed with the Securities and Exchange
Commission but has not yet become effective. Information contained herein is
subject to completion or amendment.
As filed with the Securities and Exchange Commission on January 15, 1997.
--------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
POST-EFFECTIVE AMENDMENT NO. 1
FORM 10/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------
CA SHORT COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 56-0526145
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4205 East Dixon Boulevard, Shelby, North Carolina 28150
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 482-9591
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to Name of each exchange on which
be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
(Title of Class)
================================================================================
<PAGE> 2
CA SHORT COMPANY
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
ITEM 1. BUSINESS.
The information required by this item is set forth under the captions
"Summary," "Risk Factors," "Management's Discussion and Analysis of Results of
Operations," and "Business" in the Information Statement and is incorporated
herein by reference.
ITEM 2. FINANCIAL INFORMATION.
The information required by this item is set forth under the captions
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Information Statement and
is incorporated herein by reference.
ITEM 3. PROPERTIES.
The information required by this item is set forth under the caption
"Business -- Properties" in the Information Statement, and is incorporated
herein by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is set forth under the captions
"Security Ownership of Certain Beneficial Owners and Management" in the
Information Statement, and is incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this item is set forth under the captions
"Management -- Directors and Executive Officers of the Company" in the
Information Statement, and is incorporated herein by reference.
ITEM 6. EXECUTIVE COMPENSATION.
The information required by this item is set forth under the captions
"Management -- Compensation of Directors," and "Management -- Executive
Compensation" in the Information Statement, and is incorporated herein by
reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is set forth under the caption
"Certain Relationships and Related Transactions" in the Information Statement,
and is incorporated herein by reference.
ITEM 8. LEGAL PROCEEDINGS.
None
<PAGE> 3
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The information required by this item is set forth under the captions
"Summary -- The Distribution -- Trading Market," "The Distribution -- Trading
Market for Short Common Stock," "Risk Factors -- Absence of Public Market,
Possible Illiquidity of Trading Market, Possible Volatility of Stock Price" and
"Price Range of Pages Common Stock" in the Information Statement, and is
incorporated herein by reference.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The registrant has not sold any of its securities within the past three
years.
ITEM 11. DESCRIPTION OF SECURITIES.
The information required by this item is set forth under the caption
"Description of Capital Stock" in the Information Statement, and is
incorporated herein by reference.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The information required by this item is set forth under the caption
"Indemnification of Officers and Directors" in the Information Statement, and
is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is set forth under the captions
"Selected Financial Data"; "Pro Forma Financial Data," "CA Short Company
Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Capitalization" in the Information
Statement, and is incorporated herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by this item is set forth under the caption
"Independent Auditors" in the Information Statement and is incorporated
herein by reference.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
See Index to Financial Statements on Page F-1 of the Information
Statement, which is incorporated herein by reference.
(b) EXHIBITS.
See Exhibit Index.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
CA SHORT COMPANY
By: /s/ S. Robert Davis
-------------------------------
Name: S. Robert Davis
Title: Chairman of the Board
Date: January 14, 1997
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<S> <C>
(2) Agreement and Plan of Merger +
3(i).1 Certificate of Incorporation of Clyde A. Short Incorporated +
3(i).2 Certificate of Amendment to Certificate of Incorporation of Clyde A. Short
Incorporated +
3(ii) Bylaws of CA Short Company +
4 Form of Stock Certificate +
8 Form of Opinion of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. +
10.1 Distribution Agreement between the Company and Pages, Inc.
10.2 CA Short Company 1996 Incentive Stock Option Plan +
10.3 Form of Subordinated Debenture+
10.4 Form of Security Agreement+
10.5 Huntington Loan Documents:
10.5.1 Loan and Security Agreement
10.5.2 Revolving Note
10.5.3 Commercial Letter of Credit Reimbursement Agreement
10.5.4 Deed of Trust, Assignment of Rents and Security Agreement
10.5.5 Debt Subordination and Intercreditor Agreement
10.6 CA Short Company Non-Employee Director Stock Option Plan +
23 Consent of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. +
27 Financial Data Schedule (for SEC use only) +
99 Fairness Opinion of Recca & Company, Inc. +
</TABLE>
- ---------------
+ Previously filed.
<PAGE> 1
EXHIBIT 10.1
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement"), is made as of the 31st
day of December, 1996, between PAGES, INC., a Delaware Corporation
("Pages"), and CA SHORT COMPANY, a Delaware Corporation ("CA Short").
BACKGROUND STATEMENTS:
A. Pages is the holder of all the issued and outstanding shares of
capital stock of CA Short.
B. It is the intention of Pages to distribute approximately all of the
currently issued and outstanding capital stock of CA Short held by it to the
stockholders of Pages.
C. Pages and CA Short have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
such distribution and to set forth other agreements that will govern certain
other matters following such distribution.
In consideration of the mutual covenants and agreements made herein,
the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 GENERAL. As used in this Agreement and the Exhibits hereto, the
following terms shall have the following meanings:
ACTION: any action, suit arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: a legal entity or association which, directly or
indirectly, is controlled by, is in control of, or under common control with
the legal entity or association with reference to which the term "affiliate" is
used.
ASSUMED LIABILITIES: all liabilities arising from the conduct or
operation of the CA Short Business or the ownership, or use of assets in
connection therewith whether arising before, on or after the Distribution Date,
including without limitation, CA Short employee benefit plans and the
Liabilities set forth or referred to in the audited financial statements of CA
Short included within the Form 10.
<PAGE> 2
CA SHORT BUSINESS: the business involving the creation, marketing and
administration of safety, sales incentive, service recognition, and holiday
gift awards programs for businesses.
CODE: the Internal Revenue Code of 1986, as amended, or, as the
context may require, the Internal Revenue Code applicable to the
pre-Distribution year in question.
COMMISSION: the Securities and Exchange Commission.
DETERMINATION: means a "determination" as defined by Section 1313(a)
of the Code.
DISTRIBUTION: the distribution to holders of Pages Common Stock of all
of the shares of Short Common Stock owned by Pages.
DISTRIBUTION AGENT: The Huntington National Bank as distribution
agent appointed by Pages to assist in the distribution of copies for the
Information Statement and to distribute certificates for shares of Short Common
Stock pursuant to the Distribution.
DISTRIBUTION DATE: the date of effecting the Distribution, which shall
occur on the Record Date.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
FORM 10: the registration statement on Form 10 to be filed by CA Short
with the Commission to effect the registration of Short Common Stock pursuant to
the Exchange Act, as such registration statement may be amended from time to
time.
INCOME TAXES: means all Taxes based upon or measured by income.
INFORMATION STATEMENT: the information statement, constituting a part
of the Form 10, in the form to be distributed to the holders of Pages Common
Stock as of the Record Date in connection with the Distribution, and as it may
be amended or supplemented subsequent to such dissemination.
IRS: means the Internal Revenue Service.
LIABILITIES: any and all claims, debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating thereto,
and those debts, liabilities and obligations arising under any law, rule,
regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitration of any kind, and those
arising under any contract, commitment or undertaking.
PAGES BUSINESS: the business involving the publishing and distribution
of children's leisure-based literature.
PAGES COMMON STOCK: the shares of common stock, par value $.01 per
share, of Pages.
PAGES LIABILITIES: all of (i) the Liabilities of Pages under this
Agreement, and (ii) the Liabilities of Pages, whether arising before, on or
after the Distribution Date.
RECORD DATE: the close of business on December 31, 1996.
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<PAGE> 3
RETURN: means returns, reports and forms required to be filed with
respect to Taxes.
SHORT COMMON STOCK: the shares of common stock, par value $.01 per
share, of CA Short.
SHORT LIABILITIES: all of (i) the Liabilities of CA Short under this
Agreement, (ii) the Assumed Liabilities, and (iii) the Liabilities arising out
of any of the documents or instruments executed and delivered by CA Short
pursuant to the transactions contemplated hereby.
TAXES: means all taxes (whether federal, state, local or foreign)
based upon or measured by income and any other tax whatsoever, including,
without limitation, gross receipts, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, capital stock, net worth, withholding,
payroll, employment, excise, or property taxes, together with any interest or
penalties imposed with respect thereto.
TAXING AUTHORITY: means governmental authority, domestic or foreign,
having jurisdiction over the assessment, determination, collection, or other
imposition of taxes.
TAX LAWS: means the Code, federal, state, county, local, or foreign
laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
ARTICLE II
THE DISTRIBUTION
2.01 COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Subject to the provisions of Section 2.02, Pages and CA
Short shall prepare, and CA Short shall file with the Commission, the Form 10
which shall include the Information Statement. Pages and CA Short shall use
reasonable efforts to cause the Form 10 to become effective under the
Exchange Act. Pages and CA Short shall prepare, and Pages shall mail to the
holders of Pages Common Stock as of the Record Date, the Information Statement,
which shall set forth appropriate disclosure concerning CA Short, the
Distribution and any other appropriate matters.
(b) CA Short shall use its reasonable best efforts to cause at
least one securities broker to agree to act as a market maker for the Short
Common Stock on the NASD OTC Electronic Bulletin Board Service.
(c) In addition to the Activities specifically provided for
elsewhere herein, each of Pages and CA Short will use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable
laws, regulations and agreements to consummate and make effective the
transactions contemplated by this Agreement.
2.02 PAGES BOARD ACTION; CONDITIONS PRECEDENT TO THE DISTRIBUTION.
Pages' Board of Directors shall, in its discretion, establish the Record Date
and the Distribution Date and any
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<PAGE> 4
appropriate procedures in connection with the Distribution. In no event shall
the Distribution occur unless the following conditions shall, unless waived by
Pages, have been satisfied:
(a) Pages' Board of Directors shall have finally approved the
Distribution;
(b) the Distribution shall be payable in accordance with applicable
law and all necessary regulatory approvals shall have been received;
(c) the Form 10 shall have become effective under the Exchange Act;
(d) Pages shall have received a favorable response to its request to
the Commission for "no-action" and "interpretative" positions with respect to
the Distribution;
(e) Pages shall have received the opinion in form and substance
acceptable to it of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. (the
"Tax Opinion") to the effect that there is a reasonable basis for treating the
Distribution as a transaction qualifying under Section 355 of the Internal
Revenue Code the Distribution will be a tax-free spin-off under the Code;
(f) CA Short shall have executed and delivered to Pages a subordinated
promissory note in the principal amount of $5,000,000 payable to Pages bearing
interest at the rate of 7% per annum, payable as described in the Form 10;
(g) Pages' lender shall have consented to the Distribution CA Short;
(h) CA Short shall have received a commitment for a credit facility in
the minimum amount of $4.5 million upon terms acceptable to Pages' Board of
Directors;
(i) Pages Board of Directors shall have received a fairness opinion
with respect to the Distribution from an investment banking firm;
(j) CA Short shall have obtained insurance (or binders therefor)
providing coverage to CA Short and its directors and officers for Director and
Officer Liability matters reasonably satisfactory to CA Short; and
(k) no preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental
regulatory or administrative agency or commission and no statute, rule,
regulation or executive order promulgated by any governmental authority shall
be in effect which would make illegal or otherwise prevent the Distribution.
2.03 THE DISTRIBUTION. The Distribution shall be effective on the
Distribution Date and Pages shall no longer be the owner of any shares of Short
Common Stock as of that date even though certificates evidencing the ownership
of Short Common Stock are not mailed until later. On the Distribution Date,
subject to the conditions set forth in this Agreement, Pages shall deliver to
the Distribution Agent a certificate or certificates representing all of the
Short Common Stock then held by Pages, endorsed in blank, and shall instruct
the Distribution Agent, except as otherwise provided in Section 2.04, to
distribute to each holder of record of Pages Common Stock on the Record Date a
certificate or certificates representing one and one half shares of Short
Common Stock for each ten shares of Pages
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<PAGE> 5
Common Stock so held. CA Short agrees to provide all certificates for shares
of CA Short Common Stock that the Distribution Agent shall require in order to
effect the Distribution.
2.04 SALE OF FRACTIONAL SHARES. The Distribution Agent shall not
distribute any fractional share of Short Common Stock ("Fractional Share") to
any holder of Pages Common Stock. The Distribution Agent shall aggregate all
such Fractional Shares and sell them in an orderly manner after the Distribution
Date in the open market and, after completion of such sales and within
forty-five (45) trading days after the Distribution Date, distribute a pro rata
portion of the proceeds from such sales, based upon the average gross selling
price of all such Short Common Stock, less appropriate deductions of any amount
required for tax withholding purposes and a pro rata portion of the aggregate
brokerage charges, commissions and transfer taxes payable in connection with
such sales, to each holder of Pages Common Stock who would otherwise have
received a Fractional Share.
2.05 FEES AND EXPENSES OF DISTRIBUTION AGENT. The fees and expenses of
the Distribution Agent shall be paid by Pages.
2.06 COOPERATION AFTER THE DISTRIBUTION. CA Short shall use its
reasonable best efforts to ensure that the representations of CA Short set
forth in the Tax Opinion are true and correct and continue after the
Distribution to be true and correct.
ARTICLE III
TRANSITION ARRANGEMENTS
3.01 CONDUCT OF CA SHORT BUSINESS PENDING DISTRIBUTION. Prior to the
Distribution Date, CA Short shall not, without the prior consent in writing of
Pages, make any public announcement or issue any press release regarding the
Distribution and each of Pages and CA Short shall use its best efforts not to
take any action which may prejudice or delay the consummation of the
Distribution.
3.02 SUBORDINATED NOTE. On the Distribution Date, CA Short shall
execute and deliver to Pages a Subordinated Note in the principal amount of
$5,000,000 and Security Agreement as described in the Form 10.
ARTICLE IV
INDEMNIFICATION
4.01 CA SHORT INDEMNIFICATION OF PAGES. On and after the Distribution
Date, CA Short shall indemnify, defend and hold harmless Pages and each of its
directors, officers and Affiliates other than CA Short (the "Pages Indemnitees")
from and against any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorney's fees and expenses in connection with any and all Actions or
threatened Actions) (collectively, "Indemnifiable Losses") incurred or suffered
by any of the Pages Indemnitees and arising out of, or due to the failure of CA
Short to pay, perform or otherwise discharge, any of the Short Liabilities.
5
<PAGE> 6
4.02 PAGES INDEMNIFICATION OF CA SHORT. On and after the Distribution
Date, Pages shall indemnify, defend and hold harmless CA Short and each of its
directors, officers and Affiliates other than Pages (the "Short Indemnitees")
from and against any and all Indemnifiable Losses incurred or suffered by any of
the Short Indemnitees and arising out of, or due to the failure of Pages to pay,
perform or otherwise discharge, any of the Pages Liabilities.
4.03 CA SHORT RELEASE OF CLAIMS AGAINST PAGES INDEMNITIES. Except as
otherwise provided in this Agreement, CA Short hereby releases, effective upon
the Distribution Date, the Pages Indemnitees from and against any claim that CA
Short may have against any such Pages Indemnitee which relates to events,
actions or omissions taken or occurring prior to the distribution Date;
provided, however, that the foregoing release shall not apply to Pages'
obligations to satisfy any of the Pages Liabilities.
ARTICLE V
INDEMNIFICATION PROCEDURES
5.01 NOTICE AND PAYMENT OF CLAIMS. If any Pages Indemnitee or Short
Indemnitee (the "Indemnified Party") determines that it is or may be entitled to
indemnification by any party (the "Indemnifying Party") under Article IV (other
than in connection with any Action or claim subject to Section 5.02), the
Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party believes it is
entitled to be indemnified. After the Indemnifying Party shall have been
notified of the amount for which the Indemnified Party seeks indemnification,
the Indemnifying Party shall, within thirty (30) days after receipt of such
notice, pay the Indemnified Party such amount in cash or other immediately
available funds unless the Indemnifying Party objects to the claim for
indemnification or the amount thereof. If the Indemnifying Party does not give
the Indemnified Party written notice objecting to such claim and setting forth
the grounds therefor within the same 30-day period, the Indemnifying Party shall
be deemed to have acknowledged its liability for such claim and the Indemnified
Party may exercise any and all of is rights under applicable law to collect such
amount.
5.02 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. Promptly following the
earlier of (a) receipt of notice of the commencement by a third party of any
Action against or otherwise involving any Indemnified Party or (b) receipt of
information from a third party alleging the existence of a claim against an
Indemnified Party, in either case, with respect to which indemnification may be
sought pursuant to this Agreement (a "Third-Party Claim"), the Indemnified Party
shall give the Indemnifying Party written notice thereof. The failure of the
Indemnified Party to give notice as provided in this Section 5.02 shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent that the Indemnifying Party is prejudiced by such failure to give
notice. Within 30 days after receipt of such notice, the Indemnifying Party may
(a) by giving written notice thereof to the Indemnified Party, acknowledge
liability for and at its option elect to assume the defense of such Third-Party
Claim at its sole cost and expense or (b) object to the claim of indemnification
set forth in the notice delivered by the Indemnified Party pursuant to the first
sentence of this Section 5.02; provided that if the Indemnifying Party does not
within the same 30 day period give the Indemnified Party
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<PAGE> 7
written notice objecting to such claim and setting forth the grounds therefor,
the Indemnifying Party shall be deemed to have acknowledged its liability for
such Third-Party Claim. Any contest of a Third-Party Claim as to which the
Indemnifying Party has elected to assume the defense shall be conducted by
attorneys employed by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party; provided that the Indemnified party shall have the right to
participate in such proceedings and to be represented by attorneys of its own
choosing at the Indemnified Party's sole cost and expense. If the Indemnifying
Party assumes the defense of a Third-Party Claim, the Indemnifying Party may
settle or compromise the claim without the prior written consent of the
Indemnified Party; provided that the Indemnifying Party may not agree to any
such settlement pursuant to which any such remedy or relief, other than
monetary damages for which the Indemnifying Party shall be responsible
hereunder, shall be applied to or against the Indemnified Party, without the
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Notwithstanding anything in this Article V to the
contrary, such Indemnifying Party shall not waive its attorney-client privilege
in connection with such Third-Party Claim without the prior written consent of
the Indemnified Party. If the Indemnifying Party does not assume the defense of
a Third-Party Claim for which it has acknowledged liability of indemnification
under Article IV, the Indemnified Party may require the Indemnifying Party to
reimburse it on a current basis for its reasonable expenses of investigation,
reasonable attorney's fees and reasonable out-of-pocket expenses incurred in
defending against such Third-Party Claim and the Indemnifying Party shall be
bound by the result obtained with respect thereto by the Indemnified Party;
provided that the Indemnifying Party shall not be liable for any settlement
effected without its consent, which consent shall not be unreasonably withheld.
The Indemnifying Party shall pay to the Indemnified Party in cash the amount
for which the Indemnified Party is entitled to be indemnified (if any) within
fifteen (15) days after the final resolution of such third-Party Claim (whether
by the final nonappealable judgment of a court of competent jurisdiction or
otherwise) or, in the case of any Third-Party Claim as to which the
Indemnifying Party has not acknowledged liability, within fifteen (15) days
after such Indemnifying Party's objection has been resolved by settlement,
compromise or the final nonappealable judgment of a court of competent
jurisdiction.
ARTICLE VI
ACCESS TO INFORMATION AND SERVICES
6.01 PROVISION OF CORPORATE RECORDS. Upon CA Short's request, Pages
shall arrange as soon as practicable following the Distribution Date for the
delivery to CA Short of existing CA Short corporate records in the possession of
Pages, together with all active agreements and any active litigation files
relating to the CA Short Businesses, except to the extent such items are already
in the possession of CA Short. Such records shall be the property of CA Short,
but shall be available to Pages for review and duplication until Pages shall
notify CA Short in writing that such records are no longer of use to Pages.
6.02 ACCESS TO INFORMATION. From and after the Distribution Date, Pages
shall afford to CA Short and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to all records, books, contracts,
7
<PAGE> 8
instruments, computer data and other data and information (collectively,
"Information") within Pages' possession relating to the CA Short Business,
insofar as such access is reasonably required by CA Short. CA Short shall afford
to Pages and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to Information within CA Short's possession relating to
the Pages Business, insofar as such access is reasonably required by Pages.
Information may be requested under this Article VI for, without limitation,
audit, accounting, claims, litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations and for performing the
transactions contemplated in this Agreement.
6.03 SECURITIES FILINGS. For a period of five years following the
Distribution Date, each of Pages and CA Short shall provide to the other,
promptly following such time at which such documents shall be filed with the
Commission, copies of all documents which shall be publicly filed with the
Commission pursuant to the periodic and interim reporting requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder.
6.04 PROVISION OF SERVICES. Following the Distribution Date, each party
upon written request, shall make available to the other party, during normal
business hours and in a manner that will not unreasonably interfere with such
party's business, its financial, tax, accounting, legal, employee benefits and
similar staff services (collectively "Services") whenever and to the extent that
they may be reasonably required in connection with the preparation of tax
return, audits, claims, litigation or administration of employee benefit plans,
and otherwise to assist in effecting an orderly transition following the
Distribution.
6.05 PRODUCTION OF WITNESSES. At all times from and after the
Distribution Date, each of Pages and CA Short shall use reasonable efforts to
make available to the other, upon written request, its officers, directors,
employees and agents as witnesses to the extent that such persons may reasonably
be required in connection with legal, administrative or other proceedings in
which the requesting party may from time to time be involved.
6.06 REIMBURSEMENT. A party providing Information or Services to the
other party under this Article VI shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such information or services.
6.07 RETENTION OF RECORDS. For the period of five (5) years following
the Distribution Date, each of Pages and CA Short shall retain all information
relating to the other, except as otherwise required by law or except to the
extent that such information is in the public domain or in the possession of the
other party; provided, however, after the expiration of such retention period,
such information shall not be destroyed or otherwise disposed of at any time,
unless, prior to such destruction or disposal (a) the party proposing to destroy
or otherwise dispose of such information provide not less than ninety (90) days
prior written notice to the other, specifying in reasonable detail the
information proposed to be destroyed or disposed of and (b) if a recipient of
such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the information proposed to be destroyed or
disposed of be delivered to such
8
<PAGE> 9
requesting party, the party proposing the destruction or disposal shall
promptly arrange for the delivery of such of the information as was requested,
at the expense of the party requesting such information.
6.08 CONFIDENTIALITY. Subject to any contrary requirement of law and
the right of each party to enforce its rights hereunder in any legal action,
each party shall keep strictly confidential and cause its employees and agents
to keep strictly confidential any information of or concerning the other party
which it or any of its agents or employees may acquire pursuant to, or in the
course of performing its obligations under any provisions of this Agreement;
provided, however, that such obligation to maintain confidentiality shall not
apply to information which (i) at the time of disclosure was in the public
domain, not as a result of improper acts by the receiving party, (ii) was
already independently in the possession of the receiving party at the time
of disclosure or (iii) is received by the receiving party from a third party who
did not receive such information from the disclosing party under an obligation
or confidentiality.
ARTICLE VII
TAX MATTERS
7.01 TAX INDEMNIFICATION BY PAGES. Pages shall indemnify and hold CA
Short and any successor corporation thereto or Affiliate thereof harmless from
and against the following Taxes arising from or attributable to the business or
operations of CA Short or Pages or their respective Affiliates:
(a) any and all Taxes arising in or attributable to any
taxable period ending (or deemed, pursuant to Section 7.03, to end) on or before
the Distribution Date except for Taxes of CA Short which are not yet due and
payable as of the Distribution Date and are provided for in the financial
statements of CA Short; and
(b) any several liability of such Pages and CA Short under
Treasury Regulations Section 1.1502 - 6 or under any comparable or similar
provisions under state, local or foreign laws or regulations for periods ending
on or prior to the Distribution Date.
7.02 TAX INDEMNITY BY CA SHORT. CA Short shall indemnify and hold Pages
and any successor corporations thereto and any Affiliates (other than Pages)
thereof harmless from and against the following Taxes arising from or
attributable to the CA Short Business: (a) any and all Taxes arising in or
attributable to any taxable period beginning (or deemed, pursuant to Section
7.03, to begin) after the Distribution Date, due or payable by CA Short or by
Pages; (b) Taxes arising in or attributable to any taxable period ending (or
deemed pursuant to Section 7.03, to end) on or before the Distribution Date to
the extent provided for in the financial statements of CA Short and not yet due
and payable as of the Distribution Date. CA Short shall not be obligated
hereunder to indemnify Pages in the event that the Distribution does not
constitute a tax-free spin-off under Section 355 of the Internal Revenue Code.
7.03 ALLOCATION OF CERTAIN TAXES:
(a) CA Short and Pages agree that if CA Short or Pages are
permitted but not required under applicable foreign, state or local tax laws to
treat the Distribution Date as the last day of a taxable
9
<PAGE> 10
period, CA Short and Pages shall treat such day as the last day of a taxable
period. CA Short and Pages agree that they will treat CA Short as if such
entity ceased to be part of Pages' affiliated group, within the meaning of
Section 1504 of the Code, as of the close of business on the Distribution Date.
(b) Any Taxes for a taxable period beginning before the
Distribution Date and ending after the Distribution Date with respect to CA
Short shall be paid by Pages or CA Short, and the Taxes for such period shall be
apportioned for purposes of Section 7.01 and Section 7.02 between Pages and CA
Short based on the portion of such period ending on the Distribution Date and
the portion of such period beginning on the day following the Distribution Date,
and for purposes of this Agreement, each portion of such period shall be deemed
to be a taxable period (whether or not it is in fact a taxable period).
7.04 FILING RESPONSIBILITY.
(a) Pages shall prepare and file or shall cause CA Short to
prepare and file the following Returns with respect to CA Short:
(i) all Returns relating to Taxes for any
taxable period ending on or before the
Distribution Date other than Returns for
Taxes referred to in Section 7.03(b), and
(ii) all other Returns required to be filed
(taking into account extensions) on or
before the Distribution Date.
(b) CA Short shall, subject to the provisions of Section
7.04(c), prepare and file all other Returns with respect to CA Short required to
be filed (taking into account extensions) after the Distribution Date.
(c) With respect to any Return for taxable periods beginning
before the Distribution Date and ending after the Distribution Date, CA Short
shall consult with Pages concerning each such Return and report all items with
respect to the period ending on the Distribution Date in accordance with the
instructions of Pages, unless otherwise agreed by Pages and CA Short. CA Short
shall provide Pages with a copy of each proposed Return at least thirty (30)
days prior to the filing of such Return, and Pages may provide comments to CA
Short, which comments shall be delivered to CA Short within fifteen (15) days
after receiving such copies from CA Short.
7.05 REFUNDS AND CARRYBACKS.
(a) Pages shall be entitled to an amount equal to any refunds
or credits of Taxes attributable to taxable periods (or portions thereof,
determined in accordance with Section 7.03(b)) ending on or before the
Distribution Date, other than any such refunds or credits provided for in the
financial statements of CA Short.
(b) CA Short shall be entitled to any refunds or credits of
Taxes attributable to taxable periods (or portions thereof, determined in
accordance with Section 7.03(b)) beginning on or after the Distribution Date or
provided for in the financial statements of CA Short.
10
<PAGE> 11
(c) CA Short agrees that, with respect to any Tax, CA Short
shall not carry back any item of loss, deduction or credit which arises in any
taxable period ending after the Distribution Date ("subsequent loss") into any
taxable period ending on or before the Distribution Date. If a subsequent loss
with respect to any Tax is carried back into any taxable period ending on or
before the Distribution Date, Pages shall be entitled to any refund or credit of
Taxes realized as a result thereof.
7.06 COOPERATION AND EXCHANGE OF INFORMATION.
(a) CA Short and Pages and their respective Affiliates shall
cooperate in the preparation of all Returns relating in whole or in part to
taxable periods ending on or before or including the Distribution Date that are
required to be filed after such date. Such cooperation shall include, but not be
limited to, furnishing prior years' Returns or return preparation packages
illustrating previous reporting practices or containing historical information
relevant to the preparation of such Returns, and furnishing such other
information within such party's possession requested by the party filing such
Returns as is relevant to their preparation. In the case of any state, local or
foreign joint, consolidated, combined, unitary or group relief system Returns,
such cooperation shall also relate to any other taxable periods in which one
party could reasonably require the assistance of the other party in obtaining
any necessary information.
(b) Pages shall have the right, at its own expense, to control
any audit or examination by any Taxing Authority ("Tax Audit"), initiate any
claim for refund, contest, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to any and all
Taxes for any taxable period ending on or before the Distribution Date with
respect to CA Short. CA Short shall have the right, at its own expense, to
control any other Tax Audit, initiate any other claim for refund, and contest,
resolve and defend against any other assessment, notice of deficiency, or other
adjustment or proposed adjustment relating to Taxes with respect to CA Short,
provided that, with respect to any state, local and foreign Taxes for any
taxable period beginning before the Distribution Date and ending after the
Distribution Date, CA Short or Pages, as the case may be, shall keep the other
party duly informed and shall consult with each other with respect to the
resolution of any issue that would adversely affect the other party, and not
settle any such issue, without the consent of the affected party, which consent
shall not unreasonably be withheld.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 ASSUMPTIONS OF ALL ASSUMED LIABILITIES. Pages agrees to obtain
consents, permits and authorizations necessary to permit CA Short to assume, and
CA Short agrees to assume from Pages, any Assumed Liability which has not been
assumed by CA Short by the Distribution Date.
8.02 COLLECTION OF ACCOUNTS. After the Distribution Date, Pages agrees
promptly to transfer or deliver to CA Short any cash or other property received
directly or indirectly after the Distribution Date by Pages in respect of any CA
Short accounts receivable.
11
<PAGE> 12
8.03 EXPENSES. Except as specifically provided in this Agreement, all
internal costs and expenses incurred in connection with the preparation,
execution, delivery and implementation of this Agreement and with the
consummation of the transactions contemplated by this Agreement (collectively,
the "Distribution Costs and Expenses") shall be paid by the party incurring such
costs and expenses. Except as specifically provided in this Agreement, all
out-of-pocket Distribution Costs and Expenses (including transfer taxes and the
fees and expenses of all counsel, accountants and financial and other advisors)
shall be paid by Pages, it being agreed such Distribution Costs and expenses are
properly costs and expenses of Pages. Without limiting the foregoing sentence,
it is understood and agreed that Pages shall pay the legal, filing, accounting,
printing and other accountable and out-of-pocket expenditures in connection with
the preparation, printing and filing of the Form 10.
8.04 ADDITIONAL ASSURANCES. Pages and CA Short agree to cooperate with
respect to the implementation of this Agreement and to execute such further
documents and instruments as may be necessary to confirm the transactions
contemplated hereby. Pages and CA Short agree that they will not take any action
inconsistent with the facts and representations set forth in the "no-action
letter" request filed with the Commission in connection with the Distribution or
the conditions of the "no-action letter" received from the Commission in
connection with the Distribution and will use their best efforts to cause the
facts to remain true and correct, to satisfy such conditions and to maintain the
effectiveness of such letter and, if either Pages or CA Short shall take any
such inconsistent action, or fail to use such best efforts, it will indemnify
the other party for any expense or Liability incurred as a consequent thereof.
ARTICLE IX
MISCELLANEOUS
9.01 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Florida.
9.02 CONSTRUCTION. Each provision of this Agreement shall be
interpreted in a manner to be effective and valid to the fullest extent
permissible under applicable law. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions of
this Agreement which shall remain in full force and effect.
9.03 ARBITRATION. Any controversy regarding, connected with or arising
from this Agreement, shall be settled by informal, speedy and binding
arbitration in Pinellas County, Florida. The conduct of the arbitration shall be
governed by Florida Arbitration Code.
9.04 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
9.05 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and other
agreements and documents referred to herein, shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter.
12
<PAGE> 13
9.06 TERMINATION. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Distribution Date by and in the sole
discretion of Pages without the approval of CA Short. In the event of such
termination, no party shall have any liability of any kind to any other party.
9.07 EXHIBITS. Exhibits to this Agreement shall be deemed to be an
integral part hereof, and schedules or exhibits to such Exhibits shall be deemed
to be an integral part thereof.
9.08 AMENDMENTS; WAIVERS. This Agreement may be amended or modified
only in writing executed on behalf of Pages and CA Short. No waiver shall
operate to waive any further or future act and no failure to object of
forbearance shall operate as a waiver.
9.09 NOTICES. Notices hereunder shall be effective if given in writing
and delivered or mailed, postage prepaid, by registered or certified mail to:
Pages, Inc.
801 94th Street North
St. Petersburg, FL 33702
Attn: S. Robert Davis
or to:
CA Short Company
4205 East Dixon Boulevard
Shelby, NC 28150
Attn: Charles R. Davis
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 that this Agreement and the rights and obligations
contained herein or in any exhibit or schedule hereto shall not be assignable,
in whole or in part, without the prior written consent of the other party and
any attempt to effect any such assignment without such consent shall be void.
13
<PAGE> 14
SIGNATURE PAGE TO
DISTRIBUTION AGREEMENT
BETWEEN
PAGES, INC. AND CA SHORT COMPANY
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PAGES, INC.
By: /s/ S. Robert Davis
------------------------------
S. Robert Davis as President
CA SHORT COMPANY
By: /s/ Charles R. Davis
------------------------------
Charles R. Davis as President
14
<PAGE> 1
EXHIBIT 10.5.1
LOAN AND SECURITY AGREEMENT
DATED AS OF
DECEMBER 31, 1996
BETWEEN
CA SHORT COMPANY
AND
THE HUNTINGTON NATIONAL BANK
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE #
<S> <C> <C>
1 The Loans .......................................................................................... 1
1.1 The Revolving Loan and Borrowing Base ..................................................... 1
1.2 Letters of Credit ......................................................................... 1
1.3 Pending Defaults .......................................................................... 2
2 Eligibility ........................................................................................ 3
2.1 Eligible Accounts ......................................................................... 3
2.2 Eligible Inventory ........................................................................ 4
2.3 Eligible Real Estate ...................................................................... 4
3 Terms and Uses of Loan ............................................................................. 4
3.1 Interest Rates and Fees ................................................................... 4
3.2 Terms and Advances ........................................................................ 5
3.3 Costs and Expenses ........................................................................ 5
3.4 Use of Proceeds ........................................................................... 5
3.5 Amendment and Restatement ................................................................. 5
3.6 Increased Capital ......................................................................... 6
3.7 Maximum Charges ........................................................................... 6
4 Security Agreement ................................................................................. 6
4.1 Grant of Security Interest ................................................................ 6
4.2 Representations and Covenants Regarding the Collateral .................................... 8
4.3 Lockbox and Collection of Accounts ........................................................ 8
4.4 Cash Collection Account ................................................................... 8
4.5 Application of Proceeds from Collection of Accounts; Setoff;
Government Accounts; Perfection; Lien Notation ............................................ 9
4.6 Collateral Insurance ...................................................................... 9
4.7 Books and Records ......................................................................... 10
4.8 Collateral Administration ................................................................. 10
4.9 Preservation and Disposition of Collateral ................................................ 11
4.10 Extensions and Compromises ................................................................ 11
4.11 Financing Statements ...................................................................... 11
4.12 Bank's Appointment as Attorney-in-Fact .................................................... 11
4.13 Remedies on Default ....................................................................... 12
5 Warranties and Representations ..................................................................... 13
5.1 Corporate Organization and Authority ...................................................... 13
5.2 Borrowing is Legal and Authorized ......................................................... 14
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
5.3 Taxes ..................................................................................... 14
5.4 Capital Structure ......................................................................... 14
5.5 Compliance with Law ....................................................................... 14
5.6 Financial Statements; Full Disclosure ..................................................... 14
5.7 Litigation: Adverse Effects ............................................................... 15
5.8 No Insolvency ............................................................................. 15
5.9 Government Consent ........................................................................ 16
5.10 Title to Properties ....................................................................... 16
5.11 No Defaults ............................................................................... 16
5.12 Environmental Protection .................................................................. 16
5.13 Regarding the Accounts and Inventory ...................................................... 17
6 Borrower Business Covenants ........................................................................ 17
6.1 Payment of Taxes and Claims ............................................................... 17
6.2 Maintenance of Properties and Corporate Existence ......................................... 18
6.3 Sale of Assets, Merger, Subsidiaries, Tradenames, Conduct of
Business .................................................................................. 18
6.4 Negative Pledge ........................................................................... 18
6.5 Other Borrowings and Contingent Liabilities ............................................... 19
6.6 Sale of Accounts; No Consignment .......................................................... 19
6.7 Minimum Security .......................................................................... 19
6.8 Management ................................................................................ 19
6.9 Acquisition of Capital Stock .............................................................. 20
6.10 Cash Dividends and Other Distributions .................................................... 20
6.11 Transactions With Affiliates .............................................................. 20
6.12 Adjusted Tangible Net Worth ............................................................... 20
6.13 Minimum Pretax Operating Profit or Maximum Pretax Operating
Loss ...................................................................................... 21
6.14 Capital Expenditures ...................................................................... 21
6.15 Loan and Advances ......................................................................... 21
6.16 Operating Lease Rentals ................................................................... 22
6.17 Environmental Compliance and Indemnification .............................................. 22
6.18 Maintenance of Accounts ................................................................... 22
6.19 Other Covenants ........................................................................... 22
7 Financial Information and Reporting ................................................................ 22
8 Default ............................................................................................ 24
8.1 Events of Default ......................................................................... 24
8.2 Default Remedies .......................................................................... 25
9 Miscellaneous ...................................................................................... 25
9.1 Notices .................................................................................. 25
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
9.2 Access to Accountants ..................................................................... 26
9.3 Reproduction of Documents ................................................................. 26
9.4 Survival, Successors and Assigns .......................................................... 26
9.5 Amendment and Waiver, Duplicate Originals ................................................. 26
9.6 Accounting Treatment and Fiscal Year ...................................................... 27
9.7 Enforceability and Governing Law .......................................................... 27
9.8 Confidentiality ........................................................................... 27
9.9 Waiver of Right to Trial by Jury .......................................................... 27
9.10 Advertising ............................................................................... 28
9.11 No Consequential Damages .................................................................. 28
9.12 Indemnity ................................................................................. 28
9.13 Conditions Precedent ..................................................................... 28
9.14 Conditions Precedent to Subsequent Money Advances ......................................... 29
10 Definitions ........................................................................................ 29
10.1 Index of Definitions ...................................................................... 29
10.2 Uniform Commercial Code Terms ............................................................. 31
10.3 Accounting Terms .......................................................................... 32
10.4 Other Definitional Provisions ............................................................. 32
</TABLE>
Exhibits
Exhibit A-1 - Revolving Note
Exhibit A-2 - Reimbursement Agreement
Exhibit B - Schedule of Permitted Encumbrances
Exhibit C - Schedule of Business Locations
Exhibit D - Capital Structure
Exhibit E - Litigation Disclosure
Exhibit F - Conditions Precedent to Initial Disbursement
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<PAGE> 5
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement") is entered into at
Columbus, Ohio, between The Huntington National Bank (the "Bank") and CA Short
Company (the "Borrower") as of the 31st day of December, 1996.
1 The Loans. The Bank, subject to the terms and conditions hereof, will
extend credit to the Borrower up to the aggregate principal sum of
$4,500,000.00, which will include extensions of credit for commercial letters
of credit up to the maximum aggregate stated value outstanding of $100,000.00
(the "Letters of Credit") (collectively the "Loan").
1.1 The Revolving Loan and Borrowing Base. The Loan shall be comprised of
a revolving credit facility under which the Bank shall make, subject to the
terms and conditions hereof, loans and advances on a revolving basis up to the
principal sum of $4,500,000.00 (the "Revolving Loan"). The principal balance
of the Revolving Loan plus the aggregate stated value of all issued and
outstanding Letters of Credit shall not exceed an amount equal to the sum of
(i) the lesser of up to 60% of Eligible Inventory or the Inventory Cap, plus
(ii) up to 80% of Eligible Accounts, plus (iii) up to 75% of Eligible Real
Estate (collectively the "Borrowing Base"). The Bank, in its sole discretion,
reserves the right upon 30 days prior written notice to the Borrower to
increase or decrease the foregoing percentages or the Inventory Cap.
"Inventory Cap" shall mean up to the sum of $3,500,000.00 for the months of
January through and including May each calendar year and $6,500,000.00 for the
months June through and including December of each calendar year.
1.2 Letters of Credit.
(a) The Borrower may request the Bank to issue or cause the
issuance of a Letter of Credit by delivering to the Bank, the Bank's standard
form of Application and Agreement for Commercial Letter of Credit and/or
reimbursement agreement (collectively the "Letter of Credit Application")
completed to the satisfaction of the Bank, and, such other certificates,
documents and other papers and information as the Bank may request.
(b) Each Letter of Credit shall, among other things, (i) provide
for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than (A) one year from
issuance or (B) the stated maturity date of the Revolving Loan, whichever
occurs first. Each Letter of Credit Application and each Letter of Credit
shall be subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision thereof and, to the extent not inconsistent therewith,
the laws of the State of Ohio.
(c) In connection with the issuance of any Letter of Credit the
Borrower shall indemnify, save and hold the Bank harmless from any loss, cost,
expense or liability, including, without limitation, payments made by the Bank,
and expenses and reasonable attorneys' fees incurred by the
<PAGE> 6
Bank arising out of, or in connection with, any Letter of Credit to be issued
or created for the Borrower. The Borrower shall be bound by the Bank's
regulations and good faith interpretations of any Letter of Credit issued or
created for the Borrower's account, although this interpretation differs from
the Borrower's own, and, neither the Bank, nor any of its correspondents shall
be liable for any error, negligence, or mistakes, whether of omission or
commission, in following the Borrower's instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit, except for the Bank's gross
negligence or willful misconduct.
(d) The Borrower shall authorize and direct the Bank with respect
to each Letter of Credit to name the Borrower as the "Account Party" therein,
shall deliver to the Bank all instruments, documents, and other writings and
property pursuant to the Letter of Credit and shall accept and rely upon the
Bank's instructions and agreements with respect to all matters arising in
connection with the Letter of Credit or the application therefor.
(e) In connection with all Letters of Credit issued or caused to
be issued by the Bank under this Agreement, the Borrower hereby appoints the
Bank, or its designee, as its attorney, with full power and authority (i) to
sign and/or endorse the Borrower's name upon any warehouse or other receipts,
letter of credit applications and acceptances; (ii) to sign the Borrower's name
on bills of lading; (iii) to clear inventory through the United States of
America Customs Department ("Customs") in the name of Borrower or the Bank or
the Bank's designee, and to sign and deliver to Customs officials powers of
attorney in the name of the Borrower for such purpose; and (iv) to complete in
the Borrower's name or in the Bank's name or in the name of the Bank's
designee, any order, sale or transaction, obtain the necessary documents in
connection therewith, and collect the proceeds thereof. Neither the Bank nor
its attorneys will be liable for any acts or omissions nor for any error of
judgment or mistakes of fact or law, except for the Bank's gross negligence or
willful misconduct. This power, being coupled with an interest, is irrevocable
so long as any Letters of Credit remain outstanding.
(f) The Borrower agrees to pay to the Bank its normal and
customary issuing, servicing and amendment fees for each Letter of Credit.
1.3 Pending Defaults. The Bank shall have no obligation to advance or
readvance any sums pursuant to the Revolving Loan or issue any Letters of
Credit at any time when a set of facts or circumstances exists, which, by
itself, upon the giving of notice, the lapse of time, or any one or more of the
foregoing would constitute an Event of Default under this Agreement (a "Pending
Default").
-2-
<PAGE> 7
2 Eligibility.
2.1 Eligible Accounts. The term "Eligible Accounts" means the portion of
the Borrower's accounts that the Bank determines from time to time, based on
credit policies, market conditions, the Borrower's business and other criteria,
is eligible for use in calculating the Borrowing Base. Without limiting the
Bank's right to determine which accounts are Eligible Accounts, no account will
be an Eligible Account in calculating the Borrowing Base, unless, at a minimum,
such account is unconditionally due and owing to the Borrower from a party (the
"Account Debtor") that meets the qualifications stated herein, conforms to the
warranties regarding the Accounts contained in this Agreement, and meets all
the following requirements until it is collected in full: (a) the account is
due and payable (in U.S. dollars), exclusive of sales or other taxes, and not
more than 90 have elapsed from the original invoice therefor, or if a special
dating program has been approved in writing by the Bank, the account is due and
payable on a date permitted by the terms of such dating program and is not
past-due; (b) the account arises from the completed performance of a sale of
goods and/or related services, does not constitute a progress billing or
advance billing, and, if involving a sale of goods, all such goods have been
lawfully shipped and invoiced to the Account Debtor, and if requested by the
Bank, copies of all invoices, together with all shipping documents and delivery
receipts evidencing such shipment have been delivered to the Bank; (c) the
account does not arise from a contract with any government or agency thereof;
(d) the account is not subject to any prior assignment, claim, lien, or
security interest, or subject to any levy or setoff; (e) the account is not
subject to any credit, contra account, allowance, adjustment, return of goods,
or discount (collectively a "Contra"), provided, however, that unless the
Account Debtor has asserted a Contra, if the amount of the account exceeds the
amount of the Contra, such excess shall be considered for eligibility if such
excess meets all other requirements of this Section 2.1; (f) the account does
not arise from an Affiliate; (g) the account does not, when added to all other
accounts of the Account Debtor with the Borrower, produce an aggregate
indebtedness from the Account Debtor of more than 20% of the total of all the
Borrower's Eligible Accounts; (h) the Account Debtor is not subject to
bankruptcy, receivership or similar proceedings or is not insolvent; (i) the
account is not evidenced by any chattel paper, promissory note, payment
instrument or written agreement; (j) the account does not arise from an Account
Debtor whose mailing address or executive office is located outside the United
States or one of the Canadian Provinces other than Quebec unless the payment
for such account is assured by an irrevocable letter of credit, such letter of
credit is from a financial institution acceptable to the Bank, the same has
been assigned to the Bank and the original has been delivered to the Bank or
the same has been confirmed by a financial institution acceptable to the Bank
and is in form and substance acceptable to the Bank, payable in the full amount
of the account in United States dollars at a place of payment located within
the United States; (k) the account does not arise from an Account Debtor to
whom goods are shipped on a "cash on delivery" or C.O.D. basis; (l) the account
does not arise from an Account Debtor, having 50% or more of its accounts with
the Borrower (in dollar value or in number of accounts) not Eligible Accounts
pursuant to this Section 2.1; and (m) the Bank has not notified the Borrower
that the account or the Account Debtor is unsatisfactory or unacceptable
(although the Bank reserves the right to do so in its sole discretion at any
time).
-3-
<PAGE> 8
2.2 Eligible Inventory. The term "Eligible Inventory" means that portion
of the Borrower's inventory on which the Bank has a first and exclusive
perfected security interest and that the Bank determines from time to time,
based on credit policies, market conditions, the Borrower's business and other
matters, is eligible for use in calculating the Borrowing Base. For purposes
of determining the Borrowing Base, Eligible Inventory (unless the Bank agrees
otherwise in writing) shall not include work in process, slow-moving, obsolete
or discontinued inventory, supply items, packaging, or the freight portion of
raw materials, inventory in the control of a third person for processing,
storage or any other reason, inventory located outside the United States,
inventory for which the Borrower has not obtained a landlord's waiver in favor
of the Bank, consigned inventory, or inventory in transit, and all inventory
shall be valued at the lesser of cost (on a FIFO basis) or market.
2.3 Eligible Real Estate. The term "Eligible Real Estate" shall mean that
portion of the Borrower's real property consisting of office and warehouse
facilities, upon which the Bank shall have a first mortgage or deed of trust
that the Bank determines in good faith from time to time, based upon, among
other items, (a) market conditions, (b) the Bank's analysis of (i) current MAI
appraisals satisfactory to the Bank reflecting sufficient value, (ii) current
surveys complying with the Bank's survey standards reflecting the absence of
encroachments, access limitations or other survey defects, and reflecting that
such real property does not lie within a flood hazard area, (iii) 1970 Form
ALTA title insurance complying with the Bank's title standards and reflecting
the absence of any encumbrances, easements not acceptable to the Bank, or title
defects, (iv) current environmental surveys reflecting the absence of
environmental concerns, (v) surveys or other reports demonstrating that such
property does not contain any areas that may constitute wetlands (as defined in
40 C.F.R. Section 122.2 and 33 C.F.R. Section 328.3) and that there has been no
unpermitted filling of wetlands at such mortgaged property, (vi) such real
property is zoned or will be rezoned for the development planned by the
Borrower, and (vii) reports demonstrating appropriate assurances of
availability of necessary utilities in adequate capacities, (viii) the Bank is
named loss payee, mortgagee and additional insured and (c) the Bank's
evaluation of other real estate requirements, is eligible for use in
calculating the Borrowing Base. In the absence of updated evidence of the
items set forth in clauses (b)(i) through (viii) above, the Borrower's Eligible
Real Estate shall be valued at $2,500,000.00.
3 Terms and Uses of Loan.
3.1 Interest Rates and Fees. The Borrower agrees to pay the Bank (a) each
month interest on the unpaid balance of the Loan at the rates of interest set
forth in the note or notes evidencing the Loan; (b) no later than the execution
of this Agreement, an arrangement fee of $5,000.00; and (c) each quarter, a fee
in respect of the Revolving Loan equal to 1/2 of 1% per annum of the
difference, if any, between (i) $4,500,000.00 and (ii) the daily principal
balance of the Revolving Loan during any full or partial calendar quarter the
Revolving Loan is in effect, payable quarterly in arrears, beginning on the
first day of April, 1997, and continuing on the first day of each July,
October, January and April during the time the Revolving Loan is in effect.
-4-
<PAGE> 9
3.2 Terms and Advances. The Loan shall be evidenced by a note and/or
reimbursement agreement or by one or more notes and reimbursement agreements
subsequently executed in substitution therefor, each in substantially the form
set forth in Exhibit A-1 and A-2 attached hereto. Repayment of the Loan shall
be made in accordance with the terms of the promissory notes and reimbursement
agreements then outstanding pursuant to this Agreement.
3.3 Costs and Expenses. The Borrower further agrees to pay service
charges, analysis fees, audit fees in the amount of $500.00 per day per auditor
for each audit, plus out-of-pocket expenses, and all costs and expenses
incidental to or in connection with the Loan or any service provided by the
Bank, the enforcement of the Bank's rights in connection therewith, any
amendment or modification of this Agreement or any other loan documents, any
sale or attempted sale of any interest herein to a participant or co-lender,
any litigation, contest, dispute, proceeding or action in any way relating to
the Collateral or to this Agreement, whether any of the foregoing are incurred
prior to or after maturity, the occurrence of an Event of Default, or the
rendering of a judgment. Such costs shall include, but not be limited to, fees
and out-of-pocket expenses of the Bank's counsel, recording fees, inspection
fees, revenue stamps and note and mortgage taxes.
3.4 Use of Proceeds. The net proceeds of the Loan will be used to restate
in full all of the Borrower's existing indebtedness to the Bank, to provide for
working capital requirements of the Borrower and for any other lawful business
purpose in the Borrower's business. None of the transactions contemplated in
the Agreement will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulation issued pursuant
thereto, including, without limitation, Regulation U of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter II. The Borrower does not
own or intend to carry or purchase any "margin security" within the meaning of
said Regulation U. None of the proceeds of the Loan will be used to purchase
or refinance any borrowing, the proceeds of which were used to purchase any
"security" within the meaning of the Securities Exchange Act of 1934, as
amended.
3.5 Amendment and Restatement. The indebtedness and obligations evidenced
by this Agreement and all instruments, agreements, and documents executed in
connection herewith constitute an amendment, renewal, and restatement of all
indebtedness and obligations of the Borrower evidenced by the prior loan
agreements, promissory notes, and related loan documents (the "Prior Loan
Documents") and shall remain in full force and effect except to extent modified
by this Agreement and by the notes and other documents executed in connection
herewith. All Uniform Commercial Code financing statements, fixtures filings,
and all security agreements and/or collateral assignments executed and
delivered to the Bank in connection with the Prior Loan Documents shall remain
in full force and effect in all respects as if the indebtedness and obligations
secured and perfected with respect to such Uniform Commercial Code financing
statements, security agreements and collateral assignments had been payable
originally as provided by this Agreement and by the instruments, agreements and
documents executed in connection herewith. If any inconsistency exists between
this Agreement and the original Loan Agreement, the terms of this Agreement
shall prevail. Nothing contained in this Agreement or in any security
agreement, assignment, collateral
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<PAGE> 10
assignment, mortgage or other document or instrument executed contemporaneously
herewith shall be deemed to satisfy or discharge the indebtedness evidenced by
the Prior Loan Documents (this being an amendment and restatement only) or
terminate the security interests, assignments, mortgages, financing statements,
fixture filings, or other documents or instruments previously executed and
delivered granted to the Bank prior to the date hereof.
3.6 Increased Capital. If after the date hereof the Bank determines that
(i) the adoption or implementation of or any change in or in the interpretation
or administration of any law or regulation or any guideline or request from any
central bank or other governmental authority or quasi-governmental authority
exercising jurisdiction, power or control over the Bank or banks or financial
institutions generally (whether or not having the force of law), compliance
with which affects or would affect the amount of capital required or expected
to be maintained by the Bank or any corporation controlling the Bank and (ii)
the amount of such capital is increased by or based upon (A) the making or
maintenance by the Bank of any of the Loan, any participation in or obligation
to participate in the Loan, Letters of Credit or other advances made hereunder
or the existence of any obligation to make the Loan or (B) the issuance or
maintenance by the Bank of, or the existence of the Bank's obligation to issue,
Letters of Credit, then, in any such case, upon written demand by the Bank, the
Borrower shall immediately pay to the Bank, from time to time as specified by
the Bank, additional amounts sufficient to compensate the Bank or such
corporation therefor. Such demand shall be accompanied by a statement as to
the amount of such compensation and include a summary of the basis for such
demand with detailed calculations. Such statement shall be conclusive and
binding for all purposes, absent manifest error.
3.7 Maximum Charges. In no event whatsoever shall the interest rate and
other charges hereunder exceed the highest rate permission under law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event the court determines that the Bank has
received interest or other charges hereunder in excess of the highest rate
applicable hereto, the Bank shall promptly refund such excess amount to the
Borrower, and the provisions hereof shall be deemed amended to provide for such
permissible rate.
3.8 Transaction Validity Agreement. S. Robert Davis shall execute and
deliver to the Bank a Transaction Validity Agreement in form acceptable to the
Bank dated of even date herewith in connection with the distribution by Pages,
Inc. of the outstanding shares of common stock of the Borrower to the
shareholders of the Parent's common stock.
4 Security Agreement.
4.1 Grant of Security Interest. The Borrower hereby grants, pledges,
conveys and assigns to the Bank continuing security interests in the following
property, whether the Borrower's interest therein be as owner, co-owner,
lessee, consignee, secured party or otherwise, and whether the same be now
owned or existing or hereafter arising or acquired, and wherever located,
together with all substitutions, replacements, additions and accessions
therefor or thereto, all documents, negotiable documents, documents of title,
warehouse receipts, storage receipts, dock receipts, dock warrants,
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<PAGE> 11
express bills, freight bills, airbills, bills of lading, and other documents
relating thereto, all products thereof and all cash and non-cash proceeds
thereof including, but not limited to, notes, drafts, checks, instruments,
insurance proceeds, indemnity proceeds, warranty and guaranty proceeds (herein
the "Proceeds"): (a) all inventory including, but not limited to, all goods,
merchandise and other personal property furnished under any contract of service
or intended for sale or lease, all parts, supplies, raw materials, work in
process, finished goods, materials used or consumed, and repossessed and
returned goods (herein the "Inventory"); (b) all accounts, accounts receivable,
contract rights, chattel paper, general intangibles, income or other tax
refunds, preference recoveries and all claims in respect of any transfers of
any kind, instruments, negotiable documents, notes, drafts, acceptances and
other forms of obligations, all books, records, ledger cards, computer
programs, and other documents or property, including without limitation such
items which are evidencing or relating to the accounts and inventory and
including, but not limited to, any of the foregoing arising from or in
connection with the sale, lease or other disposition of Inventory (herein the
"Accounts"); (c) all machinery, equipment, tools, dies, molds, rolling stock,
furniture, furnishings and fixtures including, but not limited to, all
manufacturing, fabricating, processing, transporting and packaging equipment,
power systems, heating, cooling and ventilating systems, lighting and
communications systems, electric, gas and water distribution systems, food
service systems, fire prevention, alarm and security systems, laundry systems
and computing and data processing systems (herein the "Equipment"); (d) all
trade names, trademarks, trade secrets, service marks, data bases, software and
software systems, including the source and object codes, information systems,
discs, tapes, customer lists, telephone numbers, credit memoranda, goodwill,
patents, patent applications, patents pending, copyrights, royalties, literary
rights, licenses and franchises (herein the "Intellectual Property"); and (e)
all deposit accounts, whether general, special, time, demand, provisional, or
final, all cash or monies wherever located, any and all deposits or other sums
at any time due to Borrower, any and all policies or certificates of insurance,
stock, securities, investment property, securities accounts, goods, choses in
action, cash and property, which now or hereafter are at any time in the
possession or control of the Bank or in transit by mail or carrier to or from
the Bank, or in the possession of any third party acting in the Bank's behalf,
without regard to whether the Bank received the same in pledge for safekeeping,
as agent for collection or transmission or otherwise, or whether the Bank has
conditionally released the same (herein the "Deposits") (all of the Accounts,
the Inventory, the Equipment, the Intellectual Property, the Deposits and the
Proceeds herein are collectively termed the "Collateral").
The security interests hereby granted are to secure the prompt and
full payment and complete performance of all Obligations to the Bank. The word
"Obligations" means all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of the Borrower to the Bank, whether now existing or hereafter arising,
either created by the Borrower alone or together with another or others,
primary or secondary, secured or unsecured, absolute or contingent, liquidated
or unliquidated, direct or indirect, whether evidenced by note, draft,
application for letter of credit or otherwise, and any and all renewals of or
substitutes therefor, including all indebtedness owed to the Bank in connection
with the Loan.
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<PAGE> 12
The continuing security interests granted hereby shall extend to all
present and future Obligations, whether or not the Obligations are reduced or
extinguished and thereafter increased or reincurred, whether or not the
Obligations are related to the indebtedness identified above by class, type or
kind and whether or not the Obligations are specifically contemplated as of the
date hereof. The absence of any reference to this Agreement in any documents,
instruments or agreements evidencing or relating to any Obligation secured
hereby shall not limit or be construed to limit the scope or applicability of
this Agreement.
4.2 Representations and Covenants Regarding the Collateral. The Borrower
represents, warrants and covenants as follows: (a) except for the security
interests granted hereby, any liens set forth in Exhibit B, and liens permitted
by this Agreement, the Borrower is, or as to Collateral arising or to be
acquired after the date hereof, shall be, the sole and exclusive owner of the
Collateral, and the Collateral is and shall remain free from any and all liens,
security interests, encumbrances, claims and interests, and no security
agreement, financing statement, equivalent security or lien instrument or
continuation statement covering any of the Collateral is on file or of record
in any public office; (b) shall not create, permit or suffer to exist, and
shall take such action as is necessary to remove, any claim to or interest in
or lien or encumbrance upon the Collateral except the security interest granted
hereby and any liens or encumbrances set forth in Exhibit B, and shall defend
the right, title and interest of the Bank in and to the Collateral against all
claims and demands of all persons and entities at any time claiming the same or
any interest therein; (c) shall maintain its principal place of business and
chief executive office at the address set forth in paragraph 9.1 of this
Agreement, and the records concerning the Collateral shall be kept at that
address unless the Bank shall give its prior written consent otherwise; (d)
shall keep the Collateral at the locations set forth in Exhibit C attached
hereto and maintain no other place of business or place where Collateral is
located, except as shown in Exhibit C attached hereto; (e) shall deliver to the
Bank at least thirty (30) days prior to the occurrence of any of the following
events, written notice of such impending events: (i) a change in the principal
place of business or chief executive office; (ii) the opening or closing of any
place of business; or (iii) a change in name, identity or corporate structure.
4.3 Lockbox and Collection of Accounts. Within 90 days after the date
hereof, the Borrower shall cause all of its accounts to be collected through a
lockbox arrangement with the Bank and shall execute a lockbox agreement in form
and substance satisfactory to the Bank. Prior to the date of this Agreement,
the Borrower shall notify all existing Account Debtors to remit payments to the
address specified in such lockbox agreement, and all invoices rendered after
the date hereof shall bear such address. The Bank at any time may notify
Account Debtors on any Collateral that the Collateral has been assigned to the
Bank and shall be paid to the Bank through the lockbox or otherwise. Upon
request of the Bank at any time, the Borrower agrees to notify such Account
Debtors and indicate on all billings that the accounts are payable to the Bank.
4.4 Cash Collection Account. The collections through the lockbox
arrangement shall be deposited into a cash collection account maintained with
the Bank (the "Cash Collection Account"), over which the Bank alone shall have
the power of withdrawal. If the Borrower makes collections on any of the
Collateral, it shall hold in trust for the Bank the proceeds received from
collections,
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<PAGE> 13
and turn over all checks, drafts, cash and other remittances and proceeds to
the Bank each business day in the exact form in which they are received,
together with a collection report in form acceptable to the Bank. Said
proceeds shall be deposited in the Cash Collection Account. The Bank in its
discretion shall apply the whole or any part of the collected funds on deposit
in the Cash Collection Account against the principal or interest of the
Revolving Loan prior to the occurrence of a Pending Default or an Event of
Default and thereafter to any other indebtedness or Obligations of the borrower
to the Bank, and any portion of said funds on deposit in the Cash Collection
Account which the Bank elects not to apply to the Obligations may be paid over
and deposited by Bank to the Borrower's commercial account.
4.5 Application of Proceeds from Collection of Accounts; Setoff;
Government Accounts; Perfection; Lien Notation. All amounts received by the
Bank representing payment of Accounts or proceeds from the sale of Inventory or
of the Collateral may be applied by the Bank to the payment of the Obligations
in such order of preference as the Bank may determine. The Borrower also
authorizes the Bank at any time, without notice, to appropriate and apply any
balances, credits, deposits, accounts or money of the Borrower in the Bank's
possession, custody or control to the payment of any of the Obligations whether
or not the Obligations are due or matured. If any of the Accounts arise out of
contracts with or orders from the United States or any department, agency or
instrumentality thereof, the Borrower shall immediately (i) notify the Bank
thereof in writing and (ii) execute any instrument and take any steps which the
Bank deems necessary pursuant to the Federal Assignment of Claims Act of 1940,
as amended (41 U.S.C. Section 15) in order that all money due and to become due
under such contract or order shall be assigned to the Bank. The Borrower
agrees to execute, deliver, file and record all such notices, affidavits,
assignments, financing statements and other instruments as shall in the
judgment of the Bank be necessary or desirable to evidence, validate and
perfect the security interest of the Bank in the Accounts. If certificates of
title are issued or outstanding with respect to any Inventory or Equipment, the
Borrower will cause the interest of the Bank to be properly noted thereon at
the Borrower's expense.
4.6 Collateral Insurance. The Borrower shall have and maintain insurance
at all times with respect to all Inventory and Equipment insuring against risks
of fire (including so-called extended coverage), explosion, theft, sprinkler
leakage and such other casualties as the Bank may designate, containing such
terms, in such form, for such amounts, for such periods and written by such
companies as may be satisfactory to the Bank, and each such policy shall
contain a clause or endorsement satisfactory to the Bank that names the Bank as
additional insured and loss payee, as its interests may appear, that provides
that no act, default or breach of warranty or condition of the insured or any
other person shall affect the right of the Bank to recover under such policy or
policies of insurance or to pay any premium in whole or in part relating
thereto, and that provides for thirty (30) days' written minimum notice of
cancellation or alteration to the Bank. The Borrower shall deliver to the Bank
certified copies of all policies of insurance and evidence of the payment of
all premiums therefor. The Borrower hereby irrevocably appoints the Bank (and
any of the Bank's officers, employees or agents designated by the Bank) as
attorney-in-fact in obtaining and cancelling such insurance and in making,
settling and adjusting all claims under such policies of insurance, endorsing
any check, draft, instrument or other item of payment for the proceeds of such
policies of
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<PAGE> 14
insurance and for making all determinations and decisions with respect to such
policies of insurance; provided, however, that the Bank shall not exercise the
power of attorney granted by this section until and unless (a) an Event of
Default shall have occurred or (b) an event of loss shall have occurred and the
Bank in good faith deems that the Borrower is not diligently pursuing its
claims. In the event of failure to provide insurance as herein provided, the
Bank may, at its option, provide such insurance, and the Borrower shall pay to
the Bank, upon demand, the cost thereof. Should said sum not be paid to the
Bank upon demand, interest shall accrue thereon from the date of demand until
paid in full at the highest rate set forth in any document or instrument
evidencing any of the Obligations.
4.7 Books and Records. The Borrower shall (a) at all times keep accurate
and complete records of the Collateral in accordance with GAAP, including
without limitation, a perpetual inventory and complete and accurate stock
records, and at all reasonable times and from time to time, shall allow the
Bank, by or through any of its officers, agents, attorneys or accountants, to
examine, inspect and make extracts from such books and records and to arrange
for verification of the Collateral directly with Account Debtors or by other
methods and to examine and inspect the Collateral wherever located, and (b)
upon request of the Bank, provide the Bank with copies of agreements with,
purchase orders from, and invoices to, the Account Debtors, and copies of all
shipping documents, delivery receipts, and such other documentation and
information relating to the Collateral as the Bank may require.
4.8 Collateral Administration. The Borrower (a) shall promptly perform,
on request of the Bank, such acts as the Bank may determine to be necessary or
advisable to create, perfect, maintain, preserve, protect and continue the
perfection of any lien and security interest provided for in this Agreement or
otherwise to carry out the intent of this Agreement, including, without
limitation, (i) obtaining waivers or other similar documents reasonably
necessary to permit the enforcement of the remedies of the Bank hereunder, (ii)
delivering to the Bank warehouse receipts covering any portion of the Inventory
located in warehouses and for which warehouse receipts are issued, (iii)
transferring Inventory to warehouses designated by the Bank or leasing
warehouses containing the Inventory to the Bank or its designee, (iv)
delivering to the Bank copies, and originals upon the Bank's request, of all
letters of credit on which the Borrower is named beneficiary, and (v) if any
Inventory is at any time in the possession or control of a warehouseman, bailee
or any agent, notifying such person of the Bank's lien and security interest in
the Collateral and, upon the Bank's request, instructing such persons to hold
all Collateral for the Bank's account subject to the Bank's instruction; (b)
shall not (i) extend, amend or otherwise modify the terms of any Account, (ii)
amend, modify or waive any term or condition of any contractual obligation
related thereto or (iii) redate any invoice or sale or make sales on extended
dating beyond that customary in the Borrower's industry; provided, however,
that the Borrower may extend, amend or otherwise modify the terms of any
Account in the ordinary course of business, if such extension, amendment,
modification or waiver does not cause an Account to become or otherwise remain
(but for such action) an Eligible Account; and (c) if there are any disputes
with any of the Accounts, will notify the Bank promptly and resolve or settle
such dispute at no expense or detriment to the Bank.
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<PAGE> 15
4.9 Preservation and Disposition of Collateral. The Borrower shall (a)
obtain, prior to the placement of any Collateral in or upon any leased or
mortgaged real property, a waiver from the lessor and/or the mortgagee, as the
case may be, with respect to the rights (whether present or future) of the
lessor or mortgagee with respect to that Collateral; (b) advise the Bank
promptly, in writing and in reasonable detail, (i) of any material encumbrance
or claim asserted against any of the Collateral; (ii) of any material change in
the composition of the Collateral; and (iii) of the occurrence of any other
event that would have a material adverse effect upon the aggregate value of the
Collateral or upon the security interest of the Bank; (c) not sell or otherwise
dispose of the Collateral, except for the Inventory as otherwise permitted by
this Agreement; (d) keep the Collateral in good condition and shall not misuse,
abuse, secrete, waste or destroy any of the same; and (e) not use the
Collateral in violation of any statute, ordinance, regulation, rule, decree or
order; (f) not permit to become liens or encumbrances any taxes, assessments,
charges or levies upon the Accounts or the Inventory or in respect to the
income or profits therefrom. At its option, the Bank may discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
the Collateral and may pay for the maintenance and preservation of the
Collateral. The Borrower agrees to reimburse the Bank upon demand for any
payment made or any expense incurred (including reasonable attorneys' fees) by
the Bank pursuant to the foregoing authorization. Should said sum not be paid
to the Bank upon demand, interest shall accrue thereon, from the date of demand
until paid in full, at the highest rate set forth in any document or instrument
evidencing any of the Obligations.
4.10 Extensions and Compromises. With respect to any Collateral, the
Borrower assents to all extensions or postponements of the time of payment
thereof or any other indulgence in connection therewith, to each substitution,
exchange or release of Collateral, to the addition or release of any party
primarily or secondarily liable, to the acceptance of partial payments thereon
and to the settlement, compromise or adjustment thereof, all in such manner and
at such time or times as the Bank may deem advisable. The Bank shall have no
duty as to the collection or protection of Collateral or any income therefrom,
nor as to the preservation of rights against prior parties, nor as to the
preservation of any right pertaining thereto, beyond the safe custody of
Collateral in the possession of the Bank.
4.11 Financing Statements. At the request of the Bank, the Borrower shall
join with the Bank in executing, delivering and filing one or more financing
statements in a form satisfactory to the Bank and shall pay the cost of filing
the same in all public offices wherever filing is deemed by the Bank to be
necessary or desirable. A carbon, photographic or other reproduction of this
Agreement or of a financing statement shall be sufficient as a financing
statement.
4.12 Bank's Appointment as Attorney-in-Fact. The Borrower hereby
irrevocably constitutes and appoints the Bank and any officer or agent thereof,
with full power of substitution, as the Borrower's true and lawful
attorney-in-fact with full irrevocable power and authority in its place and
stead and in its name or in the Bank's own name, from time to time in the
Bank's discretion, for the purpose of carrying out the terms of this Agreement,
to take any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes
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<PAGE> 16
of this Agreement and, without limiting the generality of the foregoing, hereby
grants to the Bank the power and right, on behalf of the Borrower, without
notice to or assent: (a) to execute, file and record all such financing
statements, certificates of title and other certificates of registration and
operation and similar documents and instruments as the Bank may deem necessary
or desirable to protect, perfect and validate the Bank's security interest in
the Collateral; (b) to receive, collect, take, indorse, sign, and deliver in
the Borrower's or the Bank's name, any and all checks, notes, drafts, or other
documents or instruments relating to the Collateral; and (c) upon the
occurrence of an Event of Default, (i) to notify postal authorities to change
the address for delivery of the Borrower's mail to an address designated by the
Bank, (ii) to open such mail delivered to the designated address, (iii) to sign
and indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts and other documents relating to the
Collateral; (iv) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral; (v) to defend any suit, action or proceeding brought with respect
to any Collateral; (vi) to negotiate, settle, compromise or adjust any account,
suit, action or proceeding described above and, in connection therewith, to
give such discharges or releases as the Bank may deem appropriate; and (vii)
generally, to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Bank were the absolute owner thereof for all purposes, and to do, at the Bank's
option, at any time or from time to time, all acts and things which the Bank
deems necessary to protect, preserve or realize upon the Collateral and the
Bank's security interest therein, in order to effect the intent of this
Agreement.
The Borrower hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and shall be irrevocable. The powers conferred upon
the Bank hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon the Bank to exercise any such powers. The Bank
shall be accountable only for amounts that the Bank actually receives as a
result of the exercise of such powers and neither the Bank nor any of its
officers, directors, employees or agents shall be responsible to the Borrower
for any act or failure to act, except for the Bank's own gross negligence or
willful misconduct, as determined by a final non-appealable judgment by a court
of competent jurisdiction.
4.13 Remedies on Default. Upon the occurrence of an Event of Default, the
Bank shall have the rights and remedies of a secured party under this
Agreement, under any other instrument or agreement securing, evidencing or
relating to the Obligations and under the law of the State of Ohio or any other
applicable state law. Without limiting the generality of the foregoing, the
Bank shall have the right to take possession of the Collateral and all books
and records relating to the Collateral and for that purpose the Bank may enter
upon any premises on which the Collateral or books and records relating to the
Collateral or any part thereof may be situated and remove the same therefrom.
Except for the notices specified below of time and place of public sale or
disposition or time after which a private sale or disposition is to occur, the
Borrower expressly agrees that the Bank, without demand of performance or other
demand, advertisement or notice of any kind to or upon the
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<PAGE> 17
Borrower or any other person or entity (all and each of which demands,
advertisements and/or notices are hereby expressly waived), may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give option or options to
purchase or sell or otherwise dispose of and deliver the Collateral (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any of the Bank's offices or elsewhere at such prices
as the Bank may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Bank shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption. The Borrower further agrees,
(a) at the Bank's request, to assemble the Collateral and to make it available
to the Bank at such places as the Bank may reasonably select and (b) to allow
the Bank to use or occupy the Borrower's premises, without charge, for the
purpose of effecting the Bank's remedies in respect of the Collateral. The
Bank shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any or all of the Collateral or in any way relating to
the rights of the Bank hereunder, including reasonable attorneys' fees and
legal expenses, to the payment in whole or in part of the Obligations, in such
order as the Bank may elect, and only after so paying over such net proceeds
and after the payment by the Bank of any other amount required by any provision
of law, need the Bank account for the surplus, if any. To the extent permitted
by applicable law, the Borrower waives all claims, damages and demands against
the Bank arising out of the repossession, retention, sale or disposition of the
Collateral and agrees that the Bank need not give more than 10 days' notice
pursuant to the terms of this Agreement of the time and place of any public
sale or of the time after which a private sale may take place and that such
notice is reasonable notification of such matters. The Borrower shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which the Bank is entitled
and shall also be liable for the costs of collecting any of the Obligations or
otherwise enforcing the terms thereof or of this Agreement, including
reasonable attorneys' fees.
5 Warranties and Representations. In order to induce the Bank to enter
into this Agreement and to make the Loan and the other financial accommodations
to the Borrower and to issue the Letters of Credit described herein, the
Borrower represents and warrants to the Bank that each of the following
statements is true and correct:
5.1 Corporate Organization and Authority. The Borrower (a) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (b) has all requisite corporate power and
authority and all necessary licenses and permits to own and operate its
properties and to carry on its business as now conducted and as presently
proposed to be conducted; and (c) is not doing business or conducting any
activity in any jurisdiction in which it has not duly qualified and become
authorized to do business.
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<PAGE> 18
5.2 Borrowing is Legal and Authorized. (a) The Board of Directors of the
Borrower has duly authorized the execution and delivery of this Agreement and
of the notes and documents contemplated herein; this Agreement, the notes and
other documents executed in connection with this Agreement will constitute
valid and binding obligations enforceable in accordance with their respective
terms; (b) the execution of this Agreement and related notes and documents and
the compliance with all the provisions of this Agreement (i) are within the
corporate powers of the Borrower; and (ii) are legal and will not conflict
with, result in any breach in any of the provisions of, constitute a default
under, or result in the creation of any lien or encumbrance upon any property
of the Borrower under the provisions of, any agreement, charter instrument,
bylaw, or other instrument to which the Borrower is a party or by which it may
be bound; (c) there are no limitations in any indenture, contract, agreement,
mortgage, deed of trust or other agreement or instrument to which the Borrower
is now a party or by which the Borrower may be bound with respect to the
payment of principal or interest on any indebtedness, or the Borrower's ability
to incur indebtedness including the notes to be executed in connection with
this Agreement.
5.3 Taxes. All tax returns required to be filed by the Borrower in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon the Borrower, or upon any of its properties,
which are due and payable have been paid. The Borrower does not know of any
proposed additional tax assessment against it. The accruals for taxes on the
books of the Borrower for its current fiscal period are adequate.
5.4 Capital Structure. Exhibit D attached hereto accurately represents to
the Bank the following: (a) the classes of capital stock of the Borrower and
par value of each such class, all as authorized by the Borrower's Articles of
Incorporation, (b) the number of shares of each such class of stock issued and
outstanding, (c) the beneficial ownership of shares of the Borrower's common
stock by each person known to the Borrower to be the beneficial owner of more
than 5% of the Borrower's outstanding common stock, and (d) the Borrower's
employer tax identification number. All shares of all classes of capital stock
issued are fully paid and nonassessable. The Borrower does not have
outstanding any other stock or other equity security, or any other instrument
convertible to an equity security of the Borrower, or any commitment,
understanding, agreement or arrangement to issue, sell or have outstanding any
of the foregoing.
5.5 Compliance with Law. The Borrower (a) is not in violation of any
laws, ordinances, governmental rules or regulations to which it is subject,
including without limitation any laws, rulings or regulations relating to the
Employee Retirement Income Security Act of 1974 or Section 4975 of the Internal
Revenue Code and (b) has not failed to obtain any licenses, permits, franchises
or other governmental or environmental authorizations necessary to the
ownership of its properties or to the conduct of its business, which violation
or failure might have a Material Adverse Effect.
5.6 Financial Statements; Full Disclosure. The financial statements for
the fiscal year ending December 31, 1995, which have been supplied to the
Bank, have been prepared in accordance with GAAP and fairly represent the
Borrower's financial condition as of such date, and the financial statements
for the interim period ending September 30, 1996, which have been supplied to
the Bank,
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fairly represent the Borrower's financial condition as of such date. No
material adverse change in the Borrower's financial condition has occurred
since such dates.
The financial analyses, reports, business plans, projections, and pro
forma financial statements which have been supplied to the Bank have been
prepared in accordance with GAAP consistently applied and are based on
reasonable, good faith assumptions about the Borrower's financial condition and
projected financial condition as of the dates of such financial information or
projections. No adverse change has occurred which would materially alter any
such analyses, reports, business plans, financial statements, projections, or
assumptions. Furthermore, none of the foregoing analyses or financial
information referred to in this paragraph and none of the written statements
furnished by the Borrower to the Bank in connection with obtaining the Loan,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading.
The Borrower has disclosed to the Bank in writing all facts, including without
limitation, all pending or threatened claims or litigation, which materially
affect the properties, business, prospects, profits or condition (financial or
otherwise) of the Borrower or the ability of the Borrower to perform this
Agreement.
5.7 Litigation: Adverse Effects. Except as set forth in Exhibit E
attached hereto, there is no action, suit, audit, proceeding, investigation or
arbitration (or series of related actions, suits, proceedings, investigations
or arbitrations) before or by any governmental authority or private arbitrator
pending or, to the knowledge of the Borrower, threatened against the Borrower
or any property of the Borrower (i) challenging the validity or the
enforceability of any of this Agreement, or any loan document, agreement, or
instrument executed in connection herewith, or (ii) which has had, shall have
or is reasonably likely to have a Material Adverse Effect. The Borrower is not
(A) in violation of any applicable requirements of law which violation shall
have or is likely to result in a Material Adverse Effect, or (B) subject to or
in default with respect to any final judgment, writ, injunction, restraining
order or order of any nature, decree, rule or regulation of any court or
governmental authority, in each case which shall have or is likely to have a
Material Adverse Effect. "Material Adverse Effect" means a material adverse
effect upon (a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower, (b) the ability of the
Borrower to perform its obligations under this Agreement or any document,
agreement, guaranty, or instrument executed in connection herewith, or (c) the
ability of the Bank to enforce the terms of this Agreement, or any document,
agreement, guaranty, or instrument executed in connection herewith.
5.8 No Insolvency. On the date of this Agreement and after giving effect
to all indebtedness of the Borrower (including the Loan), the Borrower (a) will
be able to pay its obligations as they become due and payable; (b) has assets,
the present fair saleable value of which exceeds the amount that will be
required to pay its probable liability on its obligations as the same become
absolute and matured; (c) has sufficient property, the sum of which at a fair
valuation exceeds all of its indebtedness; and (d) will have sufficient capital
to engage in its business. In addition, the Borrower's grant of the Collateral
for the Loan constitutes fair consideration and reasonably equivalent value
because the Borrower has received the proceeds of the Loan.
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<PAGE> 20
5.9 Government Consent. Neither the nature of the Borrower or of its
business or properties, nor any relationship between the Borrower and any other
entity or person, nor any circumstance in connection with the execution of this
Agreement, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of the Borrower as a condition to the execution and delivery of this
Agreement and the notes and documents contemplated herein.
5.10 Title to Properties. The Borrower (a) has good title to all the
property in which it has a property interest, free from any liens and
encumbrances, except as set forth on Exhibit B attached to this Agreement, and
(b) has not agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property whether now owned
or hereafter acquired to be subject to a lien or encumbrance except as provided
in this paragraph.
5.11 No Defaults. No event has occurred and no condition exists which
would constitute a Pending Default or an Event of Default pursuant to this
Agreement. The Borrower is not in violation in any material respect of any
term of any agreement, charter instrument, bylaw or other instrument to which
it is a party or by which it may be bound.
5.12 Environmental Protection. The Borrower (a) has no actual knowledge of
the permanent placement, burial or disposal of any Hazardous Substances (as
hereinafter defined) on any real property owned, leased, or used by the
Borrower (the "Premises"), of any spills, releases, discharges, leaks, or
disposal of Hazardous Substances that have occurred or are presently occurring
on, under, or onto the Premises, or of any spills, releases, discharges, leaks
or disposal of Hazardous Substances that have occurred or are occurring off the
Premises as a result of the improvement, operation, or use of the Premises
which would result in non-compliance with any of the Environmental Laws (as
hereinafter defined); (b) is and has been in compliance with all applicable
Environmental Laws; (c) knows of no pending or threatened environmental civil,
criminal or administrative proceedings against the Borrower relating to
Hazardous Substances; (d) knows of no facts or circumstances that would give
rise to any future civil, criminal or administrative proceeding against the
Borrower relating to Hazardous Substances; and (e) will not permit any of its
employees, agents, contractors, subcontractors, or any other person occupying
or present on the Premises to generate, manufacture, store, dispose or release
on, about or under the Premises any Hazardous Substances which would result in
the Premises not complying with the Environmental Laws.
As used herein, "Hazardous Substances" shall mean and include all
hazardous and toxic substances, wastes, materials, compounds, pollutants and
contaminants (including, without limitation, asbestos, polychlorinated
biphenyls, and petroleum products) which are included under or regulated by the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601, et seq.), the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et
seq.), the Water Quality Act of 1987, as amended (33 U.S.C. Section 1251, et
seq.), the Clean Water Act, as amended (33 U.S.C. Section 1321 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7
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<PAGE> 21
U.S.C. Sec. 136, et seq.), the National Environmental Policy Act of 1969, as
amended (42 U.S.C. Sec. 4321, et seq.), and the Clean Air Act, as amended (42
U.S.C. Section 7401, et seq.), and any other federal, state or local statute,
ordinance, law, code, rule, regulation or order regulating or imposing
liability (including strict liability) or standards of conduct regarding
Hazardous Substances (hereinafter the "Environmental Laws"), but does not
include such substances as are permanently incorporated into a structure or any
part thereof in such a way as to preclude their subsequent release into the
environment, or the permanent or temporary storage or disposal of household
hazardous substances by tenants, and which are thereby exempt from or do not
give rise to any violation of any Environmental Laws.
5.13 Regarding the Accounts and Inventory. (a) Each of the accounts is
based on an actual bona fide, and genuine (i) sale and delivery of goods or
(ii) rendering or performance of services in the ordinary course of business,
the Account Debtors have accepted such goods or services and unconditionally
owe and are obligated to pay the full amounts reflected in the invoices
according to the terms thereof without any defense, offset or counterclaim; (b)
all of the shipping and delivery receipts and other documents to be given to
the Bank with respect to the accounts are genuine; (c) to the best of the
Borrower's knowledge, pursuant to its customary credit investigation in the
ordinary course of business as of the date each account is created, each of the
Account Parties is solvent and able to pay such account when due, or with
respect to any Account Parties who are not solvent, the Borrower has set up on
it books and in its financial records bad debt reserves adequate to cover such
accounts; (d) each of the accounts referenced on the Borrower's most recent
Loan and Collateral Report or other Borrowing Base certificate against which
the Borrower has requested an advance under the Revolving Loan is an Eligible
Account; and (e) all of the inventory referenced on the Borrower's most recent
Loan and Collateral Report or other Borrowing Base certificate against which
the Borrower has requested an advance under the Revolving Loan is Eligible
Inventory.
6 Borrower Business Covenants. The Borrower covenants that on and after
the date of this Agreement until terminated pursuant to the terms of this
Agreement, or so long as any of the indebtedness provided for herein remains
unpaid:
6.1 Payment of Taxes and Claims. The Borrower will pay (a) all taxes,
estimated payments, assessments and governmental charges or levies imposed upon
it or its property or assets or in respect of any of its franchises,
businesses, income or property before any penalty or interest accrues thereon;
and (b) all claims of materialmen, mechanics, carriers, warehousemen,
landlords, bailees and other like persons, (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable and which by law have or may become a lien or encumbrance upon
any of the Borrower's property or assets, prior to the time when any penalty or
fine shall be incurred with respect thereto; provided, however, that no such
taxes, assessments and governmental charges referred to in clause (a) above or
claims referred to in clause (b) above are required to be paid if being
contested in good faith by the Borrower, by appropriate proceedings diligently
instituted and conducted, without danger of any material risk to the Collateral
or the Bank's interest therein, without any of the same becoming a lien upon
the Collateral, and if
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<PAGE> 22
such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP, shall have been made therefor.
6.2 Maintenance of Properties and Corporate Existence. The Borrower shall
(a) maintain its property in good condition and make all renewals,
replacements, additions, betterments and improvements thereto which it deems
necessary; (b) maintain, with financially sound and reputable insurers, (i)
insurance with respect to its properties and business against such casualties
and contingencies, of such types (including but not limited to fire and
casualty, public liability, products liability, larceny, embezzlement or other
criminal misappropriation insurance) and in such amounts as is customary in the
case of entities of established reputations engaged in the same or a similar
business and similarly situated, with each such policy of insurance containing
a clause or endorsement satisfactory to the Bank that names the Bank as
additional insured and loss payee, as its interest may appear, and that
provides that no act, default or breach of warranty or condition of the
Borrower or any other person shall affect the right of the Bank to recover
under such policy or policies of insurance or to pay any premium in whole or in
part relating thereto, in such amounts as is customary in the case of entities
of established reputations engaged in the same or a similar business and
similarly situated; (c) reflect in its financial statements adequate accruals
and appropriations to reserves and keep and maintain proper books of record and
account in which entries in conformity with GAAP shall be made of all dealings
and transactions in relation to its businesses and activities, including,
without limitation, transactions and other dealings with respect to the
Collateral; (d) do or cause to be done all things necessary (i) to preserve and
keep in full force and effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation duly organized and existing and in good
standing under the laws of the state of its incorporation; and (e) conduct
continuously and operate actively its business and take all actions necessary
to enforce and protect the validity of any intellectual property; and (f) not
be in violation of any laws, ordinances, or governmental rules and regulations
or fail to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its properties or to the conduct
of its business, which violation or failure to obtain might have a Material
Adverse Effect.
6.3 Sale of Assets, Merger, Subsidiaries, Tradenames, Conduct of Business.
The Borrower shall not (a) except for the sale of obsolete equipment not to
exceed the aggregate sum of $150,000.00 in any fiscal year and except in the
ordinary course of business, sell, lease, transfer or otherwise dispose of, any
of its assets, (b) consolidate with, merge into, enter into partnerships or
joint ventures with or make investments in any other entity, or permit any
other entity to consolidate with or merge into it, (c) acquire all or
substantially all of the assets or business of any other company, person or
entity, or (d) create or acquire any subsidiaries or conduct business under any
other tradenames without the prior written consent of the Bank. The Borrower
has no subsidiaries and conducts business only in the name(s) of the Borrower
and Clyde A. Short Company. The Borrower shall not engage in any business
other than the businesses engaged in by the Borrower on the date hereof and any
business or activities which are substantially similar or related thereto.
6.4 Negative Pledge. The Borrower will not cause or permit or permit to
exist or agree or consent to cause or permit in the future (upon the happening
of a contingency or otherwise), any of
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<PAGE> 23
its real or personal property, whether now owned or hereafter acquired, to
become subject to a lien or encumbrance, except: (i) liens in connection with
deposits required by workers' compensation, unemployment insurance, social
security and other like laws; (ii) taxes, assessments, reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other similar title exceptions or encumbrances
affecting real property, provided they do not in the aggregate materially
detract from the value of said property or materially interfere with its use in
the ordinary conduct of business; (iii) inchoate liens arising under ERISA to
secure the contingent liability of the Borrower; and (iv) liens as set forth in
Exhibit B attached to this Agreement. In addition, the Borrower will not grant
or agree to provide in the future (upon the happening of a contingency or
otherwise), a "negative pledge" or other covenant or agreement similar to this
Section 6.4 in favor of any other lender, creditor or third party.
6.5 Other Borrowings and Contingent Liabilities. Except for the Loan, and
for a certain Subordinated Indenture of the Borrower to Pages, Inc. which is
subject to the terms of a Debt Subordination and Intercreditor Agreement dated
of even date herewith (the "Subordinated Debt"). The Borrower will not (a)
create or incur Indebtedness, or (b) guarantee, indorse or otherwise become
surety for or upon any indebtedness of others, except by indorsement of
negotiable instruments for deposit or collection in the ordinary course of
business, certain indemnification provisions contained in a certain
Distribution Agreement dated December 31, 1996, between the Borrower and Pages,
Inc. and indemnification to S. Robert Davis in connection with a certain
Transaction Validity Agreement dated of even date herewith. "Indebtedness," as
applied to the Borrower or any other entity shall mean, at any time, (a) all
indebtedness, obligations or other liabilities (i) for borrowed money or
evidenced by debt securities, debentures, acceptances, notes or other similar
instruments, and any accrued interest, fees and charges relating thereto, (ii)
under profit payment agreements or in respect of obligations to redeem,
repurchase or exchange any securities or to pay dividends in respect of any
stock, (iii) with respect to letters of credit issued, (iv) to pay the deferred
purchase price of property or services, except accounts payable and accrued
expenses arising in the ordinary course of business, or (v) in respect of
capital leases; (b) all indebtedness, obligations or other secured by a lien on
any property, whether or not such indebtedness, obligations or liabilities are
assumed by the owner of the same, all as of such time; and (c) all contingent
contractual obligations with respect to any of the foregoing.
6.6 Sale of Accounts; No Consignment. The Borrower shall not sell,
assign, or encumber, except to the Bank, any of its Accounts or notes
receivable and shall not permit any of its Inventory to be sold or transferred
on consignment or acquire or possess any of its Inventory on consignment.
6.7 Minimum Security. The Borrower shall maintain, as minimum security
for the Loan, Eligible Inventory, Eligible Accounts and Eligible Real Estate
having an aggregate value such that the Borrowing Base will equal or exceed the
sum of (a) the unpaid principal balance of the Revolving Loan, plus (b) the
aggregate stated value of all issued and outstanding Letters of Credit and if
the Borrower fails to do so, the Borrower shall immediately pay to the Bank the
difference.
6.8 Management. The Borrower shall not permit any material change in its
management.
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<PAGE> 24
6.9 Acquisition of Capital Stock. The Borrower shall not redeem or
acquire any of its own capital stock, or any warrants or any securities for its
capital stock, except through the use of the net proceeds from the simultaneous
sale of an equivalent amount of its capital stock for the same purchase or
redemption price and except for an amount which does not exceed the aggregate
sum of $250,000 during the term of this Agreement; provided, however, no such
redemption or acquisition shall be made if a Pending Default or Event of
Default has occurred or would occur after such transaction.
6.10 Cash Dividends and Other Distributions. The Borrower shall not
declare or pay any cash dividends which total in excess of $50,000.00, in any
fiscal year, which shall be paid only out of net earnings of the Borrower for
such year; provided, however, that no dividends shall be paid if an Event of
Default has occurred under this Agreement. The Borrower shall make no other
distributions of any kind to shareholders.
6.11 Transactions With Affiliates. The Borrower shall not directly or
indirectly enter into or permit to exist any transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any of its Affiliates, shareholders or any
Affiliates of either of the foregoing, on terms that are less favorable to the
Borrower than those which might be obtained at the time from persons or
entities who are not affiliated with the Borrower or its shareholders.
"Affiliate" shall mean any individual, partnership, corporation, or other
entity which, directly or indirectly, is in control of, is controlled by, or is
under common control with the Borrower, or is a family member related by birth
or marriage. For the purposes of this definition, "control" of such entity
shall mean the power, directly or indirectly, to vote 5% or more of the
securities, units or other measures having ordinary voting power for the
election of directors, management committees, or similar committees of such
entity, or the power to direct or cause the direction of the management and
policies of such entity, whether by contract or otherwise.
6.12 Adjusted Tangible Net Worth. The Borrower shall maintain as of the
following specified dates an Adjusted Tangible Net Worth of not less than (a)
$6,100,000.00 as of December 31, 1996, (b) $6,400,000.00 as of March 31, 1997,
and (c) $6,000,000.00 as of June 30, 1997, and continuing at all times
thereafter. In addition to the foregoing requirements, the Borrower shall
maintain at all times an "Adjusted Tangible Net Worth" of not less than
$6,000,000.00. "Adjusted Tangible Net Worth" shall mean as of the time of
determination the Borrower's Tangible Net Worth, plus the principal sum
outstanding of the Subordinated Debt.
"Tangible Net Worth" shall mean the Borrower's shareholders' equity, minus the
sum of all of the following: (i) the excess of cost over the value of net
assets of purchased businesses, rights, and other similar intangibles, (ii)
organizational expenses, (iii) intangible assets (to the extent not reflected
in the foregoing), (iv) goodwill, (v) deferred charges or deferred financing
costs, (vi) loans or advances to and/or accounts or notes receivable from
Affiliates, (vii) leasehold improvements, (viii) non-compete agreements, and
(ix) any other asset not directly related to the operation of the business of
the Borrower.
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6.13 Minimum Pretax Operating Profit or Maximum Pretax Operating Loss.
Beginning with the fiscal quarter ending December 31, 1996, and continuing as
of the end of each fiscal quarter thereafter, the Borrower shall, as the case
may be, either (a) achieve an Accumulated Operating Profit during any fiscal
year on a year-to-date basis of not less than the amount set forth below, or
(b) not incur an Accumulated Operating Loss during any fiscal year on a
year-to-date basis in excess of the amount set forth below:
As of December 31, 1996, Accumulated Operating Profit not less
than $100,000.00
As of March 31, 1997, Accumulated Operating Profit not less
than $150,000.00
As of June 30, 1997, Accumulated Operating Loss not to exceed
$200,000.00
Accumulated Operating Loss and Accumulated Operating Profit shall be determined
on a fiscal year-to-date basis, beginning on the first day of each fiscal year
and shall be calculated through the date of determination. "Accumulated
Operating Loss" shall mean, with respect to the period of determination, the
following calculation, provided that such calculation results in a number less
than zero: (a) the sum of the Borrower's net income (or loss) after taxes as
determined in accordance with GAAP, plus, the sum of all extraordinary losses
(and any unusual losses arising outside the ordinary course of business not
included in extraordinary losses determined in accordance with GAAP), minus (b)
the sum of all extraordinary gains (and any unusual gains arising outside the
ordinary course of business not included in extraordinary gains determined in
accordance with GAAP). "Accumulated Operating Profit" shall mean, with respect
to the period of determination, the following calculation, provided that such
calculation results in a number greater than zero: (a) the sum of the
Borrower's net income (or loss) after taxes as determined in accordance with
GAAP, plus, the sum of all extraordinary losses (and any unusual losses arising
outside the ordinary course of business not included in extraordinary losses
determined in accordance with GAAP), minus (b) the sum of all extraordinary
gains (and any unusual gains arising outside the ordinary course of business
not included in extraordinary gains determined in accordance with GAAP).
6.14 Capital Expenditures. The Borrower will not make any expenditure for
fixed or capital assets, including by way of the incurrence of capitalized
lease obligations, expenditures for maintenance and repairs which should be
capitalized in accordance with GAAP or otherwise in excess of $300,000.00 in
any fiscal year.
6.15 Loan and Advances. The Borrower will not make any loans or advances
to any person, corporation or entity if such loans or advances will exceed an
aggregate total outstanding at any one time of $75,000.00.
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<PAGE> 26
6.16 Operating Lease Rentals. The Borrower will not without the prior
written approval of the Bank enter into or permit to exist operating leases
providing in the aggregate for annual rentals which exceed $500,000.00 in any
fiscal year.
6.17 Environmental Compliance and Indemnification. The Borrower hereby
indemnifies the Bank and holds the Bank harmless from and against any loss,
damage, cost, expense or liability (including strict liability) directly or
indirectly arising from or attributable to the generation, storage, release,
threatened release, discharge, disposal or presence (whether prior to or during
the term of the Loan) of Hazardous Substances on, under or about the Premises
(whether by the Borrower or any employees, agents, contractors or
subcontractors of the Borrower or any predecessor in title or any third persons
occupying or present on the Premises), or the breach of any of the
representations and warranties regarding the Premises, including, without
limitation: (a) those damages or expenses arising under the Environmental
Laws; (b) the costs of any repair, cleanup or detoxification of the Premises,
including the soil and ground water thereof, and the preparation and
implementation of any closure, remedial or other required plans; (c) damage to
any natural resources; and (d) all reasonable costs and expenses incurred by
the Bank in connection with clauses (a), (b) and (c) including, but not limited
to reasonable attorneys' fees.
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses or costs which: (i) arise from the
gross negligence or willful misconduct of the Bank, or (ii) relate to Hazardous
Substances placed or disposed of on the Premises after the Bank acquires title
to the Premises through foreclosure or otherwise.
6.18 Maintenance of Accounts. Except for a payroll account and a lockbox
account, which shall be closed within 90 days of the date of this Agreement, at
First Union Bank, the Borrower shall maintain all of its operating and deposit
accounts at the Bank and shall utilize the cash management services provided by
the Bank in connection with such accounts.
6.19 Other Covenants. The Borrower will perform, observe and comply with
such other covenants as the Bank may from time to time reasonably require of
the Borrower to assure the repayment in full of all of the Obligations and the
complete and timely performance by the Borrower of all the covenants of the
Borrower hereunder.
7 Financial Information and Reporting. The Borrower shall deliver the
following to the Bank:
(a) within 30 days after the end of each month, financial statements,
including a balance sheet and statements of income and surplus, and statement
of cash flows, certified by the president or chief financial officer of the
Borrower (a "Financial Officer") as fairly representing the Borrower's
financial condition as of the end of such period;
(b) within 30 days after the end of each month, statements signed by a
Financial Officer of the Borrower certifying the compliance of the Borrower
with the terms of this Agreement and the calculation of the financial covenants
contained in Section 6 above;
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(c) within 30 days after the end of each month, a current loan and
collateral report, borrowing certificate, or other writings satisfactory to the
Bank for the calculation of, or setting forth the calculation of, the Borrowing
Base or if the last Borrowing Base does not reflect sufficient availability
with each advance request pursuant to the Revolving Loan or request for a
Letter of Credit.
(d) within 30 days after the end of each month, an accounts
reconciliation report and an inventory reconciliation report, in form
satisfactory to the Bank, signed by a Financial Officer, in detail satisfactory
to the Bank;
(e) within 30 days after the end of each month, an inventory report of
the Borrower, signed by a Financial Officer in form satisfactory to the Bank;
(f) within 30 days after the end of each month, a report, in form
satisfactory to the Bank, signed by a Financial Officer setting forth the
number and dollar total of accounts receivable (i) due not more than 30 days
from the date of the original invoice therefor, (ii) due more than 30 days and
not more than 60 days from the date of the original invoice therefor, (iii)
due more than 60 days and not more than 90 days from the date of the original
invoice therefor, and (iv) due more than 90 days from the date of the original
invoice therefor;
(g) within 30 days after the end of each month, a report, in form
satisfactory to the Bank, signed by a Financial Officer setting forth the
number, dollar amount and party of trade and other accounts payable remaining
due and payable less than 31 days from the date of the original invoice
therefor, less than 61 days from the date of the original invoice therefor,
less than 91 days from the date of the original invoice therefor, and more than
90 days from the date of the original invoice therefor;
(h) within 90 days after the end of each fiscal year, audited,
unqualified financial statements prepared in accordance with GAAP and certified
by independent public accountants satisfactory to the Bank, containing a
balance sheet, statements of income and surplus, statements of cash flows and
reconciliation of capital accounts, along with (1) any management letters
written by such accountants, and (2) a lender reliance letter from such
accountants authorizing the Bank to rely on such accountants' certifications;
(i) within 90 days after the end of each fiscal year, a statement
signed by the Borrower's independent public accountants certifying that nothing
has come to their attention which would lead them to believe the Borrower is in
violation of the terms of this Agreement;
(j) within 60 days after the end of each fiscal year, financial
projections with respect to the Borrower's projected financial conditions for
the current fiscal year financial projections for the Borrower for its next
fiscal year, on a monthly basis, including a projected income statement,
balance sheet, and cash flow and comparative information for the comparative
period of the preceding fiscal year;
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<PAGE> 28
(k) immediately upon the filing or release, as the case may be, copies
of any Securities and Exchange Commission or State Securities Law disclosures,
filings, 10K's or 10Q's, documents or any press releases;
(l) immediately upon becoming aware of the existence of any Pending
Default, Event of Default or breach of any term or conditions of this
Agreement, a written notice specifying the nature and period of existence
thereof and what action the Borrower is taking or proposes to take with respect
thereto; and
(m) at the request of the Bank, such other information as the Bank may
from time to time reasonably require.
8 Default.
8.1 Events of Default. Each of the following shall constitute an "Event
of Default" hereunder: (a) the Borrower fails to make any payment of principal,
interest or any other sum due and payable under any note or reimbursement
agreement executed in connection with this Agreement on or before the date such
payment is due; (b) the Borrower fails to perform or observe any agreement,
term, or covenant contained in Sections 1.1, 3.4, 4, 6.1 through and including
6.11, or 7 of this Agreement; (c) the Borrower fails to comply with any other
provision of this Agreement, or fails to perform or observe any covenant
contained in any mortgage, security agreement or other agreement in favor of
the Bank, and any such failure continues for more than 30 days after such
failure shall first become known to any officer of the Borrower; (d) any
warranty, representation or other statement made or deemed to be made contained
in this Agreement or in any instrument furnished in compliance with or in
reference to this Agreement is false or misleading in any material respect;
(e) the Borrower becomes insolvent or makes an assignment for the benefit of
creditors, or consents to the appointment of a trustee, receiver or liquidator;
(f) bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings are instituted by or against the Borrower; (g) a final judgment or
judgments for the payment of money aggregating in excess of $25,000.00 is or
are outstanding against the Borrower, and any such judgment or judgments have
not been discharged in full or stayed; (h) the occurrence of any event which
allows the acceleration of the maturity of any Indebtedness of the Borrower to
the Bank, any of the Bank's affiliates; (h) the occurrence of any event which
allows the acceleration of the maturity of any Indebtedness in excess of the
principal sum of $25,000.00 of the Borrower or constitutes a default or breach
under any material lease or material contract to any other person, corporation
or entity (other than the Bank) under any indenture, agreement or undertaking;
(i) the default by, dissolution of, or death of any guarantor, insurer or other
surety for the Borrower with respect to any obligation or liability to the Bank
or any of the Bank's affiliates; (j) a Change of Control of the Borrower shall
have occurred ("Change of Control" shall mean (1) the replacement of a majority
of the Board of Directors of any entity from the directors who constituted the
Board of Directors on the date of this Agreement for any reason other than
death or disability, and such replacement shall not have been approved by the
Board of Directors of the Borrower as constituted on the date of this Agreement
(or as changed over time with
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the approval of the Board of Directors of such entity) or (2) a company,
person, entity or group of companies, person or entities acting in concert,
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases, exercise of the stock pledge or otherwise, have
become the beneficial owner (within the meaning of Rule 13d.3 under the
Securities Exchange Act of 1934, as amended) of securities of the Borrower
representing more than 10% of the combined voting power of the outstanding
securities of the Borrower ordinarily having the right to vote in the election
of directors from the beneficial owners holding such voting power as of the
date hereof); (k) the property furnished as Collateral declines in value, and
the Borrower does not immediately, upon demand, furnish additional security
satisfactory to the Bank; or (l) the Bank, in its sole good faith discretion,
determines that a Material Adverse Effect has occurred or that a material
adverse change has occurred in the financial condition, operations or business
of the Borrower, in the value of the Collateral or in the Bank's interest in
the Collateral.
8.2 Default Remedies. Upon the occurrence of an Event of Default, the
Bank may immediately exercise any right, power or remedy permitted to the Bank
by law or any provision of this Agreement, and shall have, in particular,
without limiting the generality of the foregoing, the right to declare the
entire principal, all interest accrued, and all other charges accruing on all
Obligations to be forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by the Borrower.
9 Miscellaneous.
9.1 Notices. (a) All communications under this Agreement or under the
notes executed pursuant hereto shall be in writing and shall be sent by
facsimile or by a nationally recognized overnight delivery service (1) if to
the Bank, at the following address, or at such other address as may have been
furnished in writing to the Borrower by the Bank:
CA Short Company
4205 East Dixon Blvd.
Shelby, N.C. 28150
Attn: Charles R. Davis, President
Telephone Confirmation: 704-482-9591
Facsimile: 704-487-8218
(2) if to the Borrower, at the following address, or at such other address as
may have been furnished in writing to the Bank by the Borrower:
The Huntington National Bank
Huntington Center
Columbus, Ohio 43287
Attn: Thomas Myers, Vice President
Telephone Confirmation: 614-480-4893
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<PAGE> 30
Facsimile: 614-480-4814
(b) any notice so addressed and sent by telecopier shall be deemed to be given
when confirmed, and any notice sent by nationally recognized overnight delivery
service shall be deemed to be given the next day after the same is delivered to
such carrier.
9.2 Access to Accountants. The Borrower hereby irrevocably authorizes its
certified public accountants to provide to the Bank any and all information
that the Bank requests from time to time with regard to the Borrower, and to
discuss with the Bank from time to time any and all matters relating to the
Borrower. In furtherance of the foregoing, the Borrower hereby waives any
privilege or claim of confidentiality to the extent such might otherwise
prevent such accountants from providing such information to the Bank or
discussing such matters with the Bank.
9.3 Reproduction of Documents. This Agreement and all documents relating
hereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, (b) documents received by the Bank at the
closing or otherwise, and (c) financial statements, certificates and other
information previously or hereafter furnished to the Bank, may be reproduced by
the Bank by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process and the Bank may destroy any original
document so reproduced. The Borrower agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Bank in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
9.4 Survival, Successors and Assigns. All warranties, representations,
and covenants made by the Borrower herein or on any certificate or other
instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the Bank and shall survive the closing
of the Loan regardless of any investigation made by the Bank on its behalf.
All statements in any such certificate or other instrument shall constitute
warranties and representations by the Borrower. This Agreement shall inure to
the benefit of and be binding upon the heirs, successors and assigns of each of
the parties.
9.5 Amendment and Waiver, Duplicate Originals. All references to this
Agreement shall also include all amendments, extensions, renewals,
modifications, and substitutions thereto and thereof made in writing and
executed by both the Borrower and the Bank. This Agreement may be amended, and
the observance of any term of this Agreement may be waived, with (and only
with) the written consent of the Borrower and the Bank; provided however that
nothing herein shall change the Bank's sole discretion (as set forth elsewhere
in this Agreement) to make advances, determinations, decisions or to take or
refrain from taking other actions. No delay or failure or other course of
conduct by the Bank in the exercise of any power or right shall operate as a
waiver thereof; nor shall any single or partial exercise of the same preclude
any other or further exercise thereof, or the exercise of any other power or
right. Two or more duplicate originals of this Agreement may
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<PAGE> 31
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
9.6 Accounting Treatment and Fiscal Year. The Borrower shall not change
its fiscal year for accounting or tax purposes from a period consisting of the
twelve month period ending on December 31 of each calendar year. The Borrower
shall not make any material change in accounting treatment and reporting
practices or tax reporting treatment, except as required by GAAP or law and
disclosed to the Bank.
9.7 Enforceability and Governing Law. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction, as to such
jurisdiction, shall be inapplicable or ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. No delay or omission on the part of the Bank in exercising any
right shall operate as a waiver of such right or any other right. All of the
Bank's rights and remedies, whether evidenced hereby or by any other agreement
or instrument, shall be cumulative and may be exercised singularly or
concurrently. This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio; provided, however, that to the extent that
the creation, validity, attachment, perfection, priority, maintenance or
continuation of the security interests created by this Agreement, or the deed
of trust or mortgage interest created by the deeds of trust executed in
connection herewith, in effect of such matters in respect to particular
collateral, is governed by the laws of North Carolina, then the laws of such
jurisdiction shall apply, and the provisions of this Agreement relating to the
creation, validity, attachment, perfection, priority, maintenance or
continuation of such security interests or mortgage interests and the effect of
such matters in respect of the Collateral and such real estate collateral shall
be governed and construed in accordance with the laws of such jurisdiction.
The Borrower agrees that any legal suit, action or proceeding arising out of or
relating to this Agreement may be instituted in a state or federal court of
appropriate subject matter jurisdiction in the State of Ohio, waives any
objection which it may have now or hereafter to the venue of any suit, action
or proceeding, and irrevocably submits to the jurisdiction of any such court in
any such suit, action or proceeding.
9.8 Confidentiality. The Bank and each Participant shall hold all
non-public information obtained pursuant to the requirements hereof and
identified as such by the Borrower in accordance with the Bank's or such
Participant's customary procedures for handling confidential information of
this nature and in accordance with safe and sound banking practices, and in any
event may make disclosures reasonably required by a bona fide Participant in
connection with the contemplated participation, or as required or requested by
any governmental authority or any representative thereof, or pursuant to any
legal process, or to its accountants, lawyers and other advisors.
9.9 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
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<PAGE> 32
CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
9.10 Advertising. The Borrower agrees that the Bank may advertise or
otherwise disclose for marketing purposes the extent and nature of the credit
extended or to be extended and other services provided to the Borrower by the
Bank in connection with or relating in any way to the Loan.
9.11 No Consequential Damages. No claim may be made by the Borrower, any
officers, directors, or agents against the Bank or its affiliates, directors,
officers, employees, attorneys or agents for any special, indirect, punitive,
or consequential damages in respect of any breach or wrongful conduct (whether
the claim therefor is based in contract, tort or duty imposed by law) in
connection with, arising out of or in any way related to the transactions
contemplated and relationship established by this Agreement, or any act,
omission or event occurring in connection therewith, and the Borrower hereby
waives, releases and agrees not to sue upon any such claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
9.12 Indemnity. The Borrower shall indemnify the Bank from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against the Bank in any
litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other person or entity with
respect to any aspect of, or any transaction contemplated by, or referred to
in, or any matter related to, this Agreement, whether or not the Bank is a
party thereto, except to the extent that any of the foregoing arises out of the
willful misconduct of the Bank, as determined in a final, non-appealable
judgment by a court of competent jurisdiction.
9.13 Conditions Precedent. The obligation of the Bank to make the Loan
requested to be made shall be subject to satisfaction, immediately prior to or
concurrently with the making of the Loan of the following conditions
precedent:
(a) The Bank shall receive on or before the date of the initial
advance hereunder all of the following: (i) this Agreement, the promissory
notes and other agreements, documents and instruments described in Exhibit F
attached hereto, each duly executed where appropriate and in
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form and substance satisfactory to the Bank; and (ii) the fulfillment of all
the conditions described such additional documentation as the Bank may
reasonably request.
(b) Without limiting the foregoing, the Borrower hereby directs
its counsel, Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. and Kennedy
Covington Lobdell & Hickman, to prepare and deliver to the Bank the opinions
referred to in such Closing Memorandum.
9.14 Conditions Precedent to Subsequent Money Advances. The obligation of
Bank to make any disbursement or advance subsequent to the initial disbursement
or initial advance under the Loan, of any portion of any of the Loan is subject
to all the conditions and requirements of this Agreement and delivery of the
following required documents, or other action, all of which are conditions
precedent:
(a) Warranties and Representations. On the date of each advance
pursuant to the Revolving Loan, the warranties and representations set forth in
Section 5 hereof and each of the representations and warranties contained in
any certificate, document or financial or other statement furnished at any
time pursuant to this Agreement or any related document shall be true and
correct on and as of such date with the same effect as though such warranties
and representations had been made on and as of such date, except to the extent
that such warranties and representations expressly relate to an earlier date.
(b) Compliance. The Borrower shall have complied and shall then be
in compliance with all the terms, covenants and conditions of this Agreement
which are binding upon it, and no Event of Default or Pending Default shall
have occurred and be continuing on such date or after giving effect to the
advances requested to be made.
(c) Continuation of Representations and Warranties. The
representations and warranties herein contained shall be true, with the same
effect as though such representations and warranties had been made at the time
of the making of such advance, and any request for an advance hereunder shall
be deemed a representation and warranty of same.
Each request for an advance hereunder shall constitute a warranty and
representation as of the date of such advance that the conditions of this
subsection shall have been satisfied.
(d) Confirmation of Conditions Precedent. The Borrower shall then
be in compliance with and able to confirm all the foregoing conditions
precedent with the same effect as though such conditions precedent were
requirements to the making of any advance contemplated herein.
10 Definitions
10.1 Index of Definitions.
"Account Debtor" is defined in Section 2.1.
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<PAGE> 34
"Account Party" is defined in Section 1.2.
"Accounts" is defined in Section 4.1.
"Accumulated Operating Loss" is defined in Section 6.13.
"Accumulated Operating Profit" is defined in Section 6.13.
"Adjusted Tangible Net Worth" is defined in Section 6.12
"Affiliate" is defined in Section 6.11.
"Agreement" is defined in the preamble.
"Bank" is defined in the preamble.
"Borrower" is defined in the preamble.
"Borrowing Base" is defined in Section 1.1.
"Cash Collection Account" is defined in Section 4.4.
"Change of Control" is defined in Section 8.1.
"Collateral" is defined in Section 4.1.
"Contra" is defined in Section 2.1.
"Control" is defined in Section 6.13.
"Customs" is defined in Section 1.3.
"Deposits" is defined in Section 4.1.
"Eligible Accounts" is defined in Section 2.1.
"Eligible Inventory" is defined in Section 2.2.
"Eligible Real Estate" is defined in Section 2.3.
"Environmental Laws" is defined in Section 5.12.
"Equipment" is defined in Section 4.1.
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<PAGE> 35
"Event of Default" is defined in Section 8.1.
"Financial Officer" is defined in Section 7.
"GAAP" is defined in Section 10.3.
"Hazardous Substances" is defined in Section 5.12.
"Indebtedness" is defined in Section 6.5.
"Intellectual Property" is defined in Section 4.1.
"Inventory" is defined in Section 4.1.
"Inventory Cap" is defined in Section 1.1.
"Letter of Credit" is defined in Section 1.1.
"Letter of Credit Application" is defined in Section 1.3.
"Loan" is defined in Section 1.
"Material Adverse Effect" is defined in Section 5.6.
"Obligations" is defined in Section 4.1.
"Pending Default" is defined in Section 1.3.
"Premises" is defined in Section 5.12.
"Prior Loan Documents" is defined in Section 3.5.
"Proceeds" is defined in Section 4.1.
"Revolving Loan" is defined in Section 1.1.
"Subordinated Debt" is defined in Section 6.5.
"Tangible Net Worth" is defined in Section 6.12.
10.2 Uniform Commercial Code Terms. All terms defined in the Uniform
Commercial Code as adopted in the State of Ohio shall have the meanings given
therein unless otherwise defined herein.
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<PAGE> 36
10.3 Accounting Terms. As used in this Agreement, and any promissory
notes, certificates, reports or other documents made or delivered pursuant
hereto, accounting terms not defined in this Agreement shall have the
respective meanings given to such terms under GAAP. "GAAP" means generally
accepted accounting principles set forth in the opinions and pronouncements of
the Accounting Principles Board, the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board as in effect on the
date hereof.
10.4 Other Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder," and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement;
(b) Whenever required by the context of this Agreement, the
promissory notes or other loan documents execution in connection herewith, the
singular shall include the plural, and vice versa and the masculine and
feminine genders shall include the neuter gender and vice versa.
Each of the parties has signed this Agreement as of the date set forth
in the preamble above.
CA SHORT COMPANY
By /s/ S. Robert Davis
--------------------------------------
S. Robert Davis
Its Chairman of the Board
THE HUNTINGTON NATIONAL BANK
By /s/ Thomas G. Myers
--------------------------------------
Its Vice President
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<PAGE> 37
EXHIBIT A-1
THE HUNTINGTON NATIONAL BANK
REVOLVING NOTE
================================================================================
City Office__________________ Division________________ Branch_______ [X] Secured
Account No.________________________________ Note No.______________ [ ] Unsecured
Account Name CA Short Company
[X] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other_______________________________________________________________________
================================================================================
$4,500,000.00 Columbus, Ohio December 31, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
The Huntington National Bank (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of Four
Million Five Hundred Thousand Dollars ($4,500,000.00) or so much thereof as
shall have been advanced by the Bank at any time and not thereafter repaid
(hereinafter referred to as "Principal Sum") together with interest as
hereinafter provided and payable at the time and in the manner hereinafter
provided. The proceeds of the loan evidenced hereby may be advanced, repaid
and readvanced in partial amounts during the term of this revolving note (this
"Note") and prior to maturity. Each such advance shall be made to the
undersigned upon receipt by the Bank of the undersigned's application therefor
and disbursement instructions, which shall be in such form as the Bank shall
from time to time prescribe. The Bank shall be entitled to rely on any oral or
telephonic communication requesting an advance and/or providing disbursement
instructions hereunder, which shall be received by it in good faith from anyone
reasonably believed by the Bank to be the undersigned, or the undersigned's
authorized agent. The undersigned agrees that all advances made by the Bank
will be evidenced by entries made by the Bank into its electronic data
processing system and/or internal memoranda maintained by the Bank. The
undersigned further agrees that the sum or sums shown on the most recent
printout from the Bank's electronic data processing system and/or on such
memoranda shall be rebuttably presumptive evidence of the amount of the
Principal Sum and of the amount of any accrued interest.
This Note is executed and the advances contemplated hereunder are to
be made pursuant to a Loan and Security Agreement by and between the
undersigned and the Bank dated December 31, 1996, and all amendments,
modifications, and supplements thereto from time to time (hereinafter
collectively called the "Loan Agreement"), and all the covenants,
representations, agreements, terms,
<PAGE> 38
and conditions contained therein, including but not limited to additional
conditions of default, are incorporated herein as if fully rewritten.
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until
paid at a variable rate of interest per annum, which shall change in the manner
set forth below, equal to one percentage point (1%) in excess of the Prime
Commercial Rate.
Upon the occurrence of an "Event of Default" pursuant to the Loan
Agreement, interest will accrue on the unpaid balance of the Principal Sum and
unpaid interest, if any, at a variable rate of interest per annum, which shall
change in the manner set forth below, equal to four percentage points (4%) in
excess of the Prime Commercial Rate.
All interest shall be calculated on the basis of a 360 day year for
the actual number of days the Principal Sum or any part thereof remains unpaid.
As used herein, "Prime Commercial Rate" shall mean the rate
established by the Bank from time to time based on its consideration of
economic, money market, business and competitive factors. The Prime Commercial
Rate is not necessarily the Bank's most favored rate. Subject to any maximum
or minimum interest rate limitation specified herein or by applicable law, any
variable rate of interest on the obligation evidenced hereby shall change
automatically without notice to the undersigned immediately with each change in
the Prime Commercial Rate.
MANNER OF PAYMENT
The Principal Sum shall be due and payable on June 30, 1997, and at
maturity, whether by demand, acceleration or otherwise. Accrued interest shall
be due and payable monthly beginning on February 1, 1997, and continuing on the
1st day of each month thereafter, and at maturity, whether by demand,
acceleration or otherwise.
LATE CHARGE
Any installment or other payment not made within 10 days of the date
such payment or installment is due shall be subject to a late charge equal to
5% of the amount of the installment or payment.
SECURITY
This Note is secured by the security interests, assignments, and
mortgages granted and/or referenced in the Loan Agreement.
DEFAULT
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<PAGE> 39
Upon the occurrence of any of the following events:
(a) the undersigned fails to make any payment of interest
or of the Principal Sum on or before the date such payment is due;
(b) an "Event of Default" under the Loan Agreement shall
have occurred;
then the Bank may, at its option, without notice or demand, accelerate the
maturity of the obligations evidenced hereby, which obligations shall become
immediately due and payable. In the event the Bank shall institute any action
for the enforcement or collection of the obligations evidenced hereby, the
undersigned agrees to pay all costs and expenses of such action, including
reasonable attorneys' fees, to the extent permitted by law.
GENERAL PROVISIONS
The undersigned, and any indorser, surety, or guarantor, hereby
severally waive presentment, notice of dishonor, protest, notice of protest,
and diligence in bringing suit against any party hereto, and consent that,
without discharging any of them, the time of payment may be extended an
unlimited number of times before or after maturity without notice. The Bank
shall not be required to pursue any party hereto, including any guarantor, or
to exercise any rights against any collateral herefor before exercising any
other such rights.
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
The captions used herein are for references only and shall not be
deemed a part of this Note. If any of the terms or provisions of this Note
shall be deemed unenforceable, the enforceability of the remaining terms and
provisions shall not be affected. This Note shall be governed by and construed
in accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE UNDERSIGNED OR THE BANK WITH RESPECT TO THIS NOTE OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR THE
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<PAGE> 40
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
THE UNDERSIGNED HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT THE
UNDERSIGNED OR THE BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO
THE WAIVER OF THE RIGHT OF THE UNDERSIGNED TO TRIAL BY JURY.
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any state or territory of the United
States after the above indebtedness becomes due, whether by acceleration or
otherwise, to waive the issuing and service of process, and to confess judgment
against the undersigned in favor of the Bank for the amount then appearing due
together with costs of suit, and thereupon to waive all errors and all rights
of appeal and stays of execution.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
CA SHORT COMPANY
By:
-----------------------------------------
S. Robert Davis, Chairman of the Board
ATTEST:
- ------------------------------
Secretary
- ------------
[CORPORATE SEAL]
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<PAGE> 41
EXHIBIT A-2
COMMERCIAL LETTER OF CREDIT REIMBURSEMENT AGREEMENT
To The Huntington National Bank:
In consideration of your issuing, or your application for the issuance
by your correspondent at our request, of one or more Letters of Credit (herein
collectively referred to as the "Credit") substantially in accordance with the
Application attached hereto or such Applications as may hereafter be executed
and made a part hereof, the undersigned agrees as follows:
1. This Commercial Letter of Credit Reimbursement Agreement (this
"Agreement") is executed and the Credit contemplated hereunder are made
pursuant to a Loan and Security Agreement by and between the parties hereto
dated December 31, 1996 (hereinafter called the "Loan Agreement") and all the
covenants, representations, agreements, terms and conditions contained therein
are incorporated by reference herein. All Applications shall be made on forms
substantially identical to Exhibit A attached hereto. Upon execution, each
Application shall become a part of, and subject to, the terms and conditions of
the Loan Agreement and this Agreement.
2. We certify that each draft or acceptance under or purporting
to be under the Credit will grow out of transactions pursuant to definite bona
fide contracts for the shipment of goods within a specified reasonable time.
3. As to drafts or acceptances under or purporting to be under
the Credit which are payable in United States Currency, we agree (a) in the
case of each sight draft, to reimburse you at your issuing office on demand, in
United Stated legal tender, the amount paid on such draft, or if so demanded by
you, to pay you at said office in advance in such legal tender the amount
required to pay such draft; and, (b) in the case of each acceptance, to pay to
you, at said office, in United States legal tender, the amount thereof, on
demand but in any event not later than one business day prior to maturity, or,
in case the acceptance is not payable at your said office, then on demand, but
in any event in time to reach the place of payment in the usual course of the
mails not later than one business day prior to maturity.
4. As to drafts or acceptances under or purporting to be under
the Credit which are payable in currency other than United States currency, we
agree in the case of each sight draft to reimburse you at your issuing office,
on demand, the equivalent of the amount paid, in United States legal tender, at
the rate of exchange then current for cable transfers to the place of payment,
in the currency in which such draft is drawn; in the case of each acceptance,
to furnish you, at said office, on demand, but in any event in time to reach
the place of payment in the usual course of the mails not later than one
business day prior to maturity, with first class bankers' demand bills of
exchange to be approved by you for the amount of the acceptance, payable in the
currency of the acceptance and bearing our endorsement, or, if you so request,
to pay to you, at said office, on demand, the equivalent of the acceptance in
United States legal tender at the rate of exchange then current for
<PAGE> 42
cable transfers to the place of payment in the currency in which the acceptance
is payable. A demand made on one of us shall fix the exchange rate as to all
of us. If for any reason whatsoever, there shall be, at the time of your
demand of reimbursement or payment, no rate of exchange current for effective
cable transfers to the place of payment and in the currency in which any such
draft is drawn or any such acceptance is payable, we agree to pay you, on
demand, in United States legal tender, an amount which, in your sole judgment,
shall be sufficient to meet our obligations hereunder, which amount may be
applied by you at any time as a payment on account of such obligations; or, at
your option, held as security therefore; it being understood, however, that we
shall remain liable for any deficiency which may result in such amount in the
United States legal tender shall prove to be insufficient to effect full
payment or reimbursement to you at the time when a rate of exchange for such
transfers shall again be current.
5. We also agree to pay to you, on demand, your commission and
all charges and expenses (including all charges for legal services) paid or
incurred by you in connection with the Credit, plus correspondent's charges, if
any, and interest where chargeable. We agree to pay you after demand for
reimbursement interest upon any amounts disbursed hereunder at a variable rate
of interest per annum, which shall change in the manner set forth below equal
to four percentage points in excess of the Prime Commercial Rate of The
Huntington National Bank. As used herein, "Prime Commercial Rate" shall mean
the rate established by the Bank from time to time based on its consideration
of economic, money market, business and competitive factors, and is not
necessarily the Bank's most favored rate. Subject to any maximum or minimum
interest rate limitation specified herein or by applicable law, the variable
rate of interest on the obligation evidenced hereby shall change automatically
without notice to the undersigned immediately with each change in the Prime
Commercial Rate.
6. That, if the foregoing application requests the inclusion in
the Credit of any provision for Clean Advances to the beneficiary, you may
place in the Credit such a provision in that respect as you may deem
appropriate, under which any bank entitled to negotiate drafts under the
Credit, acting in its discretion in each instance and upon the request and
receipt in writing from the beneficiary, may make any one or more Clean
Advances at any time on or prior to the date by which drafts are to be
negotiated under the Credit. The aggregate of such advances shall in no event
be more than the amount specified in the Application for Clean Advances, and in
no event shall any such advance exceed the amount remaining available under the
Credit at the time of the advance. While it is expected by us that each such
advance will be repaid to the bank that made the advance by the beneficiary
from the proceeds of any drafts drawn under the Credit, should any such
advances not be thus repaid, we will on demand pay you the amounts thereof as
if such advances were evidenced by drafts drawn under the Credit, together with
interest on each such amount for the period that the same shall have been
outstanding at such rate as you may find at the time of demand to be payable.
It is understood that neither you nor any bank which may make such advances
shall be obligated to inquire into the use that may be made thereof by the
beneficiary and that you and each such bank shall be without liability for any
wrongful use that may be made by the beneficiary of any funds so advanced.
2
<PAGE> 43
7. We hereby recognize and admit your unqualified right to the
possession and disposal of all property shipped or warehoused under or pursuant
to or in connection with the Credit or in any way relative thereto or to the
drafts drawn thereunder, whether or not released to any of us on trust or
bailee receipt or otherwise, and also in and to all shipping documents,
warehouse receipts, policies or certificates of insurance and other documents
accompanying or relative to drafts drawn under the Credit, and in and to the
proceeds of each and all of the foregoing, until such time as all the
obligations and liabilities of us or any of us to you at any time existing
under or with reference to the Credit or this Agreement, or any other credit or
any other obligation or liability to you, whether now existing or hereafter
created or arising, have been fully paid and discharged, all as security for
such obligations and liabilities; and that all or any of such property and
documents, and the proceeds of any thereof, coming into the possession of you
or any of your correspondents, may be held and disposed of by you as herein
provided; and the receipt by you, or any of your correspondents, at any time of
other security, of whatever nature, including cash, shall not be deemed a
waiver of any of your rights or powers herein recognized.
8. Unless otherwise instructed by you, we agree from time to time
to give you trust receipts in any form acceptable to you for any property or
documents released by you to any of us and to sign and deliver to you such
Statements of Trust Receipt Financing, such Security Agreements and/or such
Financing Statements as you may from time to time request in any form
acceptable to you. We will pay any relative filing fees. In the event you
receive some, but not all, of the documents against which availments may be
made and, at your request, you deliver such documents to us, against trust
receipt or otherwise, prior to the presentation of the relative draft, we agree
to pay you on demand the amount of any claim made against you by reason thereof
and authorize you to pay or accept (as the case may be) such draft when it is
presented, regardless of whether or not such draft on any document which may
accompany it complies with the terms of the Credit.
9. Except as otherwise expressly stated in the Credit, we agree
(a) that you and any of your correspondents may receive and accept, as a "Bill
of Lading" relative to the Credit, any document issued or purporting to be
issued by or on behalf of any carrier which acknowledges receipt of property
for transportation, whatever the specific provisions of such documents, and any
such bill of lading issued by or on behalf of an ocean carrier may be accepted
by you as an "Ocean Bill of Lading" whether or not the entire transportation is
by water, and the date of every bill of lading shall be deemed the date of
shipment of the property mentioned therein; and (b) that you and any of your
correspondents may receive and accept as sufficient and controlling the
description of the property contained in the invoice; and (c) that you and any
of your correspondents may receive and accept bills of lading containing
stamped, written, or typewritten provisions thereon, whether or not signed or
initialed, and you and any of your correspondents may assume conclusively that
the same were placed with proper authority on the bill of lading at the time of
its signing and issuance by the carrier or any agent thereof; and (d) that if
the Credit states that except as otherwise expressly stated, it is subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce (Publication No. 500) (herein called the
"Uniform Customs"), the Credit shall be so subject in all respects; and (e)
that, if the Credit does not state that except as
3
<PAGE> 44
otherwise expressly stated it is subject to the Uniform Customs, you and any of
your correspondents may, without limiting the type of document acceptable
according to any other provisions of this Agreement, accept documents of any
character which comply with the Uniform Customs, or which comply with the laws
or regulations in force and customs and usages of the place of negotiation, and
(f) that you and any of your correspondents may receive and accept as documents
of insurance under the Credit either insurance policies or insurance
certificates which need not be for an amount greater than the amount paid by
you under or relative to the Credit; and (g) that you and any of your
correspondents may receive, accept, and pay as complying with the terms of the
Credit, any drafts or other documents, otherwise in order, which may be signed
by, or issued to, the administrator or executor of, or the trustee in
bankruptcy of, or the receiver for any of the property of, the party in whose
name the Credit provides that any drafts or other documents should be drawn or
issued.
10. Except as otherwise expressly stated in the Credit, we agree
(a) that part shipments may be made under the Credit and that you honor the
relative drafts without inquiry regardless of any apparent disproportion
between the quantity shipped and the amount of the relative draft and the total
amount of the Credit and the total quantity to be shipped under the Credit; and
(b) that if the Credit specifies shipments in installments within stated
periods and the shipper fails to ship in any designated period, shipments of
subsequent installments may nevertheless be made in their respective designated
periods and you may honor the relative drafts.
11. We agree that, in the event of any extension of the maturity
or time for presentation of drafts, acceptances or documents, or any other
modification of the terms of the Credit, at the request of any of us, with or
without notification to the others, or in the event of any increase in the
amount of the Credit at our request, this Agreement shall be binding upon us
with regard to the Credit so increased or otherwise modified, to drafts,
documents and property covered thereby, and to any action taken by you or any
of your correspondents in accordance with such extension, increase, or other
modification.
12. We hereby expressly authorize you and any of your
correspondents to accept and pay at your option any drafts drawn under or
purporting to be drawn under the Credit, notwithstanding any discrepancies or
irregularities between the drafts and documents presented, and those required
by the terms of the Credit; provided that as to discrepancies and
irregularities not otherwise covered by the provisions of this Agreement, you
or your correspondent so accepting or paying must be furnished with an
indemnity satisfactory to you, which, running in our favor as well as yours,
covers the discrepancies or irregularities, but is limited to the actual damage
directly attributable to such discrepancies or irregularities.
13. We assume all risks of the acts or omissions of the users of
the Credit. We agree that, should the beneficiary under a Credit upon receipt
of advice, by cable or otherwise, of the issuance of the Credit, but prior to
its actual receipt, negotiate drafts by virtue of such advice, such negotiation
shall be considered a proper one and shall be included under the terms and
subject to all conditions hereof, and we assume all the risks of the misuses of
the Credit, whatsoever. Neither you nor your correspondents shall be
responsible for the existence, character, description, quality, quantity,
4
<PAGE> 45
weight, condition, packing, value, or delivery of the property purporting to be
represented by documents; for any difference in character, description,
quality, quantity, weight, condition, packing or value of the property from
that expressed in documents; for the form, validity, sufficiency, genuineness,
or legal effect of documents, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent, or forged; for the
time, place, manner or order in which shipment is made; for partial or
incomplete shipment, or failure or omission to ship any or all of the property
referred to in the Credit; for the character, adequacy, validity, or
genuineness of any insurance; for the solvency or responsibility of any
insurer, or for any other risk connected with insurance; for any deviation from
instructions, delay, default or fraud by the shipper or anyone else in
connection with the property or the shipping thereof; for the solvency,
responsibility or relationship to the property of any party issuing any
documents in connection with the property; for delay in arrival or failure to
arrive of either the property or any of the documents relating thereto; for
delay in giving or failure to give notice of arrival or any other notice; for
any breach of contract between the shippers or vendors and ourselves or any of
us, for the validity or sufficiency of any instrument assigning/transferring or
purporting to assign/transfer the Credit or the rights or benefits thereunder
or proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason; for failure of any draft to bear any reference or
adequate reference to the Credit, or failure of documents to accompany any
draft at negotiation, or failure of documents to accompany any draft at payment
if sent by duplicate mail, or failure of any person to note the amount of any
draft on the reverse of the Credit, or to surrender to take up the Credit or to
send forward documents apart from drafts, as required by the terms of the
Credit, each of which provisions, if contained in the Credit itself, it is
agreed, may be waived by you; or for errors, omissions, interruptions, or
delays in transmission or delivery of any messages by mail, cable, telegraph,
wireless, or otherwise, whether or not they be in cipher; nor shall you be
responsible for any error, neglect, or default of any of your correspondents
for errors in translation, or for errors in interpretation of technical terms,
or for any consequences arising from causes beyond your control; and none of
the above shall affect, impair, or prevent the vesting of any of your rights or
powers hereunder. You shall have the right to transmit the terms of the Credit
without translating them. We shall protect you and any other drawee in paying
any draft dated on or before the expiration of any time limit expressed in the
Credit, regardless of when drawn and when or whether negotiated. If the Credit
provides that payment is to be made by your correspondent, neither you nor such
correspondent shall be responsible for the failure of any of the documents
specified in the Credit to come into your hands, or for any delay in connection
therewith; and our obligation to reimburse you for payments made or obligations
incurred shall not be affected by such failure or delay in the receipt by you
of any of such documents. In furtherance and extension and not in limitation
of the specific provisions herein before set forth, we agree that any action
taken by you or any correspondent of yours, under or in connection with the
Credit or the relative drafts, documents or property, if taken in good faith,
shall be binding on us, and shall not put you or your correspondent under any
resulting liability to us, and we make the same agreement as to any inaction or
omission, unless in breach of good faith.
You shall not in any way be liable for any failure by you or anyone
else to pay or accept any draft or acceptance under the Credit resulting from
any censorship, law, control or restriction rightfully or wrongfully exercised
by any de facto or de jure domestic or foreign government or
5
<PAGE> 46
agency, or from any other cause beyond your control or the control of your
correspondents, agents, or sub-agents, or for any loss or damage to us or
anyone else resulting from any such failure to pay or accept, all such risks
being expressly assumed by us, and we agree to indemnify and hold you harmless
from any claim, loss, liability, or expense arising by reason of any such
failure to pay or accept. We are responsible to you for all obligations
imposed upon you with respect to the Credit or the relative drafts, documents
or property.
14. We agree to procure promptly any necessary import and export
or other licenses for the import or export or shipping of the property and to
comply with all foreign and domestic governmental regulations in regard to the
shipment of the property or the financing thereof, and to furnish such
certificates in that respect as you may at any time require, and to keep the
property adequately covered by insurance satisfactory to you, in companies
satisfactory to you, and to assign the policies or certificates of insurance to
you, or to make the loss or adjustment, if any, payable to you, at your option;
and to furnish you, if demanded, evidence of acceptance by the insurers of such
assignment.
15. Each of us agrees, at any time and from time to time, on
demand, to deliver to you, as security for any and all of the liabilities of us
and any of us hereunder and all other liabilities of us and any of us to you,
direct or contingent, joint, several, or independent, now or hereafter
existing, due or to become due, whether created directly or acquired by
assignment or otherwise, additional property satisfactory to you, or to make
such payment as you may require. Each of us agrees that the balance of every
account of us or any of us with you and each claim of us or any of us against
you existing from time to time, shall be subject to a lien and subject to be
set off against any and all such liabilities of us or any of us; and you may at
any time or from time to time at your option and without notice appropriate and
apply toward the payment of any of such liabilities of us or any of us the
balance of each such account of us or any of us with you and each such claim of
us or any of us against you, and we and each of us, will continue liable for
any deficiency. Each of us agrees that all property of every description, now
or hereafter in your possession or custody, or in transit to you for any
purpose, including safekeeping, collection, or pledge, for the account of us or
any of us, or as to which we or any of us may have any interest, right, or
power, whether or not such property is in whole or in part released to us or
any of us on trust or bailee receipt, are hereby made security and subject to a
lien and security interest in your favor and any and all such liabilities of us
or any of us. You may at any time and from time to time, without notice,
transfer into your own name or that of your nominee, any property so held as
collateral. Each of us agrees that upon the occurrence of an Event of Default
under the Loan Agreement or upon a breach of any of the covenants, terms,
provisions or agreements contained in this Agreement, (a) any and all such
liabilities of us or any of us shall, at your option, become and e immediately
due and payable, without notice, presentation, demand of payment or protest,
all such being hereby expressly waived, and notwithstanding any credit or time
allowed to any of us, or any instrument evidencing such liabilities or
otherwise, and (b) you shall have the right from time to time to sell, re-sell,
assign, and deliver all or any part of the property, securing any liabilities
of us or any of us, arrived or to arrive, at any brokers' Board of Exchange, or
at public or private sale, at your option, without having the property at the
place of sale, in such parcel or parcels and at such time or times and at such
place or places, and upon such
6
<PAGE> 47
terms and conditions as you may deem proper, and in connection therewith, may
grant options, all without demand, advertisement or notice to us or any of us,
all of which are hereby expressly waived, and to apply the net proceeds of such
sale or sales to the payment of any and all such liabilities and we and each of
us will continue liable to you for any deficiency, with interest. Upon such
sale, you may purchase the whole or any part of the property of us or any of us
being sold, free from any right of redemption, which we and each of us hereby
expressly waive and release. Demands or calls for collateral on or any notices
to us or any of us respectively (a) may be made or given by you by leaving same
at the last know address of us or any of us respectively, or by mailing,
telegraphing, cabling, radioing, telephoning, or otherwise sending same to such
address, with the same effect as if delivered to all of us in person; (b) shall
be considered made as of the time of such leaving or mailing, telegraphing,
cabling, radioing, telephoning, or other sending by public agencies of
communication. Each of us agrees that with or without notification to any of
us, you may exchange, release, surrender, realize upon, release on trust
receipt to any of us, or otherwise deal with any property by whomsoever
pledged, mortgaged, or subjected to a security interest to secure directly or
indirectly any of the obligations hereunder or for which any of the undersigned
may be liable.
We will bear and pay all expenses of every kind (including all charges
for legal services) for the enforcement of any of your rights herein mentioned,
of any claim or demand by you against us or any of us, and of any actual or
attempted sale, exchange, enforcement, collection, maintenance, retention,
insurance, compromise, settlement, release, delivery on trust receipt, or
delivery of any such security, and of the receipt of proceeds thereof, and will
repay to you any such expenses incurred by you.
16. None of your options, powers or rights (including those
hereunder) shall be waived unless you or your authorized agent shall have
signed such waiver in writing. No such waiver, unless expressly stated herein,
shall be effective as to any transaction which occurs subsequent to the date of
such waiver, nor as to any continuance of a breach after such waiver. No
segregation or specific allocation by you of specified collateral against any
liability shall waive or affect any lien of any sort against other securities
or property or any of your options, powers or rights (including those
hereunder).
17. The word "property" as used in this Agreement includes goods,
merchandise, securities, funds, choses in action, and any and all other forms
of property, whether real, personal, or mixed, and any right or interest
therein. Property in your possession shall include property in possession of
anyone for you in any manner whatsoever. Your options, powers and rights
specified in this Agreement are in addition to those otherwise created. You
are hereby expressly given the right and power in furtherance of any right,
power or privilege which you may have hereunder or in connection with the
Credit to execute and endorsements, assignments, or other instruments of
conveyance or transfer in our name, place and stead, covering any property
standing in our name or belonging to us of every kind and description which you
may hold or which may come into your possession under the Credit or by reason
of this Agreement.
7
<PAGE> 48
18. If the undersigned is a banking institution, the undersigned
hereby appoints you as its agent to the extent of issuing the Credit in
accordance with and subject to the terms and provisions of this Agreement.
19. If the Credit shall be issued by your correspondent in
accordance with this application and agreement, each of the warranties,
liabilities and other terms of this Agreement or of the Credit shall run in
your favor as well as that of your correspondent so issuing the Credit.
21. We hereby certify that transactions in the merchandise covered
by this application are not prohibited under the Foreign Assets Control or
Cuban Assets Control Regulations of the United States Treasury Department and
that any Importation covered by this application conforms in every respect with
all existing United States Government regulations.
22. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
23. Each of the undersigned authorizes any attorney at law to
appear in any Court of Record in the State of Ohio or in any state or territory
of the United States after the above indebtedness becomes due, whether by
acceleration or otherwise, to waive the issuing and service of process, and to
confess judgment against any one or more of the undersigned in favor of the
Bank for the amount then appearing due together with costs of suit, and
thereupon to waive all errors and all rights of appeal and stays of execution.
No such judgment or judgments against less than all of the undersigned shall be
a bar to a subsequent judgment or judgments against any one or more of the
undersigned against whom judgment has not been obtained hereon, this being a
joint and several warrant of attorney to confess judgment.
24. This Agreement shall be binding upon us, our heirs, executors,
administrators, successors, and assigns, and shall inure to the benefit of, and
to be enforceable by, you, your successors, transferees and assigns. If this
Agreement should be terminated or revoked by operation of law as to us, or any
of us, we will indemnify and save you harmless from any loss which may be
8
<PAGE> 49
suffered or incurred by you in acting hereunder, prior to the receipt by you or
your transferees or assigns of notice in writing of such termination or
revocation. If this Agreement is signed by two or more parties, it shall be
the joint and several agreement of such parties and whenever used herein, the
singular number shall include the plural, and the plural the singular. This
Agreement shall be governed by and construed in accordance with the law of the
State of Ohio.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Very truly yours,
CA SHORT COMPANY
By:
-------------------------------------
Its:
------------------------------------
9
<PAGE> 50
EXHIBIT B
SCHEDULE OF PERMITTED ENCUMBRANCES
<TABLE>
<CAPTION>
Maximum Amount
Secured Party Description of Items of Obligation
- ------------- -------------------- --------------
<S> <C> <C>
Vanguard Financial Service Corp. 1 Toshiba 5540 Copier/Sorter -
Serial Number VL520064
Canon U.S.A., Inc. All CANON photographic products
sold to Borrower by Canon U.S.A., Inc.
including but not limited to audio-
visual products and all related accessories
and supplies hereinafter sold by Canon -
U.S.A., Inc. to Borrower and all similar
products which are purchased from others,
and any proceeds therefrom including all
contract rights and accounts receivable
thereon.
Leasing Services, Inc. One (1) Infiniti
One (1) Chevy Cargo Van
One (1) Chevrolet Caprice Station Wagon -
Two (2) Ford Crown Victorias
One (1) Ford Taurus
GE Capital Leased Computer Equipment -
</TABLE>
<PAGE> 51
EXHIBIT C
SCHEDULE OF BUSINESS LOCATIONS
CLYDE A. SHORT COMPANY
4205 East Dixon Blvd.
Shelby, NC 28150
(Principal Office)
301 Phenix Street
Kings Mountain, NC 28086
<PAGE> 52
EXHIBIT D
CAPITAL STRUCTURE
(a) 5,000,000 shares of common stock, authorized, par value .01 cents
300,000 shares of preferred stock, authorized, par value .01 cents
(b) 1 share of common stock outstanding
0 shares of preferred stock outstanding
(c) Beneficial ownership of shares
Charles R. Davis 103,000
S. Robert Davis 201,803
(d) Employers tax I.D. #56-0526145
<PAGE> 53
EXHIBIT E
SCHEDULE OF LITIGATION
None
<PAGE> 54
EXHIBIT F
Conditions Precedent to Initial Disbursement
1. Execution and Delivery of Certified Corporate Resolutions authorizing
execution of loan documents for CA Short Company ("Short")
2. Execution and Delivery of Closing Certificate of Short with the
following Exhibits:
a. Certificates of Good Standing - Delaware and North Carolina
b. Certified Copy of Certificate of Incorporation and amendment
and merger documents - Delaware
c. Bylaws
3. Execution and Delivery of Loan and Security Agreement with following
Exhibits:
Exhibit A-1 - Revolving Note
Exhibit A-2 - Reimbursement Agreement
Exhibit B - Schedule of Permitted Encumbrances
Exhibit C - Schedule of Business Locations
Exhibit D - Capital Structure
Exhibit E - Litigation Disclosure
Exhibit F - Conditions Precedent to Initial Disbursement
4. Execution and Delivery of Revolving Note - $4,500,000.00
5. Execution and Delivery of Commercial Letter of Credit Reimbursement
Agreement
6. Execution and Delivery of Lockbox Agreement
7. Execution and Delivery of Loan Expense and Disbursement Statement
8. Execution and Delivery of UCC-3 Amendments changing Short's name from
Clyde A. Short Company to CA Short Company
a. Secretary of State of Ohio (#AB72233)
b. Franklin County, Ohio (#2667J09)
c. North Carolina Secretary of State (#0654468)
d. Cleveland County, North Carolina Register of Deeds (#090-0382)
e. Cleveland County, North Carolina Register of Deeds (#090-0387)
(Fixture)
f. Cleveland County, North Carolina Register of Deeds (#921121)
(Fixture)
9. Execution and Delivery of New UCC-1 Financing Statements for Short -
Personal Property
<PAGE> 55
a. Secretary of State of Ohio
b. Franklin County, Ohio
c. North Carolina Secretary of State
d. Cleveland County, North Carolina Register of Deeds
9a. Execution and Delivery of UCC-1 Financing Statements for Short -
Personal Property -- Pages, Inc. as Secured Party, assigned to HNB
a. Secretary of State of Ohio
b. Franklin County, Ohio
c. North Carolina Secretary of State
d. Cleveland County, North Carolina Register of Deeds
10. Execution and Delivery of New UCC-1 Fixture Financing Statements for
Short
a. Cleveland County, North Carolina Register of Deeds (two
locations)
10a. Execution and Delivery of New UCC-1 Fixture Financing Statements for
Short -- Pages, Inc. as Secured Party, assigned to HNB
a. Cleveland County, North Carolina Register of Deeds (two
locations)
11. Execution and Delivery of Landlord's Waivers or Bailee's Waivers for
locations in which Short leases real estate or stores inventory (None)
12. Execution and Delivery of Open-End Deed of Trust and Security
Agreement
13. Execution and Delivery of Borrower's Affidavit
14. Execution and Delivery of Mortgage Releases as indicated by title work
15. Execution and Delivery of Debt Subordination and Intercreditor
Agreement by Pages, Inc.
16. Delivery of original subordinated promissory note with legend
17. Execution and Delivery of Transaction Validity Agreement - S. Robert
Davis
18. Delivery of Mortgagee's Title Insurance Commitment and Final Title
Policy in an amount not less than $2,700,000.00 with Revolving
Endorsement
19. Delivery of Title Affidavits as required by title insurance company
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20. Delivery of Insurance Endorsement for Cleveland County real estate
naming HNB as additional insured, loss payee and mortgagee for
property (May be combined with number 27 below)
21. Execution and Delivery of Opinion of Counsel to Borrower and
certificate to counsel attached
22. Execution and Delivery of Local Counsel Opinion to Borrower (North
Carolina)
23. Execution and Delivery of Accountant's Reliance Letter
24. Delivery of Judgment, tax lien and pending litigation searches on
Short
a. Cleveland County, NC
25. Delivery of UCC lien searches on Short
a. Ohio Secretary of State
b. Franklin County, Ohio Recorder
c. North Carolina Secretary of State
d. Cleveland County, NC Register of Deeds
26. Execution and Delivery of Termination Statements as indicated by UCC
lien searches
27. Delivery of Loss Payable and Additional Insured Insurance Endorsements
for personal property, real property, and liability insurance naming
HNB as additional insured, mortgagee and loss payee
28. Delivery of Certificates of Insurance for personal property, real
property and liability insurance naming HNB as additional insured,
mortgagee and loss payee
29. Delivery of Copies of personal property and real property insurance
policies naming HNB as additional insured, mortgagee and loss payee
30. Delivery of Form 10
31. Delivery of Executed Fairness Opinion - with consent for HNB Reliance
32. Delivery of 3-years Projections for Pages and subsidiaries
33. Delivery of Executed Deliotte & Touche Analysis/Opinion regarding
Subordinated Debt
34. Delivery of Executed Distribution Agreement
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35. Delivery of Evidence of Effectiveness of Form 10 by SEC
36. Delivery of No Action Letter by SEC or Supplemental Evidence of Same
37. Delivery of Evidence of appropriate D & O Insurance
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<PAGE> 1
EXHIBIT 10.5.2
THE HUNTINGTON NATIONAL BANK
REVOLVING NOTE
================================================================================
City Office__________________ Division________________ Branch_______ [X] Secured
Account No.________________________________ Note No.______________ [ ] Unsecured
Account Name CA Short Company
[X] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other_______________________________________________________________________
================================================================================
$4,500,000.00 Columbus, Ohio December 31, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
The Huntington National Bank (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of Four
Million Five Hundred Thousand Dollars ($4,500,000.00) or so much thereof as
shall have been advanced by the Bank at any time and not thereafter repaid
(hereinafter referred to as "Principal Sum") together with interest as
hereinafter provided and payable at the time and in the manner hereinafter
provided. The proceeds of the loan evidenced hereby may be advanced, repaid
and readvanced in partial amounts during the term of this revolving note (this
"Note") and prior to maturity. Each such advance shall be made to the
undersigned upon receipt by the Bank of the undersigned's application therefor
and disbursement instructions, which shall be in such form as the Bank shall
from time to time prescribe. The Bank shall be entitled to rely on any oral or
telephonic communication requesting an advance and/or providing disbursement
instructions hereunder, which shall be received by it in good faith from anyone
reasonably believed by the Bank to be the undersigned, or the undersigned's
authorized agent. The undersigned agrees that all advances made by the Bank
will be evidenced by entries made by the Bank into its electronic data
processing system and/or internal memoranda maintained by the Bank. The
undersigned further agrees that the sum or sums shown on the most recent
printout from the Bank's electronic data processing system and/or on such
memoranda shall be rebuttably presumptive evidence of the amount of the
Principal Sum and of the amount of any accrued interest.
This Note is executed and the advances contemplated hereunder are to
be made pursuant to a Loan and Security Agreement by and between the
undersigned and the Bank dated December 31, 1996, and all amendments,
modifications, and supplements thereto from time to time (hereinafter
collectively called the "Loan Agreement"), and all the covenants,
representations, agreements, terms, and conditions contained therein, including
but not limited to additional conditions of default, are incorporated herein as
if fully rewritten.
<PAGE> 2
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until
paid at a variable rate of interest per annum, which shall change in the manner
set forth below, equal to one percentage point (1%) in excess of the Prime
Commercial Rate.
Upon the occurrence of an "Event of Default" pursuant to the Loan
Agreement, interest will accrue on the unpaid balance of the Principal Sum and
unpaid interest, if any, at a variable rate of interest per annum, which shall
change in the manner set forth below, equal to four percentage points (4%) in
excess of the Prime Commercial Rate.
All interest shall be calculated on the basis of a 360 day year for
the actual number of days the Principal Sum or any part thereof remains unpaid.
As used herein, "Prime Commercial Rate" shall mean the rate
established by the Bank from time to time based on its consideration of
economic, money market, business and competitive factors. The Prime Commercial
Rate is not necessarily the Bank's most favored rate. Subject to any maximum
or minimum interest rate limitation specified herein or by applicable law, any
variable rate of interest on the obligation evidenced hereby shall change
automatically without notice to the undersigned immediately with each change in
the Prime Commercial Rate.
MANNER OF PAYMENT
The Principal Sum shall be due and payable on June 30, 1997, and at
maturity, whether by demand, acceleration or otherwise. Accrued interest shall
be due and payable monthly beginning on February 1, 1997, and continuing on the
1st day of each month thereafter, and at maturity, whether by demand,
acceleration or otherwise.
LATE CHARGE
Any installment or other payment not made within 10 days of the date
such payment or installment is due shall be subject to a late charge equal to
5% of the amount of the installment or payment.
SECURITY
This Note is secured by the security interests, assignments, and
mortgages granted and/or referenced in the Loan Agreement.
DEFAULT
Upon the occurrence of any of the following events:
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<PAGE> 3
(a) the undersigned fails to make any payment of interest
or of the Principal Sum on or before the date such payment is due;
(b) an "Event of Default" under the Loan Agreement shall
have occurred;
then the Bank may, at its option, without notice or demand, accelerate the
maturity of the obligations evidenced hereby, which obligations shall become
immediately due and payable. In the event the Bank shall institute any action
for the enforcement or collection of the obligations evidenced hereby, the
undersigned agrees to pay all costs and expenses of such action, including
reasonable attorneys' fees, to the extent permitted by law.
GENERAL PROVISIONS
The undersigned, and any indorser, surety, or guarantor, hereby
severally waive presentment, notice of dishonor, protest, notice of protest,
and diligence in bringing suit against any party hereto, and consent that,
without discharging any of them, the time of payment may be extended an
unlimited number of times before or after maturity without notice. The Bank
shall not be required to pursue any party hereto, including any guarantor, or
to exercise any rights against any collateral herefor before exercising any
other such rights.
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
The captions used herein are for references only and shall not be
deemed a part of this Note. If any of the terms or provisions of this Note
shall be deemed unenforceable, the enforceability of the remaining terms and
provisions shall not be affected. This Note shall be governed by and construed
in accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE UNDERSIGNED OR THE BANK WITH RESPECT TO THIS NOTE OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
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<PAGE> 4
TORT OR OTHERWISE; AND THE UNDERSIGNED HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT THE UNDERSIGNED OR THE BANK MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE UNDERSIGNED TO THE WAIVER OF THE RIGHT OF THE UNDERSIGNED TO
TRIAL BY JURY.
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any state or territory of the United
States after the above indebtedness becomes due, whether by acceleration or
otherwise, to waive the issuing and service of process, and to confess judgment
against the undersigned in favor of the Bank for the amount then appearing due
together with costs of suit, and thereupon to waive all errors and all rights
of appeal and stays of execution.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
CA SHORT COMPANY
By: /s/ S. Robert Davis
-----------------------------------------
S. Robert Davis, Chairman of the Board
ATTEST:
/s/ Jean P. Davis
- ------------------------------
Asst. Secretary
[CORPORATE SEAL]
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<PAGE> 1
EXHIBIT 10.5.3
COMMERCIAL LETTER OF CREDIT REIMBURSEMENT AGREEMENT
To The Huntington National Bank:
In consideration of your issuing, or your application for the issuance
by your correspondent at our request, of one or more Letters of Credit (herein
collectively referred to as the "Credit") substantially in accordance with the
Application attached hereto or such Applications as may hereafter be executed
and made a part hereof, the undersigned agrees as follows:
1. This Commercial Letter of Credit Reimbursement Agreement (this
"Agreement") is executed and the Credit contemplated hereunder are made
pursuant to a Loan and Security Agreement by and between the parties hereto
dated December 31, 1996 (hereinafter called the "Loan Agreement") and all the
covenants, representations, agreements, terms and conditions contained therein
are incorporated by reference herein. All Applications shall be made on forms
substantially identical to Exhibit A attached hereto. Upon execution, each
Application shall become a part of, and subject to, the terms and conditions of
the Loan Agreement and this Agreement.
2. We certify that each draft or acceptance under or purporting
to be under the Credit will grow out of transactions pursuant to definite bona
fide contracts for the shipment of goods within a specified reasonable time.
3. As to drafts or acceptances under or purporting to be under
the Credit which are payable in United States Currency, we agree (a) in the
case of each sight draft, to reimburse you at your issuing office on demand, in
United Stated legal tender, the amount paid on such draft, or if so demanded by
you, to pay you at said office in advance in such legal tender the amount
required to pay such draft; and, (b) in the case of each acceptance, to pay to
you, at said office, in United States legal tender, the amount thereof, on
demand but in any event not later than one business day prior to maturity, or,
in case the acceptance is not payable at your said office, then on demand, but
in any event in time to reach the place of payment in the usual course of the
mails not later than one business day prior to maturity.
4. As to drafts or acceptances under or purporting to be under
the Credit which are payable in currency other than United States currency, we
agree in the case of each sight draft to reimburse you at your issuing office,
on demand, the equivalent of the amount paid, in United States legal tender, at
the rate of exchange then current for cable transfers to the place of payment,
in the currency in which such draft is drawn; in the case of each acceptance,
to furnish you, at said office, on demand, but in any event in time to reach
the place of payment in the usual course of the mails not later than one
business day prior to maturity, with first class bankers' demand bills of
exchange to be approved by you for the amount of the acceptance, payable in the
currency of the acceptance and bearing our endorsement, or, if you so request,
to pay to you, at said office, on demand, the equivalent of the acceptance in
United States legal tender at the rate of exchange then current for cable
transfers to the place of payment in the currency in which the acceptance is
payable. A demand made on one of us shall fix the exchange rate as to all of
us. If for any reason whatsoever,
<PAGE> 2
there shall be, at the time of your demand of reimbursement or payment, no rate
of exchange current for effective cable transfers to the place of payment and
in the currency in which any such draft is drawn or any such acceptance is
payable, we agree to pay you, on demand, in United States legal tender, an
amount which, in your sole judgment, shall be sufficient to meet our
obligations hereunder, which amount may be applied by you at any time as a
payment on account of such obligations; or, at your option, held as security
therefore; it being understood, however, that we shall remain liable for any
deficiency which may result in such amount in the United States legal tender
shall prove to be insufficient to effect full payment or reimbursement to you
at the time when a rate of exchange for such transfers shall again be current.
5. We also agree to pay to you, on demand, your commission and
all charges and expenses (including all charges for legal services) paid or
incurred by you in connection with the Credit, plus correspondent's charges, if
any, and interest where chargeable. We agree to pay you after demand for
reimbursement interest upon any amounts disbursed hereunder at a variable rate
of interest per annum, which shall change in the manner set forth below equal
to four percentage points in excess of the Prime Commercial Rate of The
Huntington National Bank. As used herein, "Prime Commercial Rate" shall mean
the rate established by the Bank from time to time based on its consideration
of economic, money market, business and competitive factors, and is not
necessarily the Bank's most favored rate. Subject to any maximum or minimum
interest rate limitation specified herein or by applicable law, the variable
rate of interest on the obligation evidenced hereby shall change automatically
without notice to the undersigned immediately with each change in the Prime
Commercial Rate.
6. That, if the foregoing application requests the inclusion in
the Credit of any provision for Clean Advances to the beneficiary, you may
place in the Credit such a provision in that respect as you may deem
appropriate, under which any bank entitled to negotiate drafts under the
Credit, acting in its discretion in each instance and upon the request and
receipt in writing from the beneficiary, may make any one or more Clean
Advances at any time on or prior to the date by which drafts are to be
negotiated under the Credit. The aggregate of such advances shall in no event
be more than the amount specified in the Application for Clean Advances, and in
no event shall any such advance exceed the amount remaining available under the
Credit at the time of the advance. While it is expected by us that each such
advance will be repaid to the bank that made the advance by the beneficiary
from the proceeds of any drafts drawn under the Credit, should any such
advances not be thus repaid, we will on demand pay you the amounts thereof as
if such advances were evidenced by drafts drawn under the Credit, together with
interest on each such amount for the period that the same shall have been
outstanding at such rate as you may find at the time of demand to be payable.
It is understood that neither you nor any bank which may make such advances
shall be obligated to inquire into the use that may be made thereof by the
beneficiary and that you and each such bank shall be without liability for any
wrongful use that may be made by the beneficiary of any funds so advanced.
7. We hereby recognize and admit your unqualified right to the
possession and disposal of all property shipped or warehoused under or pursuant
to or in connection with the Credit or in any
2
<PAGE> 3
way relative thereto or to the drafts drawn thereunder, whether or not released
to any of us on trust or bailee receipt or otherwise, and also in and to all
shipping documents, warehouse receipts, policies or certificates of insurance
and other documents accompanying or relative to drafts drawn under the Credit,
and in and to the proceeds of each and all of the foregoing, until such time as
all the obligations and liabilities of us or any of us to you at any time
existing under or with reference to the Credit or this Agreement, or any other
credit or any other obligation or liability to you, whether now existing or
hereafter created or arising, have been fully paid and discharged, all as
security for such obligations and liabilities; and that all or any of such
property and documents, and the proceeds of any thereof, coming into the
possession of you or any of your correspondents, may be held and disposed of by
you as herein provided; and the receipt by you, or any of your correspondents,
at any time of other security, of whatever nature, including cash, shall not be
deemed a waiver of any of your rights or powers herein recognized.
8. Unless otherwise instructed by you, we agree from time to time
to give you trust receipts in any form acceptable to you for any property or
documents released by you to any of us and to sign and deliver to you such
Statements of Trust Receipt Financing, such Security Agreements and/or such
Financing Statements as you may from time to time request in any form
acceptable to you. We will pay any relative filing fees. In the event you
receive some, but not all, of the documents against which availments may be
made and, at your request, you deliver such documents to us, against trust
receipt or otherwise, prior to the presentation of the relative draft, we agree
to pay you on demand the amount of any claim made against you by reason thereof
and authorize you to pay or accept (as the case may be) such draft when it is
presented, regardless of whether or not such draft on any document which may
accompany it complies with the terms of the Credit.
9. Except as otherwise expressly stated in the Credit, we agree
(a) that you and any of your correspondents may receive and accept, as a "Bill
of Lading" relative to the Credit, any document issued or purporting to be
issued by or on behalf of any carrier which acknowledges receipt of property
for transportation, whatever the specific provisions of such documents, and any
such bill of lading issued by or on behalf of an ocean carrier may be accepted
by you as an "Ocean Bill of Lading" whether or not the entire transportation is
by water, and the date of every bill of lading shall be deemed the date of
shipment of the property mentioned therein; and (b) that you and any of your
correspondents may receive and accept as sufficient and controlling the
description of the property contained in the invoice; and (c) that you and any
of your correspondents may receive and accept bills of lading containing
stamped, written, or typewritten provisions thereon, whether or not signed or
initialed, and you and any of your correspondents may assume conclusively that
the same were placed with proper authority on the bill of lading at the time of
its signing and issuance by the carrier or any agent thereof; and (d) that if
the Credit states that except as otherwise expressly stated, it is subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce (Publication No. 500) (herein called the
"Uniform Customs"), the Credit shall be so subject in all respects; and (e)
that, if the Credit does not state that except as otherwise expressly stated it
is subject to the Uniform Customs, you and any of your correspondents may,
without limiting the type of document acceptable according to any other
provisions of this
3
<PAGE> 4
Agreement, accept documents of any character which comply with the Uniform
Customs, or which comply with the laws or regulations in force and customs and
usages of the place of negotiation, and (f) that you and any of your
correspondents may receive and accept as documents of insurance under the
Credit either insurance policies or insurance certificates which need not be
for an amount greater than the amount paid by you under or relative to the
Credit; and (g) that you and any of your correspondents may receive, accept,
and pay as complying with the terms of the Credit, any drafts or other
documents, otherwise in order, which may be signed by, or issued to, the
administrator or executor of, or the trustee in bankruptcy of, or the receiver
for any of the property of, the party in whose name the Credit provides that
any drafts or other documents should be drawn or issued.
10. Except as otherwise expressly stated in the Credit, we agree
(a) that part shipments may be made under the Credit and that you honor the
relative drafts without inquiry regardless of any apparent disproportion
between the quantity shipped and the amount of the relative draft and the total
amount of the Credit and the total quantity to be shipped under the Credit; and
(b) that if the Credit specifies shipments in installments within stated
periods and the shipper fails to ship in any designated period, shipments of
subsequent installments may nevertheless be made in their respective designated
periods and you may honor the relative drafts.
11. We agree that, in the event of any extension of the maturity
or time for presentation of drafts, acceptances or documents, or any other
modification of the terms of the Credit, at the request of any of us, with or
without notification to the others, or in the event of any increase in the
amount of the Credit at our request, this Agreement shall be binding upon us
with regard to the Credit so increased or otherwise modified, to drafts,
documents and property covered thereby, and to any action taken by you or any
of your correspondents in accordance with such extension, increase, or other
modification.
12. We hereby expressly authorize you and any of your
correspondents to accept and pay at your option any drafts drawn under or
purporting to be drawn under the Credit, notwithstanding any discrepancies or
irregularities between the drafts and documents presented, and those required
by the terms of the Credit; provided that as to discrepancies and
irregularities not otherwise covered by the provisions of this Agreement, you
or your correspondent so accepting or paying must be furnished with an
indemnity satisfactory to you, which, running in our favor as well as yours,
covers the discrepancies or irregularities, but is limited to the actual damage
directly attributable to such discrepancies or irregularities.
13. We assume all risks of the acts or omissions of the users of
the Credit. We agree that, should the beneficiary under a Credit upon receipt
of advice, by cable or otherwise, of the issuance of the Credit, but prior to
its actual receipt, negotiate drafts by virtue of such advice, such negotiation
shall be considered a proper one and shall be included under the terms and
subject to all conditions hereof, and we assume all the risks of the misuses of
the Credit, whatsoever. Neither you nor your correspondents shall be
responsible for the existence, character, description, quality, quantity,
weight, condition, packing, value, or delivery of the property purporting to be
represented by documents; for any difference in character, description,
quality, quantity, weight, condition, packing
4
<PAGE> 5
or value of the property from that expressed in documents; for the form,
validity, sufficiency, genuineness, or legal effect of documents, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent, or forged; for the time, place, manner or order in
which shipment is made; for partial or incomplete shipment, or failure or
omission to ship any or all of the property referred to in the Credit; for the
character, adequacy, validity, or genuineness of any insurance; for the
solvency or responsibility of any insurer, or for any other risk connected with
insurance; for any deviation from instructions, delay, default or fraud by the
shipper or anyone else in connection with the property or the shipping thereof;
for the solvency, responsibility or relationship to the property of any party
issuing any documents in connection with the property; for delay in arrival or
failure to arrive of either the property or any of the documents relating
thereto; for delay in giving or failure to give notice of arrival or any other
notice; for any breach of contract between the shippers or vendors and
ourselves or any of us, for the validity or sufficiency of any instrument
assigning/transferring or purporting to assign/transfer the Credit or the
rights or benefits thereunder or proceeds thereof in whole or in part, which
may prove to be invalid or ineffective for any reason; for failure of any draft
to bear any reference or adequate reference to the Credit, or failure of
documents to accompany any draft at negotiation, or failure of documents to
accompany any draft at payment if sent by duplicate mail, or failure of any
person to note the amount of any draft on the reverse of the Credit, or to
surrender to take up the Credit or to send forward documents apart from drafts,
as required by the terms of the Credit, each of which provisions, if contained
in the Credit itself, it is agreed, may be waived by you; or for errors,
omissions, interruptions, or delays in transmission or delivery of any messages
by mail, cable, telegraph, wireless, or otherwise, whether or not they be in
cipher; nor shall you be responsible for any error, neglect, or default of any
of your correspondents for errors in translation, or for errors in
interpretation of technical terms, or for any consequences arising from causes
beyond your control; and none of the above shall affect, impair, or prevent the
vesting of any of your rights or powers hereunder. You shall have the right to
transmit the terms of the Credit without translating them. We shall protect
you and any other drawee in paying any draft dated on or before the expiration
of any time limit expressed in the Credit, regardless of when drawn and when or
whether negotiated. If the Credit provides that payment is to be made by your
correspondent, neither you nor such correspondent shall be responsible for the
failure of any of the documents specified in the Credit to come into your
hands, or for any delay in connection therewith; and our obligation to
reimburse you for payments made or obligations incurred shall not be affected
by such failure or delay in the receipt by you of any of such documents. In
furtherance and extension and not in limitation of the specific provisions
herein before set forth, we agree that any action taken by you or any
correspondent of yours, under or in connection with the Credit or the relative
drafts, documents or property, if taken in good faith, shall be binding on us,
and shall not put you or your correspondent under any resulting liability to
us, and we make the same agreement as to any inaction or omission, unless in
breach of good faith.
You shall not in any way be liable for any failure by you or anyone
else to pay or accept any draft or acceptance under the Credit resulting from
any censorship, law, control or restriction rightfully or wrongfully exercised
by any de facto or de jure domestic or foreign government or agency, or from
any other cause beyond your control or the control of your correspondents,
agents, or sub-agents, or for any loss or damage to us or anyone else resulting
from any such failure to pay
5
<PAGE> 6
or accept, all such risks being expressly assumed by us, and we agree to
indemnify and hold you harmless from any claim, loss, liability, or expense
arising by reason of any such failure to pay or accept. We are responsible to
you for all obligations imposed upon you with respect to the Credit or the
relative drafts, documents or property.
14. We agree to procure promptly any necessary import and export
or other licenses for the import or export or shipping of the property and to
comply with all foreign and domestic governmental regulations in regard to the
shipment of the property or the financing thereof, and to furnish such
certificates in that respect as you may at any time require, and to keep the
property adequately covered by insurance satisfactory to you, in companies
satisfactory to you, and to assign the policies or certificates of insurance to
you, or to make the loss or adjustment, if any, payable to you, at your option;
and to furnish you, if demanded, evidence of acceptance by the insurers of such
assignment.
15. Each of us agrees, at any time and from time to time, on
demand, to deliver to you, as security for any and all of the liabilities of us
and any of us hereunder and all other liabilities of us and any of us to you,
direct or contingent, joint, several, or independent, now or hereafter
existing, due or to become due, whether created directly or acquired by
assignment or otherwise, additional property satisfactory to you, or to make
such payment as you may require. Each of us agrees that the balance of every
account of us or any of us with you and each claim of us or any of us against
you existing from time to time, shall be subject to a lien and subject to be
set off against any and all such liabilities of us or any of us; and you may at
any time or from time to time at your option and without notice appropriate and
apply toward the payment of any of such liabilities of us or any of us the
balance of each such account of us or any of us with you and each such claim of
us or any of us against you, and we and each of us, will continue liable for
any deficiency. Each of us agrees that all property of every description, now
or hereafter in your possession or custody, or in transit to you for any
purpose, including safekeeping, collection, or pledge, for the account of us or
any of us, or as to which we or any of us may have any interest, right, or
power, whether or not such property is in whole or in part released to us or
any of us on trust or bailee receipt, are hereby made security and subject to a
lien and security interest in your favor and any and all such liabilities of us
or any of us. You may at any time and from time to time, without notice,
transfer into your own name or that of your nominee, any property so held as
collateral. Each of us agrees that upon the occurrence of an Event of Default
under the Loan Agreement or upon a breach of any of the covenants, terms,
provisions or agreements contained in this Agreement, (a) any and all such
liabilities of us or any of us shall, at your option, become and e immediately
due and payable, without notice, presentation, demand of payment or protest,
all such being hereby expressly waived, and notwithstanding any credit or time
allowed to any of us, or any instrument evidencing such liabilities or
otherwise, and (b) you shall have the right from time to time to sell, re-sell,
assign, and deliver all or any part of the property, securing any liabilities
of us or any of us, arrived or to arrive, at any brokers' Board of Exchange, or
at public or private sale, at your option, without having the property at the
place of sale, in such parcel or parcels and at such time or times and at such
place or places, and upon such terms and conditions as you may deem proper, and
in connection therewith, may grant options, all without demand, advertisement
or notice to us or any of us, all of which are hereby expressly
6
<PAGE> 7
waived, and to apply the net proceeds of such sale or sales to the payment of
any and all such liabilities and we and each of us will continue liable to you
for any deficiency, with interest. Upon such sale, you may purchase the whole
or any part of the property of us or any of us being sold, free from any right
of redemption, which we and each of us hereby expressly waive and release.
Demands or calls for collateral on or any notices to us or any of us
respectively (a) may be made or given by you by leaving same at the last know
address of us or any of us respectively, or by mailing, telegraphing, cabling,
radioing, telephoning, or otherwise sending same to such address, with the same
effect as if delivered to all of us in person; (b) shall be considered made as
of the time of such leaving or mailing, telegraphing, cabling, radioing,
telephoning, or other sending by public agencies of communication. Each of us
agrees that with or without notification to any of us, you may exchange,
release, surrender, realize upon, release on trust receipt to any of us, or
otherwise deal with any property by whomsoever pledged, mortgaged, or subjected
to a security interest to secure directly or indirectly any of the obligations
hereunder or for which any of the undersigned may be liable.
We will bear and pay all expenses of every kind (including all charges
for legal services) for the enforcement of any of your rights herein mentioned,
of any claim or demand by you against us or any of us, and of any actual or
attempted sale, exchange, enforcement, collection, maintenance, retention,
insurance, compromise, settlement, release, delivery on trust receipt, or
delivery of any such security, and of the receipt of proceeds thereof, and will
repay to you any such expenses incurred by you.
16. None of your options, powers or rights (including those
hereunder) shall be waived unless you or your authorized agent shall have
signed such waiver in writing. No such waiver, unless expressly stated herein,
shall be effective as to any transaction which occurs subsequent to the date of
such waiver, nor as to any continuance of a breach after such waiver. No
segregation or specific allocation by you of specified collateral against any
liability shall waive or affect any lien of any sort against other securities
or property or any of your options, powers or rights (including those
hereunder).
17. The word "property" as used in this Agreement includes goods,
merchandise, securities, funds, choses in action, and any and all other forms
of property, whether real, personal, or mixed, and any right or interest
therein. Property in your possession shall include property in possession of
anyone for you in any manner whatsoever. Your options, powers and rights
specified in this Agreement are in addition to those otherwise created. You
are hereby expressly given the right and power in furtherance of any right,
power or privilege which you may have hereunder or in connection with the
Credit to execute and endorsements, assignments, or other instruments of
conveyance or transfer in our name, place and stead, covering any property
standing in our name or belonging to us of every kind and description which you
may hold or which may come into your possession under the Credit or by reason
of this Agreement.
7
<PAGE> 8
18. If the undersigned is a banking institution, the undersigned
hereby appoints you as its agent to the extent of issuing the Credit in
accordance with and subject to the terms and provisions of this Agreement.
19. If the Credit shall be issued by your correspondent in
accordance with this application and agreement, each of the warranties,
liabilities and other terms of this Agreement or of the Credit shall run in
your favor as well as that of your correspondent so issuing the Credit.
21. We hereby certify that transactions in the merchandise covered
by this application are not prohibited under the Foreign Assets Control or
Cuban Assets Control Regulations of the United States Treasury Department and
that any Importation covered by this application conforms in every respect with
all existing United States Government regulations.
22. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
23. Each of the undersigned authorizes any attorney at law to
appear in any Court of Record in the State of Ohio or in any state or territory
of the United States after the above indebtedness becomes due, whether by
acceleration or otherwise, to waive the issuing and service of process, and to
confess judgment against any one or more of the undersigned in favor of the
Bank for the amount then appearing due together with costs of suit, and
thereupon to waive all errors and all rights of appeal and stays of execution.
No such judgment or judgments against less than all of the undersigned shall be
a bar to a subsequent judgment or judgments against any one or more of the
undersigned against whom judgment has not been obtained hereon, this being a
joint and several warrant of attorney to confess judgment.
24. This Agreement shall be binding upon us, our heirs, executors,
administrators, successors, and assigns, and shall inure to the benefit of, and
to be enforceable by, you, your successors, transferees and assigns. If this
Agreement should be terminated or revoked by operation of law as to us, or any
of us, we will indemnify and save you harmless from any loss which may be
8
<PAGE> 9
suffered or incurred by you in acting hereunder, prior to the receipt by you or
your transferees or assigns of notice in writing of such termination or
revocation. If this Agreement is signed by two or more parties, it shall be
the joint and several agreement of such parties and whenever used herein, the
singular number shall include the plural, and the plural the singular. This
Agreement shall be governed by and construed in accordance with the law of the
State of Ohio.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Very truly yours,
CA SHORT COMPANY
By: /s/ S. Robert Davis
-----------------------------------------
Its: Chairman of the Board
----------------------------------------
9
<PAGE> 10
EXHIBIT A
ATTACHMENT TO COMMERCIAL LETTER OF CREDIT REIMBURSEMENT AGREEMENT
BETWEEN CA SHORT COMPANY AND THE HUNTINGTON NATIONAL BANK
EXECUTED AND DELIVERED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
___________________________ Date:______________, 19__
___________________________
___________________________ Letter of Credit No. ________
___________________________ FOR BANK USE ONLY
Please Issue for our account an Irrevocable Letter of Credit by _____ Date and Place of Expiry
Cable____Airmail____ Brief details by cable as follows: ------------------------------------------------------------
IN FAVOR OF
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICANT BENEFICIARY
- ------------------------------------------------------------------------------------------------------------------------------------
TO BE ADVISED THROUGH AMOUNT
------------------------------------------------------------
CREDIT AVAILABLE WITH
- ------------------------------------------------------------------------------------------------------------------------------------
PART SHIPMENTS TRANSHIPMENT BY ____ PAYMENT ____ ACCEPTANCE
____Allowed ____Allowed ____ NEGOTIATION Against presentation of the documents
____Not Allowed ____Not Allowed detailed herein
- ------------------------------------------------------------------------------------------------------------------------------------
SHIPMENT/DISPATCH/TAKING IN CHARGE FROM/AT AND OF DRAFT(S) AT
- ------------------------------------------------------------------------------------------------------------------------------------
FOR TRANSPORTATION TO DRAWN ON
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Indicate documents required by affixing X in the appropriate box. Additional
documents and/or special instructions may be indicated by attachment(s) hereto.
[ ] Commercial Invoice & ___ copies [ ] Customs Invoice & ___ copies
[ ] Packaging List & ___ copies [ ] Certificate of Origin [ ] Marine &
War Risk Insurance Policy or Certificate of negotiable form.
Covering ___________________________________________________________________
[ ] Other Insurance ____________________________________________________________
[ ] Other Documents ____________________________________________________________
____________________________________________________________________________
[ ] Full set CLEAN ON BOARD Original Ocean B/L [ ] Air Waybill
[ ] Truck B/L [ ] Railroad B/L
ISSUED TO ORDER/CONSIGNED TO: ______________________________________________
MARKED "NOTIFY": ___________________________________________________________
Dated Latest __________ Marked Freight [ ] Collect [ ] Prepaid
COVERING
Merchandise described in the invoice as (mention commodity only in generic
terms omitting excessive details): _________________________________________
____________________________________________________________________________
____________________________________________________________________________
Check One: [ ] FAS [ ] FOB [ ] C&F [ ] CIF [ ] C&I [ ] _______________
Documents to be presented within _____ days after the date of issuance of
the shipping documents, but within the validity of this credit.
[ ] Insurance effected by ourselves. We agree to keep coverage in force until
this transaction is completed
[ ] All charges of the advising and negotiating bank are for the beneficiary's
account.
[ ] Negotiating bank is requested to forward all documents in one airmail
dispatch.
OTHER
INSTRUCTIONS:___________________________________________________________________
________________________________________________________________________________
CA SHORT COMPANY
By:
----------------------------------
Its:
---------------------------------
<PAGE> 1
EXHIBIT 10.5.4
DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (herein
"Instrument") is made this 31st day of December, 1996, by CA SHORT COMPANY, a
Delaware corporation, successor by change of name to Clyde A. Short
Incorporated, a Delaware corporation, resulting constituent of a merger between
Clyde A. Short Company, a North Carolina corporation, aka Clyde A. Short
Company, Inc. aka Clyde A. Short Co., Inc., and the aforementioned Clyde A.
Short Incorporated, whose address is 4205 East Dixon Boulevard, Shelby, North
Carolina 28150 (herein "Borrower"), to L. HUNTER MEACHAM, JR., c/o
Commonwealth Land Title of North Carolina, Inc., 2070 Charlotte Plaza,
Charlotte, North Carolina 28244, Trustee, (herein "Trustee"), for the benefit
of THE HUNTINGTON NATIONAL BANK, a national banking association, whose address
is 41 South High Street, Columbus, Ohio 43215 (herein "Beneficiary" or
"Lender").
BORROWER, in consideration of the indebtedness herein recited and the
trust herein created, irrevocably grants, bargains, sells, conveys and assigns
to Trustee and Trustee's successors and assigns, in trust, with power of sale,
the real estate described in Exhibit "A" attached hereto and incorporated
herein by this reference,
TO HAVE AND TO HOLD unto Trustee and Trustee's successors and assigns,
forever, together with all buildings, improvements, structures and tenements
now situated or hereafter erected on said real estate, all of Seller's right,
title and interest in and to all heretofore or hereafter vacated alleys and
streets abutting said real estate, all easements, rights, appurtenances, rents,
royalties, mineral, oil and gas rights and profits, water,, water rights, and
water stock appurtenant to said real estate, and all property of every kind and
nature whatsoever, whether real, personal or mixed real and personal property,
tangible and intangible, now owned or hereafter acquired by Borrower and now or
hereafter located in, on, or about the real estate encumbered hereby, or used
or intended to be used in connection with said real estate or intended or
designated (wherever located) to be incorporated into the structures situated
or to be situated on said real estate including, but not limited to, all
building materials, inventory, equipment, machinery, tools, supplies,
furniture, furnishings, fixtures, stoves, ranges, refrigerators, dishwashers,
clothes washers, clothes dryers, trees and plants, power systems, heating,
cooling and ventilating systems, sewerage and garbage disposal systems, radio,
telephone, television and communication systems, electric, gas and water
distribution systems, food service systems, fire prevention, alarm and security
systems, laundry systems, computing and
COLLATERAL INCLUDES FIXTURES
DRAWN BY ROBERT C. KIGER
When recorded, return to:
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215-6194
Attention: Robert C. Kiger
<PAGE> 2
data processing systems and all hardware and software therefor, floor, wall and
ceiling coverings, draperies, blinds and window treatments; and all rentals,
revenues, payments, repayments, deposits, income, charges and monies derived
from the use, lease, sublease rental or other disposition of said real estate
and the proceeds from any insurance or condemnation award pertaining thereto;
and all accounts, contract rights, general intangibles, income tax refunds,
actions and rights in action, instruments and documents; and all permits,
consents, approvals, licenses or authorizations of all governmental or
regulatory authorities or of any persons, corporations, partnerships or other
entities, used or intended to be used in connection with said real estate; all
of which, including all proceeds and products thereof, and all replacements,
additions and accessions therefor or thereto, shall be deemed to be and remain
a part of the real estate encumbered by this Instrument. All of the foregoing,
together with said real estate, are hereinafter referred to as the "Property."
TO SECURE TO LENDER (a) the repayment of the indebtedness evidenced by
Borrower's revolving note dated as of December 31, 1996 (herein the "Note") in
the aggregate principal sum of Four Million Five Hundred Thousand Dollars
($4,500,000.00), with interest thereon, with the balance of the indebtedness,
if not sooner paid, due and payable on the maturity date thereof, as the same
may be extended from time to time, in the sole and absolute discretion of
Lender, and all renewals, extensions and modifications thereof; (b) the
performance of the covenants and agreements of Borrower contained in a
Commercial Letter of Credit Reimbursement Agreement between Lender and Borrower
dated as of December 31, 1996 (such Commercial Letter of Credit Reimbursement
Agreement together with the Note are herein collectively called the
"Obligation"); (c) the performance of the covenants and agreements of Borrower
contained in a Loan and Security Agreement between Lender and Borrower dated as
of December 31, 1996, as provided in paragraph 28 hereof; (d) the payment of
all other sums with interest thereon advanced in accordance herewith to protect
the security of this Instrument; and (d) the performance of the covenants and
agreements of Borrower herein contained.
Borrower covenants that Borrower is lawfully seized of the estate
hereby conveyed and has the right to grant, convey and assign the Property,
that the Property is unencumbered, and that Borrower will warrant and defend
generally the title to the Property against all claims and demands, whatsoever.
Borrower and Lender covenant and agree as follows:
1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay
when due the principal of and interest on the indebtedness evidenced by the
Obligation, any prepayment premiums and late charges provided in the
Obligation, and all other sums secured by this Instrument.
2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. If requested in
writing by Lender, Borrower shall pay to Lender on the day monthly installments
of principal or interest are payable under the Note (or on another day
designated in writing by Lender), until the Obligation is paid in full, a sum
(herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates
and taxes and assessments which may be levied on the Property, (b) the yearly
premium
2
<PAGE> 3
installments for fire and other hazard insurance, rent loss insurance and such
other insurance covering the Property as Lender may require pursuant to
paragraph 5 hereof, and (c) the yearly premium installments for mortgage
insurance, if any, all as reasonably estimated initially and from time to time
by Lender on the basis of assessments and bills and reasonable estimates
thereof. Any waiver by Lender of a requirement that Borrower pay such Funds
may be revoked by Lender, in Lender's sole discretion, at any time upon notice
in writing to Borrower. Lender may require Borrower to pay to Lender, in
advance, such other Funds for other taxes, charges, premiums, assessments and
impositions in connection with Borrower or the Property which Lender shall
reasonably deem necessary to protect lender's interests (herein "Other
Impositions"). Unless otherwise provided by applicable law, Lender, at
Lender's option, may require Funds for Other Impositions to be paid by Borrower
in a lump sum or in periodic installments.
The Funds shall be held in an institution(s), the deposits or accounts
of which are insured or guaranteed by a Federal or state agency. Lender shall
apply the Funds to pay said rates, taxes, assessments, insurance premiums and
Other Impositions so long as Borrower is not in breach of any covenant or
agreement of Borrower in this Instrument. Lender shall make no charge for so
holding and applying the Funds, analyzing said account or for verifying and
compiling said assessments and bills, unless Lender pays Borrower interest,
earnings or profits on the Funds and applicable law permits Lender to make such
a charge. Borrower and Lender may agree in writing at the time of execution of
this Instrument that interest on the Funds shall be paid to Borrower, and
unless such agreement is made or applicable law requires interest, earnings or
profits to be paid, Lender shall not be required to pay Borrower any interest,
earnings or profits on the Funds. Lender shall give to Borrower, without
charge, an annual accounting of the Funds in Lender's normal format showing
credits and debits to the Funds and the purpose for which each debit to the
Funds was made. The Funds are pledged as additional security for the sums
secured by this Instrument and shall be subject to the right of set off.
If the amount of the Funds held by Lender at the time of the annual
accounting thereof shall exceed the amount deemed necessary by Lender to
provide for the payment of water and sewer rates, taxes, assessments, insurance
premiums, and Other Impositions, as they fall due, such excess shall be
credited to Borrower on the next monthly installment or installments of Funds
due. If at any time the amount of the Funds held by Lender shall be less than
the amount deemed necessary by Lender to pay water and sewer rates, taxes,
assessments, insurance premiums, rents and Other Impositions, as they fall due,
Borrower shall pay to Lender any amount necessary to make up the deficiency
promptly after notice from Lender to Borrower requesting payment thereof.
Upon Borrower's breach of any covenant or agreement of Borrower in
this Instrument, Lender may apply, in any amount and in any order as Lender
shall determine in Lender's sole discretion, any Funds held by Lender at the
time of application (a) to pay rates, taxes, assessments, insurance premiums
and Other Impositions which are now or will hereafter become due, or (b) as a
credit against sums secured by this Instrument. Upon payment in full of all
sums secured by this Instrument, Lender shall promptly refund to Borrower any
Funds held by Lender.
3
<PAGE> 4
3. APPLICATION OF PAYMENTS. Unless applicable law provides
otherwise, all payments received by Lender from Borrower under the Obligation
or this Instrument shall be applied by Lender in the following order of
priority: (a) amounts payable to Lender by Borrower under paragraph 2 hereof;
(b) late charges payable pursuant to the Obligation; (c) prepayment premiums,
if any, payable pursuant to the Obligation; (d) interest payable on the
Obligation; (e) principal of the Obligation; (f) interest payable on advances
made pursuant to paragraph 9 hereof; (g) principal of advances made pursuant to
paragraph 9 hereof; and (h) any other sums secured by this Instrument in such
order as Lender, at Lender's option, may determine; provided, however, that
Lender may, at Lender's option, apply any sums payable pursuant to paragraph 9
hereof prior to interest on and principal of the Obligation, but such
application shall not otherwise affect the order of priority of application
specified in this paragraph 3.
4. CHARGES; LIENS. Borrower shall pay all water and sewer rates,
taxes, assessments, premiums, and Other Impositions attributable to the
Property at Lender's option in the manner provided under paragraph 2 hereof or,
if not paid in such manner, by Borrower making payment, when due, directly to
the payee thereof, or in such other manner as Lender may designate in writing.
Borrower shall promptly furnish to Lender all notices of amounts due under this
paragraph, and in the event Borrower shall make payment directly, Borrower
shall promptly furnish to Lender receipts evidencing such payments. Borrower
shall promptly discharge any lien which has, or may have, priority over or
equality with, the lien of this Instrument, and Borrower shall pay, when due,
the claims of all persons supplying labor or materials to or in connection with
the Property. Without Lender's prior written consent,, Borrower shall not
allow any lien, encumbrance, or other interest in the Property inferior to the
lien of this Instrument to be perfected against the Property. The provisions
of this paragraph 4 are subject to the provisions of paragraph 6.1 of the Loan
and Security Agreement between Lender and Borrower dated December 31, 1996.
5. HAZARD INSURANCE. Borrower shall keep the improvements now
existing or hereafter erected on the Property insured by carriers at all times
satisfactory to Lender against loss by fire, hazards included within the term
,'extended coverage", rent loss, flood if required by law, and such other
hazards, casualties, liabilities and contingencies as Lender shall require and
in such amounts and for such periods as Lender shall require. All premiums on
insurance policies shall be paid, at Lender's option, in the manner provided
under paragraph 2 hereof, or by Borrower making payment, when due, directly to
the carrier or in such other manner as Lender may designate in writing.
All insurance policies and renewals thereof shall be in a form
acceptable to Lender and shall include the New York Standard or other standard
mortgagee clause in favor of and in form acceptable to Lender. Lender shall
have the right to hold the policies, and Borrower shall promptly furnish to
Lender all renewal notices and all receipts of paid premiums. At least thirty
(30) days prior to the expiration date of a policy, Borrower shall deliver to
Lender a renewal policy in form satisfactory to Lender.
4
<PAGE> 5
In the event of loss, Borrower shall give immediate written notice to
the insurance carrier and to Lender. Borrower hereby authorizes and empowers
Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and
compromise any claim under insurance policies, to appear in and prosecute any
action arising from such insurance policies, to collect and receive insurance
proceeds, and to deduct therefrom Lender's expenses incurred in the collection
of such proceeds; provided, however, that nothing contained in this paragraph
shall require Lender to incur any expense or take any action hereunder.
Borrower further authorizes Lender, at Lender's option, (a) to hold the balance
of such proceeds to be used to reimburse Borrower for the cost of restoration
or repair. of the Property or (b) to apply the balance of such proceeds to the
payment of the sums secured by this Instrument, whether or not then due, in the
order of application set forth in paragraph 3 hereof.
If the insurance proceeds are held by Lender to reimburse Borrower for
the cost of restoration and repair of the Property, the Property shall be
restored to the equivalent of its original condition or such other condition as
Lender may approve in writing Lender may, at Lender's option, condition
disbursement of said proceeds on Lender's approval of such plans and
specifications of an architect satisfactory to Lender, contractor's cost
estimates, architect's certificates, waivers of liens, sworn statements of
mechanics and materialmen and such other evidence of costs, percentage
completion of construction, application of payments, and satisfaction of liens
as Lender may require. If the insurance proceeds are applied to the payment of
the sums secured by this Instrument, any such application of proceeds to
principal shall not extend or postpone the due dates of the monthly
installments referred to in paragraphs 1 and 2 hereof or change the amounts of
such installments. If the Property is sold pursuant to paragraph 26 hereof or
if Lender acquires title to the Property, Lender shall have all of the right,
title and interest of Borrower in and to any insurance policies and unearned
premiums thereon and in and to the proceeds resulting from any damage to the
Property prior to such sale or acquisition.
6. PRESERVATION AND MAINTENANCE OF PROPERTY. Borrower (a) shall
not commit waste or permit impairment or deterioration of the Property, (b)
shall not abandon the Property, (c) shall restore or repair promptly and in a
good and workmanlike manner all or any part of the Property to the equivalent
of its original condition, or such other condition as Lender may approve in
writing, in the event of any damage, injury or loss thereto, whether or not
insurance proceeds are available to cover in whole or in part the costs of such
restoration or repair, (d) shall keep the Property, including improvements,
fixtures, equipment, machinery and appliances thereon in good repair and shall
replace fixtures, equipment, machinery and appliances on the Property when
necessary to keep such items in good repair, (e) shall comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property, (f) shall generally operate and maintain the Property in a manner
to insure maximum income, and (g) shall give notice in writing to Lender of
and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security of this
Instrument or the rights or powers of Lender. Without Lender's prior written
consent, neither Borrower nor any tenant or other person shall remove, demolish
or alter or construct additions to any improvement now existing or hereafter
erected on the Property or any fixture, equipment, machinery or appliance in or
on the
5
<PAGE> 6
Property except when incident to the replacement of fixtures, equipment,
machinery and appliances with items of like kind.
7. HAZARDOUS SUBSTANCES. Borrower (a) has no actual knowledge of
the permanent placement, burial or disposal of any Hazardous Substances (as
hereinafter defined) on the Property, of any spills, releases, discharges,
leaks, or disposal of Hazardous Substances that have occurred or are presently
occurring on, under, or onto the Property, or of any spills, releases,
discharges, leaks or disposal of Hazardous Substances that have occurred or are
occurring off of the Property as a result of Borrower's improvement, operation,
or use of the Property which would result in non-compliance with any of the
Environmental Laws (as hereinafter defined); (b) is and has been in compliance
with all applicable Environmental Laws; (c) knows of no pending or threatened
environmental civil, criminal or administrative proceedings against Borrower
relating to Hazardous Substances; (d) knows of no facts or circumstances that
would give rise to any future civil, criminal or administrative proceeding
against Borrower relating to Hazardous Substances; and (e) will not permit any
of its employees, agents, contractors, subcontractors, or any other person
occupying or present on the Property to generate, manufacture, store, dispose
or release on, about or under the Property any Hazardous Substances which would
result in the Property not complying with the Environmental Laws.
As used herein, "Hazardous Substances" shall mean and include all
hazardous and toxic substances, wastes, materials, compounds, pollutants and
contaminants (including, without limitation, asbestos, polychlorinated
biphenyls, and petroleum products) which are included under or regulated by the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601, et seq., the Toxic Substances Control Act, 15
U.S.C. Section 2601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., the Water Quality Act of 1987, 33 U.S.C. Section
1251, et seq., and the Clean Air Act, 42 U.S.C. Section 7401, et seq., and any
state or local statute ordinance, law, code, rule, regulation or order
regulating or imposing liability (including strict liability) or standards of
conduct regarding Hazardous Substances (hereinafter the "Environmental Laws"),
but does not include such substances as are permanently incorporated into a
structure or any part thereof in such a way as to preclude their subsequent
release into the environment, or the permanent or temporary storage or disposal
of household hazardous substances by tenants, and which are thereby exempt from
or do not give rise to any violation of the aforementioned Environmental Laws.
Further, Borrower hereby indemnifies Lender and holds Lender harmless
from and against any loss, damage, cost, expense or liability (including strict
liability) directly or indirectly arising out of or attributable to the
generation, storage, release, threatened release, discharge, disposal or
presence (whether prior to or during the term of the loan secured by this
Instrument) of Hazardous Substances on, under or about the Property (whether by
Borrower or any employees, agents, contractor or subcontractors of Borrower or
any predecessor in title or any third persons occupying or present on the
Property), or the breach of any of the representations and warranties regarding
the Property, including, without limitation: (a) those damages or expenses
arising under the Environmental Laws; (b) the costs of any required or
necessary repair, cleanup or detoxification of
6
<PAGE> 7
the Property, including the soil and ground water thereof, and the preparation
and implementation of any closure, remedial or other required plans; (c) damage
to any natural resources; and (d) all reasonable costs and expenses incurred by
Lender in connection with clauses (a), (b) and (c) including, but not limited
to reasonable attorneys' fees.
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses or costs which: (i) arise from the
gross negligence or willful misconduct of Lender, or (ii) relate to Hazardous
Substances placed or disposed of on the Property after Lender acquires title to
the Property through foreclosure or otherwise.
8. USE OF PROPERTY. Unless required by applicable law or unless
Lender has otherwise agreed in writing, Borrower shall not allow changes in the
use for which all or any part of the Property was intended at the time this
Instrument was executed. Borrower shall not initiate or acquiesce in a change
in the zoning classification of the Property without Lender's prior written
consent.
9. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform
the covenants and agreements contained in this Instrument, or if any action or
proceeding is commenced which affects the Property or title thereto or the
interest of Lender therein, including, but not limited to, eminent domain,
insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent, then Lender at Lender's option may, after consultation
with Borrower, make such appearances, disburse such sums and take such action
as Lender deems necessary, in its sole discretion, to protect Lender's
interest, including, but not limited to, (a) disbursement of attorney's fees,
(b) entry upon the Property to make repairs, and (c) procurement of
satisfactory insurance as provided in paragraph 5 hereof.
Any amounts disbursed by Lender pursuant to this paragraph, with
interest thereon, shall become additional indebtedness of Borrower secured by
this Instrument. Unless Borrower and Lender agree to other terms of payment,
such amounts shall, after notice to Borrower, be immediately due and payable
and shall bear interest from the date of disbursement at the highest rate
stated in the Obligation unless collection from Borrower of interest at such
rate would be contrary to applicable law, in which event such amounts shall
bear interest at the highest rate which may be collected from Borrower under
applicable law. Borrower hereby covenants and agrees that Lender shall be
subrogated to the lien of any mortgage or other lien discharged, in whole or in
part, by the indebtedness secured hereby. Nothing contained in this paragraph
shall require Lender to incur any expense or take any action hereunder.
10. INSPECTION. Lender may make or cause to be made reasonable
entries upon and inspections of the Property.
11. BOOKS AND RECORDS. Borrower shall keep and maintain at all
times complete and accurate books of accounts and records adequate to reflect
correctly the results of the operation of the Property and copies of all
written contracts, leases and other instruments which affect the
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Property. Such books, records, contracts, leases and other instruments shall
be subject to examination and inspection. at any reasonable time by Lender.
Upon Lender's request, Borrower shall furnish to Lender, within 120 days after
the end of each fiscal year of Borrower, a balance sheet and a statement of
income and expenses of the Property, both in reasonable detail and certified by
Borrower and, if Lender shall require, by an independent certified public
accountant. At the request of Lender, Borrower shall furnish, together with
the foregoing financial statements and at any other time upon Lender's request,
a rent schedule for the Property, certified by Borrower, showing the name of
each tenant and for each tenant, the space occupied, the lease expiration date,
the rent payable and the rent paid.
12. CONDEMNATION. Borrower shall promptly notify Lender of any
action or proceeding relating to any condemnation or other taking, whether
direct or indirect, of the Property, or part thereof, and Borrower shall appear
in and prosecute any such action or proceedings unless otherwise directed by
Lender in writing. Borrower authorizes Lender, after consultation with
Borrower, at Lender's option, as attorney-in-fact for Borrower to commence,
appear in and prosecute, in Lender's or Borrower's name any action or
proceeding relating to any condemnation or other taking of the Property,
whether direct or indirect, and to settle or compromise any claim in connection
with such condemnation or other taking. The proceeds of any award, payment or
claim for damages, direct or consequential, in connection with any condemnation
or other taking, whether direct or indirect, of the Property, or part thereof,
or for conveyances in lieu of condemnation, are hereby assigned to and shall be
paid to Lender.
Borrower authorizes Lender to apply such awards, payments, proceeds or
damages, after the deduction of Lender's expenses incurred in the collection of
such amounts, at Lender's option, to restoration or repair of the Property or
to payment of the sums secured by this Instrument, whether or not then due, in
the order of application set forth in paragraph 3 hereof, with the balance, if
any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any
application of proceeds to principal shall not extend or postpone the due date
of the monthly installments referred to in paragraphs 1 and 2 hereof or charge
the amount of such installments. Borrower agrees to execute such further
evidence of assignment of any awards, proceeds, damages or claims arising in
connection with such condemnation or taking as Lender may require.
13. BORROWER AND LIEN NOT RELEASED. From time to time, Lender
may, at Lender's option, without giving notice to or obtaining the consent of
Borrower, Borrower's successors or assigns or of any junior lienholder or
guarantors, without liability on Lender's part and notwithstanding Borrower's
breach of any covenant or agreement of Borrower in this Instrument, extend the
time for payment of said indebtedness or any part thereof, reduce the payments
thereon, release anyone liable on any of said indebtedness, accept a renewal
note or notes therefor, modify the terms and time of payment of said
indebtedness, release from the lien of this Instrument any part of the
Property, take or release other or additional security, reconvey any part of
the Property, consent to any map or plan of the Property, consent to the
granting of any easement, join in any extension or subordination agreement,
agree in writing with Borrower to modify the rate of interest or period of
amortization of the Obligation, or change the amount of the monthly installments
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<PAGE> 9
payable thereunder. Any actions taken by Lender pursuant to the terms of this
paragraph shall not affect the obligation of Borrower or Borrower's successors
or assigns to pay the sums secured by this Instrument and to observe the
covenants of Borrower contained herein, shall not affect contingent obligations
of any person, corporation, partnership or other entity for payment of the
indebtedness secured hereby, and shall not affect the lien or priority of lien
hereof on the Property. Borrower shall pay Lender a reasonable service charge,
together with such title insurance premiums and reasonable attorney's fees as
may be incurred at Lender's option for any such action if taken at Borrower's
request.
14. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender
in exercising any right or remedy hereunder, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any right
or remedy. The acceptance by, Lender of payment of any sum secured by this
Instrument after the due date of such payment shall not be a waiver of Lender's
right to either require prompt payment when due of all other sums so secured or
to declare a default for failure to make prompt payment. The procurement of
insurance or the payment of taxes or other liens or charges by Lender shall not
be a waiver of Lender's right to accelerate the maturity of the indebtedness
secured by this Instrument. Lender's receipt of any awards, proceeds or
damages under paragraphs 5 and 12 hereof shall not operate to cure or waive
Borrower's default in payment of sums secured by this Instrument.
15. ESTOPPEL CERTIFICATE. Borrower shall, within ten days of a
written request from Lender, furnish Lender with a written statement, duly
acknowledged, setting forth the sums secured by this Instrument and any right
of set-off, counterclaim or other defense which exists against such sums and
the obligations of this Instrument.
16. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. In addition to
being a Deed of Trust and Assignment of Rents, this Instrument is intended to
be a security agreement pursuant to the Uniform Commercial Code for any of the
items specified above as part of the Property which, under applicable law, may
be subject to a security interest pursuant to the Uniform Commercial Code, and
Borrower hereby grants to Lender a security interest in said items. Borrower
agrees that Lender may file this Instrument in any personal property or real
estate records or other appropriate index as a financing statement for any of
the items specified above as part of the Property. A carbon, photographic or
other reproduction of this Instrument or of a financing statement shall be
sufficient as a financing statement. In addition, Borrower agrees to execute
and to deliver to Lender, upon Lender's request, any financing statements, as
well as extensions, renewals and amendments thereof, and reproductions of this
Instrument, in such form as Lender may require to perfect its security interest
with respect to said items, and Borrower authorizes Lender, to the extent
permitted by any applicable law, to execute and to file financing statements
relating to said security interest without the signature of Borrower. Borrower
shall pay all costs of filing such financing statements and any extensions,
renewals, amendments and releases thereof, and shall pay all reasonable costs
and expenses of any searches of financing statement records that Lender may
reasonably require. Without the prior written consent of Lender, Borrower
shall not create, permit or suffer to exist, and shall take such action as is
necessary to remove, any claim to or interest in or
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<PAGE> 10
lien or encumbrance upon said items, including replacements and additions
thereto, and shall defend the right, title and interest of Lender in and to
said items against all claims and demands of all persons and entities at any
time claiming the same or any interest therein. Upon Borrower's breach of any
covenant or agreement of Borrower contained in this Instrument or in any other
document, instrument or agreement executed by Borrower in connection herewith,
including the covenant to pay when due all sums secured by this Instrument,
Lender shall have the rights and remedies of a secured party under the Uniform
Commercial Code and, at Lender's option, Lender may also invoke the remedies
provided in paragraph 26 of this Instrument as to such items. In exercising
any of said remedies, Lender may proceed against the items of real property and
any items of personal property specified above as part of the Property
separately or together and in any order whatsoever, without in any way
affecting the availability of Lender's remedies under the Uniform Commercial
Code or of the remedies provided in paragraph 26 of this Instrument.
17. LEASES OF THE PROPERTY. Borrower shall comply with and
observe Borrower's obligations as landlord under all leases of the Property or
any part thereof. Borrower, at Lender's request, shall furnish Lender with
executed copies of all leases now existing or hereafter made of all or any part
of the Property, and all leases now or hereafter entered into will be in form
and substance subject to the approval of Lender. Unless otherwise directed by
Lender, all leases of the Property shall specifically provide that such leases
are subordinate to this Instrument; that the tenant attorns to Lender, such
attornment to be effective upon Lender's acquisition of title to the Property;
that the tenant agrees to execute such further evidences of attornment as
Lender may from time to time request; that the attornment of the tenant shall
not be terminated by foreclosure; and that Lender may, at Lender's option,
accept or reject such attornments. Borrower shall not without Lender's written
consent, execute, modify, surrender or terminate either orally or in writing,
any lease now existing or hereafter made of all or any part of the Property
providing for a term of three years or more, permit an assignment or sublease
of such a lease without Lender's written consent, or request or consent to the
subordination of any lease of all or any part of the Property to any lien
subordinate to this Instrument. If Borrower becomes aware that any tenant
proposes to do, or is doing, any act or thing which may give rise to any right
of set-off against rent, Borrower shall (a) take such steps as shall be
reasonably calculated to prevent the accrual of any right to a set-off against
rent, (b) notify Lender thereof and of the amount of said set-offs, and (c)
within ten days after such accrual, reimburse the tenant who shall have
acquired such right to 'set-off or take such other steps as shall effectively
discharge such set-off and as shall assure that rents thereafter due shall
continue to be payable without set-off or deduction.
Borrower hereby assigns to Lender all leases now existing or hereafter
made of all or any part of the Property and all security deposits made by
tenants in connection with such leases of the Property. Lender shall have all
of the rights and powers possessed by Borrower prior to such assignment;
provided, however, Lender shall have no liability as Lessor under the leases
until Lender takes possession of the Property. Lender shall have the right,
but not the obligation, to modify, extend or terminate such existing leases and
to execute new leases, in Lender's sole discretion.
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18. REMEDIES CUMULATIVE. Each remedy provided in this Instrument
is distinct and cumulative to all other rights or remedies under this
Instrument or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever. No waiver or release
by lender or any of its rights or remedies hereunder, or otherwise, shall be
considered a waiver or release of any other or subsequent right or remedy of
Lender; no delay or omission in the exercise or enforcement by Lender of any
rights or remedies shall ever be construed as a waiver of any right or remedy
of Lender; and no exercise or enforcement of any such rights or remedies shall
ever be held to exhaust any right or remedy of Lender.
19. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. If Borrower
shall voluntarily file a petition under the Federal Bankruptcy Code, as such
Code may from time to time be amended, or under any similar or successor
Federal Statute relating to bankruptcy, insolvency, arrangements or
reorganizations, or under any state bankruptcy or insolvency act, or file an
answer in an involuntary proceeding admitting insolvency or failure to pay
debts as they come due, or if Borrower shall fail within sixty (60) days to
obtain a vacation, stay or dismissal of involuntary proceedings brought for the
reorganization dissolution or liquidation of Borrower, or if an order for
relief under the Federal Bankruptcy Code shall be entered against the Borrower,
or if a trustee, receiver or custodian shall be appointed for Borrower or
Borrower's property, or if the Property shall become subject to the
jurisdiction of a Federal bankruptcy court or similar state court, or if
Borrower shall make an assignment for the benefit of Borrower's creditors, or
if there is an attachment, execution or other judicial seizure of any portion
of Borrower's assets and such seizure is not discharged within sixty (60) days,
then Lender may, at Lender's option, declare all of the sums secured by this
Instrument to be immediately due and payable without prior notice to Borrower,
and Lender may invoke any remedies permitted by paragraph 26 of this
Instrument. Any reasonable attorney's fees and other expenses incurred by
Lender in connection with Borrower's bankruptcy or any of the other aforesaid
events shall be additional indebtedness of Borrower secured by this Instrument
pursuant to paragraph 9 hereof.
20. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER.
On sale, encumbrance or transfer of (a) all or any part of the Property, or any
legal or equitable interest therein, or (b) any beneficial interests in
Borrower, Lender may at Lender's option, declare all of the sums secured by
this Instrument to be immediately due and payable, and Lender may invoke any
remedies permitted by paragraph 26 of this Instrument.
21. NOTICE. Except for any notice required under applicable law
to be given in another manner, (a) any notice to Borrower provided for in this
Instrument or in the Obligation shall be given by mailing such notice by
certified mail addressed to Borrower at Borrower's address as shown on Lender's
records or at such other address as Borrower may designate by notice to Lender
as provided herein, and (b) any notice to Lender shall be given by certified
mail, return receipt requested, to Lender's principal place of business or to
such other address as Lender may designate by notice to Borrower as provided
herein. Any notice provided for in this Instrument or in the Obligation shall
be deemed to have been given to Borrower or Lender when given in the manner
designated herein.
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22. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY;
AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind,
and the rights hereunder shall inure to, the respective successors and assigns
of Lender and Borrower, subject to the provisions of paragraph 20 hereof. In
exercising any rights hereunder or taking any actions provided for herein,
Lender may act through its employees, agents or independent contractors as
authorized by Lender. The captions and headings of the paragraphs of this
Instrument are for convenience only and are not to be used to interpret or
define the provisions hereof.
23. GOVERNING LAW; SEVERABILITY. The real property covenants and
the enforcement provisions of this Instrument shall be governed by the law of
the jurisdiction in which the Property is located. All other provisions
contained herein, or in the Obligation or Loan and Security Agreement and all
other documents executed in connection therewith shall be governed by the laws
of the State of Ohio. The foregoing sentences shall not limit the
applicability of federal law to this Instrument. In the event that any
provision of this Instrument or the Obligation conflicts with applicable law,
such conflict shall not affect other provisions of this Instrument or the
Obligation which can be given effect without the conflicting provisions, and to
this end the provisions of this Instrument and the Obligation are declared to
be severable. In the event that any applicable law limiting the amount of
interest, attorney's fees, or other charge permitted to be collected from
Borrower is interpreted so that any charge provided for in this Instrument or
in the Obligation, whether considered separately or together with other charges
levied in connection with this Instrument and the Obligation, violates such
law, and Borrower is entitled to the benefit of such law, such charge is hereby
reduced to the extent necessary to eliminate such violation. The amounts, if
any, previously paid to Lender in excess of the amounts payable to Lender
pursuant to such charges as reduced shall be applied by Lender to reduce the
principal of the indebtedness evidenced by the Obligation. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
indebtedness which is secured by this Instrument or evidenced by the Obligation
and which constitutes interest, as well as all other charges levied in
connection with such indebtedness which constitute interest, shall be deemed to
be uniformly allocated and spread over the stated term of the Obligation.
24. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Instrument or to any action brought to enforce the Obligation or
any other obligation secured by this Instrument.
25. WAIVER OF MARSHALLING. Notwithstanding the existence of any
other security interests in the Property held by Lender or by any other party,
Lender shall have the right to determine the order in which any or all of the
Property shall be subjected to the remedies provided herein. Lender shall have
the right to determine the order in which any or all portions of the
indebtedness secured hereby are satisfied from the proceeds realized upon the
exercise of the remedies provided herein. Borrower, any party who consents to
this Instrument, and any party who now or hereafter acquires a security
interest in the Property and who has actual or constructive notice hereof
hereby, waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein.
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26. ACCELERATION; REMEDIES. Upon Borrower's breach of any
covenant or agreement of Borrower in this Instrument, including, but not
limited to, the covenants to pay when due any sums secured by this Instrument,
Lender at Lender's option may declare all of the sums secured by this
Instrument to be immediately due and payable without further demand, and may
invoke the power of sale and any other remedies permitted by applicable law or
provided herein. Lender shall be entitled to collect all costs and expenses
incurred in pursuing such remedies, including, but not limited to, costs of
documentary evidence, abstracts and title reports, all of which shall be
additional sums secured by this Instrument.
If Lender invokes the power of sale and if it is determined in
a hearing held in accordance with applicable law that Trustee can proceed to
sale, Trustee shall take such action regarding notice of sale and shall give
such additional notices to Borrower and to other persons as North Carolina law
may require. After the lapse of such time as may be required by applicable law
and after the publication of the notice of sale, Trustee shall sell the
Property according to the laws of North Carolina. Trustee may sell the
Property at the time and place and under the terms designated in the notice of
sale in one or more parcels and in such order as Trustee may determine.
Trustee may postpone sale of all or any parcel of the Property by public
announcement at the time and place of any previously scheduled sale. Lender or
Lender's designee may purchase the Property at any sale.
Trustee shall deliver to the purchaser a Trustee's deed
conveying the Property so sold without any covenant or warranty, expressed or
implied. The recitals in the Trustee's deed shall be prima facie evidence of
the truth of the statements made therein. Trustee shall apply the proceeds of
the sale in the following order: (a) to all costs and expenses of the sale,
including, but not limited to, reasonable Trustee's fees and costs of title
evidence; (b) to all sums secured by this Instrument in such order as Lender in
Lender's sole discretion, directs; and (c) the excess, if any, to the person or
persons legally entitled thereto.
27. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN
POSSESSION. As part of the consideration for the indebtedness evidenced by the
Obligation, Borrower hereby absolutely and unconditionally assigns and
transfers to Lender all the rents and, revenues, including all security
deposits, of the Property, including those now due, past due, or to become due
by virtue of any lease or other agreement for the occupancy or use of all or
any part of the Property, regardless of to whom the rents and revenues of the
Property are payable. Borrower hereby authorizes Lender or Lender's agents to
collect the aforesaid rents and revenues and hereby directs each tenant of the
Property to pay such rents to Lender or Lender's agents; provided, however,
that prior to written notice given by Lender to Borrower of the breach by
Borrower of any covenant or agreement of Borrower in this Instrument, Borrower
shall collect and receive all rents and revenues of the Property as trustee for
the benefit of Lender and Borrower, to apply the rents and revenues so
collected to the sums secured by this Instrument in the order provided in
paragraph 3 hereof with the balance, so long as no such breach has occurred, to
the account of Borrower, it being intended by Borrower and Lender that this
assignment of rents constitutes an absolute assignment and not an assignment
for additional security only. Upon delivery of written notice by Lender to
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<PAGE> 14
Borrower of the breach by Borrower of any covenant or agreement of Borrower in
this Instrument, and without the necessity of Lender entering upon and taking
and maintaining full control of the Property in person, by agent or by a
court-appointed receiver, Lender shall immediately be entitled to possession of
all rents and revenues of the Property as specified in this paragraph as the
same become due and payable, including but not limited to rents then due and
unpaid, and all such rents shall immediately upon delivery of such notice be
held by Borrower as trustee for the benefit of Lender only; provided, however,
that the written notice by Lender to Borrower of the breach by Borrower shall
contain a statement that Lender exercises its rights to such rents. Borrower
agrees that commencing upon delivery of such written notice of Borrower's
breach by Lender to Borrower, each tenant of the Property shall make such rents
payable to and pay such rents to Lender or Lender's agents on Lender's written
demand to each tenant therefor, delivered to each tenant personally, by mail or
delivering such demand to each rental unit, without any liability on the part
of said tenant to inquire further as to 'the existence of a default by
Borrower.
Borrower hereby covenants that Borrower has not executed any prior
assignment of said rents, that Borrower has not performed, and will not
perform, any acts or has not executed, and will not execute, any instrument
which would prevent Lender from exercising its rights under this paragraph, and
that at the time of execution of this Instrument there has been no anticipation
or prepayment of any of the rents of the Property for more than two months
prior to the due dates of such rents. Borrower covenants that Borrower will
not hereafter collect or accept payment of any rents of the Property more than
two months prior to the due dates of such rents. Borrower further covenants
that Borrower will execute and deliver to Lender such further assignments of
rents and revenues of the Property as Lender may from time to time request.
Upon Borrower's breach of any covenant or agreement of Borrower in
this Instrument, Lender may in person, by agent or by a court-appointed
receiver, regardless of the adequacy of Lender's security, enter upon and take
and maintain full control of the Property in order to perform all acts
necessary and appropriate for the operation and maintenance thereof including,
but not limited to, the execution, cancellation or modification of leases, the
collection of all rents and revenues of the Property, the making of repairs to
the Property and the execution or termination of contracts providing for the
management or maintenance of the Property, all on such terms as are deemed best
to protect the security of this Instrument. In the event Lender elects to seek
the appointment of a receiver for the Property upon Borrower's breach of any
covenant or agreement of Borrower in this Instrument, Borrower hereby expressly
consents to the appointment of such receiver. Lender or the receiver shall be
entitled to receive a reasonable fee for so managing the Property.
All rents and revenues collected subsequent to delivery of written
notice by Lender to Borrower of the breach by Borrower of any covenant or
agreement of Borrower in this Instrument shall be applied first to the costs,
if any, of taking control of and managing the Property and collecting the
rents, including, but not limited to, reasonable attorney's fees, receiver's
fees, premiums on receiver's bonds, costs of repairs to the Property, premiums
on insurance policies, taxes, assessments and other charges on the Property,
and the costs of discharging any obligation or
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<PAGE> 15
liability of Borrower as lessor or landlord of the Property and then to the
sums secured by this Instrument. Lender or the receiver shall have access to
the books and records used in the operation and maintenance of the Property and
shall be liable to account only for those rents actually received. Lender
shall not be liable to Borrower, anyone claiming under or through Borrower or
anyone having an interest in the Property by reason of anything done or left
undone by Lender under this paragraph.
If the rents of the Property are not sufficient to meet the costs, if
any, of taking control of and managing the Property and collecting the rents,
any funds expended by Lender for such purposes shall become indebtedness of
Borrower to Lender secured by this Instrument pursuant to paragraph 9 hereof.
Unless Lender and Borrower agree in writing to other terms of payment, such
amounts shall be payable upon notice from Lender to Borrower requesting payment
thereof and shall bear interest from the date of disbursement at the rate
stated in the Obligation.
Any entering upon and taking and maintaining of control of the
Property by Lender or the receiver and any application of rents as provided
herein shall not cure or waive any default hereunder or invalidate any other
right or remedy of Lender under applicable law or as provided herein. This
assignment of rents shall terminate at such time as this Instrument ceases to
secure indebtedness held by Lender.
28. LOAN PROVISIONS. Borrower agrees to comply with the covenants
and conditions of the Loan and Security Agreement which is hereby incorporated
by reference in and made a part of this Instrument. All advances made by
Lender pursuant to the Loan and Security Agreement shall be indebtedness of
Borrower secured by this Instrument. All such sums shall bear interest from
the date of disbursement at the rate stated in the Obligation, and shall be
payable upon notice from Lender to Borrower requesting payment therefor.
From time to time as Lender deems necessary to protect Lender's
interests, Borrower shall, upon request of Lender, execute and deliver to
Lender, in such form as Lender shall direct, assignments of any and all rights
or claims which relate to the construction of the Property and which Borrower
may have against any party supplying or who has supplied labor, materials or
services in connection with construction of the Property. In case of breach by
Borrower of the covenants and conditions of the Loan and Security Agreement,
Lender, at Lender's option, with or without entry upon the Property, (a) may
invoke any of the rights or remedies provided in the Loan and Security
Agreement, (b) may accelerate the sums secured by this Instrument and invoke
those remedies provided in paragraph 26 hereof, or (c) may do both.
29. RELEASE. Upon payment of all sums secured by this Instrument,
Lender or Trustee shall cancel this Instrument. Borrower shall pay the
reasonable costs incurred in cancelling this Instrument. If Trustee is
requested to cancel this Instrument, all notes evidencing indebtedness secured
by this Instrument shall be surrendered to Trustee.
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30. SUBSTITUTE TRUSTEE. Lender, at Lender's option, may from time
to time remove Trustee and appoint a successor trustee to any Trustee appointed
hereunder by an instrument recorded in the city or county in which this
Instrument is recorded. Without conveyance of the Property, the successor
trustee shall succeed to all the title, power and duties conferred upon the
Trustee herein and by applicable law.
31. FUTURE ADVANCES. It is the intention of the parties hereto
that this Instrument is made and executed to comply with the provisions of
N.C.G.S. Section 45-67 et seq. and shall secure any and all present and future
obligations which Borrower may now or hereafter owe to Lender (but in no event
incurred more than fifteen (15) years after the date hereof), including,
without limitation, any future loans, advances, and readvances on a revolving
basis which may be made from time to time by Lender to Borrower pursuant to the
Loan and Security Agreement, and any and all amendments or modifications
thereto which may hereafter be entered into from time to time between Borrower
and Lender or any other instrument, document or agreement referred to or
contemplated thereby. Although the amount, including present and future
obligations, which Lender will lend to Borrower may decrease or increase from
time to time, it is understood and agreed by the parties hereto that all such
future loans, advances and readvances shall be secured to the same extent as
the original obligations hereunder, up to a maximum aggregate amount of
principal indebtedness outstanding at any one time or Four Million Five Hundred
Thousand and 00/100 Dollars ($4,500,000.00), plus interest, costs and advances
made by Lender to protect or preserve the Property or for taxes or insurance
premiums as provided in this Instrument. The principal amount of present
obligations of Borrower to Lender secured hereby is the sum of Three Million
Five Hundred Thirty Thousand Six Hundred Thirty-Eight and 27/100 Dollars
($3,530,638.27) as of the date hereof. Pursuant to N.C.G.S. Section 45-68(2),
Borrower and Lender agree that at the time each obligation is incurred it
shall not be necessary for each obligation to be evidenced by any written
instrument or notation signed by Borrower and stipulating that such obligation
is secured by this Instrument.
32. PRIORITY OF LIEN. This Instrument shall remain in full force
and effect notwithstanding any extension or extensions of the maturity or other
reamortization of the obligations which this Instrument secures and
notwithstanding the fact that such extensions and reamortizations may be
evidenced by a note or notes signed and dated after the date of this
Instrument.
IN WITNESS WHEREOF, Borrower has caused this Instrument to. be
executed by its representatives thereunto duly authorized.
Attest: CA SHORT COMPANY
By: /s/ Jean P. Davis By: /s/ S. Robert Davis
--------------------------- -------------------------------------
Its: Asst. Secretary Its: Chairman
----------------- ------------------------------------
Chairman
[CORPORATE SEAL]
16
<PAGE> 17
STATE OF Ohio,
COUNTY OF Franklin, SS:
I, a Notary Public of the County and state aforesaid, certify that
Jean P. Davis, personally appeared before me this day and acknowledged that she
is Asst. Secretary of the CA Short Company, a Delaware corporation, and that by
authority duly given and as an act of the corporation, the foregoing instrument
was signed in its name by its Chairman, scaled with its corporate seal and
attested by Jean P. Davis as its Asst. Secretary.
Witness my hand and official stamp or seal, this 31st day of December,
1996.
/s/ Susan E. Portwood
----------------------------------------
Notary Public
[SEAL]
17
<PAGE> 18
EXHIBIT "A"
TRACT I
Being all of that tract containing 16.35 acres, more or less, lying in Number 6
Township, Cleveland County, North Carolina; bounded by natural boundaries
and/or lands now or formerly owned by and/or in possession of persons as
follows: on the South by the-Right-of-way of U.S. Highway 74, on the West by
the lands of Joseph M. Wright and Phillip R. Rucker, on the North by other
lands of Phillip R. Rucker, on the East by Copeland Corporation; said tract
located approximately 1400 feet East of the intersection of the U.S. Highway 74
and business 74; and being more particularly described by courses based on grid
North and distances at the surface according to a survey dated 20 February
1990, by Clyde Fespperman, RLS No. L-934.
Commencing at N.C.G.S. Station "NO" with North American Datum of 1983 State
Plane coordinates of N=559,233.6485, and E=1,264,603.055 and runs N 67 degrees
49 minutes 48 seconds W 2870.201 feet to an existing iron pin in the northern
edge of the right-of-way of U.S. Highway 74 and the Southwestern corner of that
tract of land described in that deed to Copeland Corporation recorded in Deed
Book 17 D at page 713, the beginning corner of the within described 16.35-acre
tract; thence with the right-of-way of U.S. Highway 74 N 69 degrees 21 minutes
06 seconds W 591.06 feet to an existing iron pin located in the edge of said
right-of-way and the Southeastern corner of the tract of land described in that
deed to Joseph M. Wright recorded in Deed Book 16 B at page 806, and runs thence
with the East line of Wright N 29 degrees 02 minutes 09 seconds E 572.27 feet
to an existing iron pipe the Southeastern corner of that tract of land described
in that Deed to Philip R. Rucker recorded in Deed Book 13 W at page 304 and
Book 14C at page 296; thence with the same course and Rucker's Eastern line N
29 degrees 02 minutes 09 seconds E 125.00 feet for a total distance of 697.27
feet to an iron pipe set in the center of the branch; thence with the lines of
Phillip R. Rucker the following three calls: (1) N 72 degrees 42 minutes 48
seconds E 338.29 feet to a point in the center of the branch, said point being
located S 03 degrees 53 minutes 50 seconds W 10.00 feet from a marked poplar on
the North bank of the branch, (2) N 28 degrees 46 minutes 40 seconds E 625.96
feet to an existing iron pin, (3) S 41 degrees 39 minutes 20 seconds E 386.60
feet to an existing iron pin, the Northwestern corner of the Copeland
Corporation; thence with lines of Copeland Corporation the following three
calls: (1) S 28 degrees 39 minutes 00 seconds W 1128.72 feet to an existing
iron pin, (2) N 61 degrees 21 minutes 00 seconds W 20.00 feet to a point, (3)
S 28 degrees 39 minutes 24 seconds W 225.01 feet to the beginning existing iron
pin.
18
<PAGE> 19
EXHIBIT A
TRACT NO. 2
Parcel No. 1:
Located in Number Four Township, in the City of Kings Mountain, North Carolina,
on the Southwest side of U.S. Highway No. 74, on the North Side of Phenix
Street, on the East side of Baker Street, the Southeast side of Myers Street,
lying on both sides of the Norfolk Southern Railroad, being shown as Lots No.
14 and 15 and an unnumbered tract on a map entitled "PROPERTY OF BURLINGTON
MILLS CORPORATION," recorded in Plat Book 5 at page 46 in the Cleveland County
Public Registry and being described by metes and bounds as follows:
BEGINNING at an iron pin set at the Easternmost corner of Lot No. 9 as shown in
Book of Plats 5 at page 46 in the Cleveland County Registry, said pin being N
60-02-31 W 177.47 feet from the centerline of the Norfolk Southern Railroad;
thence, with the Eastern line of Lots Nos. 9-13 as shown in Plat Book 5 at Page
46, S 33-36-29 W (passing an existing iron at 7,802 feet) a total distance of
309.91 feet to an existing iron located at the Southernmost corner of Lot No.
13; thence, with the Southern line of Lot No. 13, N 56-23-41 W 143.75 feet to
an iron set in the Eastern edge of Myers Street; thence, with the Eastern edge
of Myers Street, S 33-36-29 W 177.00 feet to an iron set in the North edge of
Baker Street, the Westernmost corner of Lot No. 15; thence, with the Southern
line of Lot No. 15 and the Northern edge of Baker Street; S 56-23-41 E 143.75
feet to an existing iron in the Northern edge of Baker Street; thence,
continuing with the Northern edge of Baker Street, S 80-16-40 E 32.73 feet to
an unmarked point in the centerline of the Norfolk Southern Railroad; thence,
continuing with the edge of Baker Street, S 32-57-18 E 349.78 feet to an
existing iron at the edge of Baker Street at the point where Baker Street
intersects with the Northern edge of Phenix Street; thence, with the Northern
edge of Phenix Street, N 83-04-53 E 630.11 feet to an existing iron; thence,
continuing with Phenix Street in a Northeasterly direction in the following ten
(10) courses and distances: N 82-27-41 E 25.05 feet to an existing iron;
thence, N 78-14-23 E 24.99 feet to an existing iron; thence, N 75-03-11 E 24.98
feet to an existing iron; thence, N 71-26-41 E 24.98 feet to an existing iron;
thence N 60-07-55 E 25.01 feet to an iron; thence, N 23-20-23 E 24.94 feet to
an existing iron; thence, N 10-48-47 E 25.03 feet to an existing iron; thence,
N 06-48-06 E 25.03 to an existing iron; thence, N 02-36-28 E 25.01 feet to an
existing iron; thence, N 00-38-04 W 25.02 feet to an existing iron located at
the Western edge of Phenix Street at its Northern terminus; thence, with the
Northern end of Phenix Street, N 87-36-12 E 50.03 feet to an iron set at the
Eastern edge of the Northern terminus of Phenix Street - the Northwest corner
of Lot No. 87 as shown in Plat Book 5 at Page 46; thence, with the Northern
line of Lot No. 87, N 89-37-49 E 165.78 feet to an existing iron located at the
Northeast corner of Lot No. 87; thence, with the Eastern line of Lot No. 87,
88, and 89, S 06-02-50 W 195.75 feet to an existing iron at the corner of Lots
No. 91, 92, 93, 94, and 95, S 83-55-17 E 464.98 feet to an iron set at the
Northeast corner of Lot No. 95; thence, N 12-10-36 E 32.72 feet to a right of
way monument for U.S. Highway No. 74; thence, with the right of way for said
Highway No. 74, the following four (4) courses and distances: N 55-50-44 W
378.32 feet to a right of way monument; thence, N 58-36-47 W 194.18 feet to a
right of way monument; thence, N 61-48-47 W 358.38 feet to a right of way
monument; thence, N 62-46-53 W 390.01 feet to an unmarked point in the
centerline of the Norfolk Southern Railroad.
<PAGE> 20
Parcel No. 2:
Located in Number Four Township, in the City of Kings Mountain, North Carolina,
on the West Side of Baker Street, on the East side of Gillespie Street and the
South side of Phenix Street and Clinton Drive and being all of Lots Nos. 45 and
46 as shown on a map entitled "PROPERTY OF BURLINGTON MILLS CORPORATION" and
recorded in Plat Book 5 at Page 46 of the Cleveland County Registry and being
described by metes and bounds as follows:
BEGINNING at an existing iron pin located in the Southern edge of Phenix Street
at its intersection with the Western edge of Baker Street which iron pin is
also located at the Northeastern corner of Lot 46 as shown on the above-
referenced map and running thence, with the Western edge of Baker Street, S
6-53-48 E 90.10 feet to an iron pin set at the Western edge of Baker Street;
thence, S 83-06-30 W 115.00 feet to an iron pin set in the Eastern edge of
Gillespie Street; thence, with the Eastern edge of Gillespie Street, N 06-53-30
W 202.30 feet to an iron pin set at the Southern edge of Clinton Drive; thence,
with the Southern edge of Clinton Drive, N 62-02-30 E 18.31 feet to an iron pin
set at the Western edge of Baker Street; thence, with the Western edge of Baker
Street, S 32-57-18 E 132.25 feet to an existing iron; thence, N 83-05-12 E
39.80 feet to the point and place of BEGINNING, according to a survey and map
by Clyde Fesperman, Registered Surveyor, dated January 13, 1990.
Parcel No. 3:
Located in Number Four Township, in the City of Kings Mountain, North Carolina,
on the West side of Gillespie Street and the South side of Clinton Drive and
being all of Lots Nos. 35 and 36 as shown on a map entitled "PROPERTY OF
BURLINGTON MILLS CORPORATION" recorded in Plat Book 5 at Page 46 of the
Cleveland County Registry and being described by metes and bounds as follows:
BEGINNING at an iron pin set in the Southern edge of Clinton Drive at its
intersection with the Western edge of Gillespie Street; thence, with the
Western edge of Gillespie Street, S 06-53-30 E 211.41 feet to an existing iron
pin set in the Western edge of Gillespie Street; thence, S 83-06-30 W 100.00
feet to an existing iron pin located at the common corner of Lot Nos. 44 and
36; thence, with the Eastern line of Lot No. 44, No 06-53-30 W 89.99 feet to an
existing iron pin located at a common corner of Lot Nos. 34, 35, 44, and 36;
thence, with the Eastern line of Lot No. 34, N 14-51-47 W 85.98 feet to an
iron pin set in the Southern edge of Clinton Drive, the Northeast corner of Lot
No. 34; thence, with the Southern edge of Clinton Drive, 5-09-11 E 117.65
feet to the point and place of BEGINNING, according to a plat and survey by
Clyde Fesperman, Registered Surveyor, dated January 13, 1990.
Parcel No. 4:
Located in Number Four Township, in the City of Kings Mountain, North Carolina
and being the lot located on the South side of Battleground Road, on the West
side of Baker Street and the North side of Clinton Drive and being bounded on
the West by Lot No. 16 as shown in a map entitled "PROPERTY OF BURLINGTON MILLS
CORPORATION" recorded in Plat Book 5 at Page 46 and being shown as an
unnumbered lot in said map and being described by metes and bounds as follows:
BEGINNING at an existing iron pin located on the South side of Battleground
Road, the Northeast corner of Lot No. 16 as shown on said plat and in the right
of way of the Norfolk Southern
<PAGE> 21
thence with the South side of Battleground Road N. 50-17-45 154.74 feet to an
iron pin set on the South side of Battleground Road; thence along the radius
found at the intersection of the southern edge of Battleground Road with
Western edge of Baker Street an arc distance of 40.02 feet (chord bearing and
distance S 81-18-30 E 35.43 feet) to an existing iron pin located in the
Western edge of Baker Street; thence, continuing with the Western edge of Baker
Street, S 32-57-18 E 94.95 feet to an iron pin set in the Western edge of Baker
Street at its intersection with the northern edge of Clinton Drive; thence,
with the northern edge of Clinton Drive S 60-52-00 W 169.00 feet to an iron pin
set at the Northern edge of Clinton Drive, the Southeast corner of Lot No. 16;
thence, with the Eastern edge of Lot No. 16, N 39-45-48 W 89.62 feet to the
point and place of BEGINNING, according to a plat and survey by Clyde
Fesperman, Registered Surveyor, dated January 13, 1990.
Parcel No. 5:
Located in Number Four Township, in the City of Kings Mountain, North Carolina
at the terminus of Chestnut Street and being bounded on the North by Lot Nos.
72, 81 and 80 as shown on a map entitled "PROPERTY OF BURLINGTON HILLS
CORPORATION" recorded in Plat Book 5 at Page 46 of the Cleveland County
Registry and being described by metes and bounds as follows:
BEGINNING at an existing iron pin located at the Southeast corner of Lot No. 80
of the said Burlington Mill property, as shown in Plat Book 5 at Page 46, said
existing iron pin being also at the Western edge of Chestnut Street where it
terminates; thence, with the Southern edge of Lot Nos. 80 and 81, N 86-29-19 W
168.18 feet to an existing iron pin located at the Southeast corner of Lot No.
72; thence, with the Southern line of Lot No. 72, N 86-35-18 W 70.65 feet to an
iron set at the Southwest corner of Lot No. 72; thence, S 05-55-00 E 213.77
feet to a concrete monument located at or near a branch; thence, N 83-52-21 E
217.17 feet, crossing a concrete monument on line at 210.47 feet, to an
unmarked point; thence, N 06-41-28 E 175.06 feet to an unmarked point located
in the Eastern edge of Chestnut Street where it terminates; thence, N 86-29-19
W 20.00 feet to the point and place of BEGINNING, containing 1.05 acres,
according to a plat and survey by Clyde Fesperman, Registered Surveyor, dated
January 13, 1990.
Parcel No. 6:
Located in Number Four Township, in the City of Kings Mountain, North Carolina
and being all that triangular-shaped vacant tract lying East of the Eastern
right of way line of Cleveland Avenue (having a right of way width of 60 feet),
shown as that unnumbered triangular-shaped tract lying East of Cleveland
entitled "PROPERTY OF BURLINGTON MILLS CORPORATION" recorded in Plat
Book 5 at Page 46 of the Cleveland County Registry and being referred to as
"TRACT NO. 7 - CLEVELAND AVENUE TRACT" in the Deed from Burlington Industries,
Inc. to Phenix Warehouse Company, Inc., dated October 15, 1984 and recorded in
Deed Book 18-R at Page 290 in the Cleveland County Public Registry.
This Parcel is located completely within either the roadbed or the right of way
for Highway No. 74 and Grantor includes this Parcel for the intent and purpose
of conveying all remaining right, title and interest which the Guarantor may
possess in said parcel, if any exists.
This being the same property conveyed to Burlington Industries, Inc., to Phenix
Warehouse Company, Inc. by Deed dated October 15, 1984 and recorded in Deed
Book 18-R at Page 290 in the Cleveland County Public Registry.
<PAGE> 1
EXHIBIT 10.5.5
DEBT SUBORDINATION
AND
INTERCREDITOR AGREEMENT
This DEBT SUBORDINATION AND INTERCREDITOR AGREEMENT (the "Agreement")
is entered into as of December 31, 1996, by and between the PAGES, INC. (the
"Subordinated Creditor"), a Delaware corporation and THE HUNTINGTON NATIONAL
BANK, a national banking association ("Senior Creditor").
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, and in consideration of the loans, leases, advances,
renewals or extensions, or other accommodations now or hereafter made by Senior
Creditor, directly or indirectly, to or for the benefit of CA Short Company
(the "Debtor"), Subordinated Creditor and Senior Creditor agree as follows:
1. Description of Subordinated Debt. Subordinated Creditor represents
and warrants to Senior Creditor that (a) Debtor is indebted to Subordinated
Creditor in the principal sum of $5,000,000.00, evidenced by a certain
Subordinated Debenture from Debtor dated December 31, 1996, which is attached
to this Agreement as Exhibit A (the "Subordinated Debenture"); (b) Subordinated
Creditor holds no collateral, guarantees, assurances, or security for the
Subordinated Debt, except for a subordinated and junior security interest and
deed of trust on the following property of Debtor: accounts, inventory,
equipment, and fixtures and certain real estate owned by Debtor located in
Cleveland County, North Carolina, as evidenced by the agreements attached
hereto as Exhibits B, C, And D (the "Subordinated Collateral"); (c) the
Subordinated Debt has not been subordinated in favor of or sold, assigned,
pledged or otherwise transferred or encumbered, in whole or in part, to any
other person, entity or corporation; (d) the only indebtedness or obligations
the Subordinated Collateral secures is the Subordinated Debt; and (e)
Subordinated Creditor has the full right, power and authority to enter into
this Agreement.
2. Subordination. Subordinated Creditor hereby subordinates all
indebtedness, obligations, and liabilities now or hereafter owing by Debtor to
Subordinated Creditor, including without limitation, all principal, interest,
fees, expenses, and other charges (the "Subordinated Debt"), to the payment of
any and all indebtedness, obligations and liabilities now or hereafter owing
by Debtor to Senior Creditor, plus all principal, interest, fees, expenses, and
other charges accruing on such principal sum (the "Senior Debt"), to the extent
and in the manner set forth below, and Subordinated Creditor agrees not to
demand, accept or receive, directly or indirectly, any payment or repayment
of principal, interest or other amount on the Subordinated Debt, or from any
property of Debtor or guarantor or any third party, or any rights in connection
with any security interests, liens, mortgages in the Subordinated Collateral,
in contravention hereof or in violation of the terms hereof. Nothing contained
in this Agreement shall be construed to constitute consent or acquiescence in
the granting of any security interest, lien, mortgage, assignment, pledge,
chattel mortgage, guaranty, surety, hypothecation or any other property or
security for the Subordinated Debt by Debtor.
<PAGE> 2
(a) Permitted Payments. Subject to the provisions of paragraphs 2(b)
and 2(c) below, the Debtor may pay to Subordinated Creditor the following
payments in connection with the Subordinated Debt (the "Permitted Payments" or
a "Permitted Payment"): (1) accrued interest not to exceed 7% per annum in
connection with the Subordinated Debenture, on a quarterly basis; and (2)
payments of principal in connection with the Subordinated Note not to exceed
the aggregate sum of the following amounts for the years specified below:
January 1, 1998, $100,000.00; January 1, 1999, $100,000.00; January 1, 2000,
$100,000.00; January 1, 2001, $100,000.00; and January 1, 2002, $4,600,000.00,
as set forth in the Subordinated Note. No prepayment of principal or interest
or any other distribution of any kind shall be made pursuant to the
Subordinated Debt.
(b) No Payments Upon Default. No amount, in respect of the
Subordinated Debt, including, without limitation, the Permitted Payments, shall
be paid by Debtor or accepted by Subordinated Creditor, whether in cash,
property, securities or otherwise, if (i) there exists, or would exist after
giving effect to such proposed payment, any "Event of Default" or default as
defined or provided in any loan and security agreement, loan agreement,
promissory note or other agreement of Debtor with Senior Creditor (a "Default")
and (ii) Subordinated Creditor shall (A) have received written notice of such
Default from Senior Creditor or (B) have knowledge of a Default under the
Senior Debt. Subordinated Creditor acknowledges and agrees that a "default" or
"event of default" under the terms of the Subordinated Debt shall automatically
constitute a Default (and Subordinated Creditor's knowledge of the same) under
the Senior Debt; provided, however, that notwithstanding the foregoing
restrictions, Subordinated Creditor may receive any payment which was suspended
hereunder upon the earlier of (i) the cure by Debtor, acknowledged by the
Senior Creditor in writing or written waiver by Senior Creditor of the then
existing Defaults, or (ii) the payment in full in cash of Senior Debt and the
irrevocable termination of the loan documents relating thereto.
(c) No Payments Upon Bankruptcy. In the event of any insolvency or
bankruptcy proceedings, or any receivership, liquidation, reorganization, sale
or transfer of any material asset or interest in Debtor, or other similar
proceedings or transactions in connection therewith, relative to the same, to
creditors of the same, or to properties of the same, or in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of
either such entity, whether or not involving insolvency or bankruptcy, Senior
Creditor shall be entitled to receive payment in full of all principal and
interest, fees, expenses, and other charges on the Senior Debt including,
without limitation, interest, fees, or expenses accruing subsequent to the
filing of a petition in any such insolvency or bankruptcy proceeding,
notwithstanding any law, rule or regulation that would otherwise limit Senior
Creditor's right to receive such "post-petition" interest, fees, or expense
before Subordinated Creditor is entitled to receive any payment of any
principal, interest, fee, charge, or expense on account of the Subordinated
Debt, and Senior Creditor shall be entitled to receive for application in
payment thereof any payment, distribution, or dividend or any kind or character,
whether in cash or property or securities, which may be payable or deliverable
in any such proceedings in respect of the Subordinated Debt, except securities
which are subordinate and junior in right of payment to the payment of all the
Senior Debt then outstanding.
-2-
<PAGE> 3
3. Legend and Grant of Security Interest. Subordinated Creditor
shall cause all debentures, promissory notes, security agreements, mortgages,
financing statements and other instruments and agreements evidencing any
Subordinated Debt or any Subordinated Collateral to bear an appropriate legend
referring to this Agreement and reciting that the payment of the Subordinated
Debt evidenced thereby is subject to the provisions hereof, and agrees to cause
any extension of any such instrument to bear such legend. As security for the
Senior Debt and for the covenants and agreements contained herein, and in order
to effectuate the foregoing subordination, Subordinated Creditor hereby
transfers and assigns and grants a security interest and grants the full right
and power to Senior Creditor in all debentures, notes, claims or demands, and
all monies due or to become due thereon of Subordinated Creditor against
Debtor, with full right on the part of Senior Creditor, in its own name or in
its name as attorney in fact for Subordinated Creditor, to enforce and collect
said debentures, notes, claims or demands by suit, proof of debt in bankruptcy
or other liquidation, reorganization or insolvency proceedings or otherwise.
If requested by Senior Creditor after the occurrence of a Default, Subordinated
Creditor will deliver or cause to be delivered to Senior Creditor the
Subordinated Debenture or any promissory notes and other instruments and
agreements evidencing the Subordinated Debt, all mortgages, security
agreements, instruments and other writings and property evidencing or
constituting the Subordinated Collateral, and all records, documents and
information necessary or convenient to permit Senior Creditor to enforce and
collect said claims.
4. Turnover of Payments. If, prior to the satisfaction of the
Senior Debt, Subordinated Creditor receives from any source whatsoever
including, but not limited to, receipt resulting from the exercise by any court
of its legal or equitable powers, any payment (except for a Permitted Payment)
with respect to any of the Subordinated Debt or the Subordinated Collateral,
Subordinated Creditor shall forthwith deliver such payment or security to
Senior Creditor, in precisely the form received, except for Subordinated
Creditor's indorsement when necessary, for application on account of the Senior
Debt and until so delivered, such payment or security shall be held in trust by
Subordinated Creditor as the property of Senior Creditor. In the event of the
failure of any Subordinated Creditor to indorse any instrument for the payment
of money so received by such Subordinated Creditor, Senior Creditor is
irrevocably appointed attorney for such Subordinated Creditor with full power
to make such indorsement and with full power of substitution. The provisions
of this Section 4 are not intended to and shall not be construed to constitute
consent by Senior Creditor to the acceptance of payments by Subordinated
Creditor.
5. Standstill. Subordinated Creditor, and Subordinated
Creditor's successors and assigns, agree for the benefit of the holders of the
Senior Debt that, so long as any part of the Senior Debt remains outstanding,
Subordinated Creditor will not, prior to 180 days after providing written
notice to Senior Creditor of a default or Event of Default by Debtor relating
to the failure to make payment of any scheduled installment of principal or
interest on the Subordinated Debt, which is not thereafter waived or cured by
Subordinated Creditor(a) take any action to accelerate or demand the payment of
the Subordinated Debt, (b) take any action against any property of Debtor or
any guarantor or any third party, or any rights in connection with any security
interests, liens, mortgages, assignments, pledges, chattel mortgages,
guarantees, sureties, hypothecations, subordinations, or any
-3-
<PAGE> 4
other property or security, whether now existing or acquired hereafter, held by
Senior Creditor to secure or assure the payment of the Senior Debt
(collectively the "Senior Collateral") or in the Subordinated Collateral, or
delay, impede or otherwise interfere with the efforts of Senior Creditor in
connection with the realization of the Senior Collateral, the Subordinated
Collateral, or application of the proceeds thereof.
6. Mutual Consent. Notwithstanding any provision in any
promissory notes, security agreements, mortgages, financing statements and
other instruments and agreements evidencing any indebtedness owed to Senior
Creditor, the Senior Creditor hereby consents to the Debtor granting a
subordinate security interest or mortgage interest in the Subordinated
Collateral to the Subordinated Creditor. Notwithstanding any provision in any
debenture, security agreements, mortgages, financing statements and other
instruments and agreements evidencing any indebtedness owed to Subordinated
Creditor, the Subordinated Creditor hereby consents to the Debtor granting a
senior security interest in the Senior Collateral to the Senior Creditor.
7. Further Assurances. In order to carry out the terms and
intent of this Agreement more effectively, Subordinated Creditor will do all
acts and execute all further instruments deemed by Senior Creditor to be
reasonably necessary or convenient to preserve for Senior Creditor the benefits
of this Agreement.
8. No Waiver, No Offset. No action which Senior Creditor may
take or refrain from taking with respect to any Senior Debt, or any note or
notes representing the same, or any collateral therefor, including a waiver or
release thereof, or any agreement or agreements (including guaranties) in
connection therewith, shall affect this Agreement or the obligations of
Subordinated Creditor hereunder. Without limitation, the subordination of
Subordinated Creditor shall in no way be affected or impaired by, and
Subordinated Creditor hereby irrevocably consents to: (a) any amendment,
restatement, alteration, extension, renewal, waiver, indulgence or other
modification of the documents evidencing the Senior Debt; (b) any settlement or
compromise in connection with the Senior Debt; (c) any substitution, exchange,
release or other disposition of all or any part of the Senior Debt or the
Senior Collateral; (d) any failure, delay, neglect, act or omission by the
Senior Creditor to act in connection with the Senior Debt or the Senior
Collateral; or (e) any advances for the purpose of performing or curing any
term or covenant contained in the documents or agreements evidencing the Senior
Debt to which Debtor shall be or would otherwise be in default. The
obligations and agreements of the Subordinated Creditor shall be unconditional
and continuing, notwithstanding any defect in the genuineness, validity,
regularity or enforceability of the documents or agreements evidencing the
Senior Debt or the Senior Collateral or any other circumstances whether or not
referred to herein, which might otherwise constitute a legal or equitable
discharge or a defense of the Subordinated Creditor.
9. Collateral Priority Cooperation. Subordinated Creditor hereby
acknowledges and agrees that the security, assignment, mortgage or other
interest of Senior Creditor in the Senior Collateral shall have priority to the
extent of the Senior Debt secured thereby over any right, security interest,
lien or claim Subordinated Creditor may now have or hereafter have therein or
thereto,
-4-
<PAGE> 5
including, without limitation, any rights with respect to the Subordinated
Collateral. The priorities established hereby shall be irrespective of the
time or order of attachment or perfection of security interests, liens or
claims or the time or order of filing of financing statements or the giving of
or failure to give notices of purchase money security interests or otherwise.
Except with respect to the application of proceeds of disposition of the Senior
Collateral remaining after (a) payment of the expense of retaking, holding,
preparing for sale or lease, selling, or leasing the Senior Collateral and (b)
satisfaction of the Senior Debt, Senior Creditor shall not have any liability
or obligation, expressed or implied, to Subordinated Creditor for any act
(whether of omission or commission and whether based upon any error of judgment
or mistake of law or fact) with respect to the collectibility, enforceability,
or validity of the Senior Debt or with respect to the handling, disposition or
release of the Senior Collateral, other than gross negligence or wilful
misconduct, nor shall anything contained herein, or in any prior agreement or
understanding, be deemed to create any duty on the part of Senior Creditor to
extend or continue to extend financial accommodations to Debtor. Subordinated
Creditor further agrees to release its lien, security interest, mortgage or
other lien or encumbrance against the Senior Collateral upon the request of
Senior Creditor to the extent necessary or desirable to permit Senior Creditor
to repossess or sell the Senior Collateral or any portion thereof or to permit
the Debtor to transfer the Senior Collateral, or any portion thereof, to any
third party pursuant to a workout arrangement, provided, however, that
Subordinated Creditor shall be afforded a lien on the proceeds thereof to the
extent that any excess proceeds over and above the Senior Debt remain after the
sale of the Senior Collateral. In the event of forbearance or workout
arrangements, or any insolvency or bankruptcy proceedings relative to Debtor,
Subordinated Creditor agrees that it will fully cooperate with Senior Creditor
and will not take any action to delay, impede, oppose, or otherwise interfere
with efforts or actions taken by Senior Creditor with respect to any actions,
proceedings, motions, orders, agreements or other matters arising in or related
to such insolvency or bankruptcy proceedings, including but not limited to, any
actions, proceedings, motions, orders, agreements or other matters relating to
relief from any automatic stay provisions, abandonment of property, use of cash
collateral, sale of the Senior Collateral free and clear of liens, the recovery
of fees and expenses in connection with such proceedings, voting on any plan of
reorganization either with respect to a claim in respect of the Senior Debt or
the Subordinated Debt, filing and prosecution of claims, or making any election
permitted by the Bankruptcy Code, Title 11, United States Code, or otherwise.
10. Bankruptcy. With respect to any security interest or mortgage
with respect to the Senior Collateral, Subordinated Creditor, agrees not to
assert any right it may have to "adequate protection" of its interest in such
property in any Bankruptcy Proceeding, or to initiate proceedings to enforce
any "secured claims" under Section 506 of Title 11 of the United States Code,
11 U.S.C. Section 101, et seq. (the "Bankruptcy Code"), without the prior
written consent of the Senior Creditor. Subordinated Creditor waives any claim
that it may now or hereafter have against the Senior Creditor arising out of
any proceeding instituted under Chapter 11 of the Bankruptcy Code related to
the Senior Creditor's election of the application of Section 1111(b)(2) of the
Bankruptcy Code or Senior Creditor's right to adequate protection in connection
with any borrowing or grant of a security interest under Section 364 of the
Bankruptcy Code by Debtor as debtor in possession. To the extent that the
Senior Creditor receives payments on, or proceeds of the Senior Collateral
which
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<PAGE> 6
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal laws, common law or equitable cause,
then, to the extent of such payment or proceeds received, the Senior Debt, or
part thereof, intended to be satisfied shall be revived and the Senior
Creditor's security interest in the Senior Collateral shall continue in full
force and effect as if such payments or proceeds had not been received by the
Senior Creditor.
11. No Waiver. No waiver shall be deemed to be made by Senior
Creditor of any of its rights hereunder unless the same shall be in writing and
then only with respect to the specific instance involved, and shall in no way
impair or offset the rights of Senior Creditor or the obligations of
Subordinated Creditor in any other respect or at any other time.
12. Successors and Assigns. This Agreement shall be binding upon
Subordinated Creditor and Debtor and their respective successors and assigns
and shall inure to the benefit of Senior Creditor and its successors and
assigns (including without limitation any transferee of any Senior Debt).
References herein to the binding effect of this Agreement shall not be deemed
to constitute consent or acquiescence in the sale, assignment, pledge or other
transfer or encumbrance of the Subordinated Debt by Subordinated Creditor.
This Agreement shall be construed and enforced in accordance with and governed
by the law of the State of Ohio.
13. Jury Trial Waiver. THE PARTIES TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE: AND
THE PARTIES HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
14. Notice. Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) one day after
the same is sent to the address set forth below such party's signature line
below if sent by recognized overnight delivery service, (b) upon confirmation
of electronic communication if sent by telecopier, or (c) upon delivery to such
address if personally delivered.
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<PAGE> 7
15. Subrogation. Subject to the prior payment in full in cash of
Senior Debt, to the extent that Senior Creditor has received any payment or
distribution which but for this Agreement, would have been applied to the
Subordinated Debt, Subordinated Creditor shall be subrogated to the rights of
Senior Creditor until the Subordinated Debt shall be paid in full, and, for the
purposes of such subrogation, no such payment or distribution shall, as between
the Debtor or its other creditors, be deemed to be a payment or distribution on
account of the Senior Debt.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same document.
17. Headings. The headings contained in this Agreement are for
ease of reference only, and shall not be construed to modify, alter or affect
this Agreement in any way.
18. Termination. This Agreement shall remain in full force and
effect until the earlier to occur of (a) the Senior Debt is indefeasibly paid
in full (including, but not limited to, all interest accruing from time to time
on the Senior Debt after the commencement of any proceeding) or (b) the
Subordinated Debt has been paid in full.
Each of the parties has executed this Agreement as of the date set
forth above.
SUBORDINATED CREDITOR:
PAGES, INC.
By: /s/ S. Robert Davis
-----------------------------------------
S. Robert Davis, Chairman of the Board
Notice address:
Pages, Inc.
5720 Avery Road
Dublin, Ohio 43016
Attention: S. Robert Davis, Chairman
Phone No.: (614) 793-8749
Fax No.: (614) 889-7841
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<PAGE> 8
SENIOR CREDITOR:
THE HUNTINGTON NATIONAL BANK
By: /s/ Thomas G. Myers VP
-------------------------------------
Thomas Myers, Vice President
Notice Address:
The Huntington National Bank
41 South High Street
Columbus, Ohio 43215
Attention: Thomas Myers, Vice President
Phone No.: (614) 480-4893
Fax No.: (614) 480-4814
Debtor hereby acknowledges notice of the foregoing Debt Subordination
and Intercreditor Agreement and agrees to be bound by all of the terms,
provisions and conditions thereof.
DEBTOR:
CA SHORT COMPANY
By: /s/ S. Robert Davis
-----------------------------------------
S. Robert Davis, Chairman of the Board
Notice address:
4205 East Dixon Blvd.
Shelby, NC 28150
Attention: Charles R. Davis
Phone No.: (704) 482-9591
Fax No.: (704) 487-8218
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